MP High Court Quashes ₹7.01 Crore GST Demand Order Passed Without GST Council Recommendation — Proper Officer Jurisdiction Under Scanner

Background and Overview

The Madhya Pradesh High Court, in a significant ruling, quashed a GST demand order imposing a tax liability of ₹7,01,61,092 on the grounds that the officer who issued it lacked the requisite authority to do so. The case arose from two writ petitions — Writ Petition Nos. 2510/2026 & 2532/2026 — which were clubbed together by the Court owing to the commonality of legal issues involved. For the purpose of adjudication, facts were drawn from Writ Petition No. 2510/2026.

The judgment serves as a crucial reminder that under the GST framework, an order passed by an authority not properly constituted as a "Proper Officer" in accordance with the statutory scheme is void for want of jurisdiction — regardless of whether the underlying tax demand may have merits on facts.

The Dispute: What Was the Case About?

The Impugned Order

The petitioner, M/s Subhash Chandra Narendra Kumar Nahar, challenged an order dated 30.12.2025 passed by the Assistant Commissioner of State Tax, Anti-Evasion Bureau, Indore (Respondent No. 4). The said order fastened a total tax liability of ₹7,01,61,092 upon the petitioner.

The Core Grievance

The petitioner's primary legal challenge was straightforward but fundamental: the officer who passed the demand order was not a "Proper Officer" within the meaning of Section 2(91) of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017). Since the officer lacked the requisite designation and authorisation, the entire order was assailed as being without jurisdiction and therefore liable to be set aside.

The State's Defence: What Did the Respondents Argue?

The State raised a two-pronged response before the Court:

Preliminary Objection — Alternative Remedy

The respondents raised a preliminary objection on maintainability, contending that the writ petition was not the appropriate forum since the petitioner had an efficacious alternative remedy available — namely, the statutory appeal under Section 107 of the CGST Act, 2017. The State urged the Court to decline interference at the writ stage and direct the petitioner to pursue the appellate route.

Substantive Justification of the Order

On merits, the respondents sought to justify the demand order by explaining the circumstances that triggered the proceedings:

  • An inspection under Section 67(1) of the M.P. Goods and Services Tax Act, 2017 (M.P. GST Act, 2017) was carried out at the business premises of M/s Dakshraj Enterprises.
  • During the inspection, it emerged that the said entity had claimed inadmissible/missing Input Tax Credit (ITC) reflected in its GSTR-2A/2B returns and had passed on such ITC to multiple recipient dealers, including the petitioner.
  • Investigations established that M/s Dakshraj Enterprises had availed and transmitted ITC without actual payment of tax to the Government, thereby creating a fraudulent supply chain mechanism.
  • As a consequence, the petitioner — being a recipient of such ITC — was held to have failed to fulfil the conditions prescribed under Sections 16(2)(b) and 16(2)(c) of the M.P. GST Act, 2017, rendering the ITC availed by it inadmissible.
  • The State also invoked Section 6 of the Union Territory GST Act, 2017 to support the competence of the officer who passed the impugned order.

The Petitioner's Rebuttal: Pecuniary Jurisdiction Issue

In addition to the jurisdictional argument based on the "Proper Officer" definition, the petitioner filed additional documents by way of a rebuttal application. These included:

  1. A Tax Audit Report for Financial Year 2024-25, and
  2. Order No. 03/2024 dated 18.04.2024 passed by the Commissioner, Commercial Tax, Madhya Pradesh.

A critical extract from the tax audit report (Para 5) read as follows: