Inspecting officers can issue tax notices (SCNs) and decide the case themselves, as long as they meet the legal definition of a "proper officer" under the GST Act.

Case Breakdown:

• A company in Tamil Nadu faced a tax inspection by a State Tax Officer (Inspection). Following the inspection, the company received a show cause notice, a document outlining potential tax liabilities.

• The company objected to the notice, arguing that a previous policy (Circular No. 23/2021) required inspectors to handle only cases initiated before a specific date. In other situations, the policy dictated sending the inspection report to a different officer for further action.

• However, the company pointed out that this policy (Circular No. 23/2021) was later withdrawn by a new one (Circular No. 13/2022-TNGST). They argued that having the same inspector investigate and decide the case could lead to bias.

Court Decision:

• The Madras High Court reviewed the case. They clarified that tax laws allow inspectors to issue show cause notices, as long as they meet the legal definition of a "proper officer."

• To avoid bias, a different officer will decide the case in this instance.

• While the court dismissed the company's challenge to the notice and the new policy, they acknowledged the potential for bias. To address this concern, the court directed the State Tax Officer (Inspection) to transfer the case to a different "proper officer" for a final decision. This ensures a neutral party makes the final call on the company's tax liability.

• The company can respond to the notice and will be heard before a final decision.

Case Law- Rasathe Garments Versus The State Tax Officer

Citation-2024 TAXONATION 1233 (MADRAS)

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