Circular, Not Notification: Delhi High Court Upholds the 'Highest Demand' Rule for Choosing a Common Adjudicating Authority in Multi-State DGGI Notices

Quick answer: In Katyani Exports Through Its Proprietor Sh. Ajay Singh Gautam v. Union of India, decided on 16 September 2026, a Division Bench of the Delhi High Court (Anil Kshetarpal and Shail Jain, JJ.) dismissed a batch of eight writ petitions challenging the jurisdiction of the Additional Commissioner, CGST, Delhi, who had adjudicated a composite show cause notice issued to 146 noticees under Section 74(1) of the Central Goods and Services Tax Act, 2017. The Court held that Notification No. 2/2017-Central Tax and Notification No. 2/2022-Central Tax, both issued under Sections 3 and 5(3) of the Act, validly vest pan-India adjudicatory jurisdiction over Directorate General of GST Intelligence notices in a defined class of Additional and Joint Commissioners, and that the “highest demand” circulars — Circular No. 31/05/2018-GST as amended in 2022 and 2024 — merely allocate a composite notice among officers already within that class rather than conferring jurisdiction themselves. The petitioners were relegated to their statutory appeal under Section 107.

Key Takeaways

• A circular can validly allocate, though it cannot validly confer, adjudicatory jurisdiction. The Court drew a firm line between a notification under Sections 3 and 5(3) of the CGST Act, 2017 — the only instrument that can create a class of officers and vest a function in them — and a circular under Section 168(1), which can only operationalise a jurisdiction the notification has already conferred.
• The “highest demand” criterion for selecting a Common Adjudicating Authority survives an Article 14 challenge. The Court found the criterion objective, quantifiable, uniformly applied, and rationally connected to the legitimate goal of a single, consistent adjudication of one investigation, avoiding conflicting findings by different officers on the same facts.
• Absence of actual prejudice mattered, even though it was not decisive on its own. The petitioners could not show they were denied a hearing or treated less fairly by the Delhi-based authority than they would have been by an officer in their home state; the Court treated this as a relevant, though not independently sufficient, circumstance once it had found the jurisdictional challenge itself unfounded.
• A finding of fraud in the impugned order narrowed the writ court’s willingness to intervene. Although the alternative-remedy bar is not absolute where the very existence of jurisdiction is in question, the Court declined to extend its scrutiny to the merits once the jurisdictional foundation was upheld, given the adjudicating authority’s finding that the petitioners had participated in a scheme to defraud the exchequer.
• The judgment leaves the appellate-forum question to follow the Common Adjudicating Authority’s own Commissionerate. Circular No. 250/07/2025-GST was read as merely clarifying, not creating, an appellate jurisdiction already notified under Table III of Notification No. 2/2017-Central Tax — a point that will matter to any assessee whose adjudicating authority sits outside its home state.

1. Introduction

The Directorate General of GST Intelligence increasingly investigates fraud rings that span several states at once — a chain of shell suppliers in one state passing fictitious input tax credit to exporters or end-users registered elsewhere. When the investigation concludes, the Department typically issues a single, composite show cause notice to every noticee in the chain, rather than separate notices filed with each noticee’s own jurisdictional officer. That practice raises an immediate structural question: which officer, among the many who could otherwise claim territorial jurisdiction over one or another noticee, is entitled to adjudicate the notice as a whole? The Central Board of Indirect Taxes and Customs has answered that question since 2018 through a chain of circulars establishing a “Common Adjudicating Authority,” selected by the simple expedient of identifying whichever noticee faces the highest quantum of demand and vesting jurisdiction in the officer who would ordinarily handle that noticee’s affairs.

Katyani Exports v. Union of India, decided by the Delhi High Court on 16 September 2026, tests whether that mechanism can survive scrutiny when the instrument creating it is a circular rather than a notification — a distinction the Central Goods and Services Tax Act, 2017 treats as constitutionally significant, since only a notification is required to be laid before Parliament. Eight petitioners caught up in an alleged three-layer fake-invoicing racket argued that the circular-based mechanism amounted to jurisdiction being conferred by administrative fiat, in violation of the statutory scheme and of Article 14 of the Constitution. This article sets out the fraud allegations and procedural history that produced the composite notice, the Court’s reasoning on the notification-versus-circular divide, and what the decision means for assessees and counsel handling multi-state DGGI proceedings going forward.

2. Case summary and background

The petitioners were eight entities drawn into a single investigation conducted by the DGGI’s Gurugram Zonal Unit into what the adjudicating authority found to be a large-scale fraudulent Integrated Goods and Services Tax racket. The Department’s case, as recorded in the judgment, was that the fraud operated through a three-layer chain of invoicing without any actual movement of goods: eighteen non-existent entities, characterised as “L-2 suppliers,” issued goods-less invoices to a tier of “L-1 Suppliers,” themselves found non-existent at their declared addresses, who in turn issued their own goods-less invoices to a set of exporter or end-user firms. The end-user firms availed and utilised the resulting input tax credit both to discharge domestic tax liability and, more significantly, to claim refunds of Integrated Goods and Services Tax on exports. The investigation attributed control of the entire chain to two individuals — one allegedly controlling the L-1 Suppliers and the other allegedly controlling the exporter and end-user firms — operating with the assistance of a common transporter engaged to lend the appearance of genuine movement of goods.

Of the eight petitioners, five were classified as exporter or end-user firms and three as L-1 Suppliers. Two exporter firms were first identified through a joint operation and taken up for investigation to verify the genuineness of purchases reflected in their returns; tracing the inward supply chain from there led to the remaining noticees, and statements recorded under Section 70 of the CGST Act led the Department to conclude that the entire chain, spanning both tiers, was controlled by the same two individuals.

On these findings, a show cause notice was issued under Section 74(1) of the CGST Act to 146 noticees — including the eight petitioners and their respective proprietors, partners, directors and controllers — invoking the extended period of limitation on the ground of fraud and wilful suppression of facts. Upon adjudication, the Additional Commissioner, CGST, Delhi, confirmed the demand of input tax credit with interest under Section 74(1) read with Section 50 against the end-user firms; confirmed demand, interest and penalty under Sections 74(1) and 122(1) against the L-1 Supplier firms; and imposed penalty under Sections 74(1), 122(1) and 122(3) upon the individual proprietors, partners, directors and controllers, including the two individuals alleged to control the scheme.

Rather than appeal under Section 107 of the CGST Act, the petitioners moved the Delhi High Court by writ. An earlier order dated 20 August 2025 had already narrowed the hearing: noticing that the petitions raised both a jurisdictional objection and a challenge on the merits, the Court confined the final hearing to jurisdiction alone, leaving the merits — including the fraud findings — to be examined, if at all, elsewhere. The batch accordingly proceeded before the Division Bench solely on whether the Additional Commissioner, CGST, Delhi, had jurisdiction to adjudicate a notice naming 146 noticees across different Commissionerates, including petitioners based in Haryana.

3. Legal analysis

3.1 The statutory scheme: notification as the vehicle for jurisdiction, circular as the vehicle for uniformity

The Court’s analysis begins from the definitions in Section 2 of the CGST Act. Section 2(4) defines “Adjudicating Authority” broadly, to include any authority appointed or authorised to pass an order under the Act, subject to a short list of exclusions. Section 2(91) defines “proper officer,” in relation to any function, as the Commissioner or an officer of central tax “assigned that function by the Commissioner in the Board” — a definition that identifies the function-specific character of the assignment without specifying, on its own terms, the instrument by which the assignment must be made.

The Court held that this gap is filled by Sections 3 and 5 of the Act. Section 3 empowers the Government to appoint, by notification, the classes of officers recognised under the Act, from Principal Chief Commissioners down to Assistant Commissioners. Section 5(3) empowers the Commissioner to delegate powers to a subordinate officer, subject to conditions and limitations specified in that behalf. Section 167 supplies a further mechanism, empowering the Commissioner to direct, by notification, that any function exercisable by one authority be exercised also by another. Read together, the Court found, these provisions make a notification “the statutory vehicle for creating a class of officers, for vesting that class with a function, and for transferring a function from one class of officer to another.” Section 166 reinforces the point: every notification issued under the Act must be laid before both Houses of Parliament for thirty days, a form of legislative oversight the Court treated as reflecting “a deliberate legislative choice as to the mode in which jurisdiction-affecting decisions are to be made and scrutinized” — a discipline a circular does not attract.

Section 168, by contrast, was held to occupy different ground. Sub-section (1) empowers the Board to issue orders, instructions or directions “for the purpose of uniformity in the implementation” of the Act, binding on central tax officers. Sub-section (2) requires that certain specified functions — including the Commissioner’s powers of delegation under Section 5(3) and of directing performance under Section 167 — be exercised by the Board itself, or with its approval. The Court held that Section 168 “does not independently confer, transfer or assign jurisdiction”, describing its role as “administrative and interpretative, intended to ensure uniformity in the exercise of an existing jurisdiction, and not to create or confer such jurisdiction.” Invoking the maxim generalia specialibus non derogant — a general provision cannot override a special provision governing the same field — the Court held that Section 168(1)’s general uniformity-securing power cannot override the specific mode of conferring jurisdiction under Sections 3, 5(3) and 167, while remaining available to operationalise a jurisdiction a notification has already validly conferred.

3.2 Applying the framework: what the notifications did and what the circular did

Against that framework, the Court examined the two notifications said to underlie the impugned adjudication. Notification No. 2/2017-Central Tax, issued under Sections 3 and 5, is the principal instrument assigning territorial jurisdiction to central tax officers, with Table II correlating each Commissionerate to the officer competent to adjudicate within specified pecuniary limits. Notification No. 2/2022-Central Tax inserted paragraph 3A and Table V into that notification specifically to address show cause notices issued by the DGGI, conferring pan-India jurisdiction on the specified Additional and Joint Commissioners to adjudicate such notices notwithstanding the territorial limits in Table II.

The difficulty, as the Court identified it, is that Notification No. 2/2022-Central Tax does not itself say which of the several officers vested with pan-India jurisdiction should adjudicate a single composite notice naming noticees spread across different Commissionerates. That is “this residual, administrative gap, and not the existence of jurisdiction itself” — and it is this gap that Circular No. 31/05/2018-GST, as amended by Circular No. 169/01/2022-GST and Circular No. 239/33/2024-GST, was found to address. Paragraphs 7.1 and 7.2 of that circular provide that where a composite notice is issued to noticees falling within the territorial jurisdiction of different Additional or Joint Commissioners, the notice is to be adjudicated by the officer having jurisdiction over the noticee against whom the highest demand has been raised.

On a plain reading, the Court held, the circular “does not claim to appoint any officer, nor does it extend any officer’s jurisdiction beyond what NN 2/2022 already confers” — it selects, “by an objective and uniformly applied criterion, one officer from among several who are already and equally competent to adjudicate.” The notifications determine who may adjudicate; the circular determines which of those officers will adjudicate a particular composite notice. On that characterisation, the circular is “an administrative allocation-of-business direction and not as an instrument conferring jurisdiction”, and the challenge to its vires failed.

3.3 The petitioners’ subsidiary arguments

The petitioners raised several further objections, each of which the Court addressed and rejected. The argument that the amending circulars failed to recite the source of statutory power or record the Board’s approval under Section 168(2) was held to go, at most, to a drafting infirmity rather than a jurisdictional defect: validity turns on whether the issuing authority possessed and exercised the requisite power, not on whether the instrument recites its own source, and the petitioners had placed no material showing the circular was issued without authority. The argument that Notification No. 2/2022-Central Tax, by conferring jurisdiction on a class of officers without identifying an officer for every combination of noticees, left the circular to supply — and thereby confer — jurisdiction was rejected on the ground that a notification under Sections 3 and 5(3) is not required to identify an officer for every possible combination of noticees; the notification identifies the competent class, and the circular allocates a composite notice among that class. A further submission — that Notification No. 2/2022-Central Tax required ratification by the GST Council under Section 6(1) of the Haryana Goods and Services Tax Act, 2017 — was rejected for want of any material or provision establishing such a requirement, Section 6(1) being confined to cross-empowerment for enforcement rather than conditioning the validity of a central notification.

The petitioners, based in Haryana, also argued that no pan-India Commissioner (Appeals) had been notified, so an appeal from a Delhi-based Common Adjudicating Authority would leave them without a clear appellate forum under Sections 107, 109 and 112 of the Haryana Goods and Services Tax Act, 2017, relying on Pr. Commissioner of Income Tax-1 v. ABC Papers Ltd. for the principle that jurisdiction cannot be left to different fora at different stages of one proceeding. The Court held this apprehension did not survive scrutiny: the appellate forum is not created by Circular No. 250/07/2025-GST, but stands already notified under Table III of Notification No. 2/2017-Central Tax for the Commissionerate in which the Common Adjudicating Authority is posted, and the later circular “merely clarifies the position.” ABC Papers was accordingly found not to be violated, since the adjudicatory, appellate and Tribunal hierarchy remained within one notified Commissionerate — that of the Delhi-based Additional Commissioner.

3.4 Article 14 and the “highest demand” criterion

The petitioners separately argued that the “highest demand” criterion for selecting a Common Adjudicating Authority was arbitrary, lacked any statutory basis, and offended Article 14 of the Constitution, in reliance on Anirudhsinhji Karansinhji Jadeja v. State of Gujarat for the proposition that an exercise of power by an authority not vested with it is void. The Court found the criterion “objective, quantifiable and uniformly applicable”, bearing “a rational nexus with the legitimate object of ensuring a single and consistent adjudication of what is, in substance, one cause of action arising from one investigation”, while also avoiding the risk of conflicting findings on the same facts by different officers. Anirudhsinhji Jadeja was distinguished rather than applied: that decision concerned impermissible sub-delegation of power to an officer never vested with it, whereas here the officer issuing the composite notice exercises no discretion in selecting the adjudicating authority, applying instead a criterion fixed in advance by the Board — a distinction the Court held removed any element of sub-delegation from the case.

3.5 Alternative remedy and the limits of writ scrutiny

The Department raised a preliminary objection to maintainability, relying on the availability of a statutory appeal under Section 107 of the CGST Act and on a separate Delhi High Court order in Ambika Traders v. Additional Commissioner, Adjudication, DGGSTI, CGST Delhi North. The Court reiterated the settled position, applying Assistant Commissioner of State Tax v. Commercial Steel Limited, that writ jurisdiction under Article 226 is ordinarily not exercised where an efficacious alternative remedy exists, but that a writ court may still intervene where the challenge concerns the very existence of jurisdiction. It was on this footing that the petitions had been entertained at all, confined, as the August 2025 order had already directed, to the jurisdictional question. Having held that the Common Adjudicating Authority’s jurisdiction was properly traceable to the two notifications, and that the allocating circular was not vitiated, the Court held that “the basis for invoking the exception no longer survives.” The remaining grounds — the merits of the demand, evidentiary questions and any alleged breach of natural justice — were left for the statutory Appellate Authority under Section 107.

The Court added a further, discretionary reason for declining to go further: the adjudicating authority had recorded a finding that the petitioners had participated in a scheme to defraud the exchequer, and given the availability of a statutory appeal, exercising writ jurisdiction on grounds going to the merits “would not be warranted.” This is a separate strand from the jurisdictional holding — it speaks to the Court’s residual discretion under Article 226 even where the alternative-remedy exception might otherwise apply.

3.6 What the decision does, and does not, decide

The judgment settles the narrow but recurrent question of whether the “highest demand” Common Adjudicating Authority mechanism is a valid exercise of circular-making power, drawing a clear doctrinal line between the notification as the instrument of jurisdiction and the circular as the instrument of allocation among officers already possessed of it. It does not decide whether the underlying fraud allegations are made out, whether the extended period of limitation was rightly invoked, or whether the penalties under Sections 122(1) and 122(3) were properly quantified — all of that remains for the Section 107 appeal. Nor does it address a case where a circular sought to allocate jurisdiction among officers not all vested with pan-India competence by notification in the first place; the reasoning is confined to a circular operating within a class the notification had already defined.

4. Practical significance

For assessees named in a composite, multi-state DGGI notice, the immediate consequence is that a jurisdictional challenge framed as an attack on the allocating circular itself is unlikely to succeed on this reasoning, provided the underlying notifications validly vest pan-India jurisdiction in the class of officers from which the Common Adjudicating Authority is drawn. Counsel should instead examine whether the specific notification relied upon by the Department in fact covers the officer selected — a defect in the notification itself, rather than in the allocation circular, remains open to challenge.

The judgment also bears on venue and appellate strategy for assessees based outside the state in which the Common Adjudicating Authority happens to be posted. Since the appellate forum follows the Commissionerate of the Common Adjudicating Authority — a position the Court treated as already fixed by Table III of Notification No. 2/2017-Central Tax rather than newly created by the 2025 clarificatory circular — an assessee whose registration is in one state but whose adjudicating authority sits in another should expect its statutory appeal, and any further appeal to the GST Appellate Tribunal, to follow the adjudicating authority’s location rather than its own.

The decision also illustrates the narrowing effect a fraud finding at the adjudication stage has on a writ court’s willingness to examine the merits, even where the writ was entertained only because a jurisdictional question was raised. Assessees relying on the “existence of jurisdiction” exception to the alternative-remedy bar should recognise that establishing the exception in principle does not guarantee the writ court will go beyond the jurisdictional question once it is resolved against them; here, the fraud finding was treated as an additional, independent reason to leave the merits to the statutory appellate process. Finally, the Court’s confirmation that Section 14 of the Limitation Act, 1963 remains available to exclude the period spent pursuing the writ petitions is a useful safeguard: assessees electing to test a jurisdictional objection by writ, rather than proceeding directly to appeal, should expressly invoke that exclusion before the Appellate Authority, so that an unsuccessful jurisdictional challenge does not also cost them their appeal on limitation grounds.

5. Conclusion

Katyani Exports resolves a structural question that recurs wherever the Directorate General of GST Intelligence issues a single composite notice to noticees spread across several states: a circular that merely allocates an already-conferred, pan-India jurisdiction among the officers who hold it, using an objective and uniformly applied criterion, does not thereby confer that jurisdiction and does not require the legislative scrutiny a notification attracts. The Court’s reasoning rests on a careful reading of the interplay between Sections 2, 3, 5, 166, 167 and 168 of the CGST Act, and its holding that the “highest demand” criterion survives Article 14 scrutiny gives the mechanism a considered judicial foundation it had previously enjoyed largely through administrative practice alone.

For practitioners, the decision’s durable value lies in the line it draws rather than in any relief it grants: a jurisdictional challenge to a Common Adjudicating Authority should be built around whether the notification underlying the officer’s competence is itself valid and applicable, not around the circular that merely selects among competent officers. Where that foundation holds, and particularly where the adjudicating authority has recorded findings of fraud, this judgment indicates that a writ court is likely to relegate the assessee to the statutory appeal — leaving the merits, the limitation question, and the correctness of the penalties imposed to be tested there instead.

Authorities

Applied by the Court

• Assistant Commissioner of State Tax v. Commercial Steel Limited, (2022) 16 SCC 447 — applied for the principle that writ jurisdiction under Article 226 may be exercised, notwithstanding an alternative statutory remedy, where the challenge concerns the very existence of jurisdiction.

Engaged with and distinguished, or found not to be violated

• Anirudhsinhji Karansinhji Jadeja v. State of Gujarat, (1995) 5 SCC 302 — cited by the petitioners for the proposition that an exercise of power by an authority not vested with it is void; distinguished by the Court as concerning impermissible sub-delegation, a defect not present where the issuing officer exercises no discretion and merely applies a Board-fixed criterion.
• Pr. Commissioner of Income Tax-1 v. ABC Papers Ltd., [2022] 289 Taxman 150 (SC) — cited by the petitioners on the need for a single, coherent jurisdictional hierarchy across stages of a proceeding; the Court held its principle was not violated, since the appellate forum here remains within the same notified Commissionerate as the Common Adjudicating Authority.

Cited by counsel, not independently applied

• Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries, [2008] 17 STT 103 (SC)
• BMG Informatics Pvt. Ltd. v. Union of India, 2021 SCC OnLine Gau 2570
• Union of India v. Bharat Forge Ltd., 2022 SCC OnLine SC 1018
• Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd., (2001) 3 SCC 609
• Shree Gouri Shankar Jute Mills Ltd. v. Union of India, (2012) 286 ELT 652
• Ambika Traders v. Additional Commissioner, Adjudication, DGGSTI, CGST Delhi North, W.P.(C) 4853/2025 — cited by the Department on maintainability; referenced by the Court in recording the preliminary objection but not separately relied upon, the objection being addressed instead through Commercial Steel Limited.

Legislation, notifications and circulars considered

Judgment

Katyani Exports Through Its Proprietor Sh. Ajay Singh Gautam v. Union of India and Ors., W.P.(C) 10607/2025 and connected matters (CM APPL. 43991/2025, W.P.(C) 10609/2025, 10613/2025, 10614/2025, 10670/2025, 10718/2025, 10720/2025 and 10721/2025), High Court of Delhi at New Delhi (Anil Kshetarpal and Shail Jain, JJ.), judgment reserved 6 August 2026, pronounced 16 September 2026 — https://indiankanoon.org/doc/40580108/

FAQ

Can a circular validly determine which officer adjudicates a GST show cause notice issued to noticees in different states? Yes, according to this decision, provided a notification under Sections 3 and 5(3) of the CGST Act, 2017 has already vested pan-India jurisdiction in the class of officers concerned. The Delhi High Court held that a circular allocating a composite notice among such officers, using an objective criterion such as the noticee facing the highest demand, is an administrative allocation and does not itself confer jurisdiction.

Does the “highest demand” criterion for selecting a Common Adjudicating Authority violate Article 14 of the Constitution? No. The Court held the criterion to be objective, quantifiable, uniformly applied, and rationally connected to the goal of securing a single, consistent adjudication of one investigation without conflicting findings by different officers.

If the Common Adjudicating Authority is based in a different state from the assessee, which Commissioner (Appeals) hears the appeal? On this judgment’s reasoning, the appellate forum follows the Commissionerate in which the Common Adjudicating Authority is posted, as already notified under Table III of Notification No. 2/2017-Central Tax, rather than the assessee’s home state.

This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.