TaxTMI 
TaxTMI 
TaxTMI 
Law, like architecture, does not announce its strength by height, but by what lies unseen beneath. What carries the weight of justice is not the noise of adjudication, nor the volume of paper that follows, but the quiet certainty that the foundation was laid with care, knowledge, and restraint. The question, therefore, is not when adjudication concludes, but when it truly begins.
1. The moment before construction a building is not born when walls rise; it is conceived when the earth is tested. Engineers do not argue with gravity — they respect it. They examine the soil, calculate the load, and submit to natural laws before laying a single stone. The law is no different. Before an authority commences adjudication, it must pause at this silent moment — the moment of scientific and juristic planning. This pause is not hesitation; it is constitutional discipline.
2. Taxation and the Grammar of Certainty-- Govind Saran Ganga Saran Versus Commissioner Of Sales Tax And Others - 1985 (4) TMI 65 - Supreme Court, the Hon’ble Supreme Court did not merely decide a tax dispute; it articulated the grammar of fiscal law. The Court held that a valid tax must unambiguously manifest on four fundamental mighty pillars: the taxable event, the person on whom the burden falls, the rate, and the measure. If even one of these elements is absent, the levy dissolves — not by judicial discretion, but by constitutional necessity. This was not a technical holding. It is a philosophical one: Power must speak clearly when it demands obedience.
Therefore adjudicator must speak evidence of facts from his own knowledge truthfully. It should be borne in mind that, opinions of others, which may not be precise one, are impermissible and inadmissible to run the risk of seriously misleading.
3. From levy to adjudication: The moral extension what Govind Saran judgement [supra] declared for levy, the Constitution silently extends to adjudication. Adjudication is not an arena to discover the charge; it is a forum to test a charge already known. When an authority enters adjudication without first answering the foundational questions — what is the offence, under what law, based on what material — it does not adjudicate; it assumes. Assumption is the enemy of justice.
4. The foundation that must exist before authority speaks before adjudication commences, the authority must inwardly satisfy itself: Do I possess jurisdiction, not merely by designation, but by law? Does tangible material exist, or am I proceeding on suspicion dressed as certainty? Have I applied my mind, or have I borrowed another’s conclusion? Is the notice a mirror of reason, or merely a shadow of investigation? These are not procedural steps. They are acts of self-restraint.
5. When process becomes illusion-- A defective notice cannot be healed by an eloquent order, just as a cracked foundation cannot be hidden by polished marble. Courts have repeatedly reminded us that adjudication does not sanctify illegality. The ritual of hearing does not redeem a notice born without jurisdiction or clarity. Where the foundation is absent, the superstructure — however grand — stands on nothing.
6. Arbitrariness and the collapse of trust-- When adjudication begins without scientific planning, the law ceases to be reason and becomes force. This is the precise moment where Article 14 is violated — not by discrimination, but by arbitrariness. Businesses do not fear taxation; they fear uncertainty. Trade does not resist regulation; it resists unpredictability. The Constitution does not prohibit power — it insists on discipline in its exercise.
7. The quiet teaching of Govind Saran Govind Saran judgement [supra] teaches us restraint in a world tempted by speed. It reminds the State that clarity is not a favour, but a duty. It affirms that legality is not achieved by outcomes, but by origins. What is born unclear cannot mature into justice.
8. Humble request to the Tax Administration: Courts do not strike down tax demands because revenue is unwelcome. They do so because law cannot stand on air. Experience before the Hon’ble Supreme Court and High Courts reveals an uncomfortable truth: an overwhelming majority of tax disputes are decided in favour of taxpayers not on evasive conduct, but on foundational failure — absence of jurisdiction, vagueness of charge, mechanical notices, borrowed satisfaction, and non-application of mind. When the foundation is infirm, justice has no option but to collapse the structure. This reality is no longer anecdotal; it is institutional.
9. Yet, despite decades of judicial guidance, the quality control mechanism within tax administration remains unchanged. The same errors are repeated, the same notices issued, the same assumptions recycled — as though judicial pronouncements are advisory essays rather than binding law. The cost of this indifference is not borne by the exchequer alone. It is borne by: businesses dragged into avoidable litigation, courts burdened with preventable disputes, and an administration whose credibility erodes with every quashed proceeding. The Hon’ble Supreme Court has spoken often and clearly: jurisdiction precedes adjudication, clarity precedes coercion, and evidence precedes allegation.
10. The ethics of beginning adjudication under Section 73, 74 and 74A is not an act of assertion; it is an act of listening — listening first to law, then to facts, and only lastly to conclusions. One must begin building not when the edifice is visible, but when the foundation is tested and found worthy. These principles are absolutely indispensable components without which a judicious adjudication cannot exist. And so, before the authority speaks, before it summons, before it adjudicates, it must ask itself:
Have I laid the foundation, or am I merely raising walls in the air? For in law, as in life, what begins without depth ends without dignity.
11. Jurisdiction is not a license to presume, but a mandate to adjudge upon proved facts within the four corners of law. The dignity of the State is preserved only when its officers protect the lawful businesses from arbitrariness, and allow statute- not suspicion- to govern conclusions. Let adjudication stand upon the sanctity of rule of law. There is no substitute for this eternal philosophy--a timeless doctrine.
12. The Hon’ble Supreme Court, notably in RADHIKA AGARWAL Versus UNION OFINDIA AND OTHERS [2025 (2) TMI 1162 - Supreme Court (LB)] upheld the constitutional validity of arrest powers under the GST Act but imposed strict conditions, ruling that arrests must be based on recorded 'reasons to believe,' not mere suspicion, supported by concrete evidence, and follow CrPC safeguards. Despite it is worth to remember the horrendous case of Sri J Ramesh Chand Versus Union Of India, Commissioner South GST, Inspector Of Central Tax and Intelligence Officer DGGI BZU Benglauru [2025 (11) TMI 180 - KARNATAKA HIGH COURT], which held as the obtainment / collection / receipt of a sum of Rs.10 crores by the respondents from the petitioner at the time of search, inspection and seizure operations is not voluntary or by way of self-ascertainment and the same is wholly illegal, arbitrary and contrary to law and the provisions of the CGST Act and also without jurisdiction or authority of law and the said amount deserves to be refunded back to the petitioner together with interest at the rate of 6% p.a. within a stipulated timeframe.
13. Time and again, such incidents recur due to a deliberate disregard for the four foundational pillars of adjudication and the coercive misuse of arrest powers under Section 69 of the Act, without testing the nature of the transactions. The looming threat of arrest, wielded without prior determination of liability, operates not as an instrument of law but as a tool of intimidation. A person of standing and repute values his social credibility above all else. Despite entering into legitimate transactions, the stigma of arrest inflicts an injury far deeper than physical restraint—it destroys dignity, honour, and social standing. The repercussions extend beyond the individual; families are shattered, reputations irreparably damaged, and in several cases, even the marriages of daughters are broken due to the social stigma attached to arrest. Section 69, therefore, causes irreversible harm to the social fabric, wholly disproportionate to any alleged fiscal default. It is for this reason that eminent jurists have consistently questioned the wisdom of conferring draconian arrest powers on civil administrators such as GST authorities, especially on mere suspicion of tax evasion.
14. Since the power to arrest a person under Section 69 mandates that, the person should have committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 are very serious in nature shaking the foundational and fundamental right of the citizens guaranteed under the Constitution of India, if not judicially calibrated before arresting such person and prosecuting him on specific charge. Meaning the incontrovertible evidences shall be manifest on records establishing the specific offence to satisfy the mandatory requirement of opening phrase of Section 132- Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences,.. In this regard, it is worth to refer the ratio of the judgement dated 18/07/2024 of Hon’ble Calcutta High Court in Utpal Das Versus State of West Bengal & Ors. - 2024 (10) TMI 1016 - CALCUTTA HIGH COURT and the case of Vishal Chauhan Versus Haryana State GST (Intelligence Unit) through Excise Taxation Officer-cum-Proper Officer, Rohtak - 2024 (8) TMI 1095 - PUNJAB & HARYANA HIGH COURT as regards to commission of offence only when both wrongful availment and actual utilisation of ITC also are manifest.
15. If there is no case of tax evasion and no criminality under Section 132 of the CGST Act arises. So investigators have to be very sensible, reasonable and strongminded on this count and cannot act as adjudicators; the CGST Act mandates a clear separation of powers. It is also pertinent to note that the maximum punishment prescribed for the alleged offence under Section 132 is only 5 years. Many eminent advocates opine that, such offences are, therefore, not of the category of heinous or violent crimes that ordinarily warrant pre-trial confinement and therefore bails are granted. So under democratic rule of law, every taxpayer is entitled to fair, impartial, and reasoned adjudication. Invocation of coercive or penal measures without evidence of evasion or fraud is wholly unjustified. Under the GST regime, every transaction is digitally recorded, traceable, and verifiable. The system is designed to be robust and virtually fool proof, leaving negligible scope for destruction, manipulation, or tampering of evidence to evade prosecution under Section 132. If this is the practical and technological reality, one must ask: what legitimate purpose does arrest serve at the pre-adjudication stage? Arrest neither determines liability nor enhances revenue recovery. On the contrary, it subverts due process. The legally sound and constitutionally compliant approach would be to first complete adjudication under Sections 74 / 74A, determine tax, interest, and penalty in accordance with law, and effect recovery through statutory mechanisms. Only thereafter, and strictly in cases warranting criminal prosecution, should proceedings under Section 132 be contemplated. Such a structured process ensures fairness, proportionality, and effectiveness, while preserving the dignity of the taxpayer and the sanctity of the legal system. Arrest without valid and swift adjudication is not enforcement—it is excess. Adjudication followed by recovery and, if necessary, prosecution is not only more effective, but it alone aligns with the rule of law.
16. Economic offences such as tax evasion and money laundering undoubtedly have a deleterious impact on the financial health of the nation and are, therefore, treated as grave offences warranting stringent deterrence. Criminal sanctions, including arrest, are recognised tools to curb such violations. However, arrest, being the most severe form of coercive state action, results in deprivation of personal liberty guaranteed under Article 21 of the Constitution of India. Consequently, while the State has a legitimate interest in maintaining economic discipline and fiscal order, the power of arrest must invariably be tempered with robust procedural safeguards, transparency, and accountability. It is in this backdrop that the arrest provisions under Section 69 of the CGST Act require close scrutiny to assess the adequacy of the statutory safeguards and the nature of authorisation embedded therein. The operation of Section 69 cannot be viewed in isolation; it must be harmonised with constitutional mandates, the general law governing arrests under the Code of Criminal Procedure, and the evolving judicial standards laid down by constitutional courts to prevent arbitrary or mechanical deprivation of liberty.
17. Judicial precedents have consistently emphasised that arrest should not be resorted to as a punitive or investigative shortcut, but only when it is demonstrably necessary. Significantly, offences under Section 132 of the CGST Act, which form the very basis for invoking arrest powers under Section 69, are rendered compoundable under Section 138, either before or after prosecution. This statutory option to compound offences substantially dilutes the perceived gravity and criminality attached to the same acts for which arrest is otherwise authorised. The coexistence of expansive arrest powers with a liberal compounding framework exposes an inherent inconsistency in the legislative scheme and raises serious questions regarding proportionality, necessity, and reasonableness of arrest at the pre-adjudication stage. Such dilution of gravity reinforces the need for strict judicial oversight and restrained executive discretion in exercising arrest powers under the GST regime.
18. The experts’ experience points out that, adjudication is not an exercise in walking on water. It is not divine infallibility, nor theatrical brilliance. It is human duty- to weigh facts without fear, to apply law without prejudice, and reason without arrogance. Errors may occur, but abandonment of reasoning is the real failure. It is said that, garbage in, garbage out- even in adjudication. Therefore adjudications cannot be made casually and then left to be lost in the prolonged court proceedings. End of the day, facts alone are the fundamentals of lawful adjudication regardless of false invoicing or reporting the supply. Fortunately, traditional style of assessment is now obsolete. “If the objective is real and sustainable revenue, adjudication must be productive—not punitive”. The simple secret of such success is— start thinking like an adjudicator, not like a notice-issuer. There is no Chinese wall to ensure a fair and judicious adjudication, but requires fundamental skills, brilliance, adaptability, mannnerisms and a sense of balance. A great adjudicator never oversteps the bounds of fairness. If one possesses the truth, the act of lying is a violation of universal moral law. Meaning adjudication should amplify the truth, not replace it. This is the dignity of premier institution of adjudication which produces more sustainable and impactful results. Many a times adjudication is quite exciting too dealing with human emotions as the process involves microscopic purification of law, facts and reality to render justice. This is the aspiration of legislature and judiciary.
19. The Constitution Bench of Hon’ble Supreme Court, in its landmark judgment dated 20 November 2025 in In Re: Assent, Withholding or Reservation of Bills By The Governor And The President Of India - 2025 (11) TMI 1428 - Supreme Court (LB), has unequivocally reaffirmed that separation of powers is not a mere constitutional ornament, but a functional restraint on institutional overreach. The judgment authoritatively holds that where the Constitution or statute entrusts a function to a distinct authority, any parallel or supervisory intervention by another wing—beyond statutorily defined limits—is constitutionally impermissible. Applying this binding ratio, it is evident that the adjudicatory function under the CGST Act occupies an independent statutory domain, insulated from investigative or inspecting authorities. Once proceedings enter the realm of adjudication, the adjudicator is answerable only to the statute and the law—not to the investigative narrative, expectations, or personal opinions of the inspecting authority. Any attempt by investigating officers to influence, direct, or script the contours of adjudication amounts to a structural violation of separation of powers, rendering the adjudicatory process vitiated in law. The Constitution Bench has made it abundantly clear that institutional independence is destroyed not only by express usurpation, but also by subtle control, indirect pressure, or doctrinal subordination. Therefore, treating adjudicators as functionally subordinate to investigators—whether by pre-determined conclusions, compelled reasoning, or mechanical adoption of investigative reports—strikes at the root of statutory adjudication and offends constitutional discipline. In sum, investigative authority ends where adjudicatory discretion begins. Any transgression of this boundary is not a mere procedural irregularity, but a constitutional infraction, fatal to the sustainability of the impugned proceedings.
20. The biggest hurdle in this endeavour is the State’s ruthless obsession with revenue maximisation and the pursuit of absurd, target-driven collections. It is precisely in this arena that institutional quality is collapsing at an alarming pace. Tax administration has been reduced to a numbers game, where legality, fairness, and economic rationality are routinely sacrificed at the altar of targets. The Government would do well to remember that sustainable tax revenue is not an end in itself but a natural by-product of genuine economic growth. When business expands, compliance follows; when fear replaces facilitation, both growth and credibility suffer. This approach is not only deeply flawed and counter-productive but also a serious threat to the business. Such harsh approach triggers to move for expensive justice—not merely in money, but in patience, courage, time and sometimes reputation.
21. The adjudicating authority must distinguish between the digital shadow and the corporeal supply. Section 9 of the CGST Act is not a tax on the literary artifice of an invoice/e-way bill, but a levy on the physical movement of goods. Where a transaction is suspected to be engineered, the Revenue cannot sustain a demand by merely citing an e-way bill/invoice; it must establish a verifiable taxable event anchored in empirical logistical presence of weighbridge data, FASTag telemetry, loading evidence, payment/receipt of consideration via bank statements etc. The authority is supposed to look past the ephemeral paper trail and demand gravimetric certainty; for in the eyes of the law, where there is no tangible movement of goods, there is no exigibility of tax. The levy must be grounded in the bedrock of reality, not the vanity of ink. This analogy equally applies to arrest a person not on suspicion but on actual commission of offences as specified under Section 132.
Conclusion:
In the final analysis, adjudication under the GST framework is not a mere mechanical exercise of confirming demands, but a solemn duty entrusted with balance and fairness. Two silent yet decisive pillars—the avoidance of undue hardship to the taxpayer and the safeguarding of the legitimate interests of Revenue—must breathe life into every adjudicatory order. These twin considerations are not ornamental phrases; they are the very conscience of fiscal justice. Recognising this, the legislature, in its profound wisdom, has meticulously demarcated crystal-clear contours under Sections 69, 73, 74, 74A & 132 of the CGST Act, 2017, leaving little room for arbitrariness or ambiguity, and ensuring a fool-proof adjudicatory mechanism. When such clarity is legislatively ordained, the real question that lingers is not of complexity or constraint, but of commitment—what truly prevents the authorities from faithfully adhering to these foundational tenets that alone transform adjudication from authority into justice?
Galaxy of vintage judgements have answered this question with an inevitable conclusion--- on a cursory glance it appears that the demand raised has no leg to stand on the touchstone of fairness and legality. Meaning the adjudication orders passed are self-sabotaging.
“Truth may be troubled, but it cannot be defeated”
