THE INHERENT SEPERATION OF ROLES IN GST: JURISDICTIONAL VALIDITY OF DUAL AUDIT-ADJUDICATION ORDERS

The bedrock canon of natural justice and administrative jurisprudence rests on an enduring legal maxim: nemo judex in causa sua-no person shall be a judge in their own cause. Within the framework of the Central and State Goods and Services Tax (GST) Acts, this principle faces its sharpest operational test at the intersection of tax audit and subsequent tax adjudication.

2. A recurring practice across revenue jurisdictions involves the same tax officer conducting a departmental audit under Section 65 and subsequently assuming the mantle of the "proper officer" under Section 73 or Section 74 to adjudicate the very tax liabilities they flagged. This dual role compromises institutional neutrality. The Hon'ble Karnataka High Court addressed this conflict in M/s Sali Basavaraj S/O. Sharabayya Versus The State Of Karnataka, Rept. By its Chief Secretary, The Commissioner Of Commercial Tax, Government Of Karnataka, The Joint Commissioner Of Commerical Tax, Davanagere, The Deputy Commissioner Of Commerical Tax, (Audit) -2, Davanagere and The Executive Engineer, PWD Division, Hospete - 2026 (9) TMI 1097 - KARNATAKA HIGH COURTreaffirming that an audit officer cannot act as the adjudicator.

3. This ruling leaves taxpayers and practitioners with two critical inquiries: why does this dual jurisdiction fail statutory scrutiny, and can past adjudication orders concluded under this defective procedure still be challenged after statutory appeal deadlines have lapsed?

Part I: Section 65 vs. Sections 73, 74 & 74A

4. The GST statutory scheme deliberately separates the investigatory discovery of non-compliance from the formal, quasi-judicial determination of tax liabilities into two mutually independent stages:

5. Section 65 inspects books of accounts, reconciles turnover with returns, scrutinizes input tax credit claims, and formulates audit observations. Statutory Milestone: Culminates in an audit report under Form GST ADT-02 detailing quantified discrepancies. Legal Position: The officer operates as an investigator and the accuser assembling the department's prima facie claims.

6. Under Section 65(7), where an audit results in detection of unpaid or short-paid tax, the proper officer is directed to initiate demand action. This handoff marks a complete change of function: the investigative exercise ends, and the matter shifts to a neutral forum required to evaluate those findings without bias.

7. Sections 73, 74, and 74A issues show-cause notices (SCN), evaluates taxpayer replies, reviews rebuttal evidence, and conducts formal personal hearings. Statutory Milestone: Culminates in a reasoned adjudication order under Section 73(9) or 74(9), either confirming demands or dropping allegations. The officer acts as an impartial adjudicator duty-bound to assess the allegations with a clean, detached mind. When the same individual discharges both roles, the investigator evaluates their own findings. The proper officer cannot ride both horses simultaneously-one cannot serve as the prosecuting investigator and the impartial judge in the same proceeding.

Part II:

8. The invalidity of combining audit and adjudication functions stems from inherent institutional and personal bias: Confirmation Bias and Pre-Determination: Having drafted an audit report (Form GST ADT-02) alleging tax evasion or misclassification, an audit officer enters Section 73/74 proceedings with an established conclusion. Expecting that officer to discard their own findings during adjudication asks them to find their initial work defective. Section 75(4) mandates a reasonable opportunity of being heard. When this hearing occurs before the officer who framed the audit charges, it risks becoming an empty administrative formality rather than an open adjudication. Quasi-judicial adjudication demands an unbiased mind. Fusing audit and adjudication inside a single officer undermines the statutory checks created to protect taxpayers against administrative overreach.

Part III:

9. The Hon'ble Karnataka High Court has consistently struck down orders where this separation of powers was breached:

A. M/s PRESIDENCY BUILDERS AND DEVELOPERS Versus THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT) 3, MANGALURU; THE COMMISSIONER OF COMMERCIAL TAXES GOVERNMENT OF KARNATAKA, BENGALURU; THE STATE OF KARNATAKA - 2025 (11) TMI 1987 - KARNATAKA HIGH COURT : The High Court quashed adjudication orders passed by audit officers under Section 73, mandating reassignment to an independent officer to preserve natural justice.

B. M/s RAJAPUR MINERALS Versus THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT) -2, KARNATAKA, THE JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEALS), THE JOINT COMMISSIONER OF COMMERCIAL TAXES (ADMIN), KARNATAK; THE BRANCH MANAGER STATE BANK OF INDIA, M/s CLARIYA ENTERPRISES - 2026 (2) TMI 1415 - KARNATAKA HIGH COURT : The High Court set aside the Order-in-Original, the subsequent Order-in-Appeal, and recovery garnishee notices. The matter was remitted to the Joint Commissioner of Commercial Taxes (Administration) to allocate the case to an independent proper officer for fresh adjudication starting from the reply stage.

C. M/s Sali Basavaraj v. The State of Karnataka & Ors. (supra), the High Court reaffirmed the principle in Rajapur Minerals (supra). Because the record established that the Deputy Commissioner of Commercial Taxes (Audit)-2 conducted both the audit and passed the adjudication order under Section 73(9), the adjudication order was quashed. The High Court remanded the matter for fresh adjudication by a proper officer other than the audit officer.

Part IV:

10. Can they be reopened after statutory deadlines expire? This ruling raises a practical dilemma: can taxpayers challenge older orders passed by audit officers where the statutory appeal deadlines have already expired?

11. Under Section 107(1) of the CGST/KGST Act, appeals must be filed within 3 months, extendable by 1 additional month under Section 107(4) upon showing sufficient cause (a maximum of 120 days). The Hon'ble Supreme Court (in Singh Enterprises v. CCE and related GST rulings) has settled that when a statute prescribes an outer limit for condonation, the appellate authority cannot condone delay beyond that period. A statutory appeal filed after the limitation window will be rejected on maintainability alone.

12. The extraordinary writ jurisdiction of the High Court is not governed by the Limitation Act. While writ courts generally require exhaustion of alternative remedies, established exceptions apply. The Hon'ble Supreme Court in plethora of cases has held that, an alternative statutory remedy is not an absolute bar where:

A. The order breaches principles of natural justice.

B The proceedings or order are wholly without jurisdiction / ultra vires.

An adjudication order passed by an officer disqualified by the rule against bias suffers from a foundational defect of authority, rendering the order void ab initio.

13 .Limitation cannot cure or validate an order that is fundamentally void for lack of competent, unbiased jurisdiction. High Courts apply the doctrine of delay and laches when exercising discretionary writ powers. A taxpayer who accepted an order, paid the demand without protest, and allowed years to pass without action may be denied relief due to acquiescence. Conversely, where the demand remains unpaid and the department initiates active recovery (such as bank attachments, garnishee notices under Section 79, or recovery letters under Form GST DRC-09), a continuing cause of action exists. This ongoing prejudice justifies invoking writ jurisdiction despite the passage of time since the original order.

Part V:

14. For taxpayers holding past adjudication orders passed by audit officers:

A. Filing an appeal beyond the 120-day limit under Section 107 results in a threshold dismissal on limitation, which complicates subsequent writ proceedings.

B. Frame the challenge on foundational jurisdictional defects, patent institutional bias, and breach of nemo judex in causa sua, citing Sali Basavaraj and Rajapur Minerals. Explicitly plead that the order is void ab initio, removing statutory limitation constraints.

C. Align the prayer with established High Court directions: request that the impugned order be quashed and the proceedings remitted to the administrative head for reassignment to an independent proper officer for fresh adjudication from the reply stage.

15. Justice requires both actual impartiality and the unambiguous appearance of impartiality. The investigation of records under Section 65 cannot merge into the quasi-judicial determination under Sections 73, 74, or 74A. When an auditor acts as the adjudicator, the statutory checks balancing state power and taxpayer rights collapse. As confirmed in Sali Basavaraj, tax administration must maintain a strict institutional firewall between its audit and adjudication wings. For orders concluded in violation of this principle, the constitutional protection of Article 226 remains open to correct jurisdictional errors and enforce fair administrative process, even when ordinary appeal periods have elapsed.

16. To break this cycle of executive defiance, the judiciary must strip officers of statutory "good faith" immunity and impose exemplary personal costs recoverable directly from their salaries, complemented by civil contempt citations and adverse entries in their service records for deliberate insubordination of binding precedents. Until individual accountability replaces institutional impunity, administrative authorities will continue to treat High Court rulings as mere case-specific inconveniences at the expense of honest taxpayer.

GST Officers are not Gods!

17. In a constitutional democracy, revenue officers are public servants whose salaries, infrastructure, and authority are funded directly by the very taxpayers they audit and adjudicate. When that relationship turns into an adversarial game of harassment, intimidation, or unrealistic revenue targets, the entire purpose of governance is inverted. When taxpayers "audit" the tax authorities, the illusion of administrative immunity shatters as procedural abuses, personal liability, and judicial scoldings force arrogant bureaucrats to answer to the very laws they claim to enforce.

Bottomline:

Why administration is unwilling to implement the repeated rulings of the same High Court is a billion dollar question? Is it to protect one man's dictatorship? Something smells foul within the internal corridors of the administration.