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Issues: (i) Whether the adjudication was vitiated because the same officer conducted the audit and thereafter issued the show cause notice and passed the order in original. (ii) Whether the consequential order in original and recovery proceedings could be sustained, or whether the matter required remand for fresh adjudication.
Issue (i): Whether the adjudication was vitiated because the same officer conducted the audit and thereafter issued the show cause notice and passed the order in original.
Analysis: The audit proceedings under Section 65(6) of the Karnataka Goods and Services Tax Act, 2017, the issue of the show cause notice, and the final adjudication all emanated from the same officer. Although the statute did not expressly prohibit this sequence, the Court held that adjudication must remain free from a reasonable apprehension of bias. Where the officer who framed the audit objections later adjudicates the same allegations, the decision-making process may lack the appearance of independence required by natural justice.
Conclusion: The challenge on the ground of reasonable apprehension of bias succeeded.
Issue (ii): Whether the consequential order in original and recovery proceedings could be sustained, or whether the matter required remand for fresh adjudication.
Analysis: Since the same defect tainted the order in original, the consequential recovery measures could not stand. The Court applied the same approach as in an identical matter and held that the impugned adjudication had to be set aside. The matter was therefore remitted for reconsideration by a different proper officer from the stage of reply to the show cause notice, with liberty to file additional material and with a requirement of a reasoned order after hearing the petitioner.
Conclusion: The order in original, the appellate order, and the recovery proceedings were set aside and the matter was remanded for fresh adjudication.
Final Conclusion: The writ petition succeeded to the extent of quashing the impugned adjudication and recovery actions, but the dispute itself was sent back for de novo consideration before a different officer in accordance with law.
Ratio Decidendi: An adjudication becomes vulnerable when the same officer who has conducted the audit and formed the initial objection later decides the same matter, because such a process creates a reasonable apprehension of bias and offends the requirements of natural justice; the proper course is fresh adjudication by another officer.
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