GST Payment Under Compulsion Cannot Be Construed as Voluntary: SC

1. Time & again, judicial forums have settled the proposition that issuance of a SCN sets the stage for a quasi-judicial proceeding and is legally bound to be disposed of & culminated by passing a final reasoned Order which is not just a formality as failure to pass such order, is in violation of natural justice & jeopardizes the taxpayer’s right to Appeal.

2. Recently¹, the Hon’ble Supreme Court has not only fortified the aforesaid legal proposition, but it has also concomitantly held as under-

I. Payment made under Compulsion Cannot be Construed as Voluntary or an Admission of Liability

a. Payment under protest, commercial compulsion or due to business exigencies does not amount to voluntary acceptance of liability & does not absolve the responsibility of the proper officer to pass an order concluding the proceedings.

II. Right to Litigate or Contest a Demand cannot be treated as Waived or Abandoned, Even by Election

b. Payment, by itself, cannot be treated as a waiver or abandonment of right to litigate, especially when the demand has been objected & there is a statutory mandate to pass an order and a corresponding right to appeal.

c. Payment only bars further coercive action, not adjudication.

d. Even by election, taxpayer cannot be treated to have waived his right against the illegality committed by the proper officer or acquiesced to the demand, as by the constitutional mandate under Article 265 of the Constitution, no tax can be levied or collected except with the authority of law.

e. Action of the proper officer must always be justifiable and fall within the four corners of law, as it is well settled that there can be no acquiescence in tax.

III. Final, Reasoned Order is Imperative to Conclude SCN Proceedings

f. Once objections are filed, adjudication is not optional, it becomes imperative to pass a speaking order to justify the demand of tax and penalty to safeguard the taxpayer’s right to Appeal.

g. Payment does not absolve the responsibility of proper officer to pass an order justifying the demand of tax and penalty.

h. Principles of natural justice mandating that when response to a SCN is submitted, it is to be considered & a reasoned, speaking order is to be rendered, are not a mere procedural formality, but a substantive safeguard ensuring fairness in quasi-judicial proceedings.

i. Fairness, transparency, and accountability are inseparable from the duty to provide reasons and failure to furnish reasons violates the principles of natural justice and renders the right of appeal or judicial review illusory²

IV. Other Reinforced Principles

j. Article 265 of the Constitution not only bars the levy of tax but also its collection, except with authority of law.

k. Between a written reply and an oral submission contrary to such written submission/reply, the written reply would prevail

It is to note that the said judgement deals with the provisions of Section 129 of the CGST Act however, the legal propositions settled by the Hon’ble Apex Court shall aid in adjudications across GST law. For any clarification on the above discussed matter, please discuss.

¹ M/s ASP Traders C.A. No. 9764/2025

² Reliance placed by the Hon’ble SC in the matter of Kranti Associates (2010) 9 SCC 496