Summary: Adjudication in GST refers to the process of resolving tax-related disputes or issues, such as classification or tax liability, through departmental authorities. The process typically begins with a Show Cause Notice (SCN) issued when discrepancies or irregularities are observed. Adjudication ensures that the taxpayer has an opportunity to present their case before any decision is made. Section 75 of the CGST Act, 2017 outlines general principles governing adjudication, including timelines for issuing orders, the opportunity for hearings, and restrictions on the number of adjournments. Tamil Nadu’s recent Circular No. 8/2024 provides detailed guidelines for adjudicating officers, emphasizing the qualities of a good GST order, such as clarity, fairness, and adherence to legal standards. It also outlines the structure of a model adjudication order, which must be logical, detailed, and follow established legal doctrines like “Nemo judex in causa sua” (Rule Against Bias) and “Audi Alteram Partem” (Rule of Fair Hearing). The success of any adjudication order lies in its ability to withstand judicial scrutiny at higher forums.
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Meaning of Adjudication under GST
Adjudication is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.
Adjudication proceedings in any assessment or penal proceedings is a very important aspect of tax administration. It provides an opportunity to the assessee to be heard and show cause before any action is taken in proceedings relating to him. Issue of show cause notice is a pre-condition to a proper adjudication which is an intimation to assessee of the proposed action by the department. The adjudicating officer adjudicates the show cause notice by considering the reply to show cause notice and other available or produced evidences by the noticee. A SCN should follow certain principles to be legally sustainable.
Section 75 of CGST Act, 2017 sets out the general principles governing the adjudication under the GST law. It provides for the principles and norms to be observed by proper officer carrying out any adjudication under section 73 and 74 or any other provisions of the GST law. Such provisions inter-alia includes the following:
a) Service of notice
b) Issuance of order
c) Time lines for issuance of order
d) Granting of opportunity of being heard
e) Granting of adjournment upto three times on request and against reasons to be recorded
f) Confirmation of demand strictly as per Show Cause Notice (SCN)
g) Grounds to be considered only as per show cause notice
h) Payment of interest irrespective of whether specified in order or not:
i) Adjudication proceedings deemed to be concluded if no order is issued :
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- Within three years in section 73 cases
- Within five years in section 74 cases
j) Period of litigation before appellate forums shall be excluded while computing the period of three or five years.
k) Any unpaid amount of self assessed tax and interest shall be recovered as per section 79 of CGST Act, 2017.
l) No penalties shall be imposed under any provision of the act if penalty has already been imposed under section 73 or 74 of the CGST Act, 2017.
Guidelines on GST Adjudication Proceedings
- Tamil Nadu Government has recently issued guidelines vide Circular No. 8/2024 (A1/553/2024/Ease of Business Cell) dated 29.08.2024 on the adjudication proceedings highlighting the qualities of a good order, show cause notice, proceedings etc including even the covering letter.
- These guidelines relate to :
- Qualities of a good GST order
- Role of adjudicating authority
- General contents expected in a show cause notice
- Points to be noted before issuance of orders
- Points to be noted while drafting the orders
- General contents of a model order arranged in logical sequence
- Further, these guidelines are meant for Adjudicating Authorities and can not be cited by any Proper officer as reference in the show cause notice or in any order.
Accordingly, following principles are worth noting.
Attributes of good adjudication order
A well drafted and legally sustainable adjudication order should have the following attributes:
(i) Clarity and Conciseness
(ii) Logical Reasoning
(iii) Fairness and Impartiality
(iv) Compliance with Legal Standards
(v) Consistency with Precedents
(vi) Clarity on Remedies
(vii) Just and Equitable Outcome
(viii) Protection of Rights
(ix) Finality and Enforcement
(x) Clarity on Costs
(xi) Timeliness
(xii) Correctness:
(xiii) Language and Structure
Doctrines to be followed
An order should observe the following doctrines or rules:
i) Nemo judex in causa sua or Rule Against Bias: his principle, often referred to as the Rule Against Bias, embodies the fundamental requirement that no person can judge a case in which they have a personal interest. It ensures that adjudicators and decision-makers remain impartial and free from any influence that could compromise their objectivity. This rule is essential for maintaining the integrity and fairness of judicial or administrative proceedings, emphasizing the need for justice to not only be done but also to be seen to be done.
ii) Audi Alteram Partem or Rule of Fair Hearing: The Audi Alteram Partem principle, meaning “hear the other side,” underscores the right of parties involved in a legal or administrative process to be heard and to present their case before a decision is made against them. It ensures that all affected parties have a fair opportunity to respond to allegations, present evidence, and challenge opposing arguments. This rule is crucial in safeguarding procedural fairness and upholding the principles of natural justice, ensuring that decisions are based on a balanced consideration of all relevant facts and arguments.
iii) Rule of Speaking Order or Reasoned Decision: The Rule of Speaking Order mandates that any decision-making authority must provide a reasoned explanation for its decisions. This requirement ensures transparency and accountability in administrative or judicial proceedings, allowing parties to understand the basis on which decisions are made. A reasoned decision not only enhances the legitimacy of outcomes but also facilitates effective review and appeal processes by enabling parties to identify errors or inconsistencies in the decision-making process.
Contents of Order
A well drafted adjudication order may contain the following contents, preferably in this sequence:
(a) Full address of the Authority including email and phone number.
(b) Statutory provision(s) which gives authority to pass the order.
(c) Quote the references (in chronological order)
Eg. Returns/statement of accounts/audit reports / Reconciliation Statement etc
(i) Notice for checking of accounts/audit
(ii) Adjournment requests
(iii) Adjournments granted
(iv) External information received/ details of e-way bill
(v) Statement recorded
(vi) Extract /narration in accounts
(vii) Invoices of Inward and Outward supply
(viii) Inspection reports
(ix) Cross examination request
(x) Pre-assessment/penalty notices
(xi) Replies filed by the tax payer
(d) Narrate the name and address, GSTIN, and brief business practice, person to whom the order is intended and the assessment year to which the order relates.
(e) The Adjudication order shall contain a bilingual preamble in Tamil and English for better understanding of the tax payers (Model enclosed as Annexure)
(f) Narrate the contents of the notice.
(g) Narrate tax payer’s reply.
(h) Personal hearing and Record of personal hearing.
(i) Briefly discuss and decide on the issues conceded by the taxable person,
(j) Issues framed on matters in which there is difference between adjudicating authority and the taxable person. Connected issues to be answered along with the main issue.
(k) Discuss issue-wise along with evidence and facts. Judgments, if any cited, shall be discussed in depth relating to the issue.
(l) Furnish the tax liability calculation. Quantify the tax, interest and penalty payable by the taxable person. If tax demand is yet to be paid, interest may not be quantified as it will be accruing every passing day till the date of payment. Hence, as regards interest not quantified cases, a mention that Interest at applicable rates as per Section 50 (1) or (3) would be payable will be quintessential.
(m) Specify the Authority before whom an appeal can be filed and the time limit within which it has to be filed.
The test of success of any order is that it must pass the judicial scrutiny at the higher forms and with reviewing authorities.
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