An adjudication order passed under Section 73 by the same officer who conducted the Section 65 audit violates natural justice and is invalid.

By | September 11, 2026
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An adjudication order passed under Section 73 by the same officer who conducted the Section 65 audit violates natural justice and is invalid.
Issue
Whether an adjudication order passed under Section 73(9) by the same GST officer who conducted the audit under Section 65 and issued the Show Cause Notice under Section 73(1) is legally sustainable or violates the principles of natural justice.
Facts
  • Respondent 5 conducted an audit of the petitioner under Section 65 of the CGST/KGST Act, 2017.
  • Following the audit, Respondent 5 issued a Show Cause Notice (SCN) to the petitioner under Section 73(1).
  • Thereafter, Respondent 5 himself passed the final adjudication order under Section 73(9).
  • The petitioner challenged both the audit order under Section 65 and the consequential adjudication order under Section 73(9), citing a violation of natural justice due to the same officer acting as auditor, accuser, and adjudicator.
  • The fact that Respondent 5 conducted both the audit and the final adjudication remained undisputed.
Decision
  • An officer who conducts the audit under Section 65 cannot adjudicate the consequential demand under Section 73, as doing so violates the fundamental principles of natural justice.
  • Following the precedent set by the Coordinate Bench in Rajapur Minerals v. Deputy CCT (Audit) (W.P. No. 100290/2026, dated 25.02.2026), the adjudication order passed by Respondent 5 was quashed.
  • The Joint Commissioner was directed to assign the matter to a proper officer other than Respondent 5 for fresh adjudication under Section 73.
  • The proceedings were ordered to recommence from the stage of the petitioner’s reply to the Show Cause Notice, with an adequate opportunity for a personal hearing (ruled matter remanded).
Key Takeaways
  • Separation of Audit and Adjudication Roles: To ensure impartiality and eliminate bias, the officer who conducts an audit under Section 65 should not act as the adjudicating authority under Section 73 / Section 74 for the same matter.
  • Violation of Natural Justice: Combining the roles of auditor (investigator) and adjudicator (judge) in a single officer invalidates the resulting adjudication order on the grounds of procedural unfairness.
  • Remand for De Novo Proceedings: When an order is quashed solely due to an officer’s lack of neutral jurisdiction, proceedings revert to the SCN reply stage before an independent proper officer.
HIGH COURT OF KARNATAKA
Sali Basavaraj
v.
State of Karnataka
C.M. Poonacha, J.
WRIT PETITION NO. 107171 OF 2026 (T-RES)
AUGUST  29, 2026
V.S. Kalasurmath, Adv. for the Petitioner. Smt. Nandini Somapur, AGA for the Respondent.
ORDER
1. The present writ petition is filed seeking for the following reliefs:
a. Issue a writ in the nature of certiorari quashing impugned Audit Report issued in Form GST ADT-01 bearing No. DCCT/(A)2/DVG/T-2025-26 dated 16.10.2025 and the impugned intimation of tax ascertained in Form GST APL-01 bearing no. DCCT/(A)2/DVG/GST/ADJ/T-2025-26 dated 30.03.2026 issued by the Respondent No.5, vide Annexure-A and A1 respectively.
b. Issue such other writ, order or direction as this Hon’ble Court deems fit under the facts and circumstances of the case, in the interest of justice and equity.
2. In the present writ petition the petitioner has assailed the order dated 16.10.2025 (Annexure-A to the writ petition) passed in the course of an audit conducted under Section 65 of the Karnataka Goods and Services Tax Act, 20171 as well as the order dated 30.03.2026 passed under Section 73 (9) of the KGST Act (Annexure-A1 to the writ petition).
3. The Learned counsel for the petitioner contends that the audit which has culminated in the order dated 16.10.2025 was conducted by respondent No.5 and the Adjudication Order dated 30.03.2026 was also issued by respondent No.5.
4. Learned counsel for the petitioner submits that in a similar fact situation, Co-ordinate Benches of this Court in the case of Presidency Builders and Developers v. Deputy CCTes [W.P. No.28539 of 2025, dated 10.11.2025], NC: 2025:KHC:46499 , as well as in the case of Rajapur Minerals v. Deputy CCTes (Audit)- [W.P. No.100290/2026, dated 25.02.2026], NC: 2026:KHC-D:2987 , have allowed the writ petitions and granted reliefs.
5. It is forthcoming that in the case of Rajapur Minerals (supra), a co-ordinate Bench of this Court, allowed the writ petition and ordered as under:
“ORDER
i. The writ petition is allowed.
ii. The impugned Order-in-Original dated No.1 20.03.2024 passed by respondent (Annexure-E series) is hereby set aside.
iii. Consequently, impugned garnishee notice dated 04.10.2025 (Annexure-K) and impugned Form DRC-09 dated 0312.2025 (Annexure-L) are also quashed.
iv. The impugned order in appeal dated 27.06.2025 (Annexure-J) is also set aside.
v. The matter is remitted to the Joint Commissioner of Commercial Tax (Administration)-respondent No.3, who shall assign the matter to the proper officer other than respondent No.1 for fresh adjudication under Section 73 of the KGST Act.
vi. The matter shall be reconsidered from the stage of the reply submitted by the petitioner to the show cause notice.
vii. Liberty is reserved to the petitioner to file additional reply, and written documents submission.
viii. The concerned officer shall afford reasonable opportunity of hearing and pass a reasoned order in accordance with law.
ix. The petitioner shall appear before respondent No.3 on 10.03.2026 without waiting for any further notice. Failure to appear on the said date, shall result in automatic recall of this order.
6. It is not in dispute that the audit has been conducted by respondent No.5 and the adjudication has also been conducted by respondent No.5. In view of the said admitted position the relief sought for in the present writ petition is to be granted in terms of the judgment of the Coordinate Bench of this Court in the case of Rajapur Minerals (supra).
7. Hence, the following:
ORDER
(i) The order dated 30.03.2026 passed by the respondent No.5 (Annexure-A1 to the writ petition) is hereby quashed;
(ii) Respondent No.4-Joint Commissioner of Commercial Taxes (Admin) shall assign the matter to a proper officer other than respondent No.5 for fresh adjudication of the matter under Section 73 of the KGST Act.
(iii) For the said purpose, the petitioner shall appear before the respondent No.4 on 02.11.2026 at 03.00 p.m., without any further notice in this regard.
(iv) Liberty is reserved to the petitioner to file further reply to the show-cause notice dated 27.01.2026 issued under Section 73(1) of the KGST Act on or before the date of appearance before the respondent No.4 .
(v) The matter shall be reconsidered from the stage of the reply submitted by the petitioner to the show-cause notice dated 27.01.2026.
(vi) The concerned officer shall afford adequate opportunity of hearing to the petitioner and conduct further proceedings in accordance with law.