The same officer conducting a GST audit and then deciding the outcome of that very case — this is something that has troubled taxpayers for years. Think about it: the officer who examines your records, raises objections, and reaches his own conclusions — can he then fairly hear your side of the story? Clearly not.
It is precisely on this reasoning that the CBIC (Central Board of Indirect Taxes and Customs) took a decisive step. This GST new update came through Circular No. 169/01/2022-GST, dated 12 March 2022, which withdrew the adjudication powers of Audit Commissionerate and DGGI (Directorate General of GST Intelligence) officers. The officer who conducts a GST audit can no longer decide that same case.
This is not a minor procedural tweak. It is the formal establishment of a fundamental principle of natural justice — one that should have been enforced much earlier. This article explains why this change came about, what it actually means, and how you as a GST taxpayer can use it to protect your rights.
The GST system operates through two distinct functions — gst audit and adjudication. They carry different meanings, involve different officers, and follow different rules. Yet for many years, both functions frequently rested in the hands of the same officer.
GST Audit (Section 65, CGST Act): This is carried out by officers of the Audit Commissionerate. Audit means examining a taxpayer's records, returns, and documents — to verify whether the declared turnover is accurate, whether taxes have been correctly paid, whether ITC (Input Tax Credit) has been rightfully claimed, and whether any refund was claimed correctly. At the conclusion of the audit, the officer communicates findings in Form GST ADT-02.
GST Adjudication (Section 73/74, CGST Act): When an audit uncovers a discrepancy or error, a Show Cause Notice (SCN) is issued. The taxpayer must respond to this notice. A hearing follows. And then an adjudication order is passed. This entire process is quasi-judicial in nature — meaning it resembles a court proceeding where the taxpayer presents their case and the officer decides neutrally.
So what was the problem?
In numerous cases, the very audit officer — who had already formed his own conclusions — was also conducting the adjudication. Consider this: a judge who has already made up his mind — can he objectively hear your arguments? That is precisely the question of "institutional bias."
"Nemo judex in causa sua."
Written in Latin, this is one of the most foundational principles of administrative law. Its meaning is simple: no one can be a judge in their own cause.
When a GST officer conducts an audit, he arrives at a conclusion. He records objections. He formally notes his findings. If that same officer then proceeds to adjudicate — he becomes the judge of his own conclusions. This is a direct violation of nemo judex.
Circular No. 169/01/2022-GST applied this very principle to the GST framework by assigning audit and adjudication functions to separate wings of the department. Now, once an audit officer records his findings, his role ends there — adjudication is carried out by a separate, independent officer.
This is not merely an administrative change. It is an expression of constitutionalism — a direct application of Article 14 (equality before law) and the principles of natural justice.
This Circular, issued on 12 March 2022, amends Circular No. 31/05/2018-GST and stands as one of the most significant GST updates in recent years for taxpayers undergoing audit. Its key provisions are as follows:
Para 6 of the Circular clearly states: "The Central Tax officers of Audit Commissionerates and Directorate General of Goods and Services Tax Intelligence (DGGI) shall exercise the powers only to issue show cause notices. A show cause notice issued by them shall be adjudicated by the competent Central Tax officer of the executive Commissionerate in whose jurisdiction the noticee is registered."
In plain terms:
As per the Circular, when an entity's audit is conducted under Section 65 by Audit Commissionerate officers and objections are raised, the audit officer can issue an SCN under Section 73 or 74. But once the SCN is issued, the audit officer's role is over. Adjudication is handled by the Central Tax officer of the jurisdictional Executive Commissionerate — who independently examines the taxpayer's written reply, audit objections, and personal hearing submissions.
This is not merely theoretical. In practice, this separation changes a great deal for taxpayers.
1. A Genuine Hearing Becomes Possible
When the adjudicating officer is a different person, he is not already influenced by the audit findings. He reads your reply with a fresh perspective. He listens to your advocate's arguments. And then he makes an independent decision.
Section 75(4) of the CGST Act, 2017 mandates personal hearing as mandatory whenever an adverse decision is being contemplated. With the same officer handling both audit and adjudication, the "rule against bias" was being directly violated — proceedings were being driven from start to finish by the same authority.
2. Non-Speaking Orders Become More Vulnerable
Courts have repeatedly held that an adjudication order is not valid merely because it restates the SCN and the reply. An order must contain independent analysis — "application of mind" is essential.
The Madras High Court, in the case of Natural Remedies Pvt. Ltd., strongly reinforced due process requirements in audit-based assessments. The Court held that audit procedures under Section 65 are not merely directory but mandatory — and that non-compliance renders subsequent assessments legally vulnerable.
3. Challenging the SCN Becomes Easier
If the same audit officer attempted adjudication, that order is legally challengeable.
When an audit officer adjudicates in violation of the Circular, the adjudication becomes nothing more than a confirmation of the officer's own audit objections. The right to personal hearing becomes a formality. The adjudicatory process loses its credibility entirely. Such an order can be challenged on the grounds of violation of natural justice.
This is an important nuance that must be understood clearly — especially for businesses keeping track of every GST update that affects their compliance obligations.
For Central Tax (CGST): CBIC Circular 169/01/2022-GST is binding. This Circular applies directly to Central Tax Audit Commissionerate and DGGI officers. No Central Tax Audit officer can now adjudicate — this is administratively prohibited.
For State GST (SGST): The situation is somewhat different.
As per Page 62 of the Model All India GST Audit Manual 2023, the individual state has the discretion to decide whether the audit officer will subsequently adjudicate or whether a separate officer will handle it. This is a significant difference between the Central and State frameworks — and one that this GST new update does not uniformly resolve across all jurisdictions.
This means that in some states, the same officer may be permitted to conduct both GST audit and adjudication under State GST — whereas under CGST, this is entirely prohibited. If your case falls under State GST, check your state's GST Audit Manual or consult a tax professional.
This is not merely a matter of an administrative circular. Courts have repeatedly reinforced the same principle.
Swastik Plastics v. Commissioner of DGST (Delhi High Court, April 2022): The Delhi High Court restricted how far a competent authority could go — and clearly held that an adjudication order cannot be passed by the same authority that conducted investigation, search, or seizure.
Natural Remedies Pvt. Ltd. (Madras High Court, 2024): Judicial intervention became necessary here because the authority had not granted personal hearing and had not considered the taxpayer's reply before passing the order. The Court ensured that procedural lapses did not cause permanent prejudice to taxpayers.
Tokyo Zairyo India Pvt. Ltd. (Madras High Court, 2024): Here too, the Madras High Court demonstrated judicial commitment to natural justice principles in audit proceedings — taking into account the authority's failure to consider the reply before passing the order.
Allahabad High Court (2025): The Allahabad High Court held in a case that where hearing dates were fixed prior to the taxpayer's submission of the reply, the order could not be sustained. Under Section 75(4), if the last hearing date preceded the reply date, the authority was bound to fix a fresh date after receiving the reply.
Suppose your GST audit has been conducted. Objections have been raised. An SCN has been issued. And now the same audit officer is attempting to adjudicate as well. What do you do?
Step 1 — Identify the Issue First, confirm whether the adjudicating officer is the same as the one who conducted the audit. Check the officer's name and designation in the notice and order headers.
Step 2 — Raise a Formal Objection Either during the personal hearing or in your written reply, clearly state that this constitutes a violation of the separation of functions and a direct breach of CBIC Circular 169/01/2022-GST.
Step 3 — Options Remain Even After the Order If the order has already been passed, the option of filing a writ petition remains. Courts have set aside such orders where violations of natural justice have been established.
Step 4 — Consult a Tax Professional Procedural battles in GST adjudication are technical in nature. An experienced GST advocate or Chartered Accountant can guide you properly through the process.
Section 75(4): The Right to Personal Hearing
This is equally important and must not be overlooked.
Section 75(4) of the CGST Act clearly mandates that personal hearing is compulsory whenever an adverse order is about to be passed. This is not discretionary — it is mandatory.
In practice, the department sometimes treats this provision as discretionary. This mismatch between courts and actual administrative practice highlights the systematic disregard for natural justice principles.
Several High Courts have quashed orders where:
All of these are valid grounds on which relief can be sought.
No, there is no express statutory prohibition in the CGST Act itself. However, CBIC's administrative instructions are binding on departmental officers. The Board has consciously allocated audit functions to one wing and adjudicatory functions to another — which means adjudication by an audit officer would be contrary to the administrative framework and is challengeable.
This GST new update — Circular 169/01/2022-GST — was issued on 12 March 2022. It applies to Central Tax Audit Commissionerates and DGGI officers. Officers of the Audit Commissionerate can now only issue Show Cause Notices — adjudication is to be conducted by the competent Central Tax officer of the jurisdictional Executive Commissionerate.
Not necessarily. The CBIC Circular is binding on CGST officers. In State GST cases, the respective state's administrative decision governs — some states allow the same officer to handle both audit and adjudication, while others keep them separate. Check your state's GST Audit Manual or consult a tax professional.
Mandatory. Section 75(4) of the CGST Act, 2017 clearly mandates personal hearing before an order is passed — this is not discretionary. Courts have set aside orders where proper personal hearing was not granted.
You can file a writ petition before the High Court under Article 226 of the Constitution. Courts have recognised that where violations of natural justice occur in GST audit demand proceedings or where the tax department exceeds its jurisdiction, taxpayers can approach the High Court to challenge such defective proceedings. Consult a GST advocate immediately.
A non-speaking order is one that merely reproduces the SCN and the reply without any independent reasoning of its own. Courts have clearly held that generic findings without "application of mind" violate the constitutional standards of fairness under Article 14. Such an order can be set aside.
An audit officer adjudicating the same case — this was a practice that continued for years and systematically prejudiced taxpayers. An officer who examines your records, forms his own conclusions, and then sits in judgment over that very case is fundamentally unfair. It was a clear violation of the most basic principle of natural justice.
CBIC Circular No. 169/01/2022-GST formally addressed this problem for Central Tax — and remains one of the most taxpayer-friendly GST updates issued in recent years. The audit officer's role now ends once the SCN is issued. Adjudication is handled by a separate, independent officer who is bound to hear your case with a completely fresh perspective.
But awareness is essential. Many taxpayers still do not know that this is their right — that they can challenge the adjudication conducted by the same audit officer. If you are currently facing GST audit or adjudication proceedings, understand your rights, seek proper legal advice, and do not hesitate to approach the High Court if necessary.
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