Why ‘Audi Alteram Partem’ is the First Line of Defence Against Arbitrary GST Demands, Penalties, and Cancellations
Introduction: Not a Courtesy—A Constitutional Command
In GST adjudication, natural justice is not optional. The core principle — audi alteram partem (hear the other side) — ensures that taxpayers are not punished before being heard. Rooted in Article 14 of the Constitution and codified in Section 75(4) of the CGST Act, this right extends across GST proceedings – from registration cancellation and ITC denial to tax demands and provisional attachments.
Ignoring this right not only results in procedural illegality but also leads to orders being struck down in appeal or writ proceedings. Here’s how this principle works in practice, and how both taxpayers and officers must implement it.
Part I: Legal Foundations — Where the Right is Codified
| GST Provision | Nature of Proceeding | Requirement |
|---|---|---|
| Section 75(4) | General GST proceedings | Hearing is mandatory if adverse decision is proposed or hearing is requested |
| Section 73 / 74 | Tax demands (with/without fraud) | Detailed SCN + reply opportunity + hearing before final order |
| Section 76 | Tax collected but not paid | Mandatory SCN and hearing |
| Section 64 | Summary assessment | Hearing post-order to ensure fairness |
| Rule 142 | SCN and order formats | Use of DRC-01 and DRC-07 ensures formal service and ability to reply |
Part II: Judicial Guidance – Non-Compliance Means Nullity
Landmark Judgments Upholding Natural Justice:
| Court | Case Law | Held |
|---|---|---|
| SC | Binapani Dei, Maneka Gandhi, Oryx Fisheries | Even administrative actions with civil consequences require hearing |
| Gujarat HC | Repeatedly held that vague or template SCNs and lack of hearing are void ab initio | |
| Allahabad HC | Cancellation without personal hearing under Section 75(4) is non-est | |
| Madras & Kerala HCs | Set aside orders where evidence wasn’t shared or personal hearing denied |
"You cannot pass a ₹10 lakh demand ex parte and expect it to survive writ scrutiny."
Part III: Checklist – What Makes a Hearing ‘Meaningful’ (Not Just Formal)
| ✅ Essentials | ❌ Invalid Scenarios |
|---|---|
| SCN with clear allegations and annexed evidence | SCN with generic lines like “You are liable under Rule XX” |
| Time given to reply + share documents | Order passed within 1-2 days of notice |
| Personal hearing when requested or if major adverse action is contemplated | No offer of hearing, or hearing denied without reason |
| Officer reads, considers, and responds to defence | Decision already pre-decided or order copy matches the SCN word-for-word |
Oryx Fisheries Case:
“A notice which implies prejudgment of guilt is a mockery of natural justice.”
Part IV: Practical Application – When and How to Assert the Right
(A) For Taxpayers:
-
ALWAYS file a reply even if SCN looks weak – silence can be treated as admission.
-
Request personal hearing in writing.
-
Seek cross-examination where third-party statements form the basis of the demand (e.g. supplier statements).
-
If documents are not shared, record objection and request inspection or copies.
(B) For Officers:
-
Avoid cut-paste SCNs; be specific.
-
Attach inspection reports, statements, or e-way bills if relied upon.
-
Document attempts to serve notice and grant hearing – this helps defend ex parte actions.
-
In urgent matters (like provisional attachment), ensure post-decisional hearing.
Part V: Where This Right Is Most Relevant in GST
| Proceeding Type | Why Hearing Matters |
|---|---|
| Registration Cancellation | Impacts ability to do business – courts are strict |
| ITC Blocking / Denial | Financial effect is huge – must be backed by evidence and chance to rebut |
| Tax Demand > ₹5 lakhs | High courts often ask if natural justice was followed |
| Suspension or Asset Freezing | Must be followed by prompt hearing and written confirmation |
Conclusion: Natural Justice Is the Safety Net in GST
A functioning tax system must balance enforcement with fairness. The right to be heard ensures that taxpayers are protected from arbitrary actions and that officers take informed, defensible decisions.
It’s not just a procedural nicety – it is the heart of lawful GST adjudication. Both taxpayers and officers should view this as a compliance discipline, not a burden.
“A fair hearing may not always change the outcome — but it ensures the outcome can be respected and defended.”
