Principles Of Natural Justice Cannot Be Disregarded During Adjudication Under Provisions Of CGST Act: Kerala HC

The Court was considering whether failure to provide opportunity to cross-examine witnesses whose statements were relied upon by the proper officer in adjudication proceedings against the assessee under Section 74 (9) of the CGST Act would amount to violation of principles of natural justice.

The Division Bench of Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. observed that in appropriate cases, opportunity of cross examination has to be provided to the assessee. It also clarified that right to cross-examine does not extend in respect of all witnesses.

“In conclusion, we find that the stand of the appellants that the principles of natural justice need not be followed during an adjudication under the provisions of the CGST Act is clearly untenable. In the light of the principles expounded by the Supreme Court in Union of India & Another v. Tulsiram Patel (1985) and Krishnadatt Awasthy v. State of M.P. and Others (2025), we hold that in appropriate cases, extending an opportunity of cross-examination in a proceedings under Section 74(9) of the CGST Act 2017 is an integral part of the principles of natural justice, a violation of which will render the proceedings void", stated the Court. 

Section 74 of the CGST Act prescribes the procedure for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts. Section 74 (9) states that the proper officer on consideration of representation made by the assessee can determine the tax, interest and penalty payable and issue an order.

In the facts of the case, adjudicating authorities have filed this writ appeal challenging the order of the single judge wherein it was held that denial of right to cross examine persons who gave statements against the assessee would amount to principles of natural justice.

The adjudicating authorities submitted that there was no requirement to follow principles of natural justice in an adjudication proceedings, since the the CGST Act does not contemplate it. It can argued that opportunity to cross examine witnesses cannot be sought as a right.

On the other hand, the assessee submitted that he could have been provided an opportunity to cross examine those witnesses whose statements were relied upon by the proper officer.

The Court noted that the adjudication against the assessee was made by relying upon statements of third parties recorded by the proper officer. It thus stated that if the assessee has to provide an effective representation, then he must be aware of the basis of allegations against him. Court added, “It was therefore imperative for the proper officer to have granted the opportunity of cross-examination to the petitioner.”

The Court further stated that it is a settled law that principles of natural justice must be followed in every quasi-judicial proceedings.

Court said, “The rule of natural justice is the tenet of every adjudication proceedings, a violation of which renders the proceedings void. When courts are called upon to decide the validity of quasi-judicial proceedings on the ground of violation of principles of natural justice, it cannot shut its eyes and adopt a pedantic approach and hold that unless the said principle is specifically extended under plenary legislation or the rules framed under it, the insistence of the principles is not mandatory.”

Referring to the Apex Court decision in Krishnadatt Awasthy (2025), the Court stated that principles of natural justice is fundamental to procedural fairness. The Court also referred to the decision in Aureliano Fernandes v State of Goa and Others (2024) to state that extension of the principles of natural justice is not an empty incantation and forms the basis of Article 14. Relying upon various precedents, the Court stated that non- extension of an opportunity to cross-examine would render proceedings invalid since it is integral to the principles of natural justice.

As such, the writ appeal was dismissed.

Counsel for Appellants: Advocate R Harishankar

Counsel for Respondents: Advocate Jaikumar Seetharaman

Case Title: The Joint Commissioner v Nishad K U

Case No: WA NO. 303 OF 2025

Citation: 2025 LiveLaw (Ker) 163