Justice Speaks Through Reasons: The Supreme Court's Guiding Light for GST Adjudication

1. Introduction – Why "Reason" Matters in Justice Delivery

In Indian jurisprudence, the principle of natural justice is not a mere procedural formality-it is the moral backbone of fairness, transparency, and accountability in governance. Among its cardinal components is the duty to record reasons for any decision affecting the rights, liabilities, or interests of an individual.

This duty is not confined to the judiciary. It extends to quasi-judicial authorities, tribunals, and even administrative bodies that wield statutory powers. The Supreme Court in the landmark case Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan (2010)-2010(09)LCX0280) emphatically declared that "reason is the soul of justice"-without it, decision-making becomes opaque, arbitrary, and constitutionally suspect.

Under the Goods and Services Tax (GST) regime, this principle has special significance. GST officers exercise quasi-judicial powers in areas such as:

• Assessment and Demand Orders (Sections 73 & 74 of the CGST Act)

• Cancellation of Registration (Section 29)

• Detention and Confiscation of Goods (Section 129 & 130)

• Refund Rejections (Section 54)

In all such proceedings, the absence of a speaking order-an order that narrates facts, examines evidence, applies law, and records reasons-can lead to constitutional challenges under Articles 14 and 21 for arbitrariness and denial of due process.

2. The Supreme Court’s Beacon – Kranti Associates Case

2.1 Case Background

In Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, the dispute arose from a property development matter. Orders passed by statutory authorities were challenged for lacking reasons. The Supreme Court, speaking through Justices G.S. Singhvi and Asok Kumar Ganguly, used the opportunity to deliver a comprehensive jurisprudential statement on the constitutional necessity of reasoned orders.

2.2 Core Holding

The Court held that reasons are indispensable for:

1. Fairness &Transparency – To demonstrate that decisions are not capricious.

2. Restraint on Arbitrariness – To ensure power is exercised judiciously.

3. Facilitating Appeals – To allow higher forums to effectively review the decision.

4. Public Confidence – To maintain trust in the system.

The Court laid down 15 guiding principles, stating:

"Reasons are the heartbeat of every conclusion. Without them, the order becomes lifeless."

3. The Fifteen Kranti Principles – Distilled for GST Context

The Supreme Court’s guidelines can be mapped directly to GST adjudication as follows:

4. Constitutional Backdrop – Articles 14 & 21 in GST Adjudication

The constitutional obligation for speaking orders rests primarily on:

• Article 14 – Equality Before Law

• Prohibits arbitrary state action. Orders without reasons are inherently arbitrary because they conceal the decision-making process.

• Article 21 – Protection of Life and Personal Liberty

• Due process includes fairness in legal proceedings. For GST taxpayers, livelihood and business continuity are integral to "life" under Article 21.

Judicial Precedent: In Maneka Gandhi v. Union of India (1978), the Supreme Court held that procedure must be "right, just, and fair"-which necessarily includes giving reasons.

5. Statutory Mandate under the CGST Act

While the Constitution supplies the moral and legal foundation, the CGST Act embeds this obligation in multiple provisions:

1. Section 73/74 – Determination of tax not paid/short paid

• Requires notice and order stating "grounds" for demand.

2. Section 29 – Cancellation of registration

• The order must specify reasons such as non-filing of returns, fraud, etc.

3. Section 129 – Detention/seizure of goods and conveyances

• Officer must state the contravention and legal provision invoked.

4. Section 107 & 112 – Appeals

• Appeal memorandum and decision both require disclosure of reasoning.

5. Rule 142(5) – Order summary in FORM DRC-07 must match detailed speaking order.

Observation: Courts have repeatedly quashed GST orders where the DRC-07 "summary" alone was issued without a reasoned order, terming it a violation of natural justice.

6. Practical Consequences of Non-Speaking Orders in GST

1. High Judicial Reversal Rate

• Orders lacking reasons are routinely set aside by High Courts, leading to wastage of administrative effort.

2. Increased Litigation

• Taxpayers are more likely to appeal vague orders, burdening appellate forums.

3. Revenue Impact

• Demand collapses when struck down for procedural infirmity.

4. Loss of Trust

• Businesses perceive GST enforcement as arbitrary, impacting voluntary compliance.

7. Case Law Illustrations in GST Context

While Kranti Associates is the touchstone, several GST-era judgments echo the same principle:

• Shree Arihant Logistics Pvt. Ltd. v. State of Assam [2025(07)LCX0474] – Gauhati HC quashed demand where only DRC-01 summary was issued without detailed SCN/order.

• Shyamalmay Paul v. Assistant Commissioner [2025(04)LCX0658] – Calcutta HC held denial of ITC without addressing taxpayer’s documents violated duty to give reasons.

• Arcon Project Pvt. Ltd. v. State of Bihar [2024(12)LCX0514] – Patna HC insisted that mismatch orders must follow CBIC Circular safeguards and give reasons.

8. Best Practices for GST Adjudicating Authorities

To align with constitutional and statutory mandates, GST officers should:

1. Narrate Facts Clearly – Brief but complete factual background.

2. Identify Issues – Frame precise questions for determination.

3. Record Evidence Considered – Mention documents, statements, and reports relied upon.

4. State Applicable Law – Cite sections, rules, notifications, and case law.

5. Apply Law to Facts – Demonstrate reasoning chain.

6. Conclude with Determination – Summarise findings with clarity.

7. Avoid Stereotyped Templates – Personalise orders to the case facts.

8. Digitally Sign and Date Orders – Maintain authenticity.

9. Taxpayer’s Perspective – How to Challenge Non-Speaking Orders

If faced with a GST order lacking reasons, a taxpayer may:

• File a Writ Petition under Article 226 citing Kranti Associates principles.

• Argue Violation of Natural Justice – No effective opportunity to rebut.

• Highlight Precedents where similar orders were quashed.
  Seek Remand for fresh adjudication with proper reasoning.

10. International Parallels – Reasoned Orders as a Global Standard

Many jurisdictions embed the same obligation:

• UK Administrative Law – "Duty to give reasons" is part of fair procedure.

• US Administrative Procedure Act – Requires agencies to provide "concise general statement" of basis and purpose.

• WTO Dispute Settlement – Panel/Appellate Body reports give detailed reasoning to support conclusions.

GST adjudication in India benefits from aligning with these norms, enhancing cross-border business confidence.

11. Conclusion – Walking the Bridge Between Power and Justice

The GST regime is a transformational tax framework aimed at seamless trade and transparent revenue mobilisation. But transparency in tax collection begins with transparency in decision-making.

Kranti Associates teaches us that reasoned orders are not a luxury-they are a constitutional imperative. In GST, where decisions can determine the survival of a business, reason is indeed the soul of justice.

A GST officer who passes a well-reasoned order does more than comply with the law-they uphold the rule of law itself. As the Supreme Court observed:

"If a quasi-judicial authority is not candid about its reasoning, it becomes impossible to know whether the decision was faithful to law or arbitrary."

Key Takeaway

In GST adjudication, a speaking order is the bridge between power and justice. Every adjudicator must walk that bridge, for without it, justice stands on shaky ground.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.