Adjudication Delay under GST- Growing Litigation and the Urgent Need for Systemic Reform

Introduction

One of the most serious and recurring problems under the Goods and Services Tax (GST) regime is the delay in adjudication of proceedings. Although GST was introduced with the promise of ease of doing business and time-bound tax administration, ground realities show a very different picture.

Across India, taxpayers are facing years of uncertainty due to delayed adjudication of show cause notices, incomplete proceedings, and prolonged departmental inaction. This delay is not merely an administrative lapse; it has direct constitutional, financial, and commercial consequences.

This article examines:

• Why are adjudication delays increasing under GST
• How such delays are leading to avoidable litigation
• What the Supreme Court of India has held on delayed adjudication
• Why urgent reforms are necessary to restore confidence in the GST system

What Is Adjudication under GST?

Under the GST framework, adjudication refers to the process by which the tax department determines:

• Tax liability
• Interest and penalty
• Legality of input tax credit (ITC)
• Alleged fraud, suppression, or misstatement

This usually begins with a Show Cause Notice (SCN) under provisions such as:

• Section 73 or 74 of the CGST Act, 2017
• Corresponding provisions under State GST Acts

The law envisages time-bound completion of this process. However, in practice, these timelines are frequently breached.

The Ground Reality: Where the System Is Failing

1. Show Cause Notices Without Conclusion

A common real-life situation is where:

• SCNs are issued
• Replies are filed promptly
• Personal hearings are completed

Yet, no adjudication order is passed for years.

During this period:

• Bank accounts may remain attached
• ITC remains blocked
• Business expansion becomes impossible

This prolonged uncertainty itself becomes a punitive measure, without any adjudicated finding.

2. Mechanical Extensions and Administrative Silence

In many cases, adjudicating authorities:

• Keep matters pending, citing “administrative reasons”
• Do not fix hearings for months
• Pass orders at the last moment without proper reasoning

Such practices defeat the purpose of a fair tax adjudication system.

3. Coercive Action Before Adjudication

Despite no final order:

• Recovery proceedings are initiated
• Garnishee orders are issued
• Registrations are suspended or cancelled

This approach forces taxpayers into writ litigation, burdening High Courts across the country.

Supreme Court of India on Delay and Arbitrary Tax Action

The Supreme Court has repeatedly held that tax administration must be fair, reasonable, and time-bound

1. Radha Krishan Industries v. State of Himachal Pradesh (2021)

The Supreme Court clearly held that:

• Provisional attachment and coercive measures cannot be routine
• Such actions must be backed by tangible material
• Arbitrary exercise of power violates Article 14 of the Constitution

The Court emphasised that tax recovery cannot precede proper adjudication.

2. Canon India Pvt. Ltd. v. Commissioner of Customs (2021)

Though arising under customs law, the principle squarely applies to GST adjudication.

The Supreme Court held:

• Jurisdictional discipline is mandatory
• Proceedings without lawful authority are void
• Administrative convenience cannot override statutory safeguards

Delayed or improperly conducted adjudication erodes the legitimacy of the tax system.

3. Mohit Minerals Pvt. Ltd. v. Union of India (2022)

The Court reiterated that:

• GST is founded on cooperative federalism
• Tax administration must not become oppressive
• Economic legislation must be interpreted in a manner that promotes certainty and business confidence

Adjudication delay directly undermines these constitutional goals.

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Composite Supply vs Mixed Supply under GST 2.0: A Practical Legal Guide

How Adjudication Delay Is Fueling GST Litigation

Due to departmental delays, taxpayers are compelled to:

• Approach the High Courts under Article 226
• Seek quashing of SCNs
• Challenge attachments and recovery actions

This has resulted in:

• Thousands of writ petitions
• Inconsistent interim orders
• Increased compliance and legal costs

Ironically, litigation arises not because of tax evasion, but because of administrative inaction.

Impact on Businesses and Professionals

For Businesses

• Working capital gets blocked
• Credit ratings suffer
• Investors hesitate due to unresolved tax exposure

For MSMEs

• Survival becomes difficult
• One pending adjudication can shut down operations

For Professionals

• Advisory roles turn into prolonged litigation
• Clients lose faith in administrative remedies

Why Reform Is No Longer Optional

Adjudication delay is not a minor procedural issue; it strikes at:

• Article 14 (Equality before Law)
• Article 19(1)(g) (Right to Trade)
• Article 21 (Right to Fair Procedure)

Without systemic reform, GST risks becoming:

• A litigation-driven tax regime
• A deterrent to business growth
• A source of constitutional challenges

Suggested Reforms: A Practical Roadmap

1. Mandatory Time-Bound Adjudication

• Strict enforcement of statutory timelines
• Automatic lapse of proceedings beyond prescribed periods

2. Accountability of Adjudicating Authorities

• Reasons must be recorded for the delay
• Internal review mechanisms within the department

3. Digital Tracking of Adjudication

• Online dashboards for SCN status
• Transparency in hearing and order timelines

4. Restriction on Coercive Action

• Recovery only after final adjudication
• Attachments to be the exception, not the rule

Read also-

Composite Supply vs Mixed Supply under GST 2.0: A Practical Legal Guide

Conclusion

Adjudication under GST was intended to be efficient, transparent, and fair. Unfortunately, delays have converted it into a source of harassment and litigation.

The Supreme Court has repeatedly cautioned against arbitrary and delayed tax action. It is now time for the GST administration to internalise these principles, rather than leaving taxpayers with no option but the constitutional courts.

Justice delayed in tax adjudication is not merely administrative delay—it is economic injustice.

Frequently Asked Questions (FAQs)

Q1. Can GST proceedings remain pending indefinitely?

No. GST law prescribes timelines. Indefinite delay is arbitrary and can be challenged before the High Courts.

Q2. Can recovery be initiated without adjudication?

As per Supreme Court principles, coercive recovery without proper adjudication is legally vulnerable.

Q3. What remedy does a taxpayer have against delay?

The taxpayer may approach the High Court seeking direction for time-bound adjudication or quashing of proceedings.

Q4. Is adjudication delay a violation of fundamental rights?

In many cases, yes. Prolonged delay affects Articles 14, 19, and 21 of the Constitution.