Facts of the Case:
The petitioner challenged the action of the GST authorities following an audit conducted under Section 65 of the CGST Act, 2017.

According to the petitioner, although the audit proceedings had been concluded, the Department had proceeded to effect recovery of the alleged tax liability directly on the basis of the audit findings, without initiating or completing adjudication proceedings under Section 73 or Section 74 of the CGST Act.

The Department, however, submitted that the impugned communication was merely an administrative communication conveying the audit findings and would, in due course, culminate in a show cause notice and adjudication proceedings.

Issue:

Whether the GST authorities can directly recover tax liability on the basis of audit findings communicated in Form GST ADT-02 under Rule 101(5), without undertaking adjudication proceedings under Sections 73 or 74 of the CGST Act?

Held:
The Court held that the petitioner’s apprehension that the Department had directly initiated recovery merely on the basis of the GST audit findings was misconceived. It noted that the impugned communication was issued pursuant to an audit conducted under Section 65 of the CGST Act, 2017 and was specifically traceable to Rule 101(5) of the CGST Rules, 2017. Rule 101(5) provides that, upon conclusion of an audit, the proper officer is required to communicate the audit findings to the registered person in FORM GST ADT-02, in accordance with Section 65(6) of the CGST Act. Thus, the communication was only an intimation of the findings arrived at during the audit and could not, by itself, be treated as a determination of tax liability or a recovery order.

The Court accepted the submission of the Department’s counsel that, in all probability, the communication was administrative in nature and would be followed by appropriate statutory proceedings, including issuance of a show cause notice where any tax liability was proposed to be determined. The Court therefore found no basis to presume that the Department would straightaway recover the amount mentioned in the audit findings without following the statutory procedure.

Importantly, the Court recognised the distinction between audit proceedings under Section 65 and adjudication proceedings under Sections 73 or 74. An audit enables the proper officer to examine the books, records and returns of the registered person and communicate discrepancies or findings. However, where the Department proposes to determine tax, interest or penalty that has not been paid or has been short-paid, the liability has to be determined through the appropriate statutory mechanism under the CGST Act. Consequently, the audit findings communicated in ADT-02 cannot themselves be equated with an adjudication order giving rise to an enforceable demand.

The Court further observed that Rule 101(5) itself contemplates communication of audit findings after completion of the audit. Since the impugned communication was clearly one issued under the said provision, the petitioner’s contention that the Department had already effected recovery without adjudication was premature. The Court specifically recorded that the petitioner’s apprehension regarding recovery merely on the basis of the information contained in ADT-02 was unfounded.

Accordingly, without adjudicating upon the underlying tax liability, the Court clarified that the GST Department would be required to take any further action strictly in accordance with the CGST Act. Since the communication did not, at that stage, constitute an adjudication order or an independent recovery order, the Court found no surviving cause for interference under writ jurisdiction and disposed of the petition.

In essence, the ruling establishes that an audit finding communicated through Form GST ADT-02 is not, by itself, a tax demand capable of recovery. Any proposed liability must thereafter be subjected to the applicable statutory proceedings and adjudication under the CGST Act.

Case Name: M/s. SVS Aqua Technologies LLP Versus Superintendent, Range IV, Division I (Shivajinagar), CGST Pune II Commissionerate & Ors. dated 31.08.2026