Facts of the Case:

In this case, the petitioner challenged an Order-in-Original dated 16.01.2025 imposing penalties under Section 122(1)(ii), (vii), (xii), (xvi) and (xvii) of the CGST Act, along with the Order-in-Appeal dated 28.01.2026 affirming the same. The dispute arose from a show cause notice dated 21.05.2024 proposing imposition of penalties under Section 122 of the CGST Act. The petitioner contended that Additional Commissioner, who ultimately adjudicated the show cause notice and imposed penalties, had earlier examined and approved the investigation report recommending initiation of prosecution proceedings under Section 132 of the CGST Act on the very same facts. The investigation report prepared by the Deputy Commissioner bore the endorsement of having been carefully examined and approved by the said Additional Commissioner.

The petitioner argued that the same officer having participated in the investigative and approval process and thereafter acting as the quasi-judicial adjudicating authority created a reasonable apprehension of bias and violated the fundamental principle that no person should be a judge in his own cause. Reliance was placed on the Supreme Court’s decision in Ashok Kumar v. State of Haryana and a recent Rajasthan High Court ruling on similar principles.

Issue:

Whether an adjudication order imposing penalties under the CGST Act is vitiated when the officer acting as the quasi-judicial authority had earlier approved the investigation report and prosecution proposal arising from the same set of facts, thereby giving rise to a reasonable apprehension of bias and violation of principles of natural justice.

Held That:

The Rajasthan High Court allowed the writ petition and set aside both the Order-in-Original dated 16.01.2025 and the Order-in-Appeal dated 28.01.2026. The Court observed that the investigation report recommending prosecution had been approved by the same Additional Commissioner who subsequently acted as the quasi-judicial authority and adjudicated the show cause notice. Such an arrangement, according to the Court, undermined the very foundation of an independent and impartial adjudicatory process.

The Court held that although it was unnecessary to determine whether actual bias or prejudice had occurred, the reasonable apprehension of bias in the mind of the taxpayer could not be ignored when the same individual was involved in approving the investigation and thereafter deciding the matter judicially.

Relying on the settled doctrine that justice must not only be done but must also appear to be done, the Court concluded that the adjudication process stood vitiated. Accordingly, the matter was remanded for fresh adjudication with a specific direction that the roles of investigator, approving authority and quasi-judicial officer should not be discharged by the same individual. The Court clarified that it had not examined the merits of the penalty proceedings and left all substantive issues open for reconsideration by the competent authority.

Case Name: Gajmukhi Bullion v. Additional Commissioner, Central Goods and Service Tax dated 17.07.2026

To read the complete judgement 2026 Taxo.online 2066