Preamble
The power of best judgment assessment stands as one of the most compelling yet contentious provisions under the Goods and Services Tax (GST) framework. Section 63 of the CGST Act, 2017, empowers the proper officer to determine tax liability where a person, though liable, has failed to obtain registration or whose registration has been cancelled but continues to carry on business. The provision is meant not as an instrument of oppression, but as a statutory safeguard to secure the revenue in cases of default, while ensuring due opportunity to the taxable person before finalization of assessment.
- The Legislative Architecture of Section 63
Section 63 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) reads:
“Where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of being heard.”
This section is a parallel to Section 62, which deals with registered persons who fail to file returns. The difference lies in the status of registration — Section 63 deals exclusively with unregistered or deregistered persons who remain liable to tax. The “best judgment” concept mandates that the assessing officer base his determination not on conjecture but on relevant materials available or gathered, reflecting the jurisprudential balance between revenue protection and taxpayer rights.
- Procedural Fairness and the Right to be Heard
While Section 63 begins with a non-obstante clause overriding Sections 73 and 74, it nevertheless embeds a critical safeguard — the requirement of opportunity of hearing. This ensures that even a person in default is not denied natural justice. Rule 100(3) of the CGST Rules supplements this by mandating that the proper officer issue a notice in FORM GST ASMT-14, specifying grounds and materials on which the assessment is proposed, followed by an order in FORM GST ASMT-15.
Thus, before any estimation is finalized, the taxable person must be allowed to respond, produce evidence, or prove payment already made. Failure to do so would render the order vulnerable to challenge for procedural impropriety. The Orissa High Court in Laxmikanta Panigrahi v. Commissioner, CT & GST, Odisha (W.P.(C) No. 28377 of 2024, decided on 20 January 2025) held precisely this — that an assessment order under Section 63 issued against a registered dealer, who had already discharged tax, was invalid. The Court observed that:
“The order is bad as it is culmination of a proceeding against the petitioner being a registered dealer, and tax paid was reflected in the records, yet was omitted to be noticed. In view of the aforesaid, the impugned order is set aside and quashed.” (Laxmikanta Panigrahi v. Commissioner, CT & GST, Orissa High Court, Order dated 20.01.2025)
This ruling reinforces that the invocation of Section 63 cannot substitute due verification. Where registration exists or tax stands duly paid, any “best judgment” without factual foundation amounts to a miscarriage of justice.
- Jurisprudential Parallels: Understanding the Spirit of ‘Best Judgment’
The philosophy of best judgment assessment is not novel; it finds roots in common law principles and erstwhile tax legislations. It is meant to estimate the tax liability fairly and honestly based on available materials. Courts have repeatedly emphasized that such estimation must not be arbitrary or capricious but guided by prudence and objectivity.
In Wild Tree Resorts v. State Tax Officer (W.P.(C) No. 35124 of 2019, Kerala High Court, Judgment dated 19 December 2019), the Court upheld assessments under Section 62 (akin to Section 63) where the taxpayer had not filed returns, noting that the orders conformed to statutory process and contained a remedial window for voluntary compliance. The principle, thus, is consistent — best judgment assessment is valid when founded on material evidence and procedural compliance.
The Orissa High Court’s Panigrahi ruling adds a complementary dimension — that even a procedurally valid assessment will fail if jurisdictional facts are absent. The officer must first ascertain whether the person is “unregistered and liable” before invoking Section 63. Proceeding against a registered taxpayer under this provision is a jurisdictional error.
- Time Limitation and Finality of Assessment
Section 63 prescribes a clear limitation: the order must be issued within five years from the due date for furnishing the annual return under Section 44 for the relevant financial year. This mirrors the limitation under Sections 62 and 74, ensuring parity and preventing indefinite exposure of taxpayers to retrospective action.
Additionally, such assessments are appealable under Section 107 of the Act, and taxpayers retain the right to challenge both factual and procedural irregularities. However, courts generally refrain from entertaining writ petitions where alternate statutory remedies are available, unless there is patent illegality, lack of jurisdiction, or violation of natural justice. The Wild Tree Resorts case reiterated that High Courts would intervene only when foundational defects exist, not merely for substitution of assessment judgment.
- Implications and Administrative Prudence
The Panigrahi decision holds immense administrative value. Officers must exercise caution before invoking Section 63. The following guiding principles emerge:
- Verify registration status: Assessment under Section 63 applies only to unregistered persons.
- Base judgment on credible data: Estimation must rest on material evidence like turnover details, purchases, bank data, or third-party information.
- Provide hearing: The right to representation and hearing is inviolable.
- Avoid parallel proceedings: Where registration is active, proceedings, if required, must lie under Section 73 or 74 — not 63.
- Document satisfaction: The record must reflect satisfaction about liability and failure to register.
By adhering to these principles, the tax administration can ensure that assessments under Section 63 remain instruments of equity and deterrence, not arbitrariness.
Conclusion
Section 63 of the CGST Act serves as a legislative shield to protect the exchequer from deliberate non-registration but simultaneously guards taxpayers through procedural fairness. The judiciary has harmonized these twin objectives — safeguarding revenue while restraining administrative overreach. The Laxmikanta Panigrahi ruling exemplifies judicial vigilance against misapplication, underscoring that the “best judgment” must indeed be a judgment, not mere presumption. In the evolving GST regime, such balanced interpretations strengthen taxpayer confidence and reinforce the constitutional commitment to fairness in fiscal governance.
Disclaimer
This article is solely for academic and educational purposes. Readers are advised to seek professional legal advice before acting on any part of this discussion.
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