The Bombay High Court has ruled that an appeal under the GST Act cannot be summarily dismissed on the ground of an alleged shortfall in the mandatory pre-deposit without first giving the taxpayer a fair opportunity to explain or make good the deficit.
A Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna reaffirmed that denial of hearing on alleged shortfall violates principles of natural justice; Appellate Authority directed to decide appeal on merits after granting reasonable time to comply
The petitioner had filed an appeal before the Appellate Authority against a tax demand, depositing ₹8.62 lakh towards the mandatory pre-deposit. The Authority, however, held that 10% of the disputed tax amounted to ₹12.76 lakh, and dismissed the appeal citing non-compliance with Section 107(6) of the CGST Act, 2017.
The petitioner/assessee, G. Khanna & Company argued that there was no short deposit and that, even otherwise, the appeal could not have been rejected without an opportunity to clarify or cure the alleged deficiency. Reliance was placed on prior judgments in JEM Exporter v. Union of India, D.N. Polymers v. Union of India, and Delphi World Money Ltd. v. Union of India, where the Court had emphasized that procedural defects must be communicated through a defect memo, allowing reasonable time to rectify them.
The Bench observed that while the petitioner was heard on the merits of the appeal, no notice or opportunity was granted on the specific issue of shortfall in pre-deposit. The Appellate Authority, the Court held, had proceeded to dismiss the appeal without affording the petitioner a fair chance to demonstrate that the deposit was adequate or to make up any shortfall.
The Court reiterated “Justice cannot be denied for failure to comply with procedure without giving an opportunity to the appellant to rectify procedural defects. The Commissioner (Appeals) ought to have issued a defect memo before rejecting the appeal.”
Setting aside the impugned order, the High Court remanded the matter to the Appellate Authority.
The Court directed that the authority shall provide the petitioner an opportunity to establish that there was no shortfall. If a shortfall is found, the petitioner must be allowed four weeks to make good the balance. Only upon failure to comply within the prescribed time may the appeal be dismissed for non-compliance. Upon compliance, the Authority must decide the appeal afresh on merits, uninfluenced by prior findings.
The Bench clarified that it had not expressed any view on the merits of the tax dispute, and all issues remained open for adjudication by the Appellate Authority.
Case Details
Case Title: M/s. G. Khanna & Company Versus UOI
Case No.: Writ Petition No. 208 Of 2025
Date: 23/09/2025
Counsel For Petitioner: Mr Mahesh Raichandani, a/w Adv. Dhanishtha Kawale
Counsel For Respondent: Mr J B Mishra a/w Mr. Ashutosh Mishra
