The Goods and Services Tax Appellate Tribunal (GSTAT), Ernakulam Bench, has held that a first appellate authority cannot send a GST dispute back to the original adjudicating authority for verification of documents or recalculation of tax liability.
The bench of Subramanya Rayaprol (Vice-President) and Ramamoorthi Sriram (Technical Member) observed that Section 107(11) of the Central Goods and Services Tax Act, 2017 expressly limits the appellate authority to confirming, modifying or annulling the order challenged before it. The provision specifically prohibits referring the case back to the adjudicating authority.
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The Bench set aside the appellate order to the extent it had referred parts of the dispute back to the original authority. The Joint Commissioner (Appeals) was directed to undertake the necessary verification at the appellate level and pass a fresh order after following the principles of natural justice.
The dispute concerned Peechattu Glass World, a registered taxpayer engaged in trading float glass and surface-ground or polished glass.
During scrutiny of the taxpayer’s returns for the financial year 2017-18, the GST authorities noticed several discrepancies. These resulted in the issuance of a show-cause notice dated March 21, 2023.
The notice was adjudicated through an order dated November 29, 2023, followed by a corrigendum dated December 11, 2023. The adjudicating authority confirmed the proposed tax and late-fee liabilities under Section 73 of the CGST and Kerala GST Acts, read with Section 20 of the Integrated GST Act.
Penalties of ₹70,056 under IGST and ₹60,550 under CGST were also imposed. In addition, interest of ₹5,15,634—comprising ₹2,57,817 each under CGST and SGST—was confirmed for delayed payment of tax.
Aggrieved by the order, the taxpayer approached the Joint Commissioner (Appeals), Kochi.
By an order dated October 9, 2024, the Joint Commissioner (Appeals) partly allowed the taxpayer’s appeal. The authority deleted an IGST demand of ₹2,93,300, together with the applicable interest and proportionate penalty.
However, instead of finally deciding the remaining disputed amounts, the appellate authority directed the taxpayer to furnish supporting documents before the original adjudicating authority.
The taxpayer was asked to produce documentary evidence supporting a reconciliation concerning the remaining IGST demand of ₹4,07,262. It was also directed to submit invoices and other material relating to its claim for transitional credit of ₹6,05,502 through TRAN-1.
The adjudicating authority was directed to verify the documents and delete any portion of the demand that was found to be unsustainable.
The Joint Commissioner (Appeals) further asked the original authority to examine whether the taxpayer was eligible for the conditional waiver of interest and penalty under Section 128A of the CGST Act, introduced through the Finance (No. 2) Act, 2024.
The Revenue challenged the appellate order before the GSTAT. It argued that the Joint Commissioner (Appeals) had violated Section 107(11) of the CGST Act and Rule 113(1) of the CGST Rules by returning the dispute to the adjudicating authority.
According to the department, the appellate authority had no power to remand the case. It should have verified the documents itself and passed a conclusive order.
The Revenue consequently requested the Tribunal to set aside the appellate order and direct the Joint Commissioner (Appeals) to complete the verification and decide the matter afresh.
The taxpayer opposed the appeal on the ground that the amount involved was below the ₹20 lakh monetary threshold prescribed in the CBIC circular dated June 26, 2024.
The Tribunal noted that Section 107(10) permits an appellate authority to allow an appellant to raise an additional ground where the omission was neither wilful nor unreasonable. Therefore, the Joint Commissioner (Appeals) was entitled to accept additional documents from the taxpayer.
However, after accepting those documents, the appellate authority could not ask the original adjudicating authority to verify them and then confirm or delete the demand.
The Bench observed that Section 107(11) authorises the appellate authority to conduct or cause any further inquiry considered necessary. After completing that inquiry, it must pass an order confirming, modifying or annulling the decision under appeal.
The Tribunal emphasised that the authority could call for documents and records from the parties, verify the figures and reach its own conclusion. It was not legally permissible to delegate that adjudicatory responsibility back to the officer whose order was under challenge.
“The power to remand has been expressly excluded by the legislature,” the Tribunal observed.
The GSTAT also referred to Section 107(12), which requires every appellate order to be in writing and state the points for determination, the decision on each point and the reasons supporting that decision.
In the present case, the Joint Commissioner (Appeals) had not reached a final conclusion regarding the remaining demands. Instead, the authority issued conditional directions stating that the demands could be deleted if the supporting documents were found to be satisfactory.
The Tribunal held that an appellate authority must pass a reasoned and conclusive order. It cannot leave the outcome dependent upon a future inquiry by the original adjudicating authority.
It said the appellate authority must decide whether the demand should be confirmed, modified or annulled “without using any ifs and buts” in its order.
The Bench further observed that once the appellate authority finds that the adjudication order cannot be sustained, it cannot return the matter to the original officer and provide the department with another opportunity to adjudicate the dispute.
Section 107 does not empower an appellate authority to give a “second chance” or “second inning” to the original adjudicating authority, it said.
The Tribunal held that relegating the taxpayer again to the adjudicating authority, without making an effort to conclude the dispute on the basis of the available record, was contrary to the statutory mandate.
The direction for verification and consequential modification of the demand was therefore declared void, illegal and beyond the jurisdiction of the appellate authority.
In reaching its conclusion, the GSTAT relied on several High Court rulings interpreting the scope of Section 107(11).
It referred to the Allahabad High Court’s decision in Kronos Solutions India Private Limited v. Union of India, which held that an appellate authority can only confirm, modify or annul an order and has no inherent power to remand proceedings.
The Tribunal also relied upon the decisions in Anand and Anand v. Principal Commissioner, CGST and Kanha Shree Steels v. Assistant Deputy Commissioner of CGST. In these cases, the Allahabad High Court held that the statutory prohibition against remand is mandatory and an appellate authority cannot provide another opportunity to the Revenue after finding deficiencies in the original order.
Reference was also made to the Calcutta High Court’s ruling in Shyam Traders v. State of West Bengal. That judgment held that an appellate authority must undertake any necessary inquiry itself and decide the matter on merits, as Section 107(11) expressly excludes the power to remand.
The Tribunal did not decide the taxpayer’s contention that the Revenue’s appeal was barred by the ₹20 lakh monetary limit prescribed by the CBIC.
It observed that the appellate order was illegal and void from its inception due to the jurisdictional defect. In view of that conclusion, the Bench found it unnecessary to examine the monetary-limit objection at this stage.
The GSTAT set aside the October 9, 2024 appellate order only to the extent that the disputed amounts had been referred back to the adjudicating authority for verification.
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