The Goods and Services Tax Appellate Tribunal (GSTAT), Surat Bench, has dismissed a departmental appeal seeking restoration of a penalty of ₹22,155, holding that mere disagreement with an appellate order or the involvement of statutory interpretation cannot justify bypassing the monetary limit prescribed for departmental appeals.
The bench of Sanjaykumar Dwivedi (Judicial Member) and Rameshkumar G. Hadvani (Technical Member) has observed that the appeal fell below the ₹20 lakh threshold under CBIC Circular No. 207/1/2024-GST dated June 26, 2024, and did not satisfy any of the specified exceptions.
The issue raised was whether relief under Section 128A of the Central Goods and Services Tax Act, 2017, can be granted in appellate proceedings without the taxpayer filing the prescribed application.
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Background: GST Return Mismatch Led to Tax Demand and Penalty
The proceedings originated from a show cause notice dated December 26, 2023, issued to the alleging short payment of GST amounting to ₹2,21,556. The alleged discrepancy arose from a comparison between the tax liability reported in GSTR-1 and the liability discharged through GSTR-3B.
The adjudicating authority confirmed the entire tax demand along with interest and imposed a penalty of ₹22,155. The taxpayer challenged that order before the Additional Commissioner (Appeals), CGST, Vadodara.
After examining the reconciliation statement, the appellate authority identified differences of ₹1,07,996 for December 2018 and ₹1,79,997 for March 2019.
The tribunal noted that these figures totalled ₹2,87,993, although the show cause notice had demanded only ₹2,21,556. However, the correctness of the reconciliation was not an issue in the departmental appeal.
Credit Note Explained March 2019 Difference
For March 2019, the appellate authority found that the discrepancy arose because a credit note involving tax of ₹1,80,000 had not been reported in GSTR-1. The error was stated to have been rectified in April 2019.
After accounting for the credit note, the appellate authority dropped the demand relating to that period. The department did not challenge this part of the decision before the tribunal.
For December 2018, the taxpayer had paid the short-paid tax of ₹1,07,996 through DRC-03 dated December 29, 2020. Interest was subsequently paid through DRC-03 dated January 31, 2025.
The appellate authority extended the benefit of Section 128A and dropped the penalty. The department’s appeal was confined to this penalty relief.
Department Challenged Relief Without Prescribed Application
The department argued that the appellate authority had extended Section 128A relief without ensuring compliance with the prescribed procedure.
It relied on Circular No. 238/32/2024-GST dated October 15, 2024, and Notification No. 20/2024-Central Tax dated October 8, 2024, contending that the taxpayer was required to file the prescribed application before receiving the benefit.
Although Section 128A provides relief from interest as well as penalty in qualifying cases, the taxpayer had already paid the interest. Consequently, the dispute before the tribunal concerned only the penalty of ₹22,155 imposed in the original adjudication order.
Before considering that substantive issue, the tribunal examined whether the departmental appeal was permissible under the monetary-limit circular.
Penalty Amount Alone Relevant to Appeal Threshold
The tribunal referred to Section 120 of the CGST Act, which empowers the Central Board of Indirect Taxes and Customs to fix monetary limits for departmental appeals. It also referred to Section 168, under which officers must follow the Board’s directions issued for uniform implementation of the Act.
The June 26, 2024 circular, reproduced in the order, prescribes monetary limits of ₹20 lakh for appeals before GSTAT, ₹1 crore before High Courts and ₹2 crore before the Supreme Court, subject to specified exclusions.
For disputes concerning only the imposition of a penalty, the circular requires the penalty amount to be considered when applying the monetary limit.
Since the department sought restoration of a penalty of ₹22,155, its appeal was substantially below the ₹20 lakh threshold applicable before GSTAT.
Calling an Order “Contrary to Law” Does Not Establish an Exception
In its grounds of appeal, the department acknowledged that the penalty was below the prescribed threshold but maintained that the appellate order was contrary to law and that its legal validity required examination.
The tribunal held that this assertion did not bring the appeal within any of the six exclusions under paragraph 4 of the circular.
The appeal did not identify a provision, rule, notification or circular that had been declared ultra vires. It also did not establish an applicable exception concerning valuation, classification, refunds or place of supply, adverse comments or costs against the department, or a determination by the Board that further litigation was necessary in the interest of justice or revenue.
The tribunal reasoned that merely considering an appellate order legally incorrect cannot justify an appeal below the monetary threshold. Otherwise, the policy of reducing unnecessary litigation would lose its practical effect.
Statutory Interpretation Cannot Become a Blanket Exception
During the hearing, the departmental representative relied on the residuary exclusion covering other issues that are recurring in nature and/or involve interpretation of statutory provisions, rules, notifications, circulars or instructions.
The tribunal considered this argument even though it had not been specifically raised in the filed grounds of appeal.
It rejected an interpretation broad enough to allow every dispute involving a legal question to escape the monetary limit. Most disputes reaching GSTAT would require interpretation of some provision, the bench observed. If that alone were sufficient, the monetary thresholds would become ineffective.
The tribunal emphasised that the circular aims to conserve judicial resources, expedite disposal of pending cases and encourage prudence in departmental litigation.
Nationwide Amnesty Scheme Did Not Establish Recurring Impact of This Dispute
The bench distinguished between the nationwide implications of the Section 128A amnesty scheme and the narrower question raised in this appeal.
The specific issue was whether an appellate authority could grant Section 128A relief without the prescribed application. The department had not shown that this question arose in several pending cases, affected a large number of matters or had a recurring or cascading revenue impact.
According to the tribunal, the wider scope of the amnesty scheme could not, by itself, establish that this particular procedural dispute justified an exception to the monetary limit.
The bench explained that invoking the residuary exception requires prudence. Further litigation could be justified where an issue has wider implications and a substantial impact on revenue interests, but the department is not compelled to challenge every order regardless of the amount or impact involved.
Non-Filing of Appeal Does Not Mean Acceptance of Legal Position
The tribunal also highlighted the safeguard under Section 120: a departmental decision not to appeal because of the monetary limit does not amount to acceptance of the disputed legal position.
It referred to the circular’s clarification that cases in which appeals are not filed pursuant to the monetary-limit instructions do not acquire precedent value merely because the department refrains from challenging them.
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