The Bombay High Court has set aside an order dismissing a cotton trader’s GST appeal, holding that an appellate authority must give the taxpayer an opportunity to address an alleged shortfall in the statutory pre-deposit before rejecting the appeal.
The bench of Justice M.S. Karnik and Justice Sandesh D. Patil found that the appellate authority had failed to consider ₹1.5 crore deposited during the investigation and appropriated against the tax demand. It observed that this amount exceeded the statutory pre-deposit required for filing the appeal.
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The petitioner/assessee, a registered cotton trader, came under investigation after officers of the Directorate General of Goods and Services Tax Intelligence, Nashik Regional Unit, gathered information concerning alleged non-payment of GST under the reverse charge mechanism on cotton purchased from agriculturists.
The officers conducted a search under Section 67 of the Central Goods and Services Tax Act, 2017. The alleged GST liability was quantified at ₹14,77,57,828, following which a show cause notice was issued.
The adjudicating authority confirmed the demand and appropriated ₹1.5 crore already deposited by the trader against the tax liability.
The trader electronically filed an appeal on February 3, 2025. However, the Commissioner (Appeals), CGST and Central Excise, Nashik, rejected the appeal by an order dated May 19, 2026.
The trader argued that the authority had overlooked the ₹1.5 crore paid during the investigation, even though the adjudicating authority had already adjusted that payment against the demand.
The taxpayer maintained that the deposit exceeded the statutory pre-deposit requirement and relied on a circular dated July 11, 2024, in support of its contention.
It further argued that the dismissal violated the principles of natural justice because the appellate authority had issued no defect memo or notice and had provided no opportunity to explain or remedy the alleged deficiency.
The Revenue defended the appellate order, contending that it suffered from no error and that the appeal had been rightly rejected.
After examining the impugned order, the High Court recorded that it was undisputed that no defect memo, notice or opportunity had been given to the taxpayer before dismissal of the appeal.
The Bench held that where an appeal is proposed to be dismissed because of a shortfall in pre-deposit, the appellant must be given an opportunity to address the deficiency. The taxpayer should be allowed to explain compliance with the requirement or make good any shortfall before the appeal is rejected.
The Court separately noted that the trader had already deposited ₹1.5 crore during the investigation, an amount exceeding the statutory requirement for filing the appeal. The appellate authority’s failure to consider this payment was a material omission.
The ruling therefore addressed both the absence of procedural opportunity and the failure to examine a deposit already made and appropriated against the demand.
The High Court quashed the Commissioner (Appeals)’ order dated May 19, 2026, and directed the authority to give the taxpayer a fresh hearing, especially on the issue of pre-deposit.
The appellate proceedings must be decided within 12 weeks from the date the High Court’s order is produced before the authority.
The Court directed the taxpayer’s authorised representative to appear before the appellate authority on October 21, 2026, at 11 a.m., after which further proceedings would commence.
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