The Goods and Services Tax Appellate Tribunal (GSTAT), Jalandhar State Bench, has held that a GST appeal cannot be dismissed merely because the taxpayer or its authorised representative fails to appear for a hearing. Even where the appellate authority proceeds ex parte, it must examine the grounds of appeal and decide the dispute on merits through a reasoned order.
The bench comprising Suman Jain (Vice President) and Harpinder Pal Singh Ghotra (Technical Member) remanded the matter to the First Appellate Authority for fresh consideration after granting the company an opportunity of hearing.
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The dispute arose from invoices issued by the company’s Punjab GST registration to its own branches in other states during June 2020. According to the order, the life insurance company operated under one PAN and held 24 GST registrations across the country, including its registration in Punjab.
The Punjab registration reported outward supplies of ₹6,89,46,317 and charged IGST of ₹1,24,10,337 on these invoices. The company discharged this liability using input tax credit available in its Punjab account.
Following an investigation, the department alleged that there was no evidence of services actually being supplied from the Punjab registration to the branches in other states. It treated the transactions as paper invoices issued without an underlying supply, allegedly to pass on and fully utilise input tax credit accumulated in the Punjab branch’s electronic credit ledger.
On this basis, a show cause notice dated January 8, 2024, proposed a penalty of ₹1,24,10,337 under Sections 122(1)(ii) and 122(1)(xvii) of the GST law. These remained departmental allegations; the Tribunal did not decide their correctness.
The company filed its reply to the show cause notice on the common portal on February 22, 2024, and attended a personal hearing before the adjudicating authority on March 14, 2024.
The State Tax Officer, Ludhiana-3, subsequently passed an order dated April 29, 2024, confirming the entire proposed penalty. The company challenged this decision by filing a first appeal before the Deputy Commissioner of State Tax (Appeals), Ludhiana, on July 26, 2024.
The appeal was listed for hearing on October 13, 2025, but no representative appeared for the company. A further hearing was fixed for November 17, 2025.
For the second hearing, the company sought an adjournment and requested a fresh date. The Tribunal noted that the adjournment application was available on record. However, the request was not considered, and the appellate authority ultimately dismissed the appeal through its order dated December 22, 2025, upholding the original penalty.
Before the Tribunal, the company’s authorised representative, Chartered Accountant Archit Aggarwal, argued that the appellate order violated the principles of natural justice.
The company submitted that its request for an adjournment and a fresh hearing date had not been considered. It also contended that the appellate authority’s one-page order neither addressed its grounds of appeal nor explained why those grounds were being rejected.
Its principal submission was that Section 107 requires an appeal to be decided on merits through a speaking order, and does not permit dismissal merely because the appellant is absent.
The department defended the order, arguing that the company had been given two opportunities to appear. It maintained that the appellate authority had heard the departmental representative, examined the grounds of appeal and found no reason to interfere with the adjudicating authority’s decision.
The Tribunal examined whether an appellate order passed without an effective hearing and without recorded reasons could be sustained under Section 107 of the Punjab Goods and Services Tax Act, 2017, and the principles of natural justice.
It highlighted three statutory requirements. Section 107(8) requires the appellate authority to give the appellant an opportunity of being heard. Section 107(11) requires the authority to undertake such further inquiry as may be necessary before confirming, modifying or annulling the challenged order. Section 107(12) requires the written appellate order to identify the points for determination, record the decisions on those points and explain the reasons supporting them.
Applying these provisions, the Tribunal found that the appellate authority had failed to consider the company’s request for an adjournment and a fresh hearing date.
It also held that merely stating that the grounds of appeal had been “perused” and that the original order required no interference did not satisfy the obligation to give reasons under Section 107(12).
The Tribunal held that the statutory scheme does not permit an appeal to be dismissed solely because the appellant or its representative does not appear.
An appellate authority may proceed ex parte in appropriate circumstances. However, it must still consider the grounds raised, examine the record and decide the appeal on merits.
The bench found that the order under challenge was cryptic and non-speaking, contrary to Section 107 and the principle of audi alteram partem, which requires a fair opportunity to be heard.
The ruling therefore distinguishes between proceeding in the taxpayer’s absence and dismissing the appeal for that absence. The former still requires a reasoned adjudication of the dispute.
The Tribunal referred to the Supreme Court’s decision in Balaji Steel Re-rolling Mills v. Commissioner of Central Excise & Customs, which held that an appellate forum must decide an appeal on merits even when the appellant or its authorised representative is absent.
It also relied on the Patna High Court’s ruling in Purushottam Stores v. State of Bihar, which explained that confirming, modifying or annulling an order under Section 107(11) cannot be an empty or mechanical exercise. Even if an adjournment is refused, the appellate authority remains responsible for examining the grounds of appeal and deciding the matter on merits.
The bench further referred to the Punjab and Haryana High Court’s decision in Krishna Maruti Limited, dated September 25, 2025, holding that the GST appellate authority cannot dismiss an appeal for default or non-prosecution.
On the requirement to record reasons, the Tribunal cited Hudson Insurance Brokers Pvt. Ltd. v. Union Territory of Chandigarh, decided on April 17, 2026. As discussed in the Tribunal’s order, that ruling emphasised that quasi-judicial authorities must consider the taxpayer’s submissions and explain why they disagree with them.
Setting aside the appellate order dated December 22, 2025, the Tribunal directed the First Appellate Authority to reconsider the company’s appeal on merits and pass a speaking order after granting an opportunity of hearing.
The authority was directed to decide the appeal as early as possible, preferably within six months.
The Tribunal expressly left all questions concerning the underlying transactions and the penalty open for determination. Its decision therefore provides a fresh appellate hearing; it does not finally cancel the ₹1.24 crore penalty or uphold the disputed branch transactions.
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