The Goods and Services Tax Appellate Tribunal (GSTAT), Kolkata Bench, has set aside an appellate order upholding a GST demand against an electrical goods trader, holding that the First Appellate Authority failed to identify the issues for determination, examine the taxpayer’s defence and explain the reasons for dismissing the appeal.

The Bench comprising Satya Gopal Chattopadhyay (Judicial Member) and Anindya Mitra (Technical Member) has observed that Section 107(12) of the Central Goods and Services Tax Act, 2017 requires an appellate order to contain the points for determination, the decision on those points and the reasons supporting that decision.

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The Tribunal remanded the matter for a fresh hearing and directed the First Appellate Authority to pass a reasoned order after giving the taxpayer adequate opportunity to produce supporting evidence. The exercise must be completed within six months from the date of communication of the Tribunal’s order. 

The dispute concerned Spandan Electrical, a trader of electrical goods operating in Hooghly district, West Bengal.

According to the factual background recorded in the judgment, a Revenue investigation team visited the taxpayer’s business premises and examined documents relating to outward supplies and GST payments. The department alleged that the taxpayer had concealed records of outward supplies to evade tax.

The investigating team seized documents and asked the taxpayer to produce books of account, bank statements and invoices for reconciliation. Following the taxpayer’s alleged failure to do so, a notice dated August 4, 2024 was issued under Section 74(1), alleging suppression of outward supplies worth ₹19,83,601 for financial year 2017–18.

The judgment records a combined CGST and SGST tax demand of ₹3,57,048.18, interest of ₹4,30,678.93, and a penalty of ₹8,76,998.

The taxpayer disputed the demand, describing it as cryptic, arbitrary and unsupported by a proper factual foundation. It also challenged the calculation of the alleged tax liability. 

The taxpayer’s principal defence was that the amounts treated by the department as receipts from outward supplies were actually advances received from customers for future supplies of goods.

It maintained that these receipts were recorded as customer advances in its books of account. According to the taxpayer, no corresponding delivery of goods took place during financial year 2017–18, and no final tax invoices were issued against those receipts.

On that basis, the taxpayer argued that the department had raised the demand without establishing that taxable supplies had occurred during the relevant financial year.

The taxpayer also challenged the invocation of Section 74(1), contending that there was no evidence of fraud, wilful misstatement or suppression of facts to justify proceedings under that provision.

These were the taxpayer’s contentions; the Tribunal did not decide whether the receipts were advances or whether GST was payable on them. 

The Adjudicating Authority confirmed the demand through an order dated January 20, 2025. The taxpayer subsequently filed an appeal under Section 107(1) of the CGST Act.

By an order dated October 14, 2025, the First Appellate Authority dismissed the appeal, stating that the taxpayer had failed to substantiate its defence with documentary evidence despite receiving reasonable opportunity.

Before the Tribunal, Sanbarta Koley, Chartered Accountant, representing the taxpayer, argued that the appellate authority had failed to consider the submissions concerning customer advances and had not explained why it rejected that defence.

He further submitted that the appellate authority had upheld the demand under Section 74 without examining whether there was evidence of fraud, wilful misstatement or suppression of facts.

Jhumpa Paul, Additional Commissioner, State GST, representing the Revenue, defended the appellate order and sought dismissal of the taxpayer’s appeal. 

After examining the appellate order and the documents available on the portal, the Tribunal found that the First Appellate Authority had neither stated the points for determination nor recorded reasons explaining how it reached its conclusion.

The Bench held that the authority should have independently evaluated the facts and passed a reasoned, speaking order. It should also have addressed the grounds raised by the taxpayer before rejecting the appeal.

The Tribunal observed that dismissing an appeal through a cryptic, non-speaking order without justifiable reasons violates the principles of natural justice.

It further noted that the absence of reasons touching the merits prevented the taxpayer from understanding why the appeal had been dismissed. Consequently, the appellate order could not be upheld. 

The Tribunal set aside the First Appellate Authority’s order and directed it to hear the appeal afresh, allow the taxpayer adequate opportunity to adduce evidence and issue a reasoned decision within the prescribed six-month period.

The ruling addresses the manner in which GST appeals must be decided. It does not finally cancel the underlying tax demand, accept the taxpayer’s explanation regarding customer advances, or determine whether Section 74 was correctly invoked. Those issues remain open for examination during the fresh appellate proceedings.

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