The GST Appellate Tribunal (GSTAT) Ernakulam Bench has held that a first appellate authority cannot direct the original adjudicating officer to verify a taxpayer’s documents and decide whether a disputed demand should be deleted.
The bench of Vice-President Subramanya Rayaprol and Technical Member Ramamoorthi Sriram has observed that under Section 107(11) of the CGST Act, the appellate authority must conduct any necessary inquiry and decide the appeal itself.
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The ruling arose from a departmental appeal against a rectification order passed in the case of K A Traders, a dealer in construction materials including cement and steel. A CGST audit covering 2017 to 2022 led to a show-cause notice dated June 16, 2023, proposing tax, interest and penalties. The adjudicating authority confirmed the demand on December 11, 2023.
The assessee challenged the demand before the Joint Commissioner (Appeals), who initially rejected its appeal in May 2024. The trader then sought rectification and submitted further documents. In a rectification order dated December 13, 2024, the Joint Commissioner (Appeals) granted relief of ₹1,18,889 out of a total disputed GST demand of ₹5,42,234.
For the remaining ₹4,23,345, however, the appellate authority directed the original adjudicating officer to examine the taxpayer’s documentary proof and delete any demand found to be legally untenable. It also allowed the trader to submit supporting documents before that officer.
The CGST Commissioner at Kochi challenged that direction before the tribunal. The department argued that Section 107(11) does not permit a first appellate authority to remand a case to the officer whose order is under appeal. If the documents and tax calculations required checking, the department submitted, the Joint Commissioner (Appeals) had to carry out that exercise and issue a fresh appellate decision.
K A Traders maintained that it had supplied the relevant documents to the appellate authority. It also argued that the department’s appeal involved an amount below the ₹20 lakh monetary threshold cited under a CBIC circular dated June 26, 2024.
The tribunal focused on what the rectification order had left undecided. It found that the Joint Commissioner (Appeals) had given no final determination on the ₹4,23,345 demand. Instead, the officer who had passed the original order was asked to verify the evidence and decide how much of that demand should survive.
Section 107(11), the bench said, allows an appellate authority to make further inquiry and then confirm, modify or annul the order under appeal. The same provision expressly bars it from referring the case back to the adjudicating authority that passed that order. The Joint Commissioner (Appeals) could have called for records and figures from both sides, checked the documents and reached a reasoned conclusion on the disputed amount, the tribunal observed.
The bench also referred to Section 107(12), which requires a written appellate order to state the points for determination, the decision on each point and the reasons for that decision. A direction to delete the demand if the documents were found satisfactory did not finally dispose of the dispute, it held.
“The JC (Appeals) ought to have undertaken further inquiry itself and then adjudicate on merits,” the tribunal said. Sending the matter back for verification amounted to giving the original authority another opportunity to decide the issue, despite the statutory prohibition on remand.
In reaching its decision, the bench considered High Court rulings on the same restriction, including Kronos Solutions India Private Limited, Anand and Anand, Kanha Shree Steels and Shyam Traders. It held that the remand direction in K A Traders’ case was beyond the Joint Commissioner (Appeals)’ jurisdiction.
The tribunal did not decide the taxpayer’s objection based on the monetary limit for departmental appeals. It said the jurisdictional defect in the rectification order made it unnecessary to examine that issue at this stage.
The bench set aside the rectification order only to the extent of the ₹4,23,345 demand and allowed the department’s appeal on that issue. It sent the matter to the Joint Commissioner (Appeals), directing that authority to verify the documents at its own level, follow the principles of natural justice and pass a fresh order. The order does not itself confirm or cancel the remaining demand.
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