GST Appellate Authority Can’t Enhance Tax Liability Without Notice and Hearing: Calcutta High Court

The Calcutta High Court has set aside, in part, an appellate order passed under the West Bengal GST regime after holding that the appellate authority unlawfully enhanced the taxpayer’s tax liability without giving an opportunity of hearing, in violation of Section 107(11) of the CGST/WBGST Act, 2017. The bench of Justice Om Narayan Rai observed that the original adjudication proceedings were strictly confined to three specified issues and did not involve any dispute regarding excess zero-rated supplies or enhancement of taxable turnover. Since the appellate authority derived its jurisdiction from the adjudication order under challenge, it could not introduce a completely new ground without following statutory safeguards. The writ petition was filed challenging an appellate order dated December 19, 2024, passed under Section 107 of the CGST/WBGST Act, which modified an earlier adjudication order dated September 8, 2023, issued under Section 73 of the Act. The original adjudication stemmed from a show cause notice issued on May 17, 2023, alleging discrepancies in GST returns—GSTR-1, GSTR-2A, GSTR-9 and GSTR-9C—for the period July 2017 to March 2018. The show cause notice, uploaded on the GST portal under the “Additional Notices and Orders” tab, went unanswered as the petitioner claimed to have no knowledge of it. The notice broadly alleged three issues: short payment of tax on outward supplies, short payment on inward supplies under reverse charge mechanism (RCM), and wrongful availment of input tax credit (ITC). While hearing the appeal, the appellate authority accepted the petitioner’s admission on two counts—outward supply tax and RCM liability—and annulled the demand relating to ITC reversal. However, it went beyond the scope of the original adjudication and held that the petitioner had allegedly claimed excess zero-rated supplies amounting to over ₹27 lakh. On this basis, the authority added the amount to taxable turnover and imposed additional GST at 18%, thereby enhancing the overall tax liability. The petitioner’s subsequent rectification application against this enhancement was also rejected, prompting the writ petition before the High Court. The principal issue before the Court was whether the appellate authority could enhance tax liability on a ground that was never part of the original show cause notice or adjudication order, without affording the taxpayer an opportunity to respond, as mandated by the second proviso to Section 107(11) of the Act. The Court emphasized that Section 107(11) explicitly requires that if the appellate authority contemplates enhancement of tax or penalty, the assessee must be given a reasonable opportunity of being heard. Relying on the earlier Division Bench ruling in Hriday Kumar Das v. State of West Bengal (2024), the Court held that failure to follow this mandatory procedure renders the appellate order unsustainable. The Court noted factual non-application of mind by the appellate authority, which had relied on figures from GSTR-3B without considering the petitioner’s explanation that the error had already been rectified in GSTR-9 and GSTR-9C. Such contentions, the Court held, were required to be examined before drawing adverse conclusions. The High Court accordingly set aside the appellate order only to the extent it enhanced the taxable turnover and imposed additional tax at 18%. The matter has been remanded to the appellate authority for limited reconsideration after granting the petitioner an opportunity to file an additional reply and be heard on the issue of alleged excess zero-rated supplies The order rejecting the rectification application was also quashed. The Court clarified that it had not examined the merits of the tax dispute and directed the appellate authority to decide the matter independently in accordance with law. No order as to costs was passed Case Details Case Title: Lakshmi Narayan Shah Vs. The State of West Bengal & ors. Case No.: WPA 6227 of 2025 Date: 14.01.2026 Counsel For Petitioner: Himangshu Kumar Ray Counsel For Respondent: Tanoy Chakraborty Click Here To Read Order Read More: Audit Delay Beyond Assessee’s Control Must Be Considered While Deciding Delay Condonation: Orissa High Court

GST Appellate Authority Can’t Enhance Tax Liability Without Notice and Hearing: Calcutta High Court

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