The Orissa High Court has set aside an appellate order passed under the Goods and Services Tax (GST) law after finding that an error in Form GST DRC-07 incorrectly reflected an interest demand as “tax,” by compelling the taxpayer to make an unwarranted pre-deposit for filing a second appeal before the GST Appellate Tribunal. These mistake would cause serious prejudice to the assessee, the Court remitted the matter to the appellate authority for fresh adjudication on merits. 

The Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman has observed that directing the petitioner to approach the GST Appellate Tribunal despite the defective appellate order would not serve the ends of justice, particularly when the online filing system would insist upon a pre-deposit calculated on an amount wrongly shown as disputed tax.

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The petitioner company was subjected to a GST audit under Section 65 of the CGST/OGST Act for the financial year 2017-18. During the audit, the department alleged that the company had wrongly availed Input Tax Credit (ITC) amounting to ₹6.08 lakh in relation to exempt supplies.

According to the record, the company had voluntarily reversed the ineligible ITC in two stages—partly through Form DRC-03 and the balance through GSTR-3B. However, the department subsequently issued a show cause notice seeking interest of ₹1.87 lakh for delayed reversal of ITC and also proposed penalty proceedings under Section 73 of the GST Act. 

Despite the taxpayer’s explanation that the audit objection was unsustainable, the adjudicating authority confirmed the demand, imposing: Interest: ₹1,87,093 and Penalty: ₹60,845.

The taxpayer’s appeal under Section 107 of the GST Act was dismissed by the Additional Commissioner (Appeals), leading to the present writ petition before the High Court. 

Before the High Court, the petitioner argued that interest under Section 50(3) is attracted only where wrongly availed ITC has also been utilised, and that the appellate authority had failed to properly examine this legal issue.

The petitioner also relied upon the subsequent insertion of Section 128A of the GST Act, contending that interest and penalty relating to the proceedings for FY 2017-18 had become liable for waiver.

On the issue of penalty, the company submitted that it had voluntarily reversed the ITC once the audit pointed out the discrepancy, and therefore imposition of penalty was unwarranted in light of settled judicial principles laid down by the Supreme Court. 

The GST Department argued that the writ petition was not maintainable because the petitioner had an effective statutory remedy by way of appeal before the GST Appellate Tribunal under Section 112 of the GST Act.

According to the Department, disputed factual questions—including whether ITC had been wrongly availed and whether interest was correctly payable—ought to be decided by the statutory appellate forum rather than in writ jurisdiction. 

While examining the record, the High Court noticed a significant discrepancy.

Although the adjudication order had demanded only interest and penalty, the corresponding Form GST DRC-07incorrectly displayed the interest amount of ₹1,87,093 under the “Tax” column instead of the “Interest” column.

This clerical error assumed considerable significance because an appeal before the GST Appellate Tribunal requires a pre-deposit calculated on the remaining disputed tax under Section 112(8). Since the portal treated the interest amount as tax, the taxpayer would have been compelled to deposit an amount which was not legally required merely to maintain the appeal. 

During the pendency of the writ proceedings, the Superintendent exercised powers under Section 161 of the GST Act and issued a rectification order correcting the DRC-07 by reclassifying the amount from “Tax” to “Interest.”

However, the appellate order passed under Section 107 remained unaltered because the statutory time limit for rectification by the appellate authority had already expired.

Consequently, although the original adjudication order stood corrected, the appellate order continued to reflect the erroneous position, making it practically impossible for the taxpayer to file an appeal before the GST Appellate Tribunal without making an unnecessary pre-deposit. Even the Department conceded this practical difficulty before the Court. 

The Court observed that ordinarily disputed questions regarding interest liability and penalty under Section 73 ought to be examined by the statutory appellate mechanism.

However, it held that the present case presented an exceptional circumstance because the clerical error in the appellate record effectively deprived the petitioner of an efficacious appellate remedy.

The Bench held that judicial intervention under Article 226 was warranted.

Allowing the writ petition, the Orissa High Court set aside the Order-in-Appeal dated 29 September 2025 passed by the Additional Commissioner (GST Appeals); Remitted the appeal back to the appellate authority for fresh adjudication on merits;

The court directed the appellate authority to decide the matter afresh, independently and in accordance with law, after granting the petitioner an opportunity of hearing, without being influenced by its earlier order.

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