“GST Appeals: A System Where Even Favourable Orders Are Not Final”

Introduction

In GST litigation, Section 107 of the CGST Act, 2017 creates an uncommon situation: both the taxpayer and the department can file a first appeal. This is a sharp departure from the Income-tax Act, where only the assessee can initiate a first appeal. The result? An environment where even a favourable order for the taxpayer may not be the end of the story.

I. Facts and Statutory Framework

A. Section 107(1) – Taxpayer’s Right to First Appeal (CGST Act, 2017)

• Any person aggrieved by an order passed by an adjudicating authority may file an appeal before the Appellate Authority.
• Time limit: 3 months from the date of communication of the order.
• Pre-deposit:
  • 100% admitted liability, and
  • 10% of the disputed tax (Section 107(6)).

B. Section 107(2) – Department’s Right to First Appeal

• The Commissioner may call for and examine the record of any proceedings.
• If the order appears illegal or improper, he may direct a subordinate officer to file an appeal before the Appellate Authority.
• Time limit: 6 months from the date of communication of the order.
• The departmental appeal is limited to specific points identified by the Commissioner.

C. Income-tax Act, 1961 – No Departmental First Appeal

• First appeal under Section 246A may be filed only by the assessee.
• The department has no right to file a first appeal against an Assessing Officer’s order.
• Revenue may act only through revisionary powers (Section 263/264).

II. Comparative Framework

Table: Key Differences – CGST Act vs Income-tax Act

III. Analysis of Core Issues

1. Disparity in Appeal Rights

• Under GST, both the taxpayer and the department have equal access to the first appellate stage.
• Under Income-tax, only the assessee can appeal; revenue must rely solely on revision.
• Legal impact: Creation of asymmetrical litigative rights under GST that do not exist in analogous tax legislation.
• Statutory contrast:Sec. 107(2) (CGST) vs Sec. 246A (Income-tax Act).

2. Double Scrutiny of the Assessee

• Even after the adjudicating officer issues a favourable order, the assessee remains exposed to:
  • (a) Departmental first appeal under Sec. 107(2), and
  • (b) Revision under Sec. 108.
• This subjects the assessee to a dual layer of departmental review, increasing uncertainty and litigation exposure.

3. Breach of Confidence in Internal Officers

• The adjudicating authority is typically a departmental officer (AC/DC).
• When the Commissioner routinely invokes Sec. 107(2), it reflects a systemic distrust within the department toward subordinate officers.
• This undermines administrative discipline and the finality of adjudication.

4. Unequal Procedural Timelines

• The Department enjoys double the time compared to the taxpayer.
• This creates an uneven playing field and contradicts the principle of procedural equality in tax administration.

5. Limitations on Departmental Appeals: A Partial Check

Although Sec. 107(2) appears wide, the law incorporates limited safeguards:

• The Commissioner must record satisfaction that the order is not legal or proper.
• The subordinate officer can appeal only on the points identified.
• The remedy is not suo motu to the extent seen under revisionary powers.

However, these checks are internal and administrative, offering no real protection to the taxpayer.

6. Restriction to Points Arising from the Order

• The appeal filed by the department is confined to specific points arising out of the adjudication order.
• This restriction prevents the department from:
  • introducing new grounds unrelated to the original order, or
  • expanding the scope of litigation at the first appellate stage.

IV. Suggestions to the Government

• Harmonise appeal timelines for taxpayer and department
• Restrict departmental appeals to exceptional cases only
• Review may be done before passing of the Original Order, not after that
• Consider aligning GST with the Income-tax model—no departmental first appeal

IV. Conclusion

Section 107(2) of the CGST Act creates a unique imbalance, taxpayers get 3 months to appeal, while the department gets 6 and the power to challenge its own officer’s order under Section 107(2). This means even a favourable order can be reopened, scrutinised again, and dragged into fresh litigation. Double scrutiny. Unequal rights. No finality.

It’s time to ask tough questions:

• Why should the department enjoy greater appellate rights than the taxpayer?
• Why should internal distrust become the taxpayer’s burden by allowing the Revenue to challenge its own officers orders?
• Why exposing the assessee to double scrutiny?
• Why does GST allow what Income-tax law deliberately avoided?

While the provision aims to safeguard revenue interests, it also raises fairness concerns, particularly regarding procedural parity and the finality of adjudication. A legislative review may be warranted to bring GST appellate rights in line with established tax jurisprudence and principles of natural justice.

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By: CA. Chitresh Gupta

https://www.linkedin.com/in/ca-chitresh-gupta-22795920/