Pay The Court Fee, Restore The Appeal, Decide The Merits

The Appeal Was Dismissed Without Examining the Tax Dispute

A statutory appeal gives a taxpayer an opportunity to challenge an adverse order before a higher authority. However, the merits of the dispute may remain unheard if the taxpayer fails to comply with a procedural requirement for filing or maintaining the appeal. This was the central concern in Bos Natural Flavours Pvt Ltd Versus The Commissioner Of Kerala State GST, Thiruvananthapuram. - 2026 (9) TMI 2057 - GSTAT ERNAKULAM. The case did not initially require the Tribunal to decide whether the tax demand was correct. It first had to determine whether the Tribunal could dismiss the taxpayer's appeal solely because the additional court fee had not been paid.

Bos Natural Flavours filed its first appeal on 05.05.2020 against the order dated 02.03.2020 passed by the State Tax Officer, Squad No. V, Mattancherry. The Joint Commissioner (Appeals), SGST Department, Ernakulam, found that the appellant had not paid the additional court fee required under Section 76 of the Kerala Court Fees and Suits Valuation Act, 1959. The Department issued a defect notice, giving the appellant an opportunity to pay and correct the defect. The appellant maintained that the fee was not applicable, but it did not pay the amount. Consequently, the First Appellate Authority dismissed the appeal on 27.05.2024 without examining the validity of the tax demand or any other issue raised on merits.

Before the Goods and Services Tax Appellate Tribunal, the appellant argued that Statutory Rules and Orders (S.R.O.) No. 949/2021 was issued only on 26.11.2021, whereas the appeal had been filed on 05.05.2020. According to the appellant, a notification issued after the appeal was filed could not impose an additional fee retrospectively. The Department replied that the 2021 notification had not introduced the levy for the first time. An earlier notification already required payment of additional court fee, and the rate applicable on the date of filing remained payable. The dispute therefore required the Tribunal to examine how the appeal requirements under the GST law operated alongside the separate court-fee requirements imposed under Kerala State legislation.

Section 107 and the State Court-Fee Law Operate Together

Section 107(6) of the CGST/KGST Act requires an appellant to pay the admitted amount of tax, interest, fine, fee and penalty, together with the prescribed percentage of the disputed tax, before an appeal can be entertained. The appellant relied on the absence of any separate reference to an additional court fee and argued that no further financial condition could be imposed on a GST appeal.

That argument appeared attractive when Section 107 of the CGST/KGST Act, 2017 was read in isolation. However, Section 107 does not create the additional court fee. It arises under Section 76 of the Kerala Court Fees and Suits Valuation Act, 1959, which authorises the State Government, through a Gazette notification, to levy an additional court fee on appeals and revisions filed before tribunals and appellate authorities. The levy is attached to the use of the appellate forum and operates alongside the conditions prescribed under the GST enactment.

The statutory pre-deposit and the additional court fee therefore serve different purposes. The pre-deposit under Section 107 secures a portion of the disputed tax and is directly connected with the tax demand under appeal. The additional court fee is imposed under a separate State enactment for filing proceedings before specified adjudicatory forums. Compliance with one does not automatically satisfy the other. An appellant approaching a State GST appellate authority must examine both the GST legislation and any applicable State court-fee law.

Court-Fee Liability Must Be Determined Under the Law in Force on the Filing Date

The appellant relied primarily on the dates of the appeal and the notification. Its first appeal was filed on 05.05.2020, while S.R.O. No. 949/2021 was issued later, on 26.11.2021. The appellant argued that delegated legislation, such as a notification issued under a statute, ordinarily applies prospectively. Therefore, a notification issued in November 2021 could not impose a new payment obligation on an appeal filed in May 2020.

The Department accepted that a later notification could not ordinarily be applied retrospectively. However, it contended that S.R.O. No. 949/2021 had not created the liability for the first time. Section 76 of the Kerala Court Fees and Suits Valuation Act, 1959, together with an earlier notification, already required payment of an additional court fee on appeals before the relevant appellate authorities. The real question was therefore not whether the 2021 notification could apply to an earlier appeal, but whether the law already in force on 05.05.2020 required the appellant to pay the fee.

The Kerala High Court had recognised the applicability of the existing court-fee requirement to first GST appeals before Bos Natural Flavours filed its appeal. The Tribunal therefore rejected the argument that the liability arose only after S.R.O. No. 949/2021. The later notification could not be applied retrospectively, but that did not remove the obligation already created by the earlier legal framework. The appellant was required to pay the additional court fee at the rate applicable on the date its appeal was filed.

State Court-Fee Requirements Can Operate Alongside Section 107

In Akay Flavours And Aromatics Pvt Ltd Versus Asst. Commissioner State Goods And Service Tax Department And Others - 2020 (8) TMI 208 - KERALA HIGH COURT, the Kerala High Court examined whether additional court fee under Section 76 of the Kerala Court Fees and Suits Valuation Act, 1959, could be demanded on a first GST appeal. The taxpayer argued that the GST appellate provisions and rules did not require payment of such a fee. It also contended that a State-specific fee was inconsistent with the objective of creating a uniform GST system throughout the country.

The High Court rejected these arguments. It found that the additional court fee was validly imposed under the Kerala legislation and could be collected on appeals filed before the State GST appellate authorities. The levy did not become discriminatory merely because taxpayers administered by different authorities might face different procedural requirements. GST provides a common framework for taxing supplies, but it does not automatically cancel every State law regulating appeals filed before State authorities. The statutory pre-deposit under the GST law and the additional court fee under the Kerala law could therefore operate together.

The decision in Akay Flavours was pronounced on 12.02.2020, whereas Bos Natural Flavours filed its first appeal on 05.05.2020. Thus, the jurisdictional High Court had already settled the legal position before the appeal was filed. The appellant was required to comply with the Kerala court-fee law applicable to proceedings before the State Appellate Authority. The absence of any reference to additional court fee in Section 107(6), or reliance on the later notification issued in 2021, could not override the binding judgment of the Kerala High Court.

Appellate Review Cannot Extend to Merits Not Decided Below

Both parties made detailed submissions on the underlying tax dispute. However, the First Appellate Authority had neither examined nor decided those issues. It had dismissed the appeal solely because the additional court fee had not been paid. The Tribunal therefore first had to determine whether that dismissal was legally justified.

Section 113(1) of the CGST/KGST Act, 2017 empowers the Appellate Tribunal to confirm, modify or cancel the order under appeal. It may also send the matter back to the appropriate authority with suitable directions. However, the Tribunal should ordinarily not decide substantive issues for the first time when the First Appellate Authority has given no findings on them. Otherwise, the parties may lose an entire stage of statutory adjudication, and the Tribunal may have to decide factual questions without the benefit of a reasoned first appellate order.

The Tribunal therefore confined its decision to the court-fee issue and expressed no opinion on the merits of the tax dispute. It neither accepted nor rejected the appellant's substantive claims. It only decided the procedural question that had prevented the First Appellate Authority from hearing the appeal.

A Curable Procedural Defect Should Not Destroy the Right of Appeal

The Tribunal decided that the additional court fee was legally payable. The appellant could not avoid that liability merely because S.R.O. No. 949/2021 was issued after the filing of its appeal, since the requirement to pay the fee already existed under the earlier legal framework. However, the appellant accepted this position before the Tribunal, undertook to pay the applicable fee and requested that its first appeal be restored for consideration on merits.

Failure to pay the required court fee is a procedural defect that ordinarily can be corrected by making the payment. It does not, by itself, extinguish the statutory right of appeal or establish that the taxpayer's challenge on merits is unsustainable. Once the appellant agrees to pay the lawful fee and removes the defect, the purpose of the requirement stands fulfilled. Refusing to hear the appeal even after the defect is cured would allow a procedural omission to permanently defeat the taxpayer's opportunity to challenge the tax demand.

The Tribunal therefore set aside the order dismissing the first appeal and restored the matter to the First Appellate Authority. After payment of the applicable additional court fee, the appeal was required to be decided on merits within three months, after providing a proper opportunity of hearing and following the principles of natural justice. This approach protected both sides: the State retained its right to collect the lawful fee, while the appellant regained the opportunity to obtain a reasoned decision on the actual tax dispute.

The Judgment's Relevance Beyond Kerala

The immediate dispute arose under Section 76 of the Kerala Court Fees and Suits Valuation Act, 1959. However, the reasoning may also be useful in other States whose laws require a court fee or an additional court fee on appeals before tax authorities. This does not mean that the Kerala provision or the amount payable under it applies throughout India. Every State may have a different legal provision, rate, monetary ceiling, effective date and method of payment. A taxpayer must therefore examine the court-fee law and relevant notifications of the particular State before filing an appeal.

The judgment makes it clear that compliance with Section 107 of the GST Act may not satisfy every financial requirement connected with an appeal. Section 107 requires the appellant to pay the admitted liability and the prescribed percentage of the remaining disputed tax. A valid State law may separately require payment of a court fee for filing the appeal before a State appellate authority. These obligations arise from different laws and serve different purposes. Accordingly, payment of the amount required under Section 107 does not automatically remove the obligation to pay a court fee imposed by the applicable State law.

The authority must nevertheless identify the precise provision and notification under which the fee is demanded and confirm that they were in force on the date the appeal was filed. A notification issued later cannot ordinarily be applied to an earlier appeal unless retrospective operation is clearly authorised. Outside Kerala, the decision would have persuasive value and would not automatically bind authorities in another State. Its broader importance lies in the approach it adopts: identify the legal source of the fee, apply the law in force on the filing date, keep the court fee distinct from the Section 107 payment, and permit correction where non-payment is a curable defect. This protects the State's right to collect a lawful fee without allowing a procedural omission to permanently defeat a hearing on merits.

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