Enhancement of tax liability on appeal without following Section 107(11) procedure leads to setting aside and remand for fresh consideration

Appellate enhancement of tax liability without following the prescribed procedure under Section 107(11) was held improper because the adjudicating authority had quantified tax at a lower sum while imposing penalty on a much larger amount; the appellate authority suo motu increased the tax payable without complying with statutory procedure, rendering that part of its order untenable and liable to be set aside. Consequently both the appellate and adjudicating orders were set aside and the matter remanded to the adjudicating authority for fresh consideration of tax and penalty consistent with applicable procedure.

---

---

Issues:
1. Appellate authority's justification in enhancing tax liability without following proper procedure under Section 107(11) of the WBGST/CGST Act, 2017.

Detailed Analysis:
The High Court of Calcutta heard an intra court appeal against an interim order in WPA 9612 of 2024. The appellant challenged an order passed by the appellate authority under Section 107 of the WBGST/CGST Act, 2017, where a stay of proceedings was granted subject to payment of 10% of the disputed tax amount. The appellant contested this condition and raised various grounds, including those related to the merits of the case. The court decided to dispose of the writ petition and appeal together. The primary issue was whether the appellate authority was justified in increasing the tax liability without following the proper procedure under Section 107(11) of the Act.

The assessing officer had quantified the tax at Rs. 2,58,536.80, but imposed a penalty on a higher amount of Rs. 41,83,804.72. The appellant filed a statutory appeal challenging this order. The appellate authority, however, enhanced the tax liability without following the required procedure under Section 107(11) of the Act. The High Court found this action by the appellate authority to be legally untenable and set it aside. The correctness of the order by the adjudicating authority in fixing the tax liability and penalty was deemed to require reconsideration due to subsequent events.

The court noted that another notice was issued by the Deputy Commissioner for the same period, and the appellant had inadvertently paid the tax, leading to a closing order by the Assistant Commissioner of Revenue (WBGST). The impact of this closing order on the current liability needed fresh examination. The appellant argued that the penalty was erroneously imposed on the entire amount and contended that the penalty itself was not justified, citing statutory provisions. The matter was remanded back to the adjudicating authority for a fresh review, with all issues left open for consideration.

The appeal and writ petition were allowed, setting aside the orders of the appellate and adjudicating authorities, and remanding the matter to the adjudicating authority for fresh consideration. The appellant was directed to file a supplementary reply within six weeks, addressing all contentions and the effect of the closing order, followed by a personal hearing and fresh orders based on merits and law. The appellant was granted the opportunity to raise all factual and legal contentions during the review process.

---