2025 (7) TMI 1395 - HC - GST

HC upholds powers of Appellate Authority under Section 107(11) CGST Act to reconsider cases afresh

Sonu Monu Telecom Pvt. Ltd. Through Its Director Jitender Garg & Anr. Versus The Union Of India Revenue Secretary, Ministry Of Finance, & Anr.

The HC dismissed the petition seeking modification of the order upholding the vires of the composite SCN issued for multiple financial years. The Court ... Seeking modification of the order - composite SCN was adjudicated against the Petitioners - challenge to vires of N/N. 06/2020-Central Tax dated 03rd February, 2020 - appealable order u/s 107 of the Central Goods and Services Tax Act, 2017 - clubbing/consolidation of SCN for various financial years - HELD THAT:- A perusal of Section 2(4) of the Act would show that the Adjudicating Authority would not include the Appellate Authority which is quite an obvious position inasmuch as, the Adjudicating Authority is the first Authority which deals with the entire dispute. Under Section 74(9), the proper officer has to consider the representation made by the Petitioner. It is the case of the Petitioner that its reply has not been considered but a perusal of the adjudication order would show that the said order is quite detailed and takes into consideration the various submissions made including in respect of SCN being issued for multiple financial years. The only embargo in the said provision, is that the matter is not to be remanded back. The purpose or the legislative intent behind the said embargo is to ensure finality in proceedings and to prevent repetitive re-consideration of the matter by the Adjudicating Authority. The Appellate Authority is fully empowered to consider the entire matter afresh including the reply of the Petitioner, as also the reasoning given by the Adjudicating Authority, the evidence on record including the statements and the documents. There can be no doubt that the appeal is a full-fledged first appeal before the Appellate Authority. A coordinate bench of this Court Addl. D. G. (Adjudication) v. Its My Name P. Ltd., [2020 (6) TMI 72 - DELHI HIGH COURT] in while dealing with a parallel provision i.e., Section 129B of the Customs Act, has not only held that the expressions ‘confirm, modify or annul the decision or order’ have wide amplitude, but also encouraged the Appellate Authority to decide the matter on merits, wherever possible. Similarly, in Sun Pharma Laboratories v. Union of India [2020 (11) TMI 785 - SIKKIM HIGH COURT], the Appellate Authority, despite finding the grounds relied upon by the Adjudicating Authority to be erroneous, sustained the rejection of the refund claim on an alternate line of reasoning. Consequently, the Applicant/Petitioner had preferred the said writ petition challenging the decision of the Appellate Authority. The Division Bench of the Sikkim High Court upheld the Appellate Authority’s power under Section 107(11) of the Act to re-examine the matter on merits - the powers of the Appellate Authority under Section 107(11) of the Act are wide enough to include powers to reconsider the reasoning adopted by the Adjudicating Authority and evidence on record by undertaking an enquiry into the merits. In this view of the matter, this Court is not inclined to modify the order dated 18th March, 2025 - application dismissed. ISSUES: Whether an order passed by the Adjudicating Authority under the Central Goods and Services Tax Act, 2017 (CGST Act) can be challenged before the High Court when it is appealable under Section 107 of the Act.Whether the Appellate Authority under Section 107(11) of the CGST Act is empowered to consider the reply or representation filed before the Adjudicating Authority during the appeal proceedings.Whether the Appellate Authority's powers under Section 107(11) of the CGST Act include the ability to confirm, modify, or annul the order on merits without remanding the matter back to the Adjudicating Authority.Whether the vires of Notification No. 06/2020-Central Tax dated 03rd February, 2020 can be adjudicated comprehensively along with the merits of the matter in the present proceedings. RULINGS / HOLDINGS: The Court held that the impugned order was an appealable order under Section 107 of the CGST Act, and hence the proper remedy was to approach the Appellate Authority; the High Court declined to entertain the challenge to the adjudication order and limited notice to the challenge against the impugned notification.The Appellate Authority under Section 107(11) has the power to 'confirm, modify or annul the decision or order appealed against' and is thus empowered to consider the entire matter afresh, including the reply filed before the Adjudicating Authority, and not merely the adjudicating order.The provision in Section 107(11) prohibiting remand back to the Adjudicating Authority is intended to ensure finality and prevent repetitive reconsideration; therefore, the Appellate Authority must decide the appeal on merits, including evidence and submissions, and not merely review the adjudicating order in isolation.The Court refused to modify the earlier order and dismissed the application, reiterating that the Petitioner is entitled to avail appellate remedy in accordance with law as directed earlier. RATIONALE: The Court relied on the statutory framework of the CGST Act, particularly Sections 2(4), 5(4), 74(9), and 107(11), to delineate the roles and powers of the Adjudicating Authority and the Appellate Authority.Section 2(4) defines the Adjudicating Authority and excludes the Appellate Authority from this definition, establishing their distinct functions.Section 74(9) mandates the proper officer (Adjudicating Authority) to consider the representation (reply) made by the person chargeable with tax before issuing an order.Section 107(11) confers wide powers on the Appellate Authority to pass such orders as it thinks just and proper, including confirming, modifying, or annulling the order without remanding the matter back, thereby empowering it to consider the entire merits and evidence afresh.The Court referred to precedent interpreting analogous provisions under the Customs Act and CGST Act, which affirm the wide amplitude of appellate powers to decide matters on merits and discourage remand, to avoid multiplicity of proceedings and ensure finality.The Court rejected the contention that the Appellate Authority cannot consider the reply filed before the Adjudicating Authority, emphasizing that the appeal is a 'full-fledged first appeal' and the Appellate Authority is empowered to rectify errors made by the Adjudicating Authority.