2026 (1) TMI 843 - HC - GST

Enhancement of taxable turnover without notice - appellate findings increasing turnover and tax set aside; remand for fresh hearing

Dominant issue: whether the appellate authority lawfully enhanced the petitioner's turnover of taxable supplies without affording notice or an opportunity ... Violation of principles of natural justice - petitioner’s turnover of taxable supply has been increased was never put to the petitioner and as such the petitioner had no opportunity to meet and rebut the same - HELD THAT:- The issue of turnover of taxable supply of the petitioner was not before the adjudicating authority and consequently it was not there before the appellate authority as well, since what was impugned before the appellate authority was the adjudication order only. The adjudication order does not even hint at the said issue. The said issue has still been considered by the appellate authority and the petitioner’s tax burden has been enhanced on the basis of the decision of the appellate authority on such issue. In such a case, the provisions of second proviso to section 107(11) of the said Act of 2017 definitely get attracted. The Hon’ble Division Bench of this Court has in the case of Hriday Kumar Das [2024 (10) TMI 40 - CALCUTTA HIGH COURT] interfered with an appellate order impugned in that case on the ground of non-adherence to the procedure mentioned in section 107(11) of the said Act of 2017. Similarly, the appellate order dated December 19, 2024 impugned herein also falls foul of the mandate of the second proviso to section 107(11) of the said Act of 2017 and calls for interference. Furthermore, it also appears that the appellate authority has not applied its mind and picked up a figure mentioned in Form GSTR-3B treating the same to be higher of the figures mentioned in Form “GSTR1/3B/9” without considering the petitioner’s contention that the said figure was corrected by the petitioners in Forms GSTR-9 and GSTR-9C. The petitioner’s contention on such score was required to be noticed. In such view of the matter too, the appellate authority is required to reconsider the aspect upon giving the petitioner an opportunity of being heard. The observations and conclusion of the appellate authority in the order dated December 19, 2024, only to the extent the same hold the petitioner liable for tax and other consequences flowing therefrom, on the ground of addition to the petitioner’s turnover of taxable supply and of taxing the same “in the 18% [9%+9%] category”, is set aside - the matter is remanded to the file of the appellate authority to the limited extent only for reconsideration of the aforesaid aspect inasmuch as of the total three grounds raised at the adjudication stage, two grounds stood admitted by the petitioner and one was annulled by the appellate authority. Petition disposed off by way of remand. Issues: (i) Whether the appellate authority lawfully enhanced the petitioners tax liability by adding to the petitioners turnover of taxable supply when that issue was not raised in the adjudication order, without giving the petitioner an opportunity to meet and rebut the appellate authoritys contention, and whether the appellate order ought to be set aside to that extent.Analysis: The adjudication order and the intimation notices underlying the show cause notice confined the dispute to three grounds: tax short paid on outward supplies, tax payable on inward supplies (RCM), and reversal of ITC. The question of increasing the petitioners turnover of taxable supply did not feature in the adjudication order. The second proviso to section 107(11) obliges adherence to procedure where an appellate authority contemplates enhancing tax liability beyond matters agitated in the adjudication. The appellate authoritys addition to turnover was based on a GSTR-3B figure without addressing the petitioners contention that the figure had been corrected in subsequent returns (GSTR-9/GSTR-9C). The petitioner was not afforded an opportunity to file a response to the new contention and the rectification application filed by the petitioner was rejected without such reconsideration. Given these defects, limited interference is required to ensure the appellant is heard and the matter reconsidered on the available material in accordance with law.Conclusion: The appellate authoritys observations and conclusions insofar as they increased the petitioners turnover of taxable supply and imposed tax thereon are set aside. The matter is remanded to the appellate authority for limited reconsideration of that aspect after giving the petitioner an opportunity to file an additional reply and for consideration of the rectification application. The appellate authority shall decide the matter independently in accordance with law.