2026 (2) TMI 726 - AT - GST

Factual jurisdiction in second appeal upheld; fraud not found, matter remitted for re determination with opportunity to amend returns.

The article analyses three legal points: the Appellate Tribunal's factual jurisdiction in second appeals under Section 112 and Rule 112, concluding the ... Jurisdiction of the Appellate Tribunal under the CGST / SGST Act - power to re-appreciate evidence in second appeals - discrepancy between return of outward supply declared in GSTR-1 and tax paid in GSTR-3B - Rule 112 of the CGST Rules - admission of additional evidence in appellate proceedings - conversion of proceedings from Section 74 to Section 73 - remand to the proper officer u/s 75(2) for re-determination - absence of fraud or wilful suppression u/s 74 - Jurisdiction under Section 112 of the CGST Act - power to re-appreciate evidence in second appeals - HELD THAT:- The Supreme Court in the case of Hamida Vs. Md. Khalil [2001 (5) TMI 939 - SUPREME COURT] stated that it is well settled that while exercising jurisdiction under Section 100 of the Code, the High Court cannot reverse the findings of the lower appellate court on facts merely on the ground that on the facts found by the lower appellate court another view is possible. We find Jurisdiction of the Appellate Tribunal under the CGST / SGST Act is different from the Jurisdiction of the High Court Under Section 100 of the Code. There is a need to compare the language used by two different Provisions. Section 100 of the Code provides the Second Appeal Jurisdiction in a Civil Matter and Section 112 of the CGST Act along with Rule 112 of the CGST Rules, 2017 provide for second appeals in GST matters. No doubt in the mind of this tribunal that the limitations enshrined in the Section 100 of the Code are singularly absent in the appeal provisions in matters relating to GST under CGST Act as far jurisdiction of the Tribunal is concerned regarding second appeals. We may also note here that Section 117 and 118 of the CGST Acts provides for appeals to High Court and Supreme Court. Thus, it is clear, the High Court as provided in Section 117 and Supreme Court as provide in Section 118 would be an Appellate Court to deal with the substantial question of law. Similar provision is found in Section 100 of the Code. Moreover, Sub-Section (2) of 111 of the CGST Act, 2017 further provides that the Appellate Tribunal, while discharging its functions, possesses the same powers as a civil court under the Code. Section 111(1) of the CGST Act, 2017 provides “that the Appellate Tribunal shall not, while disposing or proceeding before it or an appeal before it the bound by the procedure laid down in the Code of Civil Procedure, 1908”. Thus, the argument advance by the Revenue that the Tribunal cannot go into the question of fact is not sustainable and it is held that in exercise of Jurisdiction under Section 112 read with Rule 112 has power to examine question of facts also and it is the last adjudicating forum on questions of facts. Absence of fraud or wilful suppression under Section 74 - The first Appellate Authority while setting aside the penalty imposed by the Proper Officer under Section 74 of CGST Act came to the conclusion (as underlined above) that in the absence of establishment of any intention of the taxpayer to evade tax by way of fraud or suppressing the facts, as the appellant has disclosed the same in debit/credit notes, supported with invoices duly accounted for in books of accounts but did not disclose it in periodical returns matching with total liability in annual return correctly and could not prove the ITC passed by the appellant to the recipients are not utilised. Thus, First Appellate Court has accepted that the Appellant has disclosed the transaction in Debit / Credit notes and are supported with invoices duly accounted in books of Account. But his fault was that he did not disclose the transactions in the periodical returns matching with total liability in annual returns correctly. It also held that the LPO has not proved that the ITC passed by the Appellant to the Recipient were not utilized. The only mistake which has been found with the Appellant is that he has not reflected the debit / credit notes which has been duly accounted in books of account in its periodical returns. And that he did not prove the ITC passed to the Recipients by the Appellant are utilized. In this case we are of the opinion that this aspect has to be relooked into by the Learned Proper Officer and Appellant should be given chance to amend his returns by condoning his delay occasioned in the meantime. This view was discussed in course of virtual hearing and Learned Joint Commissioner was not in agreement with same, however, Learned Additional Standing Counsel would submit that such a case will become a precedent and may cause numerous cases to be remanded. We are of the view that every litigation has its own merits and demerit. It has to be decided on its own facts and merits. A cannot be decided on the basis consequences that follow with respect to other litigations. Thus, it is clear that original Proper Officer who has issued Notice Under Section 74(1) of the CGST Act shall re-determine the tax payable by the Assessee and it cannot be done by the First Appellate Authority or the Tribunal. The natural corollary to such an observation would be that in case First Appellate Authority or the Tribunal comes to the conclusion that the proceeding initiated under Section 74 (1) of the CGST Act is not maintainable because of lack of requirements to attract the provision and comes to the conclusion that this is a matter to be considered under Section 73 of the CGST Act, then the matter has to be remitted back to the learned Proper Officer for re-determining the tax to be paid along with penalty, interest, etc. There were chances of human error. In order to obviate any such human error, the matter should be re-considered by the learned Proper Officer. If we remand the matter, the best or the worst, depending upon the point of view, either from Revenue or from the side of the assessee, that can happen is that the case would be re-heard and decided at the very threshold and effective judgment would be passed. It is also not disputed at this stage that Appellant was not heard in-person at the time of passing of the order-in-original. In the Result, that order passed by the learned Proper Officer and the order passed by the First Appellate Authority, so far as it relates to treating the case as Section 73 of the CGST/SGST Act are concerned, cannot be sustained and accordingly is set aside. However, we are not setting aside the orders passed by the learned Appellate Authority as far as its finding that case does not come under Section 74 of SGST / CGST Act. The Appellant through its authorized Representative shall appear before the Proper Officer and file suitable application within a month. The case shall be re-considered as one under Section 73 of the CGST Act and after affording a reasonable opportunity of hearing, producing documents and seeking amendment (amendment must be filled withing 30 days from the publication of this judgment) shall be considered on merits by the learned proper officer. The learned Proper Officer while disposing the proceeding Under Section 73 of the CGST Act shall examine the genuineness of the Credit / Debit notes and other documents produced by the Appellant and render the final order. There shall be no orders as to costs. Issues: (i) Whether the Appellate Tribunal under Section 112 read with Rule 112 of the CGST Act has jurisdiction to examine questions of fact and admit additional evidence in a second appeal; (ii) Whether the proceedings initiated under Section 74 of the CGST Act were sustainable in view of absence of established intent to evade tax; (iii) Whether the matter should be remanded to the proper officer for re-determination under Section 73 and for permitting amendment of returns.Issue (i): Whether the Appellate Tribunal under Section 112 read with Rule 112 of the CGST Act has jurisdiction to examine questions of fact and admit additional evidence in a second appeal.Analysis: Section 112 of the Central Goods and Services Tax Act, 2017 and Rule 112 of the Central Goods and Services Tax Rules, 2017 were compared with Section 100 of the Code of Civil Procedure, 1908. The statutory scheme for GST appeals does not incorporate the civil second-appeal limitations found in Section 100 of the Code. The appellate provisions and Rule 112 permit the Tribunal to admit evidence in specified circumstances subject to recording reasons and allowing opportunity to the opposing officer to examine or rebut such evidence.Conclusion: The Tribunal has jurisdiction under Section 112 read with Rule 112 to examine questions of fact and to admit additional evidence in a second appeal where the statutory conditions for admission are satisfied.Issue (ii): Whether the proceedings initiated under Section 74 of the CGST Act were sustainable in view of absence of established intent to evade tax.Analysis: The facts show that the adjudicating authority did not establish suppression, fraud, or wilful mis-statement attracting Section 74. The First Appellate Authority similarly recorded that there was no intention to evade tax and modified the penalty from Section 74 to Section 73. The Tribunal observed that Section 34(2) timelines, reconciliation discrepancies, and alleged non-reversal of ITC by recipients were material, but the absence of established fraudulent intent was decisive for not sustaining Section 74 proceedings.Conclusion: The finding that Section 74 is not attracted is sustained; Section 74 proceedings are not maintainable insofar as fraud or evasion was not established.Issue (iii): Whether the matter should be remanded to the proper officer for re-determination under Section 73 and for permitting amendment of returns.Analysis: Sub-section 75(2) of the CGST Act requires that where a higher forum concludes that a notice under Section 74 is not sustainable, the proper officer shall determine the tax deeming the notice to have been issued under Section 73(1). CBIC guidance identifies Section 75(2) as a provision for re-determination by the proper officer. The Tribunal noted procedural and timing constraints at the relevant period, the appellant's reconciliations and documents, and the necessity of affording a fair hearing and opportunity to amend returns. The Tribunal also considered Rule 112 limits on fresh evidence and procedural safeguards for admission and cross-examination.Conclusion: The impugned orders insofar as they treat the case as under Section 73 cannot be sustained by the appellate forum; the matter is remanded to the proper officer for re-determination under Section 73, with liberty to the appellant to file amendment petitions and to produce documents within the specified period, and for the proper officer to examine genuineness of records and decide on merits after affording opportunity.Final Conclusion: The Tribunal held that it has factual jurisdiction in second appeals under Section 112/Rule 112, sustained the conclusion that Section 74 was not attracted, and remitted the matter to the proper officer for re-determination under Section 73 with liberty to the appellant to seek amendments and to produce evidence; the matter is therefore remanded for fresh adjudication rather than finally determining the tax liability.Ratio Decidendi: Where a higher forum concludes that Section 74 is not sustainable for lack of established fraud or intent to evade, Section 75(2) requires re-determination by the proper officer as if the notice were issued under Section 73, and the Appellate Tribunal under Section 112/Rule 112 may examine facts and admit additional evidence subject to the statutory safeguards.