Can the appellate authority increase tax liability beyond the disputed amount

[vaibhav agrawal]

An appeal has been filed by the department under section 107(2) of the CGST Act. In Form APL-03, the disputed amount was mentioned as INR 1,68,073, but in the order issued by the appellate authority, the total tax liability has been finalized at INR 2,83,866.

The OIO covers the tax periods for FY 2017-18 and FY 2019-20, wherein the tax liability of INR 1,68,073 pertains to FY 2017-18 and INR 1,60,326 pertains to FY 2019-20. The assessing officer had earlier withdrawn the liability and issued a nil order. This was challenged by the department, and an appeal was filed.

In the appeal application, only the tax pertaining to FY 2017-18 was shown as the disputed amount, but the appellate order has included both FY 2017-18 and FY 2019-20.

My query is: Can the amount under dispute in the appeal application be less than the amount determined in the appellate authority’s order, in cases where the appeal has been filed under section 107(2) of the CGST Act?

AI Summary

Under Section 107(11) CGST, appellate authority can increase disputed tax liability but must follow show-cause and Sections 73/74/74A procedures Under Section 107(11) of the CGST Act the appellate authority may modify, confirm or annul an OIO and its power to 'modify' has been held to include enhancement of tax liability; therefore an amount shown as disputed in the appeal can be increased by the appellate authority. However, where the authority increases the demand it must follow the procedural safeguards, including issuing a show-cause notice and proceeding under the relevant assessment/recovery provisions (Sections 73/74/74A as applicable). The appellate forum functions as a co-extended adjudicating authority.