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 The assessing officer had earlier withdrawn the liability and issued a nil order.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?

[KASTURI SETHI]

As per Section 107 (11) of CGST Act, the Appellate Authority can modify or annul or confirm the Order-in-Original. Emphasis is on the terms, "Modify" and "as it thinks just and proper".

As per legal dictionary based on the Supreme Court judgement, the word, "modify" inter alia, includes enhancement also.

As per second proviso to Section 107 (11), the Appellate Authority is required to issue the SCN to the party for increase in tax demanded/confirmed in the Order-in-Original within prescribed time limit under Section 73 or 74 or 74A whichever is applicable.

[Sadanand Bulbule]

Perfect clarification Sirji.

Appellate Authority is co-extended assessing/adjudicating authority as well. Law is settled.

[KASTURI SETHI]

 Sh.Sadanand  Bulbule Ji,

Sir, I am highly thankful to you for your validation of my reply and also for adding finishing touch. 

[vaibhav agrawal]

Thanks Kasturi Sir and Sadanand Sir for your well-explained response to my query. It has been very helpful.

AI Summary

Appellate modification power: appellate authority may enhance tax but must issue SCN before increasing demand. The appellate authority may modify an Order in Original, including enhancing tax liability, but must issue a show cause notice before increasing the tax demand and must comply with the statutory time limits applicable to assessment or reassessment under the CGST framework.