GSTAT's First Second Appeal Judgment: When Fraud Allegation Fails, Case Must Be Remitted To Proper Officer

In its first paperless judgment delivered after fully virtual hearings and its first decision in a statutory second appeal, the Principal Bench of the Goods and Services Tax Appellate Tribunal has held that if allegations of fraud (Section 74 of the CGST Act) do not stand, the case cannot be converted into a normal short-payment proceeding (Section 73) and decided at the appellate stage.

Since it became operational in September 2025, the tribunal had so far been dealing only with anti-profiteering matters. This is its first judgment in a matter outside that subject jurisdiction.

A bench led by President Justice (Retd.) Dr. Sanjaya Kumar Mishra ruled that the power to re-determine tax lies only with the original Proper Officer.

The tribunal observed, “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.”

It further clarified, “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.”

The ruling came in a second appeal filed by Sterling and Wilson Private Limited arising from a demand of Rs. 27,06,634 for FY 2018–19. The department alleged that the company disclosed lower tax in GSTR-3B (monthly summary return) than in GSTR-1 (monthly detailed return). The Proper Officer invoked Section 74 and confirmed tax, interest and equivalent penalty.

In the first appeal, the authority recorded that there was no establishment of any intention to evade tax by fraud or suppression.

It noted that the appellant had “disclosed the same in debit/credit notes supported with invoices duly accounted for in books of account but did not disclose it in periodical returns matching with total liability in annual return correctly.”

However, it sustained tax and interest, reduced the penalty to 10 percent under Section 73(9), and treated the matter as one under Section 73.

Before the tribunal, the company argued that once fraud was ruled out, the proceedings under Section 74 could not be converted and decided under Section 73 at the appellate stage. It submitted that the differences arose due to credit notes, advances and timing issues. The Revenue defended the appellate order and opposed remand.

Rejecting the Revenue's objection to its jurisdiction, the tribunal held that its powers in second appeal are not confined to substantial questions of law. It observed 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.”

The bench also noted that the CGST/SGST Act is a “relatively new Act” and that during the relevant period returns were being filed when systems were not fully stabilised, making human error possible.

The tribunal set aside the orders insofar as they treated the case as one under Section 73 without remand. It upheld the finding that the case did not fall under Section 74.

The matter was remanded to the Proper Officer for fresh determination under Section 73 after granting the appellant liberty to file an amendment petition within one month and directing that a reasonable opportunity of hearing be afforded.

For Appellant: Joydip rang (authorized signatory)

For Respondent: Additional Standing Counsel Saurav Tiberwal and Joint Commissioner Kunu Padhi, (Authorized Representatives)