Appellate Authority Cannot Enhance GST Liability Without Hearing Taxpayer: Calcutta High Court

The Calcutta High Court on 14 January reiterated that a GST appellate authority cannot enhance taxable turnover or impose a higher rate of tax on grounds that were never part of the original adjudication, without giving the taxpayer an opportunity to be heard.

A Bench of Justice Om Narayan Rai set aside an appellate order which enhanced the petitioner's taxable turnover by adding zero-rated supplies of Rs. 27 lakh and imposed GST at 18%, holding that such enhancement at the appellate stage violated the safeguards under the second proviso to Section 107(11) of the CGST Act, 2017.

The dispute arose from discrepancies noticed in the petitioner's GST returns for the Financial Year 2017–2018. A show cause notice was issued, but the petitioner was unable to respond as the notice was uploaded under the “Additional Notices and Orders” tab on the portal. An adjudication order was thereafter passed under Section 73 of the CGST Act, 2017.

While challenging this order, the petitioner faced an appellate order dated 19 December 2024, whereby the appellate authority enhanced the turnover of taxable supply and imposed GST at the rate of 18%. The rectification application filed against the appellate order was also dismissed.

The High Court noted that the issue of enhancement of taxable turnover was not part of the original adjudication proceedings. By introducing a new ground at the appellate stage, the appellate authority acted beyond its jurisdiction.

Setting aside the impugned order, the Court observed:

“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”.

Relying on the rationale laid down by a coordinate Bench in Hriday Kumar Das, the Court reiterated that an appellate authority cannot enhance tax liability on a new ground without affording the taxpayer an opportunity of hearing.

Accordingly, the High Court remanded the matter to the adjudicating authority for fresh consideration in accordance with law.

For Petitioner: Advocates Himangshu Kumar Ray, Abirlal Chakraborty, Subhasis Podder, Amit Saha, Gourav Chakraborty, Animitra Roy, Anish Mondal