GST Appeals Can't Be Dismissed Without Hearing Taxpayer On Pre-Deposit Shortfall: Bombay High Court

The Bombay High Court on 12 October held that a GST appeal cannot be dismissed for a shortfall in mandatory pre-deposit without first giving the taxpayer notice or an opportunity to rectify the defect.

A Division Bench of Justices M.S. Karnik and Sandesh D. Patil set aside the rejection of an appeal filed by Bhagyoday Agro Industries against a GST demand of approximately Rs. 14.77 crore. They observed:

“The Appellate Authority ought to have applied the well settled principle that when an Appeal is to be dismissed for adding a shortfall in pre-deposit, the Appellant has to be given a no defect memo, notice or opportunity of hearing before dismissal of the appeal.”

GST intelligence officers searched Bhagyoday Agro Industries, a cotton trader, over alleged non-payment of GST under the Reverse Charge Mechanism (RCM) on cotton purchased from agriculturists. The department subsequently raised a demand of Rs. 14.77 crore, which the adjudicating authority confirmed in October 2024.

Bhagyoday Agro Industries challenged the demand before the Commissioner (Appeals). The appellate authority rejected the appeal in May 2026. The company then approached the High Court.

It argued that it had deposited Rs. 1.50 crore during the investigation and that the department had adjusted this amount against the demand. It contended that the appellate authority had neither considered this deposit nor given it an opportunity to address the alleged shortfall in pre-deposit.

The Revenue defended the rejection. However, the Bench found that the appellate authority had dismissed the appeal without issuing a defect memo or notice or providing an opportunity of hearing. It also failed to consider the amount deposited during the investigation while examining compliance with the pre-deposit requirement.

Accordingly, the High Court set aside the rejection and directed the Commissioner (Appeals) to provide a fresh hearing and decide the proceedings within 12 weeks of the production of its order. It left all contentions on the merits of the GST demand open.

For the Petitioner (Bhagyoday Agro Industries): Advocate Parth Parikh, along with Advocates Samikshya Chatur and Yash Prakash, instructed by Economic Laws Practice (ELP).

For Respondent Nos. 1, 2 and 4 (GST Authorities): Advocate Jitendra B. Mishra, along with Advocates Sangeeta Yadav and Umesh Gupta.

For Respondent No. 3 (State): A.R. Deolekar, Additional Government Pleader (AGP).