GST Appellate Authority Cannot Enhance Tax without notifying Assessee: Calcutta HC sets Aside added Demand [Read Order]

The Calcutta High Court has decided that the GST ( Goods and ServicesTax ) appellate authority cannot increase the tax liability without intimating the assessee.

In the present matter, Lakshmi Narayan Shah, the petitioner challenged an appellate order dated 19 December 2024 passed under Section 107 of the CGSTAct, 2017. The appellate order modified adjudication order dated 8 September 2023 passed under Section 73 for the period July 2017 to March 2018.

The petitioner stated that the original show cause notice was uploaded on the GST portal under the “Additional Notices and Orders” tab, due to which it remained unreplied.

The intimation/show cause proceedings alleged discrepancies in returns such as GSTR-1, GSTR-2A, GSTR-9 and GSTR-9C. It raised demand on three issues: short payment on outward supply, short payment on inward supply under RCM, and ITC found reversible.

During appeal, the petitioner admitted the first two issues, while the appellate authority set aside the ITC reversal component.

However, the appellate authority enhanced the demand by holding that the petitioner had claimed excess zero-rated supply of ₹27,16,811, and directed that this amount be added to the turnover of taxable supply and taxed at 18% (9% CGST + 9% SGST).

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This further determined tax of ₹2,44,513 each towards CGST and SGST.

The petitioner's legal representative, Mr. Himangshu Kumar Ray, said that he was never given the opportunity to refute this increase in tax.

Although the petitioner later corrected the error through GSTR-9 and GSTR-9C, it was factually inaccurate because the appellate authority allegedly relied on a larger amount from GSTR-3B.

The High Court noted that the “turnover of taxable supply” issue was never part of the original adjudication under Section 73. Therefore it could not have been introduced for the first time in appeal to enhance liability without following the statutory safeguard under Section 107(11).

Justice Om Narayan Rai held that, when the appellate authority decides enhancement of the tax, then the second proviso to Section 107(11) gets attracted. The authority must provide opportunity to the assessee to meet such new grounds, said the court.

Accordingly, the Court set aside the appellate order only to the extent it enhanced turnover of taxable supply and imposed additional tax at 18% on the alleged excess zero-rated supply.

The matter was remanded to the appellate authority for reconsideration on this limited issue.

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