GST Update

 Desk of CA. Praveen Sharma – 924 Series (CAPS) 

The Calcutta High Court, in the case of Lakshmi Narayan Shah, examined the legality of an appellate order passed under Section 107 of the WBGST/CGST Act which had modified and partly enhanced an adjudication order issued under Section 73.

The dispute originated from a show cause notice issued for the period July 2017 to March 2018 alleging discrepancies in GST returns including GSTR-1, GSTR-2A, GSTR-9 and GSTR-9C. The petitioner contended that he could not respond to the notice as it was uploaded in an obscure tab on the GST portal, depriving him of an effective opportunity to reply.

The adjudicating authority confirmed demand on three counts—short payment of GST on outward supplies, liability under reverse charge mechanism, and reversal of input tax credit. In appeal, the petitioner accepted the first two issues, and the appellate authority dropped the ITC reversal.

However, while deciding the appeal, the appellate authority went beyond the scope of the original show cause notice and the adjudication order by alleging excess zero-rated supplies, adding the same to taxable turnover and enhancing the tax demand by levying GST at 18%.

The High Court held that this additional ground was never part of the show cause notice or adjudication proceedings, and therefore the petitioner was denied a fair opportunity to contest it. The Court found this to be a clear violation of the second proviso to Section 107(11), which mandates granting a hearing before enhancement of tax, relying on earlier judicial precedent.

The Court also observed that reliance solely on GSTR-3B figures without considering corrections made in GSTR-9 and GSTR-9C was erroneous. Accordingly, the enhanced demand and rejection of rectification were set aside, and the matter was remanded for fresh consideration after affording proper opportunity to the petitioner.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS