2026-VIL-310-GSTAT-TVP
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SGST Tribunal

GST - Demand confirmed on grounds not stated in the SCN - Section 75(4) and Section 75(7) of CGST Act, 2017 - SCN under Section 73(1) alleged that the Appellant had not issued any credit notes against the sales returns claimed, resulting in escapement of turnover and short payment of tax. The Appellant furnished sample credit notes and offered to produce the complete set on requisition. The order in original did not call for the remaining credit notes, held that the credit notes were issued on the same day as the sales invoices and examined their values against the invoices, and confirmed the demand with interest and penalty. No personal hearing was recorded - Whether the order in original confirming the demand on grounds not contained in the SCN and without personal hearing is sustainable - HELD - The foundational premise of the SCN that no credit notes were issued was contradicted by the order in original itself, which dealt with credit notes issued on the same day as the sales invoices. The order then tested the credit notes against Section 34, which was not invoked in the SCN, and examined their dates and values, which were never put to the Appellant. The Revenue itself appeared unsure of the basis of the SCN. Section 75(7) provides that no demand shall be confirmed on grounds other than the grounds specified in the notice. Section 75(4) requires an opportunity of hearing where an adverse decision is contemplated, and a personal hearing also allows the adjudicating authority to clarify its doubts. Where the Appellant offered to produce all credit notes and the officer never called for them, the Revenue cannot contend that the Appellant filed samples and withheld the rest. The plea of absence of prejudice cannot be accepted when the fresh grounds became known only after the order was issued - The order in original violates the principles of natural justice and Section 75(4) and Section 75(7) and is null and void - Findings of FAA on grounds beyond the SCN - Section 107(11) and Section 75(7) of CGST Act, 2017 - FAA dismissed the appeal on the grounds of non-disclosure of credit notes within the time limit under Section 34, non-reflection in annual returns, simultaneous generation of credit notes and invoices, and improbability of exchanges within a few days. None of these grounds was raised in the SCN. The Revenue contended that FAA could make further inquiry under Section 107(11), that the core finding of unproved sales returns was common to all orders, and that the Appellant had full opportunity before the Tribunal - Whether the order of FAA based on grounds beyond the SCN can be sustained - HELD - The order in appeal is founded on theories of the economics of the jewellery trade and the behaviour of consumers, and these cannot supplant evidence and legal principles. Further inquiry under Section 107(11) must also be conducted within the framework of natural justice. The appellate authority cannot enter a finding without first putting it to the Appellant, recording the contentions and passing a speaking order. There was no evidence that such an inquiry was conducted. A finding in the order in original on a ground not contained in the SCN does not attain any sanctity, and it was the duty of the appellate authority to rectify such errors, which it instead compounded by adding further grounds. The remarks on reporting time limits are not harmless, as they were used to discredit the credit notes. The plea that the Appellant has full opportunity before the Tribunal cannot compensate for the lack of opportunity before the lower authorities, since the Appellant has a vested right to a full opportunity at every stage. As the orders are quashed on these grounds, examination of the merits is unnecessary - The order in appeal is set aside and the appeal is allowed.
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