2026-VIL-328-GSTAT-ERN
  1. Home
  2. 2026-VIL-328-GSTAT-ERN

SGST Tribunal

GST - Natural Justice - Non-speaking order of the FAA rejecting detailed submissions in one line - Appellant was issued an SCN under Section 73 for the year 2017-18 on comparison of GSTR-3B and GSTR-2A, and the demand of tax, interest and penalty was confirmed and upheld by the FAA. The Appellant made elaborate submissions on set-off of excess output tax against the disallowed ITC, validity of credit notes not reflected in GSTR-2A and non-applicability of interest on late filing, and these were recorded in the appellate order over several pages but rejected in a single line stating that there was no evidence in support of the disputed ITC claim - Whether the order of the FAA rejecting the submissions in one line without discussion can be sustained - HELD - The submissions recorded over five pages were brusquely rejected in one line, which is a cavalier approach resulting in an order that is non-speaking, with non-application of mind writ large on its face. The order is arbitrary and passed in complete violation of the canons of natural justice and deserves to be set aside on this ground alone - The Tribunal proceeded to decide the case on merits - Demand under Section 73 alleging short payment of tax on account of ineligible ITC offset by excess output tax paid - Appellant had paid output tax in excess of what was due as per GSTR-1, while the updated GSTR-2A showed excess input tax availed only to a lesser extent under CGST and SGST. The Respondent did not dispute these facts but contended that discharge of output liability and availment of ITC are distinct mechanisms, and that unilateral adjustment of excess output tax without following the refund process under Section 54 is impermissible - Whether a notice under Section 73 can be issued for short payment of tax when the shortfall due to ineligible ITC is offset by an excess of output tax paid - HELD - Even if the Appellant made a short payment to the extent of ITC disallowed, there is no reason why it cannot be set off against the excess tax paid, which is not in dispute, and this does not violate any statutory provision. Expecting the Appellant to pay the shortfall and then claim refund of the excess would be an exercise in futility. The Kerala High Court decision, though rendered in the context of cross utilisation of ITC, upheld the principle that the electronic credit ledger is a pool with compartments for IGST, CGST and SGST and that no short payment arises where there is no loss of revenue. This principle applies with greater force where the output tax paid was much in excess of the shortfall on account of ITC disallowed - There is no overall short payment of tax warranting proceedings under Section 73, and the demand of tax, interest and penalty is not sustainable - Refund of Excess Output Tax - Applicability of unjust enrichment - The Respondent contended that Section 54 read with Section 57 requires refund of excess tax paid to undergo scrutiny for unjust enrichment, and that automatic set-off in assessment proceedings would bypass verification of whether the burden was passed on to consumers - Whether refund of excess paid output tax is subject to the test of unjust enrichment - HELD - Section 54(8)(c) provides that the refundable amount shall be paid to the applicant instead of being credited to the Fund where it is relatable to refund of tax paid on a supply which is not provided, wholly or partially, and for which invoice has not been issued. The excess payment of output tax over and above what was due falls within this exemption and is not subject to the principles of unjust enrichment. The apprehension that the statutory mandate of verifying unjust enrichment is bypassed is misplaced as there is no such statutory mandate - The contention is not sustainable and refund of excess paid output tax is not subject to the test of unjust enrichment - Sales Return - Demand confirmed on a ground not mentioned in the SCN and non-declaration of credit and debit notes in the portal - The SCN alleged that the sales return claimed was without supporting documents, whereas the Appellant produced the debit notes and credit notes. The adjudicating authority rejected them on the ground that the supplier had not declared the debit note in its GSTR-1 or GSTR-9, and the Respondent relied on Section 34(2) requiring declaration of such notes in the return - Whether the demand on account of sales return can be confirmed on a ground not found in the SCN, and whether credit and debit notes can be invalidated for non-declaration in the portal for the year 2017-18 - HELD - The adjudicating authority travelled beyond the SCN and confirmed the demand on a ground not found in it, and the FAA upheld the order without any worthwhile finding or discussion. GSTR-2A was initially rolled out in 2017-18 as a taxpayer facility for reconciliation of ITC and became a mandatory return only from October 2019. There was no mandatory provision during the period in dispute for declaring these credit and debit notes in the portal, and the notes, if otherwise in order, cannot be invalidated on the ground that they were not uploaded - The demand of tax, interest and penalty on this account is not sustainable - Interest on Belated Filing of Returns - Vague SCN lacking specificity - Appellant contended that due dates were continuously extended on account of faults in the GST Portal and that the delay was due to the Portal. The SCN did not mention the months of default, the tax on which interest was demanded or the period of interest, and the amount of interest in the order differed from that in the SCN without any explanation of the basis of either figure - Whether the demand of interest on account of late filing can be sustained on such an SCN - HELD - The SCN is vague, lacks specificity and does not disclose the specific months of default, the quantum of tax on which interest is demanded and the period for which interest is demanded. The difference between the interest stated in the SCN and the order remains unexplained. Such an SCN is in violation of the principles of natural justice - The demand of interest is not sustainable and the appeal is allowed.
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Dr. G. Gokul Kishore

Weekly Summary

VIL Video

GST Adjudication & Appeals Reform
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Security-Code
New Code?

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Security-Code
New Code?

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?