GST First Appellate Authority Cannot Remand Demand Verification: GSTAT Ernakulam

Commissioner of CGST & CE Kochi Vs K A Traders (GSTAT Ernakulam)

Summary: The Commissioner of CGST & CE Kochi appealed against a rectification order of the Joint Commissioner (Appeals) concerning K A Traders, a registered trader in construction materials. A CGST audit for 2017 to 2022 led to a show cause notice dated 16 June 2023 and an adjudication order dated 11 December 2023. The taxpayer’s first appeal was rejected on 13 May 2024. On its subsequent rectification application, the JC (Appeals) passed an order dated 13 December 2024 dropping ₹1,18,889 of the total ₹5,42,234 demand and directing the original adjudicating authority to examine documents and tax calculations relating to the remaining ₹4,23,345, and to delete any demand found untenable. The Revenue challenged that direction as a prohibited remand under Section 107(11) of the CGST/KGST Act, 2017.

The Revenue argued that the JC (Appeals) had to verify the material and decide the appeal himself. The taxpayer maintained that the documents had been supplied to the JC (Appeals), who had taken them on record, and also argued that the departmental appeal was below the ₹20 lakh monetary threshold cited from a CBIC circular dated 26 June 2024. The Tribunal identified both the legality of the reference back and the monetary-limit objection as issues. It held that Section 107 permits the first appellate authority to make further inquiry and then confirm, modify or annul the order under appeal; subsection (11) expressly forbids referring the case back to the adjudicating authority. Subsection (12) requires a written decision stating the points for determination, decisions and reasons. The JC (Appeals) had not himself completed verification or given a final reasoned decision on the remaining demand.