Case Law Details
Shalimar Industries Vs Assistant Commissioner (Telangana High Court)
Telangana High Court Remands GST Appeal on Reverse Charge Mechanism (RCM) Demand for Fresh Consideration
The Telangana High Court set aside the appellate order dated 12.03.2026 and remanded the matter to the appellate authority for fresh consideration of a GST demand, including Reverse Charge Mechanism (RCM) liability on raw cotton transactions for FYs 2017-18 to 2022-23. The petitioner contended that the purchases were made for trading purposes, that documentary evidence including invoices, e-way bills, bank statements and reconciliation statements had not been properly considered, and that a composite order under Sections 73 and 74 of the CGST Act had been passed without satisfying the ingredients of Section 74. The respondents submitted that the matter could be remanded for reconsideration. Taking note of the submissions of both parties, the Court set aside the order-in-appeal and directed the appellate authority to pass a fresh order in accordance with law after providing an opportunity of hearing. The Court also permitted the petitioner to raise additional grounds within two weeks and disposed of the writ petition without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Learned counsel Sri K.P.Amarnath Reddy appears for the petitioner.
Sri Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC), appears for respondents No.1 to 3.
2. Heard the learned counsel for the parties.
3. Both the order-in-original dated 17.11.2024 along with the summary of the order in Form GST DRC-07 dated 21.11.2024 and the appellate order dated 12.03.2026 pertaining to the financial years 2017 – 18 to 2022 – 23 are under challenge by the petitioner, whereby the respondents have fastened GST liability, including Reverse Charge Mechanism (RCM) liability on raw cotton transactions, despite the petitioner’s specific contention that the purchases were made for trading purposes.
4. The impugned proceedings have been conducted by invoking both Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as, “the Act”). After availing the appellate remedy, the petitioner has approached this court with the contention that the appellate authority failed to appreciate the detailed explanations, invoices, e-way bills, bank statements, reconciliation statements and other supporting documents furnished by the petitioner while mechanically confirming the demand. The respondents wrongly treated the petitioner’s purchases of raw cotton as attracting RCM liability, despite specific contention and documentary proof that such purchases were made for trading purposes and not for ginning activities. The order-in-original and the appellate order were passed without proper consideration of the petitioner’s submissions and evidence. They are cryptic, unsupported by reasons and reflect complete non-application of mind. The petitioner is aggrieved by the confirmation of demand, interest and penalty aggregating to Rs.1,54,33,258/- for the period covering 2017 – 18 to 2022 – 23.
5. Learned counsel for the petitioner has taken the plea that for the previous years where the proceedings under Section 73 of the Act have become time barred, the proper officer has deliberately invoked Section 74 of the Act without its ingredients, just for the purpose of availing the extended period of limitation. Learned counsel for the petitioner, therefore, submits that a composite order both under Sections 73 and 74 of the Act could not be passed in respect of different financial years without the ingredients of Section 74 of the Act being satisfied and also without consideration of the documentary evidence and the specific contentions of the petitioner etc. The matter may therefore be remanded for reconsideration by the appellate authority.
6. The matter was adjourned yesterday for the learned Senior Standing Counsel for CBIC to seek instructions.
7. Today, the learned Senior Standing Counsel for CHIC submits, on instructions, that the matter may be remanded to the appellate authority to reconsider these issues in accordance with law.
8. Having regard to the aforesaid facts and circumstances and the submissions of the learned counsel for the parties, the impugned order-in-appeal dated 12.03.2026 is set aside and the matter is remanded to the appellate authority to pass a fresh order in accordance with law after an opportunity of hearing to the petitioner. Since the matter is being remanded, the petitioner is allowed liberty to raise additional grounds within a period of two weeks from today.
9. The writ petition is accordingly disposed of. There shall be no order as to costs.
Miscellaneous applications pending, if any, shall stand closed.
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