GSTAT Sets Aside Ex Parte GST Appeal Order After First Appellate Authority Ignores Taxpayer’s Arguments:

The GSTAT Kolkata Bench set aside the order of the GST First Appellate Authority and remanded the case for fresh adjudication. The tribunal held that the concerned appellate authority had dismissed the taxpayer’s appeal without recording proper reasons or addressing the arguments raised by the taxpayer; consequently, the impugned order was ex parte and was issued in contravention of the principles of natural justice.

Spandan Electrical (appellant) engaged in the business of trading electrical goods, located in East Para, Khanpur Road, Amarpur Playground, Sugandha, in the Hooghly district of West Bengal.

In a search carried out on the premises of the appellant on March 03, 2022, the investigation team found certain incriminating documents maintained by him in his office; they were immediately confiscated. It was further observed by the team that the appellant had tried to hide the record of his outward supplies to evade tax.

Subsequently, the appellant was asked to visit the investigation team along with his books of accounts, bank statements and invoices, etc. for reconciliation. On the appellant's failure to do so, the team issued a demand notice dated August 04, 2024, under Section 74(1), suppressing the value of the outward supply of goods worth Rs 19.83 lakh (the demand also included interest and penalty). The demand belonged to the financial year 2017-18. Eventually, the appellant was held liable to pay an aggregate demand of about Rs 16.64 lakh (SGST+CGST of Rs 3.57 lakh, interest of Rs 4.30 lakh and penalty of Rs 8.76 lakh).

A condition was placed before the appellant that either it show cause why the proposed demand should not be imposed against it, or it pay the proposed demand along with interest and penalty within the time period of 30 days.

The taxpayer contended that the disputed amounts were advances received from customers for future supplies of goods. According to the taxpayer, no corresponding supply had taken place during the relevant financial year, and therefore, no final tax invoices were issued. The taxpayer also challenged the invocation of Section 74, arguing that there was no evidence of fraud, wilful misstatement or suppression of facts to justify the demand.

The Adjudicating Authority confirmed the impugned demand vide an order dated January 20, 2025. Thereafter, the aggrieved appellant filed an appeal before the First Appellate Authority. However, the appeal was dismissed vide an order dated October 14, 2025, holding that the taxpayer had failed to provide documentary evidence despite receiving reasonable opportunities.

After examining the case, GSTAT observed that Section 107(12) of the CGST Act requires the appellate authority to specify the points for determination, its decision and the reasons supporting that decision. The Tribunal found that the impugned order did not meet these requirements and failed to address the taxpayer’s arguments.

Accordingly, GSTAT set aside the impugned appellate order and remanded the matter back to the first appellate authority for a fresh hearing with direction to provide the appellant an adequate opportunity to submit evidence and pass a reasoned order within six months from the date of communication of the Tribunal’s order.