Facts of the Case

The petitioner, M/s. EPragathi Recycling, challenged the appellate order dated 14.07.2022 passed by the Joint Commissioner of GST (Appeals) relating to the assessment period 2017-18. The petitioner also questioned the audit report issued under Section 65, the audit communication in Form GST ADT-02, and the subsequent show cause notice issued under Section 73(1) of the CGST/KGST Act.

The petitioner contended that the appellate authority failed to properly examine the appeal and passed an order without granting adequate opportunity of hearing. It was further submitted that an identical issue had already been decided by the Karnataka High Court in M/s. Shri Mahila Griha Udyog Lijjat Papad vs. Joint Commissioner of Commercial Taxes (Appeals)-2, wherein the matter had been remanded for fresh consideration.

The respondents opposed the writ petition and sought dismissal of the same.

Issues Involved

  1. Whether the appellate authority passed a legally sustainable and reasoned order while disposing of the GST appeal.
  2. Whether an appeal under Section 107 was required to be reconsidered after granting proper opportunity of hearing.
  3. Whether the impugned appellate order deserved to be quashed in view of the precedent laid down by the Karnataka High Court in an identical matter.
  4. Whether the proceedings initiated pursuant to the audit report and show cause notice should remain pending until disposal of the appeal.

Petitioner’s Arguments

  • The appellate authority passed the impugned order without properly considering the issues raised in the appeal.
  • The petitioner was not afforded an effective opportunity to present its case.
  • The facts of the present case were identical to those decided by the Karnataka High Court in M/s. Shri Mahila Griha Udyog Lijjat Papad, where the appellate order was set aside and remanded.
  • Therefore, the impugned appellate order deserved to be quashed and the appeal required fresh adjudication on merits in accordance with law.

Respondent’s Arguments

The State contended that the writ petition lacked merit and argued that the impugned appellate order was valid, requesting dismissal of the petition.

Court Order / Findings

The Karnataka High Court observed that the controversy involved in the present writ petition was identical to the issue already decided in M/s. Shri Mahila Griha Udyog Lijjat Papad.

Following the earlier judgment, the Court held that the impugned appellate order deserved to be set aside and the matter required reconsideration by the Appellate Authority.

Accordingly, the Court:

  • Allowed the writ petition.
  • Quashed the appellate order dated 14.07.2022.
  • Remitted the matter to the Appellate Authority for fresh consideration in accordance with law.
  • Clarified that all rival contentions of both parties remain open.
  • Directed that the show cause notice dated 22.07.2022 shall remain in abeyance until disposal of the appeal by the Appellate Authority.

Important Clarification

  • A GST appellate authority is expected to pass a reasoned and legally sustainable order after granting proper opportunity of hearing.
  • Where an identical legal issue has already been settled by the High Court, similar matters should ordinarily receive consistent treatment.
  • Pending reconsideration of the appeal, consequential proceedings such as the show cause notice may be kept in abeyance to avoid prejudice to the taxpayer.
  • The remand does not amount to adjudication on merits, and all legal and factual contentions remain open before the appellate authority. 

Sections Involved

  • Section 65 – Audit by Tax Authorities
  • Section 73(1) – Determination of Tax Not Paid or Short Paid
  • Section 107 – Appeals to Appellate Authority
  • Section 121 – Non-Appealable Decisions and Orders
  • Articles 226 & 227 of the Constitution of India

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785325607_2260compressed.pdf

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