SUO MOTU ISSUE FRAMED BY THE APPELLATE AUTHORITY

[Mr. M. GOVINDARAJAN]

In M/S. RADIANT ENTERPRISES PRIVATE LIMITED AND ANR. VERSUS JOINT COMMISSIONER, CGST & CX (APPEAL I) & ORS. - 2023 (2) TMI 37 - CALCUTTA HIGH COURT, the appellant filed a refund application under Section 54 of the Central Goods and Services Tax Act,2017 (‘Act’ for short).  The original authority rejected the said application on 13.11.2019.  The Authority rejected the refund claim on the ground that the tax is paid by Eveready and not by the claimant.  The appellant, aggrieved by the said order filed an application before the Appellate Authority.  Before the Appellate Authority the appellant contended that as a service recipient they are entitled for the refund of the tax.  The appellant relied on some judgments of High Courts and orders of the Tribunals.  The contention of the appellant is that the person, who has borne the incidence of tax, can file a refund claim in accordance with the provisions of Section 54 of the Act. 

The Appellate Authority considered the application.  The appellant authority stated that there are two issues involved in the present appeal-

1. Whether the recipient of the services or goods can apply for refund claim for excess payment of tax or not?
2. Whether the building purchased by the appellants from their purchaser Eveready Limited is taxable under the Act or not?

For the first issue the Appellate Authority decided in favor of the appellant.  The appellant is entitled to claim for refund.  For the second issue was raised suo motu by the Appellate Authority.  The Appellate Authority decided the second issue against the appellant on 31.03.2021.

Against the order of the Appellate Authority the appellant filed a writ petition before the High Court.  The Single Judge of the High Court dismissed the appeal filed by the appellant on 20.12.2022.  The Single Judge held that it is not inclined to interfere with the order considering the reasons recorded by the Appellate Authority.

Against this order the appellant filed this intra-Court appeal challenging the order of the Single Judge.  The High Court observed that there is no independent finding recorded by the Single Judge as to how the High Court was convinced that the reasons recorded by the Appellate Authority were just and proper.   This issue is very crucial in the present case since the appellants had filed the writ petition challenging that portion of the order passed by the Appellate Authority, which was never the case before the original authority.  The issue challenged was suo motu raised by the Appellate Authority and a decision has been rendered against the appellants. 

The High Court, while analyzing the order passed by the Appellate Authority on the second issue, observed that the appellants cannot be put in a disadvantage position and cannot be worst off in their own appeal.  Thus the second issue suo motu framed by the Appellate Authority could not have been framed such an issue and there is no jurisdiction for the Appellate Authority to frame such an issue.  Assuming that the statute provides for a cross appeal to be filed and the State had filed a cross appeal, then the position would have been different.  However the Act does not provide for any such provision for filing a cross appeal by the revenue in a statutory appeal filed before the Appellate Authority under Section 107 of the Act.  The High Court, therefore, decided that the second issue has to be necessarily set aside.

The Revenue contended that the Appellate Authority is entitled to go into the other issues in terms of section 107(2) of the Act.    The High Court held that if the power under the said provision had to be invoked then the appellants should have been put in notice.  It is not the case of the Revenue that the Appellate Authority thought fir to take up the other issues, that too in an appeal filed by the appellants against an order of rejection of the refund claim.  That apart, no direction has been issued to any authority to file an application for considering the other issues.  If it is assumed that the Appellate Authority has exercised its power under Section 107(2) of the Act, such exercise is not in accordance with the provisions of the Act and it is in violation of the said provisions as well as violation of the principles of Natural Justice.  The Appellate Authority could not have taken a decision on the second issue, which did not emanate from the order passed by the original authority..

The High Court set aside the order passed on the second issue by the Appellate Authority and directed the Revenue to refund application filed by the applicant shall be entertained and to pass appropriate orders on the same.