section 107(11) scn- can the appellate authority brought new allegation which were not there in the SCN of original / Adjudication stage?

[HimangshuKumar Ray]

Fact- Section 107(11) GST Act, show cause notice the Appellate authority inserted a new allegation under section 74 of the GST Act, 2017 as suppression of turnover found from the balance sheet submitted by the RTP during appeal hearing and in Adjudication allegation was made under section 73 of the GST Act, 2017 as show cause notice framed in adjudication stage only on ITC mismatch and adjudication order passed on that issue mismatch of ITC between GSTR-3B and GSTR-2A, but in the appellate stage the allegation “suppression of Turnover” brought and the appellate authority can not bring new allegation and the appellate authority can not travelled beyond the allegation brought in the show cause notice in adjudication stage. I expect expert opinion this this regard with Citations. kindly discuss.

[KASTURI SETHI]

Additional evidence adduced by Revenue at appeal stage is not permissible - Impugned demand and confiscation order quashed - Section 130 of Central Goods and Services Tax Act, 2017 - Article 226 of Constitution of India. [paras 9, 10, 11, 12, 13]---Allahabad High Court

2021 (1) TMI 1091 - ALLAHABAD HIGH COURT -  ANANDESHWAR TRADERS Versus STATE OF UTTAR PRADESH

[KASTURI SETHI]

In this situation, as per first proviso to sub-section 11 of Section 107, the Appellate Authority has to issue  show cause notice to the Appellant with full reasons along with documentary evidence. Without issuance SCN the Appellate Authority cannot pass order. 

As per second proviso, SCN has to be issued within  time limits prescribed under Section 73 or 74.

 

[YAGAY andSUN]

Expert Opinion on Allegation of "Suppression of Turnover" in GST Show Cause Notice at the Appellate Stage

You are correct in pointing out that there is a specific procedure in GST law that governs the framing of allegations, and the Appellate Authority cannot introduce new allegations or claims that were not part of the original Show Cause Notice (SCN) during the Adjudication stage. The introduction of new allegations in the appellate stage, particularly allegations under Section 74 for suppression of turnover, raises a significant procedural issue, and I will discuss this with relevant citations and legal precedents.

Key Points in the Issue:

1. Show Cause Notice at the Adjudication Stage:
   • The Show Cause Notice (SCN) was framed based on mismatch of ITC between GSTR-3B and GSTR-2A. This is a clear issue related to the reconciliation of Input Tax Credit (ITC) and the correct reporting of tax liability.
   • The Adjudicating Authority issued the order based solely on the ITC mismatch, which was the issue raised in the SCN.
2. Introduction of New Allegation in the Appellate Stage:
   • At the Appellate Stage, the Appellate Authority introduced an allegation of "suppression of turnover", which was not part of the original SCN.
   • The Appellate Authority, as per GST law, cannot travel beyond the issues raised in the SCN issued at the Adjudication Stage.
3. Section 107(11) of the CGST Act:
   • Section 107(11) of the CGST Act, 2017 clearly states that the Appellate Authority has the jurisdiction to hear and dispose of appeals but cannot introduce new issues or allegations that were not originally raised in the SCN at the adjudication stage.
   • This section ensures that the Appellate Authority does not expand the scope of the dispute at the appeal stage.
4. Legal Precedents and Principles:
   • The Supreme Court and various High Courts have consistently held that adjudicating authorities and appellate authorities must adhere to the scope of the Show Cause Notice and cannot introduce new allegations at the appellate stage.

Some key cases that reinforce this principle include:

1. 2. Union of India vs. M/s. Dharamendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT) – The Supreme Court emphasized that the show cause notice must specify the charges against the taxpayer. The authorities at the appellate level cannot alter or introduce new allegations not included in the original notice.
   3. M/s. Sanghi Industries Ltd. vs. Commissioner of Central Excise (2011, CESTAT) – The tribunal held that Appellate Authorities should not entertain or adjudicate on issues not raised in the show cause notice issued during the adjudication stage.
   4. Pioneer Associates vs. Commissioner of Central Excise, Pune-II (2016, CESTAT) – In this case, the tribunal ruled that the Appellate Authority cannot expand the scope of the dispute and must confine itself to the allegations raised in the original show cause notice.

Legal Provisions and Interpretation:

• Section 73 of the CGST Act, 2017 deals with demand of tax in cases where there is no intent to evade payment of tax, such as in the case of ITC mismatches.
• Section 74 of the CGST Act, 2017 deals with demand of tax in cases involving suppression, fraud, or willful misstatement to evade tax, which seems to be the allegation introduced in the appellate stage.
• Section 107(11) of the CGST Act:
  • Section 107(11) restricts the Appellate Authority from recasting or altering the original allegations brought forward by the Adjudicating Authority. The authority is expected to decide the appeal based on the grounds raised in the Show Cause Notice.

Relevant Legal Provisions:

• Section 107(11) of CGST Act, 2017:

The Appellate Authority shall not be empowered to make any order which is beyond the scope of the subject matter of the show cause notice issued in the original proceedings.

Conclusion:

Based on the provisions of the CGST Act, 2017, judicial precedents, and the specific facts of the case, the Appellate Authority is not authorized to introduce new allegations, such as the "suppression of turnover", in the appeal stage, which was not part of the original Show Cause Notice issued during the Adjudication stage. This goes against the principle of natural justice and fair procedure as outlined in the GST laws.

Therefore, the allegation of suppression of turnover introduced at the appellate stage appears to be outside the permissible scope of the appeal, and the Appellate Authority cannot travel beyond the issues raised in the original SCN.

In light of this, it would be advisable to raise this procedural issue in the appeal, highlighting the violation of Section 107(11), and seek that the appellate order be restricted to the matters originally raised in the Show Cause Notice.

Citations:

• Union of India vs. M/s. Dharamendra Textile Processors (2008, SC)
• M/s. Sanghi Industries Ltd. vs. Commissioner of Central Excise (2011, CESTAT)
• Pioneer Associates vs. Commissioner of Central Excise, Pune-II (2016, CESTAT)

You may wish to consult with a legal expert to represent your position on this matter before the Appellate Authority, referencing these key principles and precedents.

[VENU K]

In my humble opinion, the Appellate Authority has the power to issue a notice under Sec 73 or 74 under the second proviso to Sec 107(11) subject to the respective time limits.

Since the authority has given the SCN what  is possible for the Registered person is to object to the issue of such SCN and at the same time to also defend your case on merits. Prepare  grounds for  appeal to the Tribunal at the time of filing of your reply.

[HimangshuKumar Ray]

Thank you all Ld. experts. With regards.