GST APPELLATE AUTHORITY HAS NO POWER TO REMAND THE CASE

[DR.MARIAPPAN GOVINDARAJAN]

Section 107 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides the procedure for filing appeal before the first appellate authority against the order passed by the Adjudicating Authority.  The appeal shall be filed within 3 months from the date of order in the prescribed form.  Section 107 gives the detailed procedure to the Appellate Authority in deciding the appeal.  The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order.  Thus, it is clear the Appellate Authority is having no power to remand the case to the Adjudicating Authority.  The Madras High Court in TVL. SHIVAM STEELS (REPRESENTED BY ITS PROPRIETOR MR. GYAN MANCHANDA) VERSUS ASSISTANT COMMISSIONER (ST) (FAC) , HOSUR - 2024 (6) TMI 1381 - MADRAS HIGH COURT, confirmed the same.

In the above said case, the petitioner was issued with a show cause notice, alleging six defects on 12.01.2024.  The petitioner filed reply to the said show cause notice on 22.01.2024 and 14.02.2024.  On 12.03.2024 the assessing officer passed the order.  The petitioner filed appeals on the decision of the show cause notice except the allegation No.3 which relates to the reversal of input tax credit.  For the allegation No. 3 the petitioner filed the present writ petition before the High Court.

The petitioner submitted the following before the High Court-

• The value of supply would not include a discount only if the conditions prescribed in clauses (a) or (b) of sub-section (3) of Section 15 are satisfied.
• The case of the petitioner does not does not fall within the scope of sub-section (3) of section 15.
• The credit notes issued by the supplier were financial credit notes which is in accordance with the circular issued by the Department in No.92/11/2019-GST dated 07.03.2019.
• The petitioner is not liable to reverse Input Tax Credit to the extent of the value of credit notes.
• The discount offered by the supplier was erroneously construed as a service provided by the purchaser to the supplier.

Therefore, the petitioner prayed for quashing of the said impugned order.

The Department submitted the following before the High Court-

• The petitioner has filed this writ petition only insofar as defect no.3 is concerned.
• As regards other defects the petitioner has carried the matter in appeal before the appellate authority.
• Such practice should not be encouraged.
• Section 15 of applicable GST statutes provides for a reduction in the value of supply, on account of a discount, if such discount has been duly recorded in the invoice issued in respect of such supply or if such discount is established in terms of an agreement entered into either before or at the time of supply although the supply may be subsequent to such agreement.
• Since the petitioner has prima facie established that neither of the requirements under sub-section (3) of section 15 were satisfied the supplier would be liable to pay tax on the full value of supply.

The High Court considered the submissions of the above parties.  The High Court analyzed the portion of order in respect of defect No.3.  The said order states as below-

• On examination of the documents, it is noticed that the discount has been received after the sale was effected by the taxable person.
• The word discount received is nothing but an amount received from the supplier in the name of discount to increase the volume of sale during the year.
• The said the amount is related to good performance done by the taxable person by way of increasing the sale and thereby to boost the total turnover of the supplier /company, which resulted in increase in goodwill of the company and also helps the company to market their products and if the company is in the stock market the value of the share of the company will automatically goes up.
• The taxable person in this end by performing a good sale have provided a service to the supplier and the supplier /company got the benefit of goodwill and sound marketability in the trading world.

The High Court observed that the assessing officer concluded that the taxable person is providing a service to the supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier.  The High Court held that the above said decision is erroneous against to the provisions of GST Act.  

Next the High Court considered the arguments of the Department that the petitioner could not agitate for one defect while others are being appealed.   Therefore, the petitioner has no locus to file the present writ petition.  In this regard the High Court held that the existence of an alternative remedy is a material consideration but not a bar to the exercise of jurisdiction.   The other issues require reappraisal of evidence, the petitioner has approached the appellate authority.  Since the conclusion of the High Court the conclusion is ex facie erroneous on this issue, and the appellate authority under applicable GST statutes does not have the power to remand the High Court exercised its jurisdiction in this petition.  

The High Court set aside the order of Assessing Officer in respect of defect No.3.  The High Court also remanded the case to the Assessing Officer to reconsider the defect No. 3 after giving reasonable opportunity to the assessee and to issue a fresh order.