Challenging GST Authorities' Inconsistent Approach in First Appeals Using the Approbate and Reprobate Doctrine

[Sabyasachi Chakraborty]

1. Challenges in GST Adjudication

The Adjudicating Authority often adopts a conflicting approach while confirming orders, which tends to be prejudicial to the assessee. The adjudication process plays a crucial role in resolving factual litigation issues, but when such issues are moved to the First Appellate Level, their resolution becomes more challenging. Unlike the pre-GST regime, the First Appellate Authority under the CGST Act, 2017 lacks the power to remand cases back to the Adjudicating Authority for verification, as restricted by Section 107(11). Due to this limitation, even when inconsistencies in the Order-in-Original are evident, the First Appellate Authority often rejects the appeal, leaving taxpayers without an effective recourse at this stage.

There are instances where, despite providing all necessary factual explanations, the Adjudicating Authority fails to consider them. In such cases, the only remedy available is before the Appellate Authority. Here, the Doctrine of Approbate and Reprobate can serve as a powerful tool in challenging inconsistent rulings and ensuring a fair adjudication process.

2. Instances of the contradictory position taken by the GST Adjudication Authority

 CA Certificate is generally treated as admissible evidence in the tax law.  Hence, the assessee submits a CA Certificate to substantiate any value in the books in defence, e.g. ITC of FY 2018-2019, availed in FY 2019-2020,  [if same deviates from the figure reported in PDF reco in GSTR-9C], etc. However, despite providing a proper explanation, evidence and also the CA Certificate, the Adjudication Authority even though prima facie accepted the CA Certificate but while confirming the order, completely ignored the fact while passing the order, by way of giving a vague explanation.  A sample form of explanation is given below to understate the principal issue in Article –

• It appears that CA Certificate dated ……. reflects the actual/final amount of ITC of FY 2017-2018 availed during FY 2018-19. However, I consider the signed PDF filled along with GSTR-9C as the SCN is based on figures reflected in GSTR-2A, GSTR-3B, and GSTR-9/ 9C.

It is also seen that even though prima facie Adjudicating Authority has not denied the eligibility of Transition Credit while comparing GSTR-2A and GSTR-3B completely, ignored the transition credit part and confirmed the demand, resulting in excess demand arising. A sample form of language used by the Adjudicating Authority is given below –

• However, the verification report has not mentioned anything about the genuineness/ ineligibility of the transitional credit of INR………. Hence it is presumed that the said Transition Credits were considered and allowed to the taxpayer. However, in the table of comparison of GSTR-3B vis-à-vis GSTR-2A, the effect of transition credit has not been taken,

3. Understanding the Doctrine of Approbate and Reprobate
4. a. Origination

These phrases are borrowed from the Scots law. They would only mean that no party can be allowed to accept and reject the same thing, and thus one cannot blow hot and cold. The principle behind the doctrine of election is inbuilt in the concept of approbate and reprobate. Once again, it is a principle of equity coming under the contours of common law. Therefore, he who knows that if he objects to an instrument, he will not get the benefit he wants cannot be allowed to do so while enjoying the fruits. One cannot take advantage of one part while rejecting the rest. A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has to affirm or disaffirm the transaction. This principle has to be applied with more vigour as a common law principle, if such a party actually enjoys the one part fully and on near completion of the said enjoyment, thereafter questions the other part. An element of fair play is inbuilt in this principle. It is also a species of estoppel dealing with the conduct of a party. We have already dealt with the provisions of the Contract Act concerning the conduct of a party, and his presumption of knowledge while confirming an offer through his acceptance unconditionally.

b. Application of Doctrine of Approbate and Reprobate in Indian Jurisprudence

The principle of the Doctrine of Approbate and Reprobate has been applied in the form Principle of “Estoppel” which is defined in Section 121 of Bharatiya Saksya Adhiniyam, 2023 [erstwhile Act known as Indian Evidence Act, 1872 ].  Section 121 of Bharatiya Saksya Adhiniyam, 2023, defines “Estoppel” as follows –

When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.

Illustration. A intentionally and falsely leads B to believe that certain land belongs to A, and thereby induces B to buy and pay for it. The land afterward becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had no title. He must not be allowed to prove his want of title.

C.  Judicial Precedent  

In the case of  THE RAJASTHAN STATE INDUSTRIAL DEVELOPMENT AND INVESTMENT CORPORATION & ANR. VERSUS DIAMOND AND GEM DEVELOPMENT CORPORATION LTD. & ANR. - 2013 (2) TMI 870 - SUPREME COURT , wherein Apex Court observed that a party cannot be permitted to “blow hot and cold”, “fast and loose” or “approbate and reprobate”. Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience

In this connection, it is pertinent to refer rely on the decision of English Decision [Square vs. Square (1935) P.120] wherein it was held that “if two people with the same source of information assert the same truth or agree to assert the same falsehood at the same time, neither can be estopped as against the other from asserting differently at another time”.

4. Practical approach to use the ‘Approbate and Reprobate’ Doctrine before Appellate Authority

Paragraph 2 provides two practical examples. Now, let’s examine, how the Doctrine of ‘Approbate and Reprobate’ can be applied in both scenarios -

Situation – 1: The value of ITC of FY 2017-2018 availed during FY 2018-2019’ certified in the CA Certificate was not considered by the Adjudication Authority, despite considering the same as ‘final or ‘actual’ value.

Possible Reply: The Ld. Adjudicating Authority cannot be permitted to approbate and reprobate. On one hand, the Ld. Adjudicating Authority acknowledges that the CA Certificate dated 21-12-2023 accurately reflects the actual/final availment of ITC for 2017-2018 in 2018-2019. However, while assessing the ITC availed/reversed, the authority relies on the figures reflected in the signed PDF filed with GSTR-9C, as the SCN is based on data from GSTR-2A, GSTR-3B, and GSTR-9/ 9C. This contradictory approach is evident—while accepting our factual basis in one instance, the authority completely disregards it when confirming the demand. Such an inconsistent stance violates the Doctrine of Approbate and Reprobate as well as the Doctrine of Estoppel.

Situation 2 :  On the basis of verification report, prima facie agrees about the genuineness of transitional credit, but while comparing GSTR-2A and GSTR-3B, completely ignored the transition credit part and confirmed the demand on an arbitrary basis.

Possible Reply:

In the present case, the Ld. Additional Commissioner has taken contradictory positions in the Order-in-Original. In Para No. (d) of the Discussion Findings [Page No. …….], it is stated that the Transition Credit of INR …….. was considered and allowed to the taxpayer. However, in Para (v) of the Discussion Findings [Page No. …….], the Ld. Additional Commissioner has confirmed the demand of INR …../- based on a comparison between the ITC auto-populated in GSTR-2A and the ITC utilized. This assessment was made without deducting the Transition Credit from the total ITC utilization, leading to an inadvertent excess ITC utilization of INR ----/- over what was reflected in GSTR-2A. This approach deviates from the facts on record and results in an inconsistent adjudication and, against the Doctrine of Approbate and Reprobate or Doctrine of Estoppel.