Appellate Authority Cannot Add New Grounds Without Notice; Tribunal Hearing No Cure: GSTAT Thiruvananthapuram

The Thiruvananthapuram Bench of the GST Appellate Tribunal quashed a demand on a jeweller’s sales returns because both lower orders relied on charges never put in the show cause notice or at a hearing.

GSTAT Thiruvananthapuram has held that an appellate authority’s power under Section 107(11) of the CGST Act to make further inquiry does not let it confirm a demand on new grounds without first putting them to the appellant, and that a full hearing before the Tribunal cannot make up for the lack of one below. It set aside a demand of ₹2,10,892 on a gold jeweller’s sales returns for 2017-18. [Josco Gold Corporation Private Ltd v. Commissioner of Kerala SGST Thiruvananthapuram, 2026-juristway.com-3310-GSTAT(Thiruvananthapuram)-GST]

Subramanya Rayaprol, Vice-President, and Ramamoorthi Sriram, Member (Technical), allowed the appeal, with Ramamoorthi Sriram writing the order. The show cause notice (SCN) dated 28 Sep 2023 alleged that the jeweller had claimed sales returns of ₹70,29,725 without issuing any credit notes, and treated the amount as escaped turnover.

The appellant replied that its B2C returns were reported net of credit notes, attached sample credit notes and offered all of them for verification. The order-in-original, with no record of a personal hearing, found instead that the credit notes had been issued on the same day as the sales invoices and did not match them in value. The appellate authority added further grounds, including the time limit in Section 34 and the improbability of customers exchanging ornaments within days.

The Bench held that the SCN’s own premise, that no credit notes existed, was contradicted by the order-in-original, and that testing the credit notes against Section 34 was a charge never made in the notice. Both orders breached Section 75(7), and the order-in-original also breached Section 75(4). Relying on Armour Security (India) Ltd v. Commissioner, CGST, Delhi East Commissionerate (2025), it held that State Bank of Patiala v. S.K. Sharma (1996) and Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise (2015) did not help the Revenue, given the prejudice caused.

Any inquiry under Section 107(11), the Bench held, must follow natural justice, and nothing showed that the new findings came from such an inquiry. It rejected the Revenue’s argument that the hearing before the Tribunal cured any lapse, holding that a taxpayer has a right to full opportunity at every stage. The order-in-appeal was set aside with consequential relief, without examining the merits.

2026-juristway.com-3310-GSTAT(Thiruvananthapuram)-GST