1️⃣ Let’s Start
Consider a case where the First Appellate Authority decides four issues. One issue involving ₹15 lakh is decided in favour of the Department, while three issues involving ₹10 lakh are decided against it.
The taxpayer files an appeal before GSTAT on the first issue. The Department does not file an independent appeal against the adverse findings on the three issues as the disputed amount is below the monetary limit prescribed under Circular No. 207/1/2024-GST dated 26.06.2024.
However, upon receiving notice of the taxpayer’s appeal, the Department seeks to challenge those adverse findings by filing a cross-objection under Section 112(5).
2️⃣ What’s the issue?
Keeping aside the issue of whether the Department can file a cross-objection, a question arises: can it challenge an issue through a cross-objection when it is barred from filing an appeal due to the prescribed monetary limit?
3️⃣ Backdrop of Legal Provisions
Section 120 empowers the Board to prescribe monetary limits for departmental appeals. Section 112(5) provides that a cross-objection shall be disposed of by the Appellate Tribunal “as if it were an appeal” filed within time.
This deeming fiction is important.
A cross-objection is not merely a defensive response. Once entertained, it becomes an independent challenge and is adjudicated in the same manner as an appeal. Consequently, when the Tribunal decides it, the matter effectively stands before it in the character of an appeal. If that is the legislative treatment accorded to a cross-objection, the monetary-limit instructions applicable to appeals should logically apply to it as well. Further, any decision on such cross-objection may ultimately be carried before the High Court or the Supreme Court. Therefore, for all practical purposes, a cross-objection assumes the character of an appeal.
4️⃣ CBIC Circular on the Issue
Interestingly, neither Circular No. 207/1/2024-GST issued under the GST regime nor the erstwhile CBIC Instruction [F. No. 390/Misc./163/2010-JC] dated 17.08.2011 (as amended from time to time) specifically addresses the issue.
5️⃣ Reference from CBDT Circular
In Para 12 of CBDT Circular No. 3/2018 dated 11.07.2018, the Board clarified that the monetary limits applicable to ITAT appeals would equally govern cross-objections under Section 253(4), and those below the prescribed threshold should not be pursued. A similar clarification was issued vide CBDT Letter F. No. 279/Misc./M-142/2007-ITJ (Part) dated 08.03.2016.
Though the GST circular is silent, the above approach indicates that monetary-limit instructions may equally extend to cross-objections where the statute treats them as appeals.
6️⃣ Concluding Thoughts
Once a cross-objection is treated as an appeal, the restrictions applicable to appeals should logically apply to it as well. Accordingly, a strong argument exists, though greater clarity may emerge in due course.
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