Standardization of GST First Appeal proceedings

by P ARAVINDHAN

GST in India has subsumed most of the indirect taxes levied by both Central and State Governments. Under GST, the taxpayers must obtain separate registration in each State where they operate. A single challan is generated for paying all taxes of GST (viz. CGST, IGST, SGST and UTGST) under each registration and one single return is filed for both the central and state taxes. The division of taxpayers in each State between State and Central jurisdictions has been done in on a mutually agreed basis. The State tax officers have been empowered to adjudicate IGST /CGST disputes also apart from SGST and grant refund of IGST and CGST. Similar instructions on the State side were also issued empowering the Central tax officers to adjudicate SGST disputes apart from CGST and IGST and grant refund of SGST also.

In view of this dual control, the GST Act provides for cross empowerment of the Central and State tax officers to administer all the components of GST viz. CGST, SGST, UTGST and IGST. The tax officers carry out administration of all components of GST in respect of the taxpayers or specific areas allocated to them. While the State Commercial tax departments are responsible for administering functions assigned to the States, the Central Board of Indirect Taxes and Customs (CBIC) and its field formations carry out functions assigned to the Centre.

Transparency and certainty have improved under GST regime compared to the legacy indirect taxes. GST Council is also  sensitive and responsive to the needs of the different types of taxpayers and has been swift in issue of Circulars and other communications to minimize the GST disputes.

It is indeed a remarkable achievement that State GST authorities have also understood the nuances of taxation of services and taxation of production. Similarly the Central GST authorities have also understood the nuances of taxation of goods. GST Adjudication Authorities under Central jurisdiction and all State jurisdictions are following uniform procedure for adjudication like issue of DRC01, PH on the DRC01, Issue of DRC07 etc.

However, the procedure being followed by First Appellate Authorities for disposal of the First Appeals is not uniform between Central First Appeal Authorities and State First Appeal Authorities. In this article, few suggestions have been proposed for Standardization of GST First Appeal proceedings.

1. PH on Appeals may be ordered in the Order of filing. Sometimes PH ordered on an appeal continuously every month by the First Appellate authority and then subsequent PHs on that appeal totally stops inexplicably and no order in appeal is also issued. Such inexplicable and inordinate delay is against the spirit of natural justice.

Section 107(13) of GST Act 2017 suggests processing of an appeal within a year of filing. Passing an order on an appeal filed in 2024 without issuing Orders on appeals filed in earlier years (in 2021 or 2022), is an opaque practice and against the ease of business. First Appeal authorities shall pass their order swiftly on merits, in chronological order of filing of appeals.

Alternately, the Cause List in the chronological order of filing of appeals, may kindly be prepared by the GSTIN portal itself. The focus shall be on disposal of first Appeals in their order of filing.

• PH record shall be provided by First GST Appellate Authorities after PH.

Some of the First Appellate Authorities do not provide PH records after the appeal. PH outcome noted by First Appellate Authority either in the file or in the register is not shown to the appellant and no concurrence obtained from the Appellant for such PH outcome agreed upon. Providing PH record is also in accordance with principles of natural justice. Submissions must be recorded, and signature of appellant/AR and Appellate authority must be obtained. Additional clarification/information required by Appellate authority and time limit for providing these clarifications/documents committed by the Appellant/AR, can also be documented in this PH record. Practice of obtaining signature of the Appellant on PH record or PH jottings in file or register may kindly be mandated.

• Role of Departmental Representative (DR) in First Appeal proceedings needs to be revisited:

Some of State GST Departments have the procedure of nominating one of their department official (junior in rank to the First Appeal Authority) as “Departmental Representative “. Irrespective of the merits of the contentions of the taxpayer either in their Appeal or in their written submissions at or after PH, the Departmental Representatives only reiterate the Original Order issued by the Adjudication Authority in their Written Arguments. DRs rarely help the First Appellate Authority in fact finding. DRs rarely comment on the contentions made by the Appellant in their appeal and written submissions. Sometimes Appellant makes additional submissions after DR’s Written Arguments and there is no sequence stipulated.

No role has been specified or mandated for Departmental Representative either in GST law or GST rules. In these states, the First Appellate Authority says that they can decide only after DR written arguments because of which the First Appeal disposal process gets delayed without any value addition. First Appellate Authority shall be advised to decide the appeal only based on Appeal papers and other additional submissions placed before him, in accordance with GST laws.

In case of complicated DRC07s arising out of GST Audits or GST investigations, views of the Original Adjudication Authorities may be obtained by First Appeal Authority directly. Further, under the GST regime, the Appellate Authority can even issue SCN for soliciting additional clarification. These steps will facilitate the proper fact-finding process and decision making in accordance with GST law, rather than depending on mere repetition of original adjudication order by DR.

• In depth one or two PHs on First appeal adequate: While the GST adjudication authorities conduct mostly one or two PH to decide and pass their adjudication orders, many of the SGST First Appellate Authorities conduct 4 to 8 PHs routinely on each Appeal rising out of the same adjudication order. Proper justice can be rendered at one or two in-depth effective PHs.

Where the numbers of issues raised in the Orders in DRC07 are less than three, the First Appeal Authority shall conduct just one or two PHs to understand and decide the issue. Where issues are complicated or more than 5-6 in number (Ex DRC 07 out of GST Audit), the Appeal Authority may conduct a maximum of 3-4 PHs to decide. This will reduce the pendency of GST First Appeals to a great extent.

First Appeal Authority is passing the decision only based on papers placed before him. If the Appellant has not provided the explanation or clarification in time, the omission and the deadline may be documented in the PH record signed by all parties. Once the time agreed upon has expired, the Appeal shall be disposed thereafter on merits without providing any further grace time.

• Technology and other infrastructure: In case of assessment /appeals related to the Services Sector, most of the time, soft copy of voluminous data is provided by the taxpayers. It is also easier for the Adjudication or Appeal Authority to check the correctness of submission of the taxpayer in a soft copy rather than hard copy. Karnataka SGST authorities follow the system of having two Computer monitors attached to a single Computer of First Appellate Authority. At the PH, the Taxpayer can present their explanations based on the soft copy of the voluminous data. Same presentation can be seen simultaneously by both the Appellate Authority and the Appellant in both the monitors. Karnataka SGST Authorities also allow the taxpayers to access websites of Taxmann, Taxmanagementindia etc. on this monitor.

Few consultants travel from distant places (Chennai, Mumbai, Delhi etc.) to represent their clients mainly in the services sector. The taxpayers engage such consultants, because of their domain expertise. CGST Appellate and adjudication authorities are providing the opportunity of Virtual PHs. Recently West Bengal and Rajasthan SGST Authorities have also allowed their Adjudication and First Appeal Authorities to provide the opportunity of Virtual PHs. Even complicated matters can be explained in a video meeting. The infrastructure required for Virtual PHs is least expensive. Recording is also available to the Appellate Authority for rechecking the submissions at PH.

Conclusion: In short, instead of being like a long winding proceedings in a Civil court, First Appeal disposal shall  be a time bound decision making exercise. Pendency will also be reduced and Taxpayers may also be less inclined to approach Writ Courts. Because of their expertise and experience, the role of First Appellate Authority in resolution of GST disputes is very important. They mitigate the gaps in adjudication and play a Guru’s role in guiding both the taxpayers and the Adjudication officials of the Department GST council shall consider bringing out a Standard Operating procedure for proper conduct of First Appeal proceedings.

This article is a part of Article Writing Competition 2025.