HC Orders Appellate Authority to Admit Evidence, Citing “Sufficient Cause” and Unfair Hearing.

By | November 3, 2025
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HC Orders Appellate Authority to Admit Evidence, Citing “Sufficient Cause” and Unfair Hearing.

Issue

Whether an Appellate Authority can refuse to admit additional evidence under Rule 112 of the CGST Rules, when the taxpayer had “sufficient cause” for not producing it earlier, particularly when the original adjudicating authority breached the principles of natural justice by scheduling a hearing before the time limit to file a reply had expired.

Facts

  • An SCN was issued to the petitioner for an ITC mismatch for the period 2018-19, granting 30 days to file a reply.
  • However, the authority scheduled a personal hearing before this 30-day reply period had ended.
  • The petitioner requested an extension, citing the voluminous data involved, but missed subsequent hearing dates.
  • An adverse order was passed confirming the demand.
  • The petitioner’s prompt application for rectification was rejected on technical grounds.
  • The petitioner then filed an appeal, attaching the necessary documents. The appellate authority refused to admit this additional evidence, citing Rule 112.

Decision

  • The High Court quashed the impugned appellate order.
  • It held that scheduling a personal hearing before the expiry of the time given to file a reply was not a reasonable opportunity and constituted a clear breach of the principles of natural justice.
  • The court found that the petitioner’s explanation (voluminous data, inadequate time) was a plausible reason for not producing the documents earlier, thus establishing “sufficient cause” under Rule 112(1)(c).
  • The High Court directed the Appellate Authority to accept the additional documents and decide the appeal on its merits.

Key Takeaways

  • Natural Justice Violation: Scheduling a hearing before the reply deadline is a violation of natural justice. A taxpayer must be given the full statutory period to prepare their written defense before being called for an oral hearing.
  • “Sufficient Cause” for Additional Evidence: When an initial hearing is procedurally flawed, it can constitute “sufficient cause” for a taxpayer’s inability to produce evidence at that stage, making it admissible at the appellate level.
  • Liberal Approach to Evidence: Appellate authorities should adopt a liberal approach to admitting evidence. The primary objective is to determine the correct tax liability based on facts, not to dismiss cases on procedural technicalities.
  • Appellate Authority’s Own Powers: The court noted that the appellate authority could also have used its own powers under Rule 112(4) to call for the necessary documents to arrive at a just decision.
HIGH COURT OF KERALA
U.S.Technology International (P.) Ltd.
v.
State of Kerala
ZIYAD RAHMAN A.A., J.
WP (C) NO. 14760 OF 2025
AUGUST  20, 2025
A.R. Madhav Rao, Sr. Counsel, Krishna Rao, Mukunda Rao, K.V. Krishnakumar and Smt. Devika R. Krishna, Advs. for the Petitioner. Arun Ajay Sankar, G.P for the Respondent.
JUDGMENT
1. The petitioner is a registered taxpayer under the provisions of CGST/KGST Act 2017. The grievance highlighted in this writ petition is against the Ext.P8 order passed by the 3rd respondent, which was confirmed in Ext.P17, the order passed by the 2nd respondent, the Appellate Authority. The case of the petitioner is that, the petitioner was denied a proper opportunity to contest the matter before the adjudicating authority, as a reasonable time was not granted to produce the necessary documents to controvert the allegations raised in the Show Cause Notice. The facts which led to the filing of this writ petition are as follows:-
2. Pertaining to the assessment year 2018-19, the petitioner submitted all the statutory returns and paid the tax conceded, as required under law. However, the 3rd respondent issued Ext.P3 Show cause notice on 30.01.2024, highlighting certain discrepancies in the returns. According to the 3rd respondent, the input tax credit available to the petitioner was on the lesser side as per GSTR-2A, than that availed by the petitioner as per GSTR-3B. The figures, referring to the excess claim made by the petitioner were also highlighted in the said notice. However, in Ext P3 notice, despite the fact that, the period specified to submit the reply to the said notice was 30 days, the personal hearing was scheduled on 15.02.2024, which was within 15 days from the date of notice. On 15.02.2024, the petitioner did not appear and therefore, Ext.P4 reminder notice dated 17.02.2024 was issued, requiring the petitioner to filed objection on 04.03.2024. The petitioner submitted Ext.P5 reply to the Show Cause Notice on 29.02.2024, seeking 20 days more time to submit the reply. According to the petitioner company, they were in the process of collecting the required documents and therefore to prepare a detailed reply, some more time was required.
3. Thereafter, a further reminder notice was issued on 06.03.2024, proposing to conduct a hearing on 16.03.2024. On 16.03.2024, apparently, taking note of the time sought by the petitioner to submit a reply, the matter was again posted to 23.03.2024.
4. However, on that day also, no one appeared for the petitioner for hearing. Accordingly, an order was passed on 25.03.2024, as evidenced by Ext.P8, confirming the discrepancies highlighted in the show cause notice. Immediately thereafter, i.e., on 26.03.2024, the petitioner submitted Ext.P9, a request letter for rectification of Ext.P8 order, by producing the necessary documents to substantiate the claim. In Ext.P9, it was averred that, the value entered by the Company in tab 8C of GSTR 9 for 2018-19 was incorrect and this was on account of an inadvertent mistake on the company’s part, while extracting the ITC report from the accounts payable module in company’s Enterprise Resource Plan (ERP) with respect to the invoices pertaining to the 2018-19 for which ITC has been availed in the year 2019-2020. According to the petitioner, the said report was generated from ERP in such a manner that, there would be multiple line items against invoices issued by telecom operators and internet service providers, wherein, each line represents the connection / expense ledger / project to which proportionate expense amount is allocated. However, the GST amount was not being apportioned to connection / expense ledger / project (since ITC would be availed), and hence the entire amount of GST involved in the invoice captured in full, was captured against each line. Thus, according to them, there occurred duplication and this resulted in unrealistic figures being entered into tab 8C of GSTR 9.
5. According to the petitioner, along with Ext.P9, the necessary documents to clarify the aforesaid mistake were also submitted. However, the said request letter was rejected by the 3rd respondent as per Ext.P11 order, after finding that, the rectification sought, was beyond the scope of the powers under Section 161 of the CGST Act, 2017.
6. In such circumstances, the petitioner submitted an appeal before the 2nd respondent, and along with the appeal, all the documents to substantiate the contentions as referred to in Ext.P9 rectification letter, were also produced. The petitioner also sought the acceptance of the documents, before the 2nd respondent appellate authority, by invoking the powers under Rule 112 of CGST Rules. However, without considering the said request to accept the said documents into file, and by holding that the petitioner failed to establish the sufficient reasons as mentioned in Rule 112(1) of the Rules, the said request was declined and ultimately the appellate order was passed by confirming Ext.P8 order. This writ petition is submitted by the petitioner challenging Ext.P17 order and seeking a direction to the 2nd respondent to accept the additional evidence produced by the petitioner in appeal, copy of which is marked as Ext.P12 in this writ petition under Rule 112(4) of the CGST Act, 2017.
7. A counter affidavit was submitted by the respondents, disputing the averments contained in the writ petition and also opposing the reliefs sought in this writ petition. In the counter affidavit, the respondents reiterated the details of the opportunities granted to the petitioner, before completing the proceedings and the failure on the part of the petitioner to avail such opportunities. A reply affidavit was also submitted by the petitioner disputing the averments in the counter affidavit, and further explaining the case of the petitioner. The circumstances under which the petitioner could not avail the opportunities granted to the petitioner, were also further explained.
8. I have heard Sri.A.R. Madhav Rao., learned Senior Counsel appearing for the petitioner and Sri.Arun Ajay Shankar, learned Government Pleader for the respondents.
9. The learned senior Counsel for the petitioner specifically contended that, the 3rd respondent-adjudicating authority failed to grant a proper opportunity to the petitioner, as all the hearing dates were fixed at very short intervals. It was also pointed out that, in Ext.P3 show cause notice itself, even though the time granted for reply was for thirty days, the personal hearing was scheduled on 15.02.2024, which was after fifteen days. Therefore, it was contended that, the same cannot be treated as an effective opportunity. Moreover, it was further pointed out that, even when a further extension of twenty days time was sought as per communication dated 29.02.2024, a further hearing was scheduled even before the expiry of the time for which extension was sought and therefore, the hearing which was held on 16.03.2024 also cannot be treated as a proper opportunity. Thus, the specific case of the learned Senior Counsel for the petitioner is that, the only effective opportunity was the hearing on 23.03.2024, but, unfortunately, before that date, the petitioner could not collate the necessary data and collect necessary documents to submit their proper reply to the discrepancies highlighted in the show cause notice, which were voluminous. It was further contended that, despite the above, immediately thereafter, the petitioner managed to collate all the data and submitted the documents, but, unfortunately, by that time, the final order was passed. Thus, the petitioner was compelled to submit the said documents in the form of a rectification request as evidenced by Ext.P9, which was alos not accepted.
10. The learned Senior Counsel also argued in detail, with reference to the attempts made by the petitioner to submit the documents before the appellate authority, and by invoking Rule 112 of the CGST Rules, which were not successful. The learned Counsel for the petitioner placed reliance upon various decisions rendered by the Honourable Supreme Court including Sanjay Kumar Singh v. State Of Jharkhand (2022) 7 SCC 247, the decision rendered by the Calcutta High Court in Rakesh Manda v. Assistant Commissioner of CGST & Central Excise  GSTL 45 (Calcutta)/(2023) 3 Centax 106 (Cal.), the order passed by the Honourable Supreme Court in Central Board of Indirect Taxes and Customs v. Aberdare Technologies (P.) Ltd.  (SC)/SLP(C) bearing No.6332/2025, the decision rendered by the Madras High Court in Anaikar Trades & Estates (P). Ltd. v. Commissioner of Income-Tax  (Madras)/1990 SCC OnLine Mad 703 and the decision rendered by the Calcutta High Court in Suchismita Maji v. Assistant Commissioner of CGST and CX [WPA No. 4133 of 2025, dated 14-7-2025].
11. The learned Government Pleader on the other hand, stoutly opposed the aforesaid contentions by highlighting that ample opportunities were granted to the petitioner, by the 3rd respondent adjudicating authority. Despite the same, the petitioner did not avail of any of the said opportunities, apart from submitting an application for extension of time to submit reply on 29.02.2024. It was pointed out that, in none of the days on which personal hearing was scheduled, the petitioner appeared, and it was in those circumstances that the order was passed. With regard to the rejection of the request by the appellate authority for accepting the documents under Rule 112, it was submitted by the learned Government Pleader that, from the conduct of the petitioner, it is evident that, none of the circumstances that warrant invocation of Rule 112 were in existence, and therefore, the said power was rightly exercised by the appellate authority. Therefore, it was contended that, no interference is required in the orders impugned in the writ petition.
12. I have carefully gone through the records and also examined the observations made by the Honourable Supreme Court as well as the other High Courts, in the decisions relied on by petitioner. When it comes to the question of opportunities granted, it is to be noted that, the proceedings commenced on the basis of issuance of Ext.P3 show cause notice on 30.01.2024, asking the petitioner to submit the reply within a period of thirty days. As rightly pointed out by the learned Counsel for the petitioner, despite the fact that, the period fixed for submitting the reply was thirty days, a personal hearing was scheduled to be conducted on 15.02.2024, which was well before the expiry of the term fixed for objections. Under no circumstances, such an exercise can be treated as reasonable. When a time limit is fixed for the assessee /tax payer to submit a reply, the hearing can only be scheduled after the expiry of such time limit. A similar view has been adopted by the High Court of Uttarakhand in M/s Modine Thermal Systems Private Limited [WRIT PETITION (M/B) NO. 123 OF 2025]. If the hearing is scheduled before the expiry of the said period, such an opportunity cannot be treated as a proper opportunity and cannot be considered as proper compliance of the principles of natural justice. Therefore, the opportunity of hearing granted to the petitioner by scheduling the hearing on 15.02.2024 cannot treated as a proper opportunity.
13. Now when it comes to the hearing that was scheduled on 16.03.2024, the crucial aspect to be noticed is that, even before the said hearing date, admittedly a request was submitted by the petitioner, on 29.02.2024 seeking a further extension of twenty days’ time for submitting reply, as they required some more time to collate the data and collect the details in response to the allegations raised against the petitioner. Again, a further opportunity of hearing was granted to the petitioner on 23.03.2024. On that day, the hearing was concluded and thereafter the order was passed on 25.03.2024, as evidenced by Ext.P8. Thus, on going through the entire sequence of events, right from the issuance of show cause notice to the issuance of the adjudication order as evidenced by Ext.P8, it is to be noted that, the entire proceedings were concluded within a period of sixty days. The specific case of the petitioner is that, despite all earnest efforts, they could not collect necessary data to submit an effective and detailed reply to the discrepancies highlighted in Ext.P3. Going by the volume of the transactions and invoices referred to in Ext.P3, I find that, the reasons highlighted by the petitioner cannot be ignored. It is also to be noted in this regard that, Ext.P3 show cause notice was issued on 30.01.2024, in respect of the assessment year 2018-2019, which ended on 31.03.2019. Thus, practically after four years and ten months, the show cause notice was issued, requiring the petitioner to submit the reply to the discrepancies highlighted in the said notice within a period of thirty days initially. Thus, considering the nature of the transactions involved, I am of the view that, as rightly pointed out by the learned Counsel for the petitioner, the same cannot be treated as a proper opportunity.
14. However, even while arriving at the conclusion that a reasonable opportunity was not extended to the petitioner, the fact that the petitioner did not appear before the adjudicating authority, in any of the hearings, is also a crucial factor which cannot be ignored. As rightly pointed out by the learned Government Pleader, apart from the fact that, the petitioner submitted an application for extension of time as evidenced by Ext.P5 communication dated 29.02.2024, there was no response from the petitioner to the repeated notices issued. This was specifically taken note of by the 3rd respondent while completing the proceedings.
15. When it comes to Ext.P17 order passed by the appellate authority, one of the specific contentions raised by the petitioner is that, despite the fact that, a specific request was made to the appellate authority to accept the documents to substantiate the contentions which they raised in appeal, the same was not accepted. The learned Counsel for the petitioner brought to the attention of this Court, the stipulations contained in Rule 112, that enables the appellate authority to admit and examine the documents in certain circumstances. The said provision reads as follows:
“112. (1) The appellant shall not be allowed to produce before the Appellate Authority or the Appellate Tribunal any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the Appellate Authority except in the following circumstances, namely:-
(a)where the adjudicating authority or, as the case may be, the Appellate Authority has refused to admit evidence which ought to have been admitted; or
(b)where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the adjudicating authority or, as the case may be, the Appellate Authority; or
(c)where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal; or
(d)where the adjudicating authority or, as the case may be, the Appellate Authority has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
(2) No evidence shall be admitted under sub-rule (1) unless the Appellate Authority or the Appellate Tribunal records in writing the reasons for its admission.
(3) The Appellate Authority or the Appellate Tribunal shall not take any evidence produced under sub-rule (1) unless the adjudicating authority or an officer authorised in this behalf by the said authority has been allowed a reasonable opportunity –
(a)to examine the evidence or document or to crossexamine any witness produced by the appellant; or
(b)to produce any evidence or any witness in rebuttal of the evidence produced by the appellant under sub-rule (1).
(4) Nothing contained in this rule shall affect the power of the Appellate Authority or the Appellate Tribunal to direct the production of any document, or the examination of any witness, to enable it to dispose of the appeal.”
16. On going through the appellate order, it can be seen that, the 2nd respondent referred to the stipulations contained in Sub-rule (1) of Rule 112 and arrived at the conclusion that, the explanations offered by the petitioner do not come under any of the circumstances referred to in Clause (a) to (d) of Sub-rule (1) of Rule 112. According to the petitioner, the same is not legally sustainable.
17. It is also the case of the learned counsel for the petitioner that, even if the documents could not have been accepted under Sub-Rule (1) of 112, the same should have been accepted by the appellate authority invoking powers under Sub Rule (4) of Rule 112 which enables the appellate authority to direct the production of any document or the examination of any witnesses to enable him to dispose of the appeal.
18. After carefully examining the reasons mentioned in the appellate order, I find that those are not justifiable. This is in view of the fact that, as per the Sub Rule 1(c) of 112, if the appellant was prevented by sufficient cause from producing the evidence before the adjudicating authority, such documents can be accepted. In this case, the specific case of the petitioner is that, since, the time granted to the petitioner to produce the documents, was very short, they could not collect all these documents despite their earnest efforts. Considering the voluminous nature of the transactions referred to in the show cause notice, in response to which the petitioner was required to furnish a reply, I find that, the explanation offered by the petitioner that they could not collect all the details required for furnishing a reply to the same, within the permitted time, is a plausible one. Therefore, it could be a case which falls within the circumstances referred to in Sub-Rule 1(c) of 112. This Court has already observed that, the adjudicating authority did not grant a reasonable opportunity to the petitioner for submitting a reply, while completing the assessment.
19. It is also a fact that, immediately after issuance of the adjudicatory order, as evidenced by Ext.P8, the petitioner submitted the necessary documents and requested for rectification of the order passed. The same was rejected on technical reasons. This would indicate that, a bona fide attempt was made by the petitioner to produce the said documents, before the adjudicating authority even though there was some delay in procuring and making the said documents available to the adjudicating authority. Thus, as the petitioner made all earnest efforts within the limited time that was extended to the petitioner for submitting this documents, I am of the view that, the non-production of the document adjudicating authority in time was due to sufficient reasons, and thus, the appellate authority ought to have invoked the jurisdiction under Rule 112(1) (c) of the CGST Rules.
20. Another contention of the learned counsel for the petitioner is that, this is a case where the appellate authority could have invoked the powers under Rule 112 (4) of the Rules. Of course, The expression used in the said provision is that, Nothing contained in this rule shall affect the power of the Appellate Authority or the Appellate Tribunal to direct the production of any document,…….” Therefore, the fact that, the relevant documents were not produced before assessing authority, would not dis-entitle appellate authority to call for the documents, if it is found to be relevant and necessary for proper disposal of the appeal by the appellate authority. However, the petitioner cannot claim it as of right, and it is for the appellate authority to decide, whether such documents are to directed to be produced, upon being satisfied about the necessity of production of such documents, for proper disposal of the appeal.
21. While considering the powers under section 112, the appellate authority has to consider the fact that, after all, these exercises are being done for the purpose of determining the actual tax liability of the taxpayer and not to penalise anyone or to recover the tax, which are not legally due. In this regard, observations made by the Madras High Court in Anaikar Traders and Estates (P) Ltd. (supra) are relevant. After referring to various decisions rendered in this regard, it was observed as follows:
“4…………However, the main contention on behalf of the Revenue in its appeal before the Tribunal was regarding the applicability of Section 52(2) of the Act and, in order to establish that that provision stood attracted, reliance was placed by the Revenue on the affidavits. It is in this context that we may refer to the decision in CIT v. Indian Express (Maduri) Pvt., Ltd.[1983] 140 ITR 705 (Mad) where it has been pointed out, after referring to several decisions of the Supreme Court, that authorities sitting in appeal in a tax case cannot be regarded as deciding any lis inter parties, but they should be considered as engaged in an act of adjusting the taxpayer’s liability and the appellate authorities perform the same function as the assessing authorities, as an appeal is nothing but a continuation of the process of the assessment and an assessment is just another name for adjustment of tax liability. Viewed thus, the appeal preferred by the Revenue before the Tribunal was only to ascertain precisely the tax liability of the assessee with reference to the provisions of Section 52(2) of the Act and under those circumstances, it cannot be said that the Tribunal did not have the power to direct the reception of the affidavits with a view to ascertain the applicability of Section 52(2) of the Act to the assessee and in directing the Appellate Assistant Commissioner to consider that after affording an opportunity to the assessee as well as the Revenue and the deponents of the affidavits. We are of the view that having regard to the scope of the appeal involving, as it did, the applicability of Section 52(2) of the Act to the assessee, it was necessary for the Tribunal to ascertain the facts justifying such application or otherwise and only in that view, the Tribunal felt that in the interest of justice and in order to correctly adjust the liability of the assessee for payment of tax, it would be necessary to remit the matter to the Appellate Assistant Commissioner for a fresh consideration on the basis of the affidavits. We may also observe that under rule 29 of the Rules, if the Tribunal required any document to be produced or affidavit to be filed to enable it to pass orders or for any other substantial cause, it may allow the document to be produced or the affidavits to be filed. This power of the Tribunal has been, in this case, properly exercised, as could be seen from paragraph 30 of the order of the Tribunal.”
22. It is also to be noted in this regard that, as observed above, going by the volume of transactions and the amount involved in the proceedings, the contention of the petitioner that it required some time to collect all the details, cannot be ignored. This Court has already observed that, the opportunities provided by the adjudicating authority was not amounting to a reasonable opportunity to the petitioner to defend the said case. Thus, the proceedings culminated in Ext.P8 order, were without any effective objection from the part of the petitioner on record. Therefore, when the appeal was submitted by the petitioner in such circumstances, along with the documents which they sought to rely on and could not be submitted before the adjudicating authority, the proper course ought to have been adopted by the appellate authority, was to take a liberal approach, by invoking the powers under Rule 112 of the CGST Rules. Such a lenient approach is absolutely necessary in an appellate proceeding under CGST Act and Rules framed thereunder, in view of the fact that there is a specific prohibition against the remand of the matter to the assessing authority. Therefore, if an appropriate opportunity was not granted by the adjudicating authority to produce the documents, despite the earnest efforts on the part of the taxpayer, it is the obligation of the appellate authority to adopt the liberal view, and to accept the documents if those documents are necessary for a just and proper disposal of the issue involved in the appeal.
23. In this case, after examining all the relevant documents and circumstances under which the impugned orders are passed, I find that this is a fit case in which such a liberal interpretation is to be adopted to Rule 112 and therefore, documents produced by the petitioner before the appellate authority ought to have been accepted and the same should have been considered on merits. Since such an exercise has not been done in this case, an interference is required.
In such circumstances, this writ petition is disposed of quashing Ext.P17, with a direction to the 2nd respondent, to accept the documents produced by the petitioner along with the appeal, which could not be submitted before the adjudicating authority, to reconsider the appeal submitted by the petitioner after taking note of the said documents and to pass fresh order in the appeal on merits. The same shall be done after giving the petitioner a reasonable opportunity for hearing also. Necessary orders in this regard shall be passed within a period of three months from the date of receipt of a copy of this judgment.