Composite GST Order Must Be Split to Allow Distinct Appeals for Company and Managing Director
Issue
Whether a single, composite adjudication order and demand notice (Form GST DRC-07) issued jointly against a company and its unregistered Managing Director is legally sustainable, and whether the department must issue separate demand notices to facilitate their independent statutory rights of appeal.
Facts
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The tax department issued a Show Cause Notice (SCN) in Form GST DRC-01 under Section 74 to both a company and its Managing Director, who did not possess an independent GST registration.
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The proceedings culminated in a composite adjudication order-in-original, accompanied by a single, combined demand notice in Form GST DRC-07 that levied tax, interest, and penalties on both parties jointly.
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Because the demand was bundled into a single Form GST DRC-07, the company and the Managing Director were structurally precluded from filing separate administrative appeals under the GST portal.
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Faced with this procedural hurdle, both parties filed writ petitions before the High Court.
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The petitioners requested the court to direct the department to grant a temporary GST registration to the Managing Director and to issue distinct, individual DRC-07 forms for each party.
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They further prayed that the statutory limitation period for filing their respective appeals should only commence from the date the fresh, separated DRC-07 forms are issued.
Decision
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The High Court held that the Managing Director is legally entitled to obtain a temporary GST registration for compliance purposes and subsequently file a statutory appeal raising all available defense grounds.
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The court ruled that the statutory limitation period for filing the appeal would only begin to run once the fresh, individual Form GST DRC-07 is formally issued to the party.
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The court directed the revenue department to break down the composite demand and issue two separate, revised DRC-07 forms—one dedicated to the company and the other to the Managing Director.
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By splitting the demands, the court successfully cleared the technical roadblock and facilitated the independent exercise of statutory appeal rights for both individuals.
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Accordingly, the writ petitions were disposed of in favor of the taxpayers without the court entering into or examining the substantive merits of the underlying tax dispute.
Key Takeaways
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Composite Orders Stifle Appeal Rights: The GST portal requires a unique, individual Form GST DRC-07 to process and log an administrative appeal. Issuing a joint or composite demand notice against multiple distinct legal entities (like a company and its director) creates an electronic bottleneck that unlawfully blocks their right to appeal.
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Temporary Registration for Unregistered Persons: Unregistered individuals, such as corporate directors facing personal tax liabilities or penalties under enforcement actions, are entitled to receive a temporary GST registration solely to log into the portal and challenge the demand.
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Limitation Clocks Reset on Fresh Notices: When an appellate or constitutional court orders the rectification and reissuance of a defective or composite tax demand notice, the statutory timeline to file a lower-court appeal is paused and only resets upon the service of the fresh, corrected notice.
and G.M.MOHIUDDIN, J.
“i. I confirm the demand of Rs.2,20,29,338/- (IGST Rs.30,60,484/-, CGST Rs.94,84,427/- & SGST Rs.94,84,427/-) (Rupees Two Crores Twenty Lakhs Twenty Nine Thousand, Three Hundred and Thirty eight only) being the irregular input tax credit of CGST availed and utilized on the invoices issued by the suppliers detailed supra, under the provisions of sub-section (9) of Section 74 of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and corresponding Section of TSGST Act, 2017;
ii. I confirm the demand of Interest on the demand confirmed at Sl.No.(i) above, under Section 50(3) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and corresponding Section of TSGST Act, 2017;
iii. 1 impose penalty of Rs.2,20,29,338/- (IGST Ra.30,60,484/-, CGST Rs.94,84,427/- & SGST Rs.94,84,427/-), which is equivalent to the demand confirmed at Sl.No.(i) above, under Section 74(9) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and corresponding Section of TSGST Act,2017;
iv. I impose penalty of Rs.38,98,708/- (CGST Rs.19,49,354/- & SGST Rs.19,49,354/-) being the input tax credit fraudulently passed on by way of issuance of tax invoices without actual supply of goods/services, under section 122(1)(ii) of the CGST/TGST Act, 2017 with read with Section 74(1) of the CGST/TGST Act, 2017 and corresponding Section of TSGST Act, 2017;