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Deficient Show Cause Notice and Unsubstantiated ITC Recredit Demands Cannot Sustain Tax, Interest, and Penalty Under Section 73

Ashwani Kumar — Tue, 03 Nov 2026 11:43:59 +0000

Deficient Show Cause Notice and Unsubstantiated ITC Recredit Demands Cannot Sustain Tax, Interest, and Penalty Under Section 73

Issue Whether a show cause notice that fails to state material facts and legal grounds regarding an ITC recredit can sustain a demand for tax, interest, and penalty, and whether interest applies to misclassified intra-State supplies where correct tax has been paid via DRC-03.

Facts

Assessee & Background: The assessee, a telecom network solutions provider, experienced a variance between GSTR-2A/2B and GSTR-3B for the period 2019-20.
Correction of Misclassification: Upon discovering that FY 2017-18 supplies to BSNL were intra-State rather than inter-State, the assessee paid CGST (₹1.25 crore) and SGST (₹1.25 crore) via Form GST DRC-03 and recredited ₹2.50 crore in its February 2020 GSTR-3B return.
Adjudication Proceedings: The Department issued a Show Cause Notice (SCN) dated 18.01.2023 under Section 73, proposing recovery of the ₹2.50 crore recredit. The Adjudicating Authority dropped the IGST short-payment allegation but confirmed the ₹2.50 crore demand along with interest (₹1.84 crore) and penalty (₹25.04 lakhs), which was upheld by the first appellate authority.
Legal Deficiencies in SCN: The notice merely quoted the statute and amount without specifying whether the entry represented fresh purchase ITC or the restoration of an output-tax debit, nor did it explain why statutory conditions were breached.

Decision

Deficiency of Show Cause Notice:
- A valid SCN must disclose material facts and legal grounds, not merely quote statutory provisions.
- The notice failed to specify the precise nature of the entry or the legal breach. The foundational notice being deficient, the demand could not stand, and appellate reasoning could not cure the initial defect.
Unilateral Correction vs. Statutory Refund Route:
- Although the statutory scheme recognizes a refund route for wrong-head IGST payments under Section 19 and does not envisage unilateral recrediting through GSTR-3B, an irregular return entry cannot validate a demand founded on a deficient notice. Both return-correction rules and notice safeguards must be respected.
Mandatory Recognition of DRC-03 Payments:
- DRC-03 payments must be recognized against their corresponding liabilities. The authorities were directed to undertake a reconciliation of the original IGST and subsequent payments without granting duplicate refunds or credits.
Insustainability of Interest:
- Section 77 and Section 50 exclude interest on Central and State tax payable where inter-State treatment is later found to be intra-State, once correct payment is made.
- Furthermore, interest on wrongly availed ITC requires proof of both availment and utilization with specific ledger debits; computing interest on the entire disputed amount without utilization findings was impermissible.
Invalidity of Penalty:
- Penalties under Section 73 cannot be automatic for corrective entries. Since the substantive demand and foundational charge were unsustainable due to a defective notice, the consequential penalty of ₹25.04 lakhs failed.

Key Takeaways

Mandatory Precision in SCNs: Show cause notices must explicitly state the factual basis and legal categorization of an alleged infraction (e.g., distinguishing fresh purchase ITC from output-tax restoration); vague notices vitiate subsequent demands.
Prohibition on Curing SCN Defects at Appellate Stage: Adjudication and appellate authorities cannot supply missing foundational grounds or cure substantive legal defects present in the initial notice.
Relief from Interest on Head Reclassifications: Once tax incorrectly paid under one head (e.g., IGST) is duly paid under the correct heads (CGST/SGST via DRC-03), interest cannot be levied on the corrected liability.
Requirement of Utilization for ITC Interest: Interest on wrongful ITC cannot be levied based merely on availment; the Department must establish actual utilization, identification of ledger debits, and the specific period of benefit.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , GHAZIABAD BENCH

Fiberhome India (P.) Ltd.

Lalit Mishra, Additional Commissioner

Dr. Sanjay Kumar Chandhariyavi, Judicial Member
and SUNGITA SHARMA, Technical Member

APL/D11/GZB/2026

OCTOBER 27, 2026

Arvind Kalra and Abhinav Kalra for the Appellant.

ORDER

Brief introductory facts .

1. M/s Fiberhome India Private Limited, GSTIN 09AABCF9623N1Z4, provides information and communication network solutions, optical communication services and data networking construction services. For Financial Year 2019-20, the Department compared the input tax credit reflected in GSTR-2A/2B with the credit claimed in GSTR-3B and found a difference. It treated the IGST credit of Rs.2,50,42,960 claimed in February 2020 as excess credit. On comparing GSTR-1 with GSTR-3B, it also alleged short payment of IGST of Rs.14,06,477.

2. Following scrutiny under Section 61, the Department issued a show-cause notice dated 18.01.2023 under Section 73(1) of the CGST/UPGST Act, 2017. It proposed recovery of tax of Rs.2,64,49,437, interest under Section 50 and penalty under Section 73. In its reply dated 17.02.2023, the appellant explained that, in Financial Year 2017-18, it had wrongly treated supplies to BSNL as inter-State supplies by using BSNL’s out-of-State GSTINs. It paid IGST through the electronic credit ledger. While preparing GSTR-9 and GSTR-9C in January 2020, it discovered that these were intra-State supplies liable to CGST and SGST.

3. The appellant voluntarily paid the correct CGST and SGST, with applicable interest, through DRC-03 dated 04.02.2020. It then credited Rs.2,50,42,960 in GSTR-3B for February 2020 to restore the credit earlier used to pay IGST. It described this as an accounting adjustment to correct payment of tax twice on the same supplies.

4. By order dated 29.08.2023, the Deputy Commissioner, State Tax, Division-10, Noida, accepted the reconciliation between GSTR-1 and GSTR-3B and dropped the demand of Rs.14,06,477. However, the authority treated the credit of Rs.2,50,42,960 as inadmissible under Section 16(2). It also imposed interest of Rs.1,84,06,576 under Section 50 and penalty of Rs.25,04,296 under Section 73(11).

5. The appellant challenged the adjudication order by filing its first appeal in Form GST APL-01. The Additional Commissioner, Grade-II (Appeals), Noida, rejected the appeal by Order-in-Appeal Reference No. ZD091124250570N dated 18.11.2024 and upheld the adjudication order. The first appellate authority held that IGST could not be recredited or adjusted through GSTR-3B without a formal refund order. It further held that Section 77 required payment under the correct head followed by a refund application for tax paid under the wrong head. Unilateral recredit in the electronic credit ledger did not satisfy Section 16. The appellant has now filed this second appeal under Section 112 of the CGST/UPGST Act, after making the mandatory pre-deposit of 10 per cent, amounting to Rs.25,04,296.

6. The surviving dispute thus concerns the character and treatment of the February 2020 credit entry. The alleged short payment of Rs.14,06,477 was separately examined and dropped by the Revenue.

7. Hearings were held on 06.08.2026, 21.08.2026, 08.09.2026 and 22.09.2026. After the defects were cured, counsel for the appellant made further submissions. Counsel argued that the Government held excess funds and that Sections 73 and 74 deal with non payment or short payment of tax. Counsel described the electronic credit ledger as a common resource or wallet, divided into CGST, SGST and IGST compartments, and submitted that proceedings under Section 73 could not continue if sufficient funds remained in that common pool.

Submissions of the appellant

8. The appellant submits that the entry of Rs.2,50,42,960 in February 2020 was not a fresh claim of ITC on inward supplies under Section 16. It was an accounting entry restoring credit already used to pay tax under the wrong head. It had voluntarily paid the correct CGST and SGST through DRC-03 on 04.02.2020, before any departmental inquiry. It therefore submits that the Government suffered no loss of revenue. Relying on Section 77 of the CGST Act, Section 19 of the IGST Act and CBIC Circular No.162/18/2021-GST dated 25.09.2021, the appellant argues that tax paid under the wrong head must be neutralised once the correct tax is paid. It submits that refund is one method of correction, but not the only method. It also claims protection from interest under Section 77(2) and argues that penalty under Section 73(9) or Section 73(11) cannot stand where there is no tax evasion or short payment. Counsel further submitted that restoring an amount debited twice is an accepted accounting correction. Section 16, according to counsel, governs fresh ITC on inward supplies and not restoration of credit after payment of the correct tax. The appellant also stated that, during scrutiny under Section 61 for Financial Year 2017-18, the Department had accepted the CGST and SGST paid through DRC-03. It sought the same treatment for Financial Year 2019-20.

9. The appellant relied on MJBR Marketing and Financial Services (P.) Ltd. v. Union of India (Ker)/W.P. (C) No.26333 of 2024, decided on 01.04.2025 by the Kerala High Court. It cited this decision for the proposition that the electronic credit and cash ledgers operate as a common pool or wallet and that the overall availability of funds must be considered before Section 73 is invoked for use of credit under the wrong head. It relied on Saji s. v. Commissioner, State GST Department Tax Tower 19 GSTL 385 (Ker), for adjustment of tax paid under the wrong head against liability under the correct head. It also cited S. Subrahmanyan & Co. v. CCE [2011] 268 ELT 497 (Tri.-Ahmd.), affirmed in Commissioner v. S. Subrahmanyan & Co. [2013] 296 ELT A123 (Guj.), for correction of duplicate duty debits without a formal refund application. The appellant cited Visakhapatnam Steel Plant v. CCE [2002] 149 ELT 708 (Tri.-Bang.), for correction of accounting errors without prior departmental approval. It relied on Bayer Vapi Pvt. Ltd. v. CCE & ST, for restoration of duplicate duty payments through self-recredit where the second payment is undisputed. It also relied onRejimon Padickapparambil Alex v. Union of India, referring to CBIC Circular No.192/04/2023-GST and treatment of the electronic ledger as a common resource across its compartments.

Submissions of the Revenue

10. The authorised representatives of the State Department submit that the electronic credit ledger is governed by statute. Credit can be restored only if it is eligible ITC under Section 16 or if a prescribed statutory process permits restoration. They argue that a taxpayer cannot, without departmental authority, unilaterally restore an earlier payment made under the wrong head. The Revenue relies on Section 77 of the CGST Act, Section 19 of the IGST Act and CBIC Circular No.162/18/2021-GST. It submits that the taxpayer must pay tax under the correct head and seek refund of the tax paid under the wrong head. A credit entry in GSTR-3B cannot replace that procedure. The Revenue further submits that the conditions of Section 16(2)(c) must be satisfied, including payment to the Government of the tax charged on an inward supply and communication under Sections 37/38. It argues that the disputed IGST credit of Rs.2,50,42,960 had no corresponding eligible inward-supply invoices in GSTR-2A.

11. The Revenue relies on Union of India v. Bharti Airtel Ltd [2022] 89 GST 1/[2021] 54 GSTL 257 (SC)/(2021) 13 SCC 1/2021 SCC OnLine SC 1006, for compliance with the statutory return and ledger mechanisms. It distinguishes Saji S. on the ground that the case concerned departmental adjustment during detention proceedings and did not authorise unilateral recredit through GSTR-3B. It also relies on State of Karnataka v. Ecom Gill Coffee Trading (P.) Ltd 72 GSTL 134 (SC)/Civil Appeal No. 230 of 2023, and Thirumalakonda Plywoods v. Asstt. Commissioner – State Tax 99 GST 232/76 GSTL 172 (A.P.)/W.P. No.24235 of 2022. It cites these decisions for the requirement to prove eligibility for ITC and comply with the statutory conditions and time limits. The Revenue therefore seeks to sustain the recovery under Section 73, interest under Section 50 and penalty under Section 73(11).

12. Show-cause notice

. The explanation submitted by you in response to the notice issued under Section 61 regarding excess input tax credit claimed in GSTR-3B as compared with GSTR-2A for the relevant year has not been found acceptable. Regarding the IGST input tax credit of Rs. 2,50,42,960.00 claimed in excess in GSTR-3B for February 2020, you explained that this credit was claimed because the IGST invoices issued by you to BSNL in different States during 2017-18 were amended in February 2018, treating the transactions as intra-State supplies. Accordingly, liability of Rs. 1,25,21,480.00 as SGST and Rs. 1,25,21,480.00 as CGST was admitted. While filing GSTR-9, the amount was deposited through DRC-03 dated 04.02.2020, and the same amount of Rs. 2,50,42,960.00 was claimed as IGST input tax credit in GSTR-3B for the relevant month. On examination, the IGST input tax credit of Rs. 2,50,42,960.00 so claimed was not found admissible under the rules. You have claimed excess or erroneous input tax credit in GSTR-3B. The conditions governing entitlement to input tax credit are prescribed in Section 16(2) of the Uttar Pradesh Goods and Services Tax Act. A dealer is entitled to input tax credit only upon fulfilment of those conditions. Thus, for the relevant financial year, IGST short payment of Rs. 2,64,49,437.00 (Rs. 2,50,42,960.00 + Rs. 14,06,477.00) has been found. Ensure payment of this amount together with IGST interest of Rs. 2,42,01,235.00 payable under Section 50 and the penalty prescribed under Section 73. Otherwise, show cause why proceedings for demand and recovery of the above amounts should not be initiated. Interest has been calculated from 15.12.2017 to 15.01.2023. It must be recalculated up to the date of payment and deposited accordingly.

13. The central question is whether the demand can be sustained on the show-cause notice reproduced above. The notice identifies an amount, reproduces Section 16(2) and refers to Section 73, but does not explain the precise facts and details supporting the demand. I examine this question separately from whether unilateral recredit through GSTR-3B was authorised by law. Section 61 permits scrutiny of returns; it does not, by itself, provide a basis for a final tax demand. Proceedings under Section 73 must identify the tax said to be unpaid or the credit said to have been wrongly availed or utilised, along with the supporting facts. Section 75(6) requires the order to state the relevant facts and reasons. Section 75(7) bars confirmation of a demand beyond the amount or grounds stated in the notice.

Section 73 and the requirement of a valid notice

14. The material part of Section 73 is sub-section (1). Its language, governing non-fraud proceedings, is reproduced below. The dispute concerns Financial Year 2019-20.

“(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.”

15. Section 73 (9) requires the proper officer to consider the taxpayer’s representation before determining tax, interest and the prescribed penalty. Sub-sections (5) to (8) deal with payment before or after notice and the corresponding consequences, subject to their conditions. Sub-section (11) concerns the penalty where self-assessed tax or an amount collected as tax remains unpaid beyond thirty days from its due date. These provisions require attention to the liability actually alleged and established; none dispenses with a proper notice for the disputed adjudication.

16. The words requiring service of notice are a substantive safeguard in the adjudicatory process. The officer’s preliminary view must be communicated through an intelligible charge which the taxpayer can answer. A demand figure explains how much is claimed, but the notice must also explain why it is claimed. Section 73 permits recovery of wrongly availed or utilised ITC; therefore, absence of ultimate revenue loss is not, by itself, a complete answer. Nevertheless, the statutory ground for treating the particular entry as wrongful must be disclosed.

CCE v. v. Brindavan Beverages (P.) Ltd /213 ELT 487 (SC)/(2007) 5 SCC 388 The Supreme Court described the show-cause notice as “the foundation on which the department has to build up its case”. Vague allegations lacking necessary details deny the noticee a proper opportunity to meet the Department’s case. The principle concerns effective disclosure of the charge, not the length of the notice.

17. we apply that principle to the notice as a whole. The test is whether the appellant was told the material facts and legal grounds supporting the proposed demand, rather than whether the Department used a particular form of words. Merely reproducing Section 16(2) does not answer the central question: did the disputed entry claim fresh ITC on purchases, or restore credit already used to pay output tax under the wrong head?

Section 16 subsection 2 and the nature of the disputed entry

18. For the February 2020 entry, the relevant conditions in Section 16(2), including the explanation then in force, read as follows. The following extract sets out the opening part and clauses (a) to (d); the separate provisos concerning instalments and payment to suppliers are not reproduced because they do not explain the ground taken against this restoration entry.

“(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,—

(a)

he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b)

he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services—

(i)

where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii)

where the services are provided by the supplier to any person on the direction of and on account of such registered person;

(c)

subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

(d)

he has furnished the return under section 39:”

19. These clauses concern credit of input tax on supplies received by the registered person. The appellant’s explanation concerns restoration of credit used for its own output-tax liability. The Revenue authorities had to identify and examine this distinction before reaching a finding. The first appellate order reproduces clause (aa), concerning supplier-furnished invoice details. That clause came into force on 01.01.2022, after the disputed February 2020 entry. The applicable provisions must be those in force during the relevant period. I do not base the outcome on this textual point alone. The more fundamental defect is the failure to examine and decide the appellant’s actual explanation within the grounds communicated in the notice. The impugned orders do not show a reasoned examination of the earlier IGST debit and the accepted DRC-03 payments. The explanation cannot be rejected merely because the appellant entered the correction in the ITC column. The supplies and ledger history must first be correctly identified before the legal effect of that method is examined.

What the notice states and what it leaves unexplained

20. The notice dated 18.01.2023 is not silent about the amount or the month. It identifies Rs.2,50,42,960 in February 2020 and records that the appellant had explained the earlier IGST payment, the change to intra-State treatment and the CGST and SGST payment through DRC-03 dated 04.02.2020.

The notice states: “On examination, the IGST input tax credit of Rs. 2,50,42,960.00 so claimed was not found admissible under the rules.” After reproducing Section 16(2), it concludes: “Thus, you have claimed the above input tax credit without fulfilling the conditions of Section 16(2).”

21. These statements convey the proper officer’s conclusion but do not explain which condition failed in relation to the appellant’s restoration claim. If the allegation concerned the original purchase credit, the relevant inward supplies and the alleged defect required identification. If it concerned unauthorised restoration of an output-tax debit, the notice needed to state that factual and legal case clearly. Merely placing the restoration amount beside the conditions for purchase credit does not supply the missing reasoning. A notice need not contain the final adjudication or answer every possible defence. However, on examining the record, we find that this notice failed to communicate the essential basis of the proposed adverse action. A clear preliminary allegation, supported by the material facts and proposed consequence, would have sufficed.

In Ecom Gill Coffee Trading, the Supreme Court considered the proof required to establish genuine purchases under the Karnataka VAT Act. In that case, invoices and cheque payments alone did not discharge the taxpayer’s burden.

That principle is relevant where eligibility for purchase credit is disputed. It does not mean that restoration of credit used to pay output tax under the wrong head must always be treated as fresh ITC or supported by a second purchase invoice. we therefore find that this decision does not advance the Revenue’s case.

22. The notice reproduces Section 16(2), while the first appellate order further states that the supplier did not deposit the tax. If the original inward supplies are disputed, that allegation must be supported by evidence concerning those supplies. Here, however, the appellant’s case is that the disputed entry restored its own credit earlier used to pay output tax. Repeating the statutory provision without addressing this distinction leaves the main defence unanswered. This causes practical prejudice. To answer an allegation that a supplier did not pay tax, the appellant would need the supplier’s identity, the invoices, the period and the material relied upon. To answer an allegation that the law forbids self-restoration and requires a refund application, it would need to address the original debit, payment under the correct heads, the applicable refund mechanism and any prior benefit. These are different factual and legal inquiries. A general reference to Section 16(2) does not fairly communicate all of them.

23. The precise terms of the notice determine the permissible scope of inquiry. Neither the Tribunal nor the officer implementing its order may introduce a new allegation of fraud, blocked credit or unrelated defects in purchases to sustain the same demand. If a ground already stated in the notice requires verification, the appellant must receive the proposed reconciliation and a meaningful opportunity to respond. Both authorities below failed to distinguish fresh ITC from restoration of credit earlier used to pay IGST under a mistaken tax head.

24. Natural justice requires a meaningful opportunity to answer the show-cause notice.

InGorkha Security Services v. Government of NCT of Delhi (SC)/(2014) 9 SCC 105, the Supreme Court held that a notice must communicate both the grounds necessitating action and the proposed action. Its contents must enable the recipient to understand and answer the precise case. Here, the appellant knew which entry was questioned and gave an explanation. That does not establish that every ground later relied upon by the Revenue had been disclosed. InOryx Fisheries (P) Ltd v. Union of India (2010) 13 SCC 427, the Supreme Court emphasised that a quasi-judicial authority must approach show-cause proceedings fairly and with an open mind. It also disapproved an order that rejected the reply without adequate reasons. The notice must permit a real defence, and the final decision must show that the defence was considered.

25. On examining the notice, we find that it expresses a preliminary adverse view. The defect is that it rejects the explanation recorded in it by a bare conclusion. The subsequent orders also fail to resolve the distinction on which that explanation rests. A fair process required the Department to state its objection clearly and then decide the actual reply with reasons. Merely inviting a reply does not discharge that duty. The notice must identify the contraventions supporting the proposed demand. A DRC-01 summary cannot replace a proper notice.

The demand cannot acquire new grounds in adjudication or appeal

26. Section 75(6) requires the adjudication order to state the relevant facts and the basis of the decision. Section 75(7) separately limits the amount demanded and the grounds on which it may be confirmed. Retaining the same amount does not permit substitution of a different factual case. Nor can a detailed appellate discussion retrospectively make an insufficiently particularised notice a valid foundation for an undisclosed allegation.

In Commissioner of Customs v. Toyo Engineering India Ltd 201 ELT 513 (SC)/(2006) 7 SCC 592, the Supreme Court did not permit the Revenue to advance grounds outside the show-cause notice. The Department must sustain its demand on the case put to the taxpayer, rather than reconstruct that case at the appellate stage.

Similarly, inCCE v. Champdany Industries Ltd 241 ELT 481 (SC)/(2009) 9 SCC 466,the Supreme Court rejected an argument that had not formed part of the case in the show-cause notice. Referring to Toyo Engineering and Ballarpur Industries, it reaffirmed that the Revenue cannot argue a new case without laying its foundation in the notice.

The distinction is between explaining an allegation already fairly disclosed and introducing a new material ground of demand. An authority may evaluate the evidence and reject an unpersuasive defence within the notice. It cannot replace a general allegation about purchase credit conditions with an uncommunicated allegation about particular supplier defaults, or sustain the demand solely by constructing a different refund-procedure case later.

27. The adjudication order also fails to give a reasoned answer to the restoration explanation. The first appellate order records the DRC-03 payment but later proceeds on the footing that tax under the correct heads was not deposited. It further refers to non payment by the seller or supplier without identifying evidence concerning the original inward supplies. These statements do not resolve the defence or provide a reasoned reconciliation of the payments and disputed entry. The authority must fairly consider the appellant’s material and give reasons that permit effective review.

In Kranti Associates (P) Ltd v. Masood Ahmed Khan (2010) 9 SCC 496, the Supreme Court emphasised that quasi-judicial conclusions must be supported by clear reasons. Reasons demonstrate consideration of relevant material, restrain arbitrariness and permit effective review. Merely affirming a result without explaining its basis does not discharge that duty.

The taxpayer filed an online reply to the show cause notice dated 18 January 2023. The reply addressed the proposed demand of Rs. 2,50,42,960 for non-compliance with section 16(2) of the CGST Act, 2017, and the proposed IGST short-payment demand of Rs. 14,06,477 for FY 2019-20, together with interest and penalty. The taxpayer submitted that, for July 2017 to March 2018, Rs. 2,49,96,590 had mistakenly been paid under IGST by using the available input tax credit balance. This tax should instead have been paid under CGST and SGST. The mistake was discovered while filing GSTR-9 and GSTR-9C for FY 2017-18. The correct figures were reported in GSTR-9, showing excess payment under IGST and tax payable under CGST and SGST. A note explaining this was included in GSTR-9C. Copies of GSTR-9 and GSTR-9C were submitted as Annexure 1. The CGST and SGST liabilities were then paid through DRC-03 dated 4 February 2020. A copy was submitted as Annexure 2.Because the earlier IGST payment had been made through the credit balance, the taxpayer claimed Rs. 2,49,96,590 as IGST credit in February 2020. The taxpayer stated that this adjustment explained the difference between the credit claimed in GSTR-3B and the credit appearing in GSTR-2A for FY 2019-20.According to the taxpayer, after excluding this adjustment relating to the annual reconciliation for FY 2017-18, the net IGST credit was Rs. 2,05,71,917, calculated as Rs. 4,55,68,507 minus Rs. 2,49,96,590. This was less than the credit available in GSTR-2A. The CGST and SGST credit claims were also stated to be below the amounts available in GSTR-2A.The taxpayer therefore submitted that there was no unexplained difference between the credit claimed and the credit available for April 2019 to March 2020. On point 1, concerning the excess input tax credit claim, the taxpayer’s explanation is not found acceptable. The conditions for claiming credit under section 16(2) of the Uttar Pradesh GST Act have been set out above. The taxpayer claimed Rs. 2,50,42,960 as input tax credit against the tax deposited through DRC-03. This is contrary to the conditions of section 16(2). The explanation is therefore rejected. The IGST credit of Rs. 2,50,42,960 claimed in February 2020 is held to have been claimed contrary to law and without fulfilling the conditions of section 16(2). A demand is accordingly created for that amount, together with interest under section 50 and penalty under section 73(11),The passage from the proper officer’s order reproduced above records the appellant’s submissions. Apart from discussing Section 16, however, it gives no reason for rejecting them. It does not identify the specific sub-section or clause of Section 16 on which that rejection rests. We therefore find that the order lacks reasons and is non-speaking on material points.

28. The defect in the notice and the failure to give reasons are connected but distinct. The first concerns what the appellant was called upon to answer; the second concerns how its answer was decided. Both require examination of the actual documents. Reproducing the statutory text cannot replace a factual charge in the notice. Similarly, reproducing the notice or the appellant’s submissions cannot replace reasons in the adjudication order. Repetition at successive stages does not cure the omission. The proper officer treated the disputed credit as contrary to Section 16(2) and rejected the explanation without the factual analysis needed to support that conclusion.

Payment under the correct tax heads and the disputed recredit

29. we now consider payment under the correct heads and the disputed recredit. According to the appellant, it paid IGST using available credit from July 2017 to March 2018, although its later reconciliation showed that the supplies attracted CGST and UPGST. Its explanation refers to BSNL invoices and amendments made in February 2018. It states that the mistake was discovered while preparing GSTR-9 and GSTR-9C for Financial Year 2017-18. Those documents disclosed the excess IGST payment and the corresponding CGST and UPGST liability. The appellant then paid CGST of Rs.1,25,21,480 and UPGST of Rs.1,25,21,480, totalling Rs.2,50,42,960, through DRC-03 dated 04.02.2020. This payment cannot be ignored. Acceptance of DRC-03, supported by the ledger and payment reference, establishes the payment. The liability under the correct heads may therefore stand discharged, even though the method used to restore the earlier mistaken debit remains to be decided. To examine the legal effect of that payment, we turn to the relevant provisions of the CGST and IGST Acts.

Section 77 of the CGST Act

“(1) A registered person who has paid the Central tax and State tax or, as the case may be, the Central tax and the Union territory tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed.

(2) A registered person who has paid integrated tax on a transaction considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the Central tax and the Union territory tax payable.”

Section 19 of the IGST Act

The corresponding provision applicable to the refund of mistakenly paid IGST is Section 19 of the Integrated Goods and Services Tax Act, 2017. Section 19 of the CGST Act deals with credit on inputs and capital goods sent for job work and does not govern this wrong-head payment. Section 19(1) of the IGST Act addresses a registered person who paid IGST on a supply considered inter-State but subsequently held to be intra-State. Its operative words are:

“shall be granted refund of the amount of integrated tax so paid in such manner and subject to such conditions as may be prescribed.”

30. Section 19(2) addresses the converse situation: Central and State or Union territory tax paid on a transaction treated as intra-State but subsequently held to be inter-State. It excludes interest on the IGST payable in that situation. In the present direction of error, the relevant combination is Section 19(1) of the IGST Act for refund of IGST and Section 77(2) of the CGST Act for interest on the correct Central and State tax liability. The provisions must be read together, with the applicable rules.

31. CBIC Circular No.162/18/2021-GST dated 25.09.2021 explains that an incorrect classification of a supply may be discovered by the taxpayer or determined through adjudication. It applies Rule 89(1A) to refunds under both Section 19 and Section 77. Where payment under the correct head was made before 24.09.2021, it provides a transitional refund period of two years from that date. The statutory framework thus recognises an entitlement concerning IGST mistakenly paid on a supply later found to be intra-State. It does not envisage retention of both IGST and CGST/SGST as the final tax burden on the same supply. However, the separate tax heads and prescribed refund process have legal significance. The requirement that refund be subject to prescribed conditions prevents that process from being treated as optional in every case. Equally, the framework does not authorise the Department to ignore tax actually paid under the correct heads. Recognition of a payment, eligibility for refund and validity of a unilateral credit entry are distinct questions, each with its own statutory requirements. This appeal cannot be decided by combining them into a single unsupported allegation about purchase credit.

32. The electronic credit ledger records eligible ITC under Sections 16, 41 and 49 of the CGST Act. IGST paid as output tax on the appellant’s own outward supply does not become “input tax” under Section 2(62) merely because that supply was later found to have been wrongly classified. Such payment does not automatically create fresh ITC under Section 16. An entry in a return cannot create a credit entitlement that the statute does not provide. The appellant’s unilateral recredit is therefore not automatically lawful merely because the earlier payment under the wrong head is established. Equally, an unauthorised or irregular credit entry does not establish every requirement of a demand and cannot cure an invalid notice. The Department must identify the disputed entry, the applicable statutory provision, the alleged wrongful availment or utilisation and the recoverable amount. A valid notice must state those grounds. I accordingly reject both automatic conclusions. It is not enough for the appellant to say that a revenue-neutral accounting entry must necessarily be lawful. It is also not enough for the Revenue to say that an irregular entry makes any demand lawful, whatever the notice alleged. The statutory return mechanism governs the appellant’s correction; the statutory notice and adjudication safeguards govern the Department’s demand . Both must be respected in the same proceeding.

33. we now consider the relationship between procedure and substantive rights.

The principle that procedure is the maid of justice means that procedure should help achieve justice and should not defeat substantive rights on technical grounds.

In Mangalore Chemicals & Fertilisers Ltd. v. Dy. CCT [1991] 55 ELT 437 (SC), the Supreme Court distinguished substantive statutory conditions from procedural requirements for implementing a benefit.

The taxpayer in that case was otherwise entitled to a sales-tax concession and adjustment, but the required departmental permission had not been granted. The Court directed that permission be given retrospectively from the relevant application dates and recognised adjustment of refunds against outstanding tax. We find that this decision fully applies here. Entitlement to refund after payment under the correct heads is hardly disputed; denial of refund and the resulting demand arise from non-compliance with the refund procedure. The decision is relevant where entitlement is established but relief is denied for want of procedural approval, documentation or compliance with adjustment requirements.

34. Payment under the correct heads followed by unilateral recredit may also be examined through purposive interpretation. We are mindful of the principles that there is no equity in tax law and that taxing provisions require strict interpretation. Their scope must nevertheless be understood in the light of the Supreme Court’s decisions. In Gursahai Saigal v. Commissioner of Income Tax, Punjab, 1962 SCC OnLine SC 71, the Supreme Court stated:

35. The question thus raised is one of construction of sub-section (6) and (8). The assessee relies on a rule of construction applicable to taxing statutes which has been variously stated. Rowlatt J. put it in these words in Cape Brandy Syndicate v. Inland Revenue Commissioners¹. “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax . There is no presumption as to a tax. Nothing is to be read in ,nothing is to be implied. One can only look fairly at the language used . “The object of this rule is to prevent a taxing statute being construe “according to its intent, though not according to its words In re: Bethlehem Hospital². This Court has accepted this rule. Bhagwati J. in A.V. Fernandez v. State of Kerala³ said, “If . the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. “It has even been said that “if the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect.” : see Inland Revenue Commissioners v. Bladnoch Distillery Co. Ltd.? The assessee therefore contends that on the plain words of sub-sections (8) and (6) he cannot be charged any interest and in fact in a case like his, sub-section (8) has to be regarded as of no effect. 9. Now it is well recognised that the rule of construction on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection. The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature which is to make a charge levied effective. Reference may be made to a few cases laying down this distinction. In CIT v. Mahaliram Ramjidas? it was said “The Section, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable utres valeat potius quam pereat”

35. In State of Punjab v. Shamlal Murari (1976) 1 SCC 719, the Supreme Court again recognised that procedure should facilitate justice. This principle cannot create an ITC entitlement contrary to statute. It requires procedural irregularities to be considered in their proper context, while protecting substantive rights and mandatory statutory safeguards. Here, there is an entitlement to refund after payment under the correct heads. The question is the legal treatment of those payments and the failure to follow the refund procedure.

36. The authorised representative for the Revenue relies on Bharti Airtel Ltd (Supra). The Revenue submits that the Supreme Court required compliance with the prescribed method of correcting returns and rejected unrestricted rearrangement of earlier GSTR- 3B returns. We find that this limits the appellant’s argument that an accounting adjustment is sufficient. It does not, however, permit the Revenue to ignore an established payment that has discharged the CGST and UPGST liability. In this context, we also refer to the Supreme Court’s decision in Central Board of Indirect Taxes and Customs v. M/s Aberdare Technologies Pvt. Ltd.:

Human errors and mistakes are normal, and errors are also made by the Revenue. Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction. Software limitation itself cannot be a good justification, as software are meant to ease compliance and can be configured. Decisions of the High Courts in Bar Code India Limited v. Union of India and others1 and Yokohama India Private Limited v. State of Telangana2″, prima facie, do not lay down good law in this regard.

In Yokohama India Private Limited and Bar Code India Limited, the requests to amend GSTR-3B returns were denied by relying on Bharti Airtel and citing the cascading effect on the system. In light of the observations quoted above, we find that the Revenue’s submission is no longer legally sustainable. Counsel for the appellant also relies on the jurisdictional High Court’s decision in Ocean E Mart v. State of U.P. There, the writ petitioner stated that tax payable as IGST had mistakenly been paid as CGST and SGST, and that both the original and appellate authorities had ignored those payments. The Revenue submitted that there was no mechanism to transfer CGST and SGST payments to IGST, but accepted that tax appeared to have been paid under the wrong head. After considering the rival submissions, the High Court quashed the impugned demand orders.

Revenue neutrality

37. Revenue neutrality means that the correct treatment and the disputed treatment make no ultimate difference to the tax retained by the Government, after accounting for admissible credit, refunds and corresponding payments. It helps assess the financial effect of a transaction. Aggregate neutrality concerns the total amount retained by the Government. Credit neutrality concerns whether payment of the demanded amount would give rise to an equivalent credit that is actually admissible.

InNirlon Ltd. v. CCE 51 GST 177/320 ELT 22 (SC)/(2015) 14 SCC 79 the Supreme Court held that revenue neutrality is relevant when examining the absence of an intention to evade tax.

Here, the appellant’s voluntary disclosure in its annual reconciliation and subsequent payment through DRC-03 are relevant to its defence of good faith. They also support its submission that voluntary payment should be considered in the light of ease of doing business. The period in question fell within the initial implementation of GST and the introduction of the place-of-supply concept. GSTR-9 and GSTR-9C, with the explanatory note, provide the documentary basis for the appellant’s explanation. The authorities should have examined these facts and the appellant’s conduct, but did not do so. we also find that these circumstances provide good grounds to give effect to revenue neutrality.

Article 265 and other constitutional provisions

38. Article 265 requires legal authority for both the levy and collection of tax. A demand summary does not itself confer that authority. The Revenue must identify the taxable event, the charging provision and the amount still lawfully recoverable after accounting for payments already made. A dispute about restoration of an earlier IGST debit does not erase an accepted CGST and SGST payment through DRC-03. If the tax liability has been validly discharged, we find no constitutional mandate for a fresh demand on the same transaction.

39. Articles 270(1A), 270(1B) and 246A are relevant to the federal structure of GST. Article 246A distributes legislative power over GST and gives Parliament exclusive power over inter-State supplies. Article 269A governs the levy, collection and apportionment of GST on inter-State supplies. In Union of India v. Mohit Minerals Pvt. Ltd., the Supreme Court upheld the principles of federalism and cooperative federalism and considered the impact of payment by the taxpayer. Here, the appellant relies on actual payments under the Central and State tax heads. Once those payments are matched with the relevant liabilities and accepted, the federal allocation framework cannot justify recovery of the same liability under the correct heads again. The provisions for allocation and settlement of tax receipts between the Centre and the States protect the distribution of revenue and prevent an additional substantive tax burden for the same identified liability.

Article 14 and arbitrariness

40. Article 14 requires fair and non-arbitrary administration of tax law. The authority must examine relevant evidence, distinguish different types of transactions and give clear reasons. Treating a disclosed claim for restoration in the same way as a claim based on fictitious purchases, without examining the explanation, ignores a material distinction. Equally, a taxpayer cannot obtain favourable treatment simply by claiming good faith.

InOm Kumar v. Union of India (2001) 2 SCC 386, the Supreme Court explained proportionality in judicial review, including the distinction between review of restrictions on rights and review of administrative arbitrariness.

The decision supports examination of the purpose of the action, the relevant facts and any excessive burden. Here, the disputed credit is about Rs.2.50 crore, with a further burden of interest and penalty. Reversal followed by delayed restoration can substantially affect working capital. That burden is relevant to a just and fair decision. Ease of doing business is relevant in this limited sense. A procedure that encourages voluntary disclosure and correction supports effective tax administration and deserves due weight. If the correct liability has been discharged, requiring payment of that same liability again would amount to double taxation and would require a legal basis and a clear explanation of the outstanding obligation.

Interest

41. Section 77(2) excludes interest on Central and State tax payable when a supply originally treated as inter-State is later found to be intra-State. we find that the appellant must receive this statutory protection. The Revenue has also demanded interest on the ground of wrongful availment of ITC. As discussed above, the demand itself is unsustainable, and consequential interest cannot survive.

In Pratibha Processors v. Union of India 88 ELT 12 (SC)/(1996) 11 SCC 101 , the Supreme Court explained the compensatory nature of interest.

Interest liability under GST must be determined under Section 50 and the applicable rules. Interest on wrongly availed ITC must be examined under Section 50(3) and Rule 88B, and both wrongful availment and utilisation must be established. Availment alone is not utilisation. The ledger balance, debit dates, amount actually utilised and period of wrongful benefit must be identified. Interest cannot be imposed on the entire disputed amount without these findings. For these reasons, we find that the interest demand of Rs.1,84,06,576 is also legally unsustainable.

42. Penalty under the GST Act

We are of the view that in this matter issue of penalty must be considered separately.

InUnion of India v. Rajasthan Spg. & Wvg. Mills (SC)/(2009) 13 SCC 448,the Supreme Court required proof of the statutory conditions for an excise penalty.

Section 73 applies to cases not involving fraud. However, the mere absence of fraud does not automatically exclude a penalty under that section. Section 73(11) does not impose a ten per cent penalty on every corrective entry. If the finding of wrongly availed credit fails, a penalty based on it cannot survive independently. For the reasons discussed above, we find that the penalty of Rs.25,04,296 is unsustainable.

Summary of findings

43. The appellant made the disputed recredit through GSTR-3B instead of following the refund procedure under Section 19(1) of the IGST Act read with Rule 89(1A) of the CGST Rules. The earlier mistaken IGST payment does not, by itself, make that entry eligible ITC under Section 16 or make unilateral recredit a lawful method of correction. However, the legality of the recredit and the legality of the demand actually raised are separate questions. An irregular method of correction cannot validate a defective show cause notice. Section 75(7) prohibits confirmation of a demand on grounds not stated in the notice. The demand cannot be sustained on a materially deficient notice, or on grounds not fairly disclosed in it, merely because an objection can later be raised to the method of recredit. At the same time, the appellant’s entitlement to refund of the IGST already paid is almost undisputed, and the effect of its procedural non-compliance must be addressed. In Shamlal Murari (Supra), the Supreme Court recognised that procedure should facilitate justice. Procedural irregularities must be considered in their proper legal context, without allowing either party to defeat substantive rights or mandatory safeguards. Here, CGST and SGST have admittedly been paid on the supplies in question. There is no allegation of fabricated invoices, fictitious transactions or fraudulent evasion. Section 19(1) recognises the entitlement to refund of IGST initially paid on supplies subsequently found to be intra-State. we therefore find that proper fiscal reconciliation is necessary. It must account for the original IGST payment, the payments under the correct heads and any benefit already obtained through unilateral recredit.

Order

44.1 The appeal is allowed and impugned order of First appellate Authority as well as Proper officer order are set aside. Demand of tax of Rs.2,50,42,960 , together with consequential interest of Rs.1,84,06,576 and penalty of Rs.25,04,296, are set aside in so far as it is based on grounds not disclosed in the show-cause notice.

44.2 The CGST payment of Rs.1,25,21,480 and UPGST payment of Rs.1,25,21,480 made through DRC-03 dated 04.02.2020 shall be recognised against the supplies and liabilities to which they relate.

44.3 The competent authority shall give due effect to the CGST and SGST already paid and undertake reconciliation of the original IGST payment and subsequent recredit. The taxpayer shall not be granted any duplicate refund or credit.

44.4 The registry shall communicate this order to the parties. There shall be no order as to costs.

GSTAT Appellate Bench may dismiss defective appecals for non-prosecution when defects remain uncured despite opportunities

Ashwani Kumar — Wed, 28 Oct 2026 11:22:53 +0000

GSTAT Appellate Bench may dismiss defective appecals for non-prosecution when defects remain uncured despite opportunities

Issue

Whether the Goods and Services Tax Appellate Tribunal (GSTAT) has the power to dismiss an appeal for non-prosecution under Rules 10 and 24 of the GSTAT (Procedure) Rules, 2025 when the appellant fails to cure defect notices and persistently fails to appear before the Bench.

Facts

The appellant presented an appeal before the GSTAT Registry.
Upon scrutiny, the Registry identified several defects in the memorandum of appeal and supporting documents and served a defect memo on the appellant.
Despite the lapse of sufficient time, the appellant failed to cure the defect items.
The matter was placed before the Assistant Registrar and subsequently listed before the Division Bench on multiple occasions.
On each scheduled hearing, no representative or counsel appeared for the appellant, no adjournment request was submitted, and the defects remained uncured.

Decision

Inherent Powers of Tribunal: Rule 10 of the GSTAT (Procedure) Rules, 2025 preserves the inherent power of the Tribunal to make orders necessary to secure the ends of justice and prevent abuse of process.
Scrutiny and Rejection Power: Rule 24 mandates the scrutiny and removal of defects, empowering the Bench to direct registration or reject an appeal after notice.
Dismissal for Non-Prosecution: Because adequate opportunity was provided to cure defects and persistent non-appearance demonstrated abandonment of the appeal, keeping defective proceedings pending served no purpose.
Dismissal Without Merits Opinion: The defective appeal was dismissed for non-prosecution without expressing any opinion on the underlying merits of the case, in favor of the Revenue.

Key Takeaways

Duty to Cure Registry Defects: Appellants before the GSTAT must actively rectify defective filings within prescribed timelines upon receiving a defect memorandum.
Powers of Dismissal for Abandonment: Continuous non-appearance combined with failure to cure registry defects constitutes abandonment, entitling the Tribunal to invoke its inherent powers under Rule 10 and Rule 24 to reject the appeal.
No Adjudication on Merits: Dismissal for non-prosecution terminates defective proceedings administratively and procedurally without creating a precedent on the underlying tax merits.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , GHAZIABAD BENCH

Afia Steel Ispat Private Limited

Rajesh Kumar, Additional Commissioner of SGST (Appeal)^*

Dr. Sanjay Kumar Chandhariyavi, Judicial Member
and SUNGITA SHARMA, Technical Member

APL/D9/GZB/2026

OCTOBER 15, 2026

Rajesh for the Appellant.

ORDER

1. The present Appeal was presented before the Registry of this Tribunal. Upon scrutiny under the provisions of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, the Registry noticed certain defects in the memorandum of appeal and the accompanying documents. Despite service of the defect memo and lapse of sufficient time, the appellant failed to cure the defects. Consequently, the appeal remained defective. In accordance with Rule 24 of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, the matter was placed before the Asst Registrar. Since the defects continued to remain uncured despite the opportunity granted, the Asst Registrar directed that the defective appeal be listed before the Bench for appropriate order. Accordingly, the matter was listed before this Division Bench on 06.08.2026, 21.08.2026, 10.09.2026 and 25.09.2026. On every occasion, none appeared on behalf of the Appellant. The matter was, therefore, directed to be listed today. Today, when the matter was called in open tribunal proceeding , none appeared on behalf of the Appellant. The matter was called repeatedly during the course of the proceedings. Neither the appellant nor any authorised representative appeared. No application for adjournment has been filed. Even today, the defects pointed out by the Registry continue to remain uncured. The conduct of the appellant clearly manifests complete lack of interest in prosecuting the present appeal. A litigant invoking the statutory appellate jurisdiction of this Tribunal is expected to prosecute the proceedings with due diligence. Mere filing of an appeal does not entitle a litigant to keep defective proceedings pending indefinitely without complying with the statutory requirements. Before passing any order there is need to consider provision laid down under section 10 of the GSTAT Rule and general concept of Inherent power. Inherent Power refers to powers that are not expressly provided by statute but are necessary to secure the ends of justice; prevent abuse of the process of the Tribunal; and ensure effective exercise of the jurisdiction expressly conferred by the statute to any Tribunal or Court.

2. So far as GSTAT Rule is concerned Rule 10 expressly provides for inherent power of the GSTAT. As per Rule 10 nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Appellate Tribunal to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Appellate Tribunal. The above principles and law are founded upon the salutary legal maxims Vigilantibus non dormientibus jura subveniunt (the law assists those who are vigilant and not those who sleep over their rights) and Interest reipublicae ut sit finis litium (it is in the public interest that there should be an end to litigation).

3. Now we also consider legal provision laid down under Rule 24 of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025 which prescribes procedure for scrutiny of appeals and removal of defects. It envisages that where defects are not removed despite notice, the matter shall be placed before the Registrar and, thereafter, before the appropriate Bench. The Rule expressly empowers the Bench, after hearing the party, either to direct registration of the appeal or to reject the same. In the present case, the Registry followed the procedure prescribed under Rule 24. Adequate opportunities were afforded to the Appellant to remove defects. Thereafter, the matter was listed before this Division Bench on three occasions. Despite repeated opportunities, the appellant neither removed the defects nor appeared before this Tribunal. No explanation whatsoever has been furnished for such persistent default. We are, therefore, satisfied that the appellant has abandoned the prosecution of the present appeal. Keeping such a defective appeal pending would serve no useful purpose and would unnecessarily burden the docket of this Tribunal. This is a fit case for exercise of the power vested in this Bench under Rule 10 and 24 of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025.

ORDER

4. Accordingly, in exercise of the powers conferred under Rule 10 and 24 of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, and for the reasons recorded hereinabove, the defective Appeal is dismissed for non-prosecution, without expressing any opinion on the merits of the controversy involved. Pending applications, if any, shall also stand disposed of. There shall be no order as to costs. Pronounced in open Court on this 15 ^th day of October, 2026.

Departmental Appeal Before Tribunal Involving Disputed Penalty Below Rs 20 Lakh Threshold Is Non-Maintainable

Ashwani Kumar — Mon, 26 Oct 2026 12:20:04 +0000

Departmental Appeal Before Tribunal Involving Disputed Penalty Below Rs 20 Lakh Threshold Is Non-Maintainable

Issue

Whether a Departmental appeal filed before the GST Appellate Tribunal (GSTAT) against an order setting aside a detention penalty under Section 129 is maintainable when the disputed penalty amount falls below the statutory monetary threshold limit of ₹20 lakhs?

Facts

Interception & Documents: A vehicle carrying dry fruits was intercepted by the Mobile Squad at Pusta, Loni, Ghaziabad. The driver produced an invoice and an e-way bill covering a Delhi-to-Delhi supply with a designated delivery address at Tilak Bazar.
Driver Statement: The driver contemporaneously stated that the intended delivery location was Loni.
Release & Initial Penalty: The proprietor sought the release of the goods on payment of penalty, following which an original order was passed imposing a penalty of approximately ₹5,95,440 under Section 129.
First Appeal Relief: The Additional Commissioner (Appeals) allowed the assessee’s first appeal and set aside the penalty order passed by the Mobile Squad.
Departmental Second Appeal: Aggrieved by the appellate order setting aside the penalty, the Revenue filed a second appeal before the GST Appellate Tribunal.
Monetary Policy Bar: Circulars issued under Section 120 prescribed a monetary threshold limit of ₹20 lakhs for filing Departmental appeals before the GSTAT. For penalty-only cases, the threshold computation applies directly to the disputed penalty amount.
Threshold Deficiency: The total disputed penalty of ₹5,95,440 fell well below the ₹20 lakh threshold, and the Department failed to produce any case-specific residual order permitting litigation below the monetary bar.

Decision

Monetary Threshold Applies to Penalty-Only Matters: Section 120 circulars mandating the ₹20 lakh limit govern Departmental appeals before the Tribunal and apply to the disputed amount as per prescribed computation methods, including penalty-only cases.
Lack of Exception/Residual Order: The Department could not produce any specific authorization or residual order justifying an exemption from the prescribed monetary limits.
Appeal Dismissed as Non-Maintainable: Since the disputed penalty of ₹5,95,440 was below the ₹20 lakh threshold, the monetary restriction under Section 120 applied, and the Departmental appeal was not admitted.

Key Takeaways

Tribunal Monetary Limits Cover Penalty Demands: Departmental appeal restrictions issued under Section 120 extend to penalty-only cases, requiring the disputed penalty amount to meet or exceed ₹20 lakhs for Tribunal maintainability.
Binding Nature on Department: Circulars fixing litigation limits under Section 120 strictly bind the Department from litigating low-stake penalties or tax demands before the GSTAT.
Requirement of Exception Orders: To pursue appeals below the prescribed monetary limits, the Department must demonstrate clear, documented exceptions or specific residual orders authorized under the policy guidelines.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , GHAZIABAD BENCH

Assistant Commissioner Ms-4 Gzb

Ram Prashad Swami^*

Dr. Sanjay Kumar Chandhariyavi, Judicial Member
and SUNGITA SHARMA, Technical Member

APL/D97/GZB/2026

OCTOBER 13, 2026

1. Preliminary

1.1 From perusal of case record it transpire that Vehicle No. DL-1LX- 7693, carrying dry fruits, was intercepted at Pusta, Loni, Ghaziabad, at approximately 8:20 p.m. on 24 June 2022 Subsequently on demand driver produced tax invoice No. AS/22-23/75 and e-way bill No. 781267378427, covering goods valued at Rs. 27,78,720. Seized documents showed supply by M/s Ashutosh Enterprises to M/s Om Enterprises, GSTIN 07BBKPS5207B1ZT, at 2326, Third Floor, Gali Hinga Beg, Tilak Bazar, Delhi-110006. The Department alleges that, although both consignor and consignee were located in Delhi and the documents showed delivery at Tilak Bazar but driver stated that the goods were to be delivered at Loni, Ghaziabad. The proprietor appeared and requested release on payment of penalty. The original-order records a penalty of Rs.5,95,440 . The taxpayer contended that both supplier and recipient were GST-registered, the transactions were recorded in the books, and the physical goods matched the accompanying documents. It denied any intention to evade tax and attributed any lapse to the driver’s mistake or technical issues. The Additional Commissioner allowed Appeal No. GSTI- ZD0908220053911R and Mobile Squad order was set aside.

2. We heard learned Authorised Representative and examined the appeal memorandum, the impugned order and the material on record. As Admission of an appeal is not a mere formality hence before considering the merits, the Tribunal must be satisfied that the appeal is maintainable and meets the conditions for admission. Filing an appeal does not, by itself, give the appellant a right to a hearing on merits. The right of appeal is created by statute and must be exercised subject to the conditions prescribed by law. In this regard we refer to Honble Apex Court decision in Ganga Bai v. Vijay Kumar (1974) 2 SCC 393.

2.1. “15. The main controversy before us centres round the question whether that appeal was maintainable. On this question the position seems to us well established. There is a basic distinction between the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute one may, at one’s peril, bring a suit of one’s choice. It is no answer to a suit, howsoever frivolous to claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite. The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute.”

2.2. In the same way we must follow direction of the Hon’ble Apex court provided in Anant Mills Co. Ltd. v. State of Gujarat (1975) 2 SCC 175 ” 40. The right of appeal is the creature of a statute. Without a statutory provision creating such a right the person aggrieved is not entitled to file an appeal. We fail to understand as to why the Legislature while granting the right of appeal cannot impose conditions for the exercise of such right. In the absence of any special reasons there appears to be no legal or constitutional impediment to the imposition of such conditions. It is permissible, for example, to prescribe a condition in criminal cases that unless a convicted person is released on bail, he must surrender to custody before his appeal against the sentence of imprisonment would be entertained. Likewise, it is permissible to enact a law that no appeal shall lie against an order relating to an assessment of tax unless the tax had been paid. Such a provision was on the statute book in Section 30 of the Indian Income Tax Act, 1922. The proviso to that section provided that “…no appeal shall lie against an order under sub-section (1) of Section 46 unless the tax had been paid”. Such conditions merely regulate the exercise of the right of appeal so that the same is not abused by a recalcitrant party and there is no difficulty in the enforcement of the order appealed against in case the appeal is ultimately dismissed. It is open to the Legislature to impose an accompanying liability upon a party upon whom legal right is conferred or to prescribe conditions for the exercise of the right. Any requirement for the discharge of that liability or the fulfilment of that condition in case the party concerned seeks to avail of the said right is a valid piece of legislation, and we can discern no contravention of Article 14 in it”.

2.3. Hence we are of considered view that admission is not a mere formality rather it is very crucial legal question to be answered at the admission stage itself. The Tribunal cannot decide the merits and afterwards examine whether the appeal met the conditions for admission or not Such course of action is neither legally sound nor logically proper.

3. The question at the admission stage

3.1 Since admittedly it is a departmental appeal, the first question is whether the Department has complied with the statutory and administrative conditions governing such an appeal. The existence of a grievance against the impugned order does not, by itself, answer that question.

3.2 first of all we consider Section 120 of the Uttar Pradesh Goods and Services Tax Act, 2017, which bears the heading “Appeal not to be filed in certain cases”. Section 120(1) provides: (1) The Commissioner may, on the recommendations of the Council, from time to time, issue orders or instructions or directions fixing such monetary limits, as he may deem fit, for the purposes of regulating the filing of appeal or application by the officer of the State tax under the provisions of this Chapter.” Under this provision, the Commissioner, State Tax, Uttar Pradesh, issued Circular No. 2425008 dated 05.07.2024. It prescribes a monetary limit of Rs. 20,00,000 for departmental appeals before GSTAT, subject to specified exceptions. Its purpose is to reduce government litigation and ensure proper use of judicial resources.

3.3 The State’s litigation-management framework continued through Circular No. 252/2026-27/State Tax dated 22.05.2026, concerning monetary limits, review of departmental appeals and litigation before GSTAT and the higher constitutional courts. The monetary-limit policy cannot, therefore, be treated as an abandoned administrative arrangement.

4. Issues for determination

4.1 Does the monetary limit of Rs. 20,00,000 apply to this departmental appeal?

4.2 Is the disputed amount, calculated in the manner prescribed by the circular, below that limit?

4.3 If so, has the Revenue specifically pleaded and established a recognised exception?

4.4 Is a statement that the Commissioner has approved or authorised the appeal sufficient to establish an exception?

4.5 Does filing and pursuing the appeal without establishing an exception violate the binding litigation policy?

4.6 What is the consequence of this failure at the admission stage?

4.7 Can the appeal be admitted and heard on merits?

5. Method for Calculation of the disputed amount

5.1 The circular prescribes the following method for applying the monetary limit:

5.2 Where tax is disputed, with or without interest or penalty, only the aggregate disputed tax, including CGST, SGST or UTGST, IGST and Compensation Cess, is taken into account.

5.3 Where only interest is disputed, the disputed interest is considered.

5.4 Where only penalty is disputed, the disputed penalty is considered.

5.5 Where only late fee is disputed, the disputed late fee is considered.

5.6 Where interest, penalty and/or late fee are disputed, but no tax is disputed, their aggregate disputed amount is considered.

5.7 Where an erroneous refund is disputed, the disputed refund amount, including the relevant tax and Compensation Cess components, is considered.

5.8 The limit applies to the disputed amount for which the appeal or application is proposed.

5.9 Where a composite order disposes of more than one appeal or demand notice, the relevant amounts are taken together. The limit is not applied separately to each appeal or demand notice.

6. Exceptions to the monetary limit

6.1 An amount below the monetary limit does not end the enquiry. Clause 4 of the circular permits departmental litigation, irrespective of the monetary limit, in the following circumstances:

6.2 A provision of the CGST Act, UPGST Act, IGST Act or GST (Compensation to States) Act has been held unconstitutional.

6.3 A rule or regulation made under any of those Acts has been held to exceed the authority conferred by the parent Act.

6.4 An order, notification, instruction or circular issued by the Government or the Board has been held to be contrary to the relevant GST Act or Rules.

6.5 The matter concerns valuation, classification, refunds, place of supply or another issue which is recurring and/or involves interpretation of the Act, Rules, notification, circular, order or instruction.

6.6 Strictures or adverse comments have been made, and/or costs have been imposed, against the Government, the Department or its officers.

6.7 The Commissioner considers it necessary to contest a case or class of cases in the interest of justice or revenue.

7. Burden of establishing an exception

7.1 An exception cannot be presumed merely because the Department wishes to pursue an appeal. The party relying on an exception must establish that it applies. Once the disputed amount is shown to be below Rs. 20,00,000, the Revenue must identify the exception, state the facts supporting it and show the statutory or administrative basis for invoking it. If the Revenue relies on the Commissioner’s residual power to contest a matter in the interest of justice or revenue, it must produce the order or recorded opinion showing that the Commissioner exercised that power in the particular case. These requirements cannot be left to inference. A bare statement that the appeal has been filed with the Commissioner’s permission is not sufficient.

8. Authorisation and compliance with the monetary limit

8.1 Permission to file an appeal and compliance with the conditions governing that appeal are separate and distinct matters. An authorisation to file an appeal does not, by itself, establish an exception to the monetary limit. Section 112(3) of the UPGST Act, 2017, provides: “(3) The Commissioner may, on his own motion, or upon request from the Commissioner of central tax, call for and examine the record of any order passed by the Appellate Authority or the Revisional Authority under this Act or under the Central Goods and Services Tax Act, 2017 for the purpose of satisfying himself as to the legality or propriety of the said order and may, by order, direct any officer subordinate to him to apply to the Appellate Tribunal within six months from the date on which the said order has been passed or the date, as may be notified by the Government, on the recommendations of the Council, for the purpose of filing application before the Appellate Tribunal under this Act, whichever is later, for determination of such points arising out of the said order as may be specified by the Commissioner in his order.” The provision requires that the Commissioner would examine the record, form an opinion on the legality or propriety of the order, and identify the points to be placed before the Tribunal. The record must enable the Tribunal to examine the basis of that decision. A bare assertion that the Commissioner has granted permission does not meet this requirement.

8.2 . Section 112(4) further provides: “(4) Where in pursuance of an order under sub-section (3) the authorised officer makes an application to the Appellate Tribunal, such application shall be dealt with by the Appellate Tribunal as if it were an appeal made against the order under sub-section (11) of section 107 or under sub-section (1) of section 108 and the provisions of this Act shall apply to such application, as they apply in relation to appeals filed under sub-section (1).” An application authorised under Section 112(3) is therefore dealt with as an appeal under the Act. That authorisation does not dispense with Section 120 or the monetary-limit instructions issued under it. Where the residual exception is invoked, the record must show that the Commissioner considered this particular case and formed the opinion that it should be contested despite the monetary limit. The basis of that opinion must be apparent. General approval cannot serve as a substitute. Otherwise, every appeal below the limit could proceed on routine authorisation, defeating the policy itself.

9. Continuing litigation policy of Uttar Pradesh

9.1 . Circular No. 252/2026-27/State Tax dated 22.05.2026 provides a structured review mechanism through Zonal Law Committees and continues the policy of limiting departmental litigation by monetary thresholds, subject to specified exceptions. This policy requires institutional discipline. The Department cannot treat it as binding when it assists the Department and as optional when it restricts an appeal. The State is expected to conduct litigation responsibly and consistently with its declared policy. In Director of Income Tax V. S.R.M.B. Dairy Farming (P) Ltd., Hon’ble Supreme Court recognised the need to reduce unnecessary government litigation and repeated proceedings through different levels of judicial scrutiny.

10. Binding effect of departmental circulars

10.1 The Department cannot rely on a statutory litigation-control mechanism when convenient and disregard it merely because an order has gone against it. In Ranadey Micronutrients v. CCE 87 ELT 19 (SC)/(1996) 10 SCC 387, the Supreme Court stressed the importance of consistency and discipline in following departmental circulars. It held that the Revenue could not repudiate the Board’s circular on the ground that it was inconsistent with a statutory provision. The principles applied under comparable revenue laws also support the conclusion that instructions issued by the competent revenue authority to regulate departmental appeals bind departmental officers.

11. The right of appeal and the conditions governing it

11.1 The Revenue may argue that Section 112 gives it a statutory right of appeal and that an appeal directed by the Commissioner must be admitted. We cannot accept that argument as an absolute proposition. Section 112 must be read with the provisions governing departmental litigation, including Section 120. As explained in Ganga Bai and Anant Mills, the right of appeal is statutory and may be subject to conditions. The existence of appellate jurisdiction does not require the Tribunal to admit every departmental appeal without examining compliance with those conditions.

12. Whether an exception is established in this case

12.1 We have examined the record and FORM GST APL-07. The appellant states that this appeal has been filed under Section 112(3) of the UPGST Act. However, the Revenue has neither specifically pleaded nor established any recognised exception to the monetary limit. There is no material showing that a provision of the relevant GST Acts has been held unconstitutional; that a rule has been held contrary to its parent Act; or that a notification, circular or instruction has been held invalid. Nor has the Revenue shown that this case involves a recurring question of law requiring authoritative determination, that adverse comments or costs have been imposed against the Department, or that the Commissioner has recorded the required opinion for contesting this particular case in the interest of justice or revenue despite the monetary limit. We therefore find that the Revenue has failed to establish an applicable exception.

13. Effect of the monetary limit on pending matters

13.1 The right of appeal must be exercised within the statutory framework. In State of Maharashtra v. Greatship (India) Ltd. , Hon’ble Supreme Court reiterated that an appeal is a creation of statute. The Department’s right is accordingly subject to the conditions and regulatory provisions of the statutory scheme. In Commissioner of Commercial Tax V. Vikram Cement, decided on 5 February 2026, Hon’ble Supreme Court considered the Rs. 20 lakh GST monetary limit and held that the circular applied to pending appeals as well. The appeals involving a tax component below the prescribed limit were dismissed, while the legal question was left open for an appropriate case. In Director of Income Tax V. S.R.M.B. Dairy Farming (P) Ltd. , the Supreme Court noted that repeated government litigation contributes to the growing number of pending cases. It referred to the National Litigation Policy and the need to secure decisions on meaningful issues rather than pursue multiple levels of scrutiny merely for their own sake. In Commissioner of Customs, New Delhi v. Balaji Overseas, the Supreme Court also disposed of the appeals on the ground of low tax effect, having regard to the applicable monetary threshold. The disputed amount in those appeals was Rs. 1,28,73,481.

13.2 Tax law is part of public law. The State has extensive powers to collect taxes, but those powers must be exercised according to law. The same requirement applies when the State litigates. An appeal is not an unrestricted means of challenging every adverse order. The revenue involved, the legal importance of the issue, the public interest, the cost of litigation and the need for authoritative determination must be considered. The Rs. 20 lakh limit does not mean that a smaller demand has no legal importance. It reflects the policy that, ordinarily, public resources are better used by avoiding departmental appeals below that amount, unless a specified exception applies.

14. Maintainability must be examined before the merits

14.1 The Revenue has invited us to consider the merits of the dispute. We decline to do so because maintainability must be decided first. The Tribunal cannot decide the merits and only afterwards examine whether the appeal met the conditions for admission. An arguable case on merits does not, by itself, overcome the binding monetary-limit policy.

15. Public interest and responsible litigation

15.1 Government litigation uses judicial time, departmental resources and public money. It also takes the time of officers and taxpayers and uses the Tribunal’s limited capacity. The monetary-limit policy is intended to ensure that the State litigates where the amount involved, the legal significance, the recurring nature of the issue, the public interest or a recognised exception justifies doing so. The statutory scheme also protects the Revenue from being treated as having accepted a disputed legal position merely because an appeal is not filed under the monetary-limit policy. Section 120(2) and (3) of the UPGST Act provide: “(2) Where, in pursuance of the orders or instructions or directions issued under sub-section (1), the officer of the State tax has not filed an appeal or application against any decision or order passed under the provisions of this Act, it shall not preclude such officer of the State tax from filing appeal or application in any other case involving the same or similar issues or questions of law.” “(3) Notwithstanding the fact that no appeal or application has been filed by the officer of the State tax pursuant to the orders or instructions or directions issued under sub-section (1), no person, being a party in appeal or application shall contend that the officer of the State tax has acquiesced in the decision on the disputed issue by not filing an appeal or application.” Section 120(4) further provides: “(4) The Appellate Tribunal or court hearing such appeal or application shall have regard to the circumstances under which appeal or application was not filed by the officer of the State tax in pursuance of the orders or instructions or directions issued under sub- section (1).”

16. Findings

16.1 This is a departmental appeal and is governed by the monetary- limit policy applicable to departmental litigation. The relevant disputed demand is penalty of Rs. 5,95,440 which is below Rs. 20,00,000. The Revenue has failed to establish any recognised exception to the monetary limit. No material shows that the Commissioner specifically exercised the residual power, with reasons relating to this case, so as to bring the appeal within an exception. A mere statement that the Commissioner has approved or authorised the appeal cannot replace compliance with the statutory provisions and binding litigation policy. Hence this appeal cannot be admitted for adjudication on merits.

Order

17.1 For the reasons stated above, we hold that this departmental appeal involves a disputed penalty of Rs.5,95,440 which is below the prescribed monetary limit of Rs. 20,00,000. The Revenue has failed to establish any recognised exception. The appeal therefore does not meet the conditions governing its admission and maintainability before this Tribunal. Accordingly, the appeal is dismissed at the threshold on the ground of the prescribed monetary limit and the Revenue’s failure to establish an applicable exception.

17.2 It is made clear that We have not examined or decided the merits of the tax dispute. Nothing in this order shall be read as approving or rejecting the correctness of the impugned order on merits. The dismissal is confined to the maintainability of the departmental appeal under the applicable monetary-limit policy.

17.3 The appeal stands disposed of accordingly. The Registrar shall supply a copy of this order to the appellant.

Departmental Appeal Dismissed as Disputed Tax Below Statutory Monetary Threshold Under Section 120

Ashwani Kumar — Mon, 26 Oct 2026 12:16:11 +0000

Departmental Appeal Dismissed as Disputed Tax Below Statutory Monetary Threshold Under Section 120

Issue

Whether a Departmental appeal filed before the GST Appellate Tribunal (GSTAT) is maintainable under Section 120 when the disputed tax amount (excluding interest and penalties) falls below the prescribed monetary threshold limit of ₹20 lakhs?

Facts

Scrutiny & Initial Demand: Proceedings initiated via ASMT-10 scrutiny culminated in an order in Form GST DRC-07 passed under Section 73, confirming a total demand of approximately ₹2.46 lakhs (inclusive of penalties).
First Appeal Relief: The Commissioner (Appeals) set aside the entire demand in favour of the taxpayer.
Departmental Second Appeal: Aggrieved by the First Appellate Authority’s order, the Department filed a second appeal before the GSTAT.
Monetary Policy Framework: Section 120 empowers the Board to issue instructions fixing monetary limits to regulate Departmental litigation.
Applicable Circulars: Board Circular No. 242/08/2024-GST (dated 05.07.2024), as continued by Circular No. 252/2026-27 (dated 22.05.2026), fixed a monetary threshold of ₹20 lakhs for filing appeals before the Tribunal.
Disputed Tax Quantum: Under the policy instructions, the threshold must be evaluated exclusively on disputed tax and cess (excluding interest and penalty). In the present case, the disputed tax comprised CGST of ₹1,11,848 and SGST of ₹1,11,848, aggregating to ₹2,23,696 (~₹2.23 lakhs).

Decision

Monetary Limit Policy Is Binding: The statutory policy governing monetary limits for Departmental litigation under Section 120 is active and fully applicable.
Exclusion of Interest and Penalties: The monetary threshold must be computed solely on the disputed tax/cess component without factoring in interest or penalty amounts.
Appeal Dismissed as Non-Maintainable: Since the disputed tax of ₹2.23 lakhs was well below the prescribed ₹20 lakh threshold, the Departmental appeal attracted the monetary bar and was dismissed in favour of the assessee.

Key Takeaways

Binding Thresholds for Departmental Litigation: Section 120 limits the Department from litigating low-stake matters, ensuring judicial efficiency and reduction of government litigation.
Tax-Only Calculation: Compliance with monetary limits is judged solely by the core disputed tax/cess liability; interest, late fees, and penalties are strictly excluded from the calculation.
Enforceability: Departmental appeals filed in contravention of Board circulars fixing monetary thresholds are liable to be dismissed on maintainability grounds alone.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , GHAZIABAD BENCH

Sonia Sharma

Nayak Engineering

Dr. Sanjay Kumar Chandhariyavi, Judicial Member
and SUNGITA SHARMA, Technical Member

APL/D94/GZB/2026

OCTOBER 13, 2026

1. Preliminary

1.1 From perusal of case record it transpire that disputed demand comprises CGST of Rs.1,11,848 and SGST of Rs. 1,11,848, together with penalties of Rs.11,184 under each head, aggregating to Rs. 2,46,064, with interest stated to be applicable. As per case record following scrutiny through ASMT-10, reference ZD0910240793948, a DRC-01 show- cause notice was issued on 22 November 2024, seeking a response by 23 December 2024. A notice dated 25 January 2025 fixed a personal hearing for 1 February 2025. According to the Department, no reply was received. The adjudicating authority consequently issued DRC-07 order ZD090225088699M dated 7 February 2025 under section 73, confirming the demand of Rs. 2,46,064. The first appellate authority accepted trader submission and, by order ZD090226123246J set aside the entire demand.

2. We heard learned Authorised Representative and examined the appeal memorandum, the impugned order and the material on record. As Admission of an appeal is not a mere formality hence before considering the merits, the Tribunal must be satisfied that the appeal is maintainable and meets the conditions for admission. Filing an appeal does not, by itself, give the appellant a right to a hearing on merits. The right of appeal is created by statute and must be exercised subject to the conditions prescribed by law. In this regard we refer to Hon’ble Apex Court decision in Ganga Bai v. Vijay Kumar (1974) 2 SCC 393

2.2. In the same way we must follow direction of the Hon’ble Apex court provided in Anant Mills Co. Ltd. v. State of Gujarat (1975) 2 SCC 175 “40. The right of appeal is the creature of a statute. Without a statutory provision creating such a right the person aggrieved is not entitled to file an appeal. We fail to understand as to why the Legislature while granting the right of appeal cannot impose conditions shall lie against an order under sub-section (1) of Section 46 unless the tax had been paid”. Such conditions merely regulate the exercise of the right of appeal so that the same is not abused by a recalcitrant party and there is no difficulty in the enforcement of the order appealed against in case the appeal is ultimately dismissed. It is open to the Legislature to impose an accompanying liability upon a party upon whom legal right is conferred or to prescribe conditions for the exercise of the right. Any requirement for the discharge of that liability or the fulfilment of that condition in case the party concerned seeks to avail of the said right is a valid piece of legislation, and we can discern no contravention of Article 14 in it”.

3. The question at the admission stage

4. Issues for determination