Bombay High Court: No Merit Order Allowed for Appeals Missing Certified Copy

Bombay High Court: No Merit Order Allowed for Appeals Missing Certified Copy

The Bombay High Court has ruled that if an appeal lacks proper documentation such as a certified copy, deposit omission, or incorrect signatures, it cannot result in an order based on its substance. The appellate body made a legal mistake by issuing a judgment based on the merits of the case.

The Bench of Justices G. S. Kulkarni and Jitendra Jain noted that the Commissioner (Appeal) acted unjustly in dismissing the appeal without affording the Petitioner a chance to rectify the procedural flaw. Such an action would contradict the principles of natural justice.

In their perspective, the justices concluded that denying justice solely due to procedural non-compliance, without granting the Appellant a chance to address the procedural shortcomings is unwarranted. The Bench held that the Commissioner (Appeal) should have issued a defect memo to the Petitioner, requesting the submission of evidence of tax pre-deposit in accordance with section 107(6) of the CGST Act, 2017. Additionally, the Bench emphasised the need for a certified copy of the order and proper authentication of the appeal memo as stipulated by rule 26(2)(a).

The petitioner/assessee under consideration, engaged in the trade of exporting mobile handsets, operates as a registered sole proprietor under the CGST Act, 2017. In pursuit of a refund of the input tax credit, the Petitioner submitted a claim in accordance with Section 54(3) of the CGST Act. However, rather than addressing the refund application, the authorities issued a show-cause notice under Section 74. This notice outlined the intention to cancel the registration and disallow the input tax credit, asserting that the situation involved fraudulent input tax credit.

According to the findings of the investigation report, the Commissioner (Appeal) noted that the suppliers from whom IJM Exporters procured their goods were found to be non-existent. Consequently, IJM Exporters were deemed to have falsely claimed input tax credit (ITC).

As the Petitioner's procurement transactions were linked to IJM Exporters, it was concluded that the Petitioner had also improperly utilised ITC and submitted a refund request based on these wrongful claims.

The petitioner argued that the prescribed procedure had not been adhered to, and highlighted that the registration cannot be revoked solely through the issuance of a notice under Section 74 of the CGST Act. The Petitioner asserted that during the processing of the refund application, no liability for payment could have been raised. Instead, the most appropriate action would have been to issue an order dismissing the refund application, rather than initiating a demand.

The department argued that the petitioner did not fulfil the obligatory requirement of making a 10 per cent pre-deposit as stipulated for considering the appeal under Section 107(6) of the CGST Act, 2017. Additionally, the appeal memorandum lacked the signature of the petitioner's proprietor. Consequently, the Appellate Authority's decision to reject the appeal on its merits was deemed reasonable by the department.

The department further argued that the petitioner had procured goods from IJM, and upon investigation, it was revealed that the suppliers associated with IJM were determined to be non-existent. Consequently, the legitimacy of the input tax credit (ITC) claimed by the petitioner came into question, leading to the conclusion that the petitioner is ineligible for a refund.

The Court determined that failure to mandate the appellant to provide a certified copy of the adjudication order would result in a violation of the principle of natural justice.