No Provisions in GST Law for remand back by First Appellate Authority

The Allahabad High Court has ruled that a First Appellate Authority under the CGST Act cannot send a case back to the original adjudicating authority for further verification once it finds the initial order to be flawed. The court stated that the appellate authority's powers are limited to confirming, modifying, or annulling the order, and it cannot grant the revenue department a 'second inning' to rectify defects. This decision aims to prevent endless appeals and ensure finality in tax proceedings.

The Hon'ble Allahabad High Court in the case of M/s Kanha Shree Steels v. Assistant Deputy Commissioner CGST Division-VI Ghaziabad & Others [WRIT TAX No. - 2746 of 2025, order dated August 19, 2025] held that once an appellate authority finds a show cause notice and cancellation order deficient for lack of reasons, it cannot remand the matter back for verification; the appellate authority under Section 107 of the CGST Act cannot grant a "second inning" to Revenue by referring cases back to the adjudicating authority.

Facts:

M/S Kanha Shree Steels ("the Petitioner'") was subjected to an inquiry on September 5, 2024, resulting in a show cause notice dated September 14, 2024 for cancellation of GST registration, to which the Petitioner replied. The registration was cancelled on September 26, 2024, and an application for revocation was rejected on December 31, 2024.

The Appellate Authority ("the Respondent") upon appeal-allowed the appeal but only "subject to verification of facts" by the adjudicating authority on March 28, 2025. Consequently, the revenue authorities communicated that without such compliance, the registration cancellation order dated May 1, 2025 would continue.

The Petitioner argued that once the Respondents found the original notice and cancellation order to be cryptic and unreasoned, they had no power to remand or issue directions for a "second inning" to the revenue under Section 107. The only permissible courses were confirmation, modification, or annulment of the order and any further direction was ultra vires.

The Respondent contended that the cancellation was factually justified on the grounds of non-functioning business premises and that remand for verification was appropriate for ensuring compliance.

Aggrieved, the Petitioner filed a writ under Article 226 of the Constitution challenging the remand aspect of the appellate order.

Issue:

Whether the GST appellate authority is empowered under Section 107 to remand a cancellation matter back to the adjudicating authority for verification of facts, after finding the impugned order to be cryptic and unsustainable?

Held:

The Hon'ble Allahabad High Court in WRIT TAX No. - 2746 of 2025, order dated August 19, 2025held as under:

· Observed that, the Appellate authority expressly found the original cancellation order to be cryptic and deficient, warranting it to be quashed.

· Noted that, Section 107(11) only permits confirmation, modification, or annulment, and specifically bars referring the case back to the original authority that passed the order.

· Held that, once the Appellate authority finds the original order unsustainable, it cannot issue directions for further verification or remand the matter for a second consideration as this would amount to an unauthorized "second inning" for the revenue.

· Set aside, the impugned order as to the remand/verification and the subsequent order predicated on it, with liberty for revenue to initiate fresh proceedings as per law if required.

Our Comments:

The judgment confirms that Section 107(11) of the CGST Act restricts the first Appellate Authority's powers to three options only-confirm, modify, or annul the impugned order. The intent is to avoid endless cycles of remands and secure finality, especially after procedural or natural justice violations. Allowing remands in such circumstances enables Revenue to cure defects at taxpayer's cost, which the law proscribes.

In P.N.C. Construction Company Ltd. v. State of U.P. [2002 UPTC 262] the Allahabad High Court on similar facts had held that, the appellate authority has no power to remand the matter or give direction as given in the impugned order. Similarly, in Tvl. Shivam Steels v. Assistant Commissioner (ST), [(2024) 20 Centax 363 (Madras HC)] has held that the GST first appellate authority cannot remand to adjudicating authority.

Relevant Provision:

Section 107(11) of the CGST Act, 2017:

"The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order."

Official copy of the judgment has been attached