GSTAT Sets Aside Fortinet’s Office-Meals GST Demand, Finding No Show-Cause Notice And No Established Reverse-Charge Liability

01Facts

Fortinet appealed against an order dated 27 June 2025 upholding a GST demand for July 2017 to March 2018.

The demand arose from two “office meals” expense entries and was confirmed as reverse-charge liability under Section 9(3).

pp. 2–10

The adjudicating authority had served Form GST DRC-01, but no separate show-cause notice under Section 73(1), and passed its order without considering Fortinet’s later-filed reply or granting a personal hearing.

pp. 2–10, 21–22

The first appellate authority relied on additional grounds, including that the catering supplier was unregistered during the relevant period and that Fortinet had collected meal charges from employees.

pp. 28–29

02Issues

i.1. Whether a summary in Form GST DRC-01, without a separate show-cause notice under Section 73(1), validly initiates adjudication proceedings.

p. 13 · ¶ 4.2(i)

ii.2. Whether passing an adverse adjudication order without granting a personal hearing violates Section 75(4) and the principles of natural justice.

p. 13 · ¶ 4.2(ii)

iii.3. Whether the DRC-01 and adjudication order were invalid for want of a DIN or RFN.

p. 13 · ¶ 4.2(iii)

iv.4. Whether the first appellate authority could sustain the demand on grounds not set out in the adjudication order or put to Fortinet.

p. 13 · ¶ 4.2(iv)

v.5. Whether Fortinet was liable to pay GST under reverse charge under Section 9(3), or otherwise under Section 9(4), on the office-meal expenses.

p. 13 · ¶ 4.2(v)

03Law Applied

Section 73(1) of the CGST/KGST Act requires the proper officer to serve a show-cause notice specifying the proposed demand; Rule 142(1) requires Form GST DRC-01 to accompany that notice and does not permit the summary to replace it.

pp. 14–16 · ¶ 4.5–4.8

Section 75(4) requires a hearing where an adverse decision is contemplated, and Section 75(6) requires the order to state the relevant facts and basis of decision.

pp. 21–24 · ¶ 4.25–4.29 · p. 32 · ¶ 4.61

Section 160 protects proceedings from mere defects only where they are substantially compliant with the Act.

pp. 20–21 · ¶ 4.21–4.22

Sections 9(3) and 9(4) provide distinct reverse-charge mechanisms: Section 9(3) applies to notified categories of supplies, while Section 9(4) concerns supplies from unregistered persons, subject to the applicable period and exemptions.

pp. 30–31 · ¶ 4.55–4.57

The Tribunal relied on “Metal Forgings v. Union of India”, “CCE v. Brindavan Beverages (P) Ltd.”, “Armour Security (India) Ltd. v. Commissioner, CGST”, and “L.C. Infra Projects (P) Ltd. v. Union of India” on the necessity of a proper notice and fair adjudication.

pp. 16–20 · ¶ 4.11–4.20

It declined to invalidate the communications for want of DIN/RFN, noting the scope of the CBIC circulars and the later issuance of Karnataka’s RFN circular.

pp. 24–28 · ¶ 4.32–4.45

Provisions in the judgment · 41 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 20 provisions

Section 6 Section 9 Section 22 Section 50 Section 52 Section 65 Section 73 Section 74 Section 75 Section 76 Section 107 Section 112 Section 122 Section 123 Section 124 Section 125 Section 127 Section 129 Section 130 Section 160

KARNATAKA GOODS AND SERVICES TAX ACT, 2017 19 provisions

Section 6 Section 9 Section 50 Section 52 Section 65 Section 73 Section 74 Section 75 Section 76 Section 107 Section 112 Section 122 Section 123 Section 124 Section 125 Section 127 Section 129 Section 130 Section 160

Integrated Goods and Services Tax Act, 2017 Section 20

Central Excise Act, 1944 Section 11

04Reasoning

The Tribunal held that DRC-01 was only a summary and could not substitute for the mandatory Section 73(1) notice; the audit report likewise did not serve as that notice.

pp. 14–21 · ¶ 4.4–4.23

The adjudication order was also passed without considering Fortinet’s reply and without a hearing, despite an adverse decision being made, contrary to Section 75(4).

pp. 21–24 · ¶ 4.24–4.29

Although the DIN/RFN objection failed, the first appellate authority had introduced grounds concerning an unregistered caterer and employee collections that had not formed the basis of the adjudication order or been put to Fortinet.

pp. 24–29 · ¶ 4.30–4.48

On the merits, the record did not establish the relevant supplies, their values, or the applicable reverse-charge provision.

pp. 29–33 · ¶ 4.49–4.63

Outdoor catering was not a notified Section 9(3) category; nor had the department identified qualifying Section 9(4) supplies within the relevant period or accounted for the applicable exemption.

pp. 29–33 · ¶ 4.49–4.63

The alleged employee collections were also unsupported by evidence establishing a taxable supply.

pp. 29–33 · ¶ 4.49–4.63

05Holding

The Tribunal allowed the appeal.

pp. 33–34 · ¶ 4.63–5.2

It set aside the adjudication order dated 25 April 2023 and the appellate order dated 27 June 2025, and set aside the CGST and SGST demands of ₹1,09,815 each, together with the related interest and penalties.

pp. 33–34 · ¶ 4.63–5.2

Any pre-deposit was directed to be refunded with interest in accordance with law; there was no order as to costs.

pp. 33–34 · ¶ 4.63–5.2

LawLens.GSTAT - ['Bengaluru']

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