Josco Gold’s ₹2.1-Lakh GST Demand Set Aside Over Credit-Note Grounds Missing From Notice And No Personal Hearing

On scrutiny of the appellant’s returns for July 2017 to March 2018, the department alleged that it had claimed sales returns without issuing credit notes, resulting in alleged escaped turnover of ₹70,29,725 and short-paid tax of ₹2,10,892

A show-cause notice (SCN) dated 28 September 2023 led to an order confirming the tax demand, interest and penalty; the first appellate authority dismissed the appellant’s appeal

The appellant contended that the SCN alleged that no credit notes had been issued, whereas the adjudicating and appellate authorities relied on other grounds—including the dates and values of credit notes and their reporting under Section 34—that were not specified in the SCN and were not put to it for response

The Tribunal considered these procedural objections before addressing the merits

Section 75(7) of the CGST/KGST Acts prohibits confirming a demand on grounds other than those specified in the notice. Section 75(4) requires an opportunity of hearing where an adverse decision is contemplated. Section 107(11) permits the appellate authority to make further inquiry and pass an appropriate order, but any such inquiry must comply with natural justice, including notice of adverse matters and an opportunity to respond

The Tribunal relied on the Supreme Court’s decision in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate, [2025] 177 taxmann.com 478 (SC), for the principle that the proceedings must remain within the case set out in the SCN; it also referred to C.C.E., Bhubaneswar-I v. Champdany Industries Ltd. and Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. in support of that principle

The Tribunal did not determine whether the credit notes substantively satisfied Section 34.

The SCN’s foundational allegation was that the appellant had not issued credit notes, but the order-in-original itself discussed credit notes and assessed their dates and values.

The Tribunal considered this inconsistency material: the adjudicating authority had effectively shifted from the allegation in the SCN to new grounds that the appellant had not been given an opportunity to meet

It also found no record of a personal hearing before adjudication, despite the adverse decision and the need to address the credit-note discrepancies, thereby contravening Section 75(4)

The first appellate authority likewise relied on matters such as reporting deadlines, annual-return disclosure and the plausibility of exchanges without establishing that these had been properly put to the appellant; Section 107(11) did not cure that defect because further inquiry must itself comply with natural justice

Applying Section 75(7), the Tribunal held that neither authority could sustain the demand on grounds outside the SCN. It therefore treated examination of the substantive tax merits as unnecessary

It allowed the appeal, set aside the order-in-appeal and granted consequential relief; it did not decide the merits of the credit-note claim