ProIndiaClub

In the case of Sterling & Wilson Pvt. Ltd. v. Commissioner, Odisha (Appeal Case No. APL/1/PB/2026), decided on 11-2-2026, the Hon’ble GSTAT, Principal Bench, New Delhi, addressed the procedural requirements following a mismatch between GSTR-1 and GSTR-3B. The Tribunal ruled that where the First Appellate Authority determines a case is free of fraud or suppression and subsequently shifts the matter from Section 74 to Section 73 of the CGST Act, 2017, it lacks the jurisdiction to finalize the tax liability at the appellate level. It was held that pursuant to Section 75(2), the matter must be remanded to the Proper Officer for a fresh determination. In this instance, the Hon’ble GSTAT remanded the matter to allow the taxpayer to reconcile debit/credit notes, produce supporting documents, and exercise the opportunity to file amendment to correct the returns.

The dispute arose due to a mismatch where the output tax liability declared in GSTR-1 (Rs. 31,36,18,763) exceeded the liability declared in GSTR-3B (Rs. 31,09,12,131), resulting in an alleged short disclosure of Rs. 27,06,634.

The Proper Officer initially raised a demand under Section 74 of the CGST/OGST Act, imposing tax, interest, and a 100% penalty (Total: Rs. 65,17,849), alleging a willful attempt to disclose lesser tax liability.

The First Appellate Authority modified the order. While it confirmed the tax and interest, it reduced the penalty to 10% (Rs. 2,70,664) by converting the case from Section 74 to Section 73, finding no evidence of fraud or suppression. However, it upheld the demand because the appellant could not prove that the Input Tax Credit (ITC) passed to recipients remained unutilized.

The GSTAT examined the appeal against the First Appellate Order. The Tribunal observed that the First Appellate Authority erred by re-determining the tax liability itself after converting the case to Section 73. The Tribunal noted that under Section 75(2), if an appellate body finds Section 74 inapplicable, the Proper Officer—not the appellate body—must re-determine the tax.

Hon’ble Principal Bench of GSTAT, remanded back the matter to the original Proper Officer for re-consideration. The Appellant is given liberty to file an amendment within one month. The Proper Officer must conduct a fresh hearing under Section 73, verifying the genuineness of credit/debit notes and other documents produced by the Appellant and render the final order.

In the present case, the Hon’ble GSTAT observed that every honest taxpayer deserves protection under the law. The Tribunal held that if a taxpayer lacks the intent to evade tax through fraud, suppression, or willful misstatement, they must be granted a fair and proper hearing before being burdened with penalties and interest.

Conclusion

The GSTAT set aside the orders of the lower authorities to the extent they finalized the demand under Section 73 of the CGST/SGST Act, 2017 without a proper de novo assessment. By invoking Section 75(2) of the CGST/SGST, the Tribunal ensured that the power to re-determine tax remains with the adjudicating officer