Limits Of Revisional Jurisdiction Under The GST Regime

Introduction

Revisional powers are special statutory powers conferred upon higher authorities to examine and review orders passed by subordinate officers. The primary objective of conferring such powers is to safeguard the interests of the revenue. Accordingly, revisional jurisdiction is supervisory in nature and is ordinarily exercised in respect of orders that are considered to be erroneous and prejudicial to the interests of the revenue.

Historically, the concept of revisional jurisdiction formed part of various fiscal statutes. Under the Income Tax Act, 1961¹/Income Tax Act, 2025 authorities may call for and examine records of proceedings and revise orders passed by an assessing officer which are erroneous and prejudicial to the interests of the revenue, after affording the assessee an opportunity of being heard. A similar framework also existed under the erstwhile Value Added Tax regime, where higher authorities were vested with suo motu revisional powers to review orders passed by lower authorities and revise them if they were erroneous and detrimental to the interests of revenue after affording an opportunity to the taxpayer .

The GST regime also recognizes such revisionary powers. The same is conferred under Section 108 of the Central Goods and Services Tax Act, 2017 ("the Act") which empowers Revisional Authority to call for and examine the records of proceedings and revise any 'decision' or 'order' passed by a subordinate officer if such 'decision' or 'order' is found to be erroneous, illegal, improper, or prejudicial to the interests of revenue.² The legislative intent is to correct jurisdictional errors, illegality, procedural irregularities, or improper exercise of discretion reflected in any decision or adjudication order passed under the GST regime.

The scope of revisional power, which is a special power, is limited as Section 108 of the Act imposes statutory limitations on the nature of proceedings and orders that may be subjected to revision. The moot question which requires to be answered here is as to what constitutes a "decision" or "order" capable of being revised under GST law. This article examines the scope and contours of revisional jurisdiction under Section 108 of the Act, particularly in the context of what constitutes a "decision" under Section 108 of the Act.

Meaning of 'Decision' and 'Order' and under Section 108 of the Act

While the expression 'order' referred to in Section 108 of the Act is an Order which is passed by a proper officer under Section 73 or Section 74 of the Act, the term 'decision' for the purposes of Section 108 of the Act has been defined under Section 108(6)(ii) of the Act to include any 'intimation' given by a subordinate officer . Therefore, for the purpose of invoking revisional powers, there must exist either an adjudicatory order or an 'intimation' falling within the meaning contemplated under the GST framework.

The term 'intimation' has not been specifically defined under the GST laws. In the absence of a statutory definition, the expression must be understood in its ordinary and natural sense. As per Merriam Webster dictionary the term 'intimation' means 'an indirect, usually subtle suggestion, indication, or hint' and as per Oxford dictionary the term intimation means 'the act of stating something or of making it known, especially in an indirect way'.

The term "intimation" has been used in multiple instances under the Act. In certain instances, it has been used to merely indicate communication whereas in certain other instances it is more than mere communication. If the dictionary meaning of the term where to be applied to the term "intimation" referred under Section 108(6)(ii) of the Act, every departmental communication would be subjected to revision. However, such an expansive interpretation would lead to absurdity.

The Hon'ble apex court in the case of M/s Armour Security (India) Ltd v. Commissioner, CGST, Delhi East Commissionerate & Anr³, held that the formal 'initiation of any proceedings' occurs only upon the issuance of a Show-Cause Notice under Section 73 or 74 of the Act. It was further observed that for an action to qualify as "proceedings", it should be undertaken with the objective of obtaining a determinative outcome. To extend revisionary powers to communications prior to proceedings which do not have the objective of determining the outcome undermines the revisionary powers.

Therefore, not every communication issued by the department can be treated as a 'decision' amenable to revision under Section 108 of the Act. Such a communication must fall within the ambit of adjudicatory proceedings initiated under Sections 73 or 74 of the Act confirming demand of tax, interest, or penalty after due application of mind and compliance with the statutory procedure contemplated under the Act.

Whether an Audit Report constitutes a decision under Section 108 of the Act?

The term 'audit' has been defined under Section 2(13) of the Act. As per the definition, it means examination of records of a registered person under GST laws to verify the correctness of their turnover declared, taxes paid, refund claimed, ITC availed, and assess compliance with the provisions of the Act and the rules made thereunder.⁴ From the aforesaid definition, it is evident that the scope of audit is confined to verification and examination of records maintained by the registered person for the purpose of ascertaining possible discrepancies or non-compliance of provisions of the Act.

Audit is conducted under Section 65(1) of the Act, and an audit report is issued in terms of Section 65(6) of the Act informing the registered person of the department's findings and the reasons thereof in form GST ADT-02⁵. An audit report merely communicates the findings of an audit conducted, the rights and obligations of the assessee and the reasons for such findings. Although, the audit report may quantify the amount of tax which may be payable by a registered person, the same is merely a finding of tax liability which does not result in confirmation of a demand, nor does it impose any penal sanctions. Therefore, the issuance of an audit report is only a procedural step reflecting the prima facie findings of the department upon verification of the records maintained by the registered person and cannot by itself be equated with proceedings under Section 73/74 of the Act. Accordingly, it can be said that an audit report is merely a conclusion of verification/examination of records.

Further, Section 65(7) of the Act itself recognises that an audit proceeding does not culminate into an adjudication. The said provision provides for initiation of proceedings under Section 73/74 of the Act if any discrepancies regarding non-payment, short-payment, erroneous refund, or wrongful ITC utilization has been observed.⁶

The Hon'ble High Court of Madras in case of ABT Ltd. vs. Additional Commissioner of GST & Central Excise (Audit), Coimbatore⁷ while examining the scope of Section 65 of the CGST Act, interpreted Section 65(7) of the Act and observed that the function of an audit report is merely to disclose instances where tax may not have been paid, may have been short paid, erroneously refunded, or where input tax credit may have been wrongly availed or utilised. Upon such discrepancies being noticed, Section 65(7) provides that the Proper Officer may initiate proceedings under Sections 73 or 74 of the Act.

From the aforesaid observation, it can be inferred that an audit report is not issued with the objective of determining the outcome of the adjudicatory proceedings. Rather, the audit report merely identifies potential discrepancies and serves as the basis for the Proper Officer to consider initiation of adjudicatory proceedings. The determination of liability, including tax, interest, or penalty, is required to be undertaken in proceedings under Sections 73 or 74 of the Act and not during the audit process. This view of the High court reinforces the legislative distinction between audit report issued under Section 65 and notices issued for initiation of adjudication proceedings under Sections 73/74 of the Act.

Therefore, an audit report is not issued with the objective of determining the outcome as a part of adjudicatory proceeding and hence the same cannot by itself be termed as a "decision" which can be subjected to revisionary powers under Section 108 of the Act .

This view is supported by the decision of the Hon'ble High Court of Karnataka in the case of M/s Navayuga Engineering Company Limited v. Joint Commissioner of Commercial Taxes⁸, wherein it was held that an Order-in-Revision passed under Section 108 of the Act revising an audit report issued under Section 65(6) of the Act is liable to be quashed on the basis that invocation of revisional jurisdiction against an audit report, in the absence of adjudicatory proceedings under Sections 73 or 74 of the Act, was without authority of law. The judgment therefore clearly recognises that an audit report cannot attain the status of a 'decision', 'intimation', or 'order' amenable to revision under Section 108 of the Act.

Consequently, the expression 'intimation' under Section 108 of the Act for invoking revisional powers assumes relevance only in the context of a communication issued for initiation of adjudicatory proceeding under Sections 73 or 74 of the Act and cannot be said to include audit reports issued in Form GST ADT-02.

Various judicial precedents have consistently understood the term 'intimation' to communications issued under Form DRC-01A in accordance with Sections 73(5) or 74(5) of the Act. The Hon'ble High Court of Gujarat in the case of Agrometal Vendibles Pvt. Ltd v. State of Gujarat⁹ observed that an intimation has to be strictly in Form DRC-01A. Similarly, in the case of Ravi Enterprises v. Commissioner of State Tax¹⁰ and Kesari Nandan Mobile v. Assistant Commissioner of State Tax, Enforcement¹¹ the High Courts have contextually used the term "Intimation" in conjunction with Form GST DRC-01A

From the scheme of the Act, it is clear that audit proceedings are merely a precursor to an adjudicatory proceeding and is not an adjudication by itself. An audit report is a merely a conclusion of verification/examination of records of a registered person and cannot, in the absence of a proceedings under Sections 73 or 74 of the Act, be equated to a 'decision', 'intimation', or an 'order' amenable to revision under Section 108 of the Act.

The legislative intent of Section 108 of the Act becomes clearer upon examination of sub-section (3), which provides that every revisional order passed thereunder shall be final and binding on the parties. The conferment of such finality to a revisionary order indicates that revisional jurisdiction is intended only upon decisions or orders having some degree of finality or legal consequences. An audit report lacks the character of having any degree of finality or legal consequence and the same is merely a conclusion of verification/examination of records which by itself neither creates nor determines any tax liability under the Act.

On the other hand if an audit report is treated as a "decision" which may be subjected to revisionary jurisdiction under Section 108 of the Act, the consequences of the same would be far-reaching. The Revisional Authority would effectively be empowered to render a binding determination of tax liability, interest, and penalty solely on the basis of an audit report/observation, without any prior adjudication under Sections 73 or 74 of the Act. Such an approach would circumvent the procedural safeguards framework prescribed by the statute under Sections 73 or 74 of the Act.

This interpretation would also blur the distinction between an audit and adjudicatory proceedings, defeat the statutory framework governing determination of tax liability, and impermissibly expand the scope of revisional jurisdiction beyond what is contemplated by the statute. More importantly, it would render the adjudicatory framework under Sections 73 and 74 of the Act largely redundant by enabling tax liability to be determined through revisionary proceedings founded solely upon audit findings

Accordingly, a purposive interpretation of Section 108 of the Act requires that the expressions "decision", "intimation", and "order" be confined to communications in the course of an adjudicatory proceeding. An audit report issued in Form GST ADT-02 cannot, in the absence of proceedings under Sections 73 or 74, be equated with a "decision", "intimation", or "order" amenable to revision under Section 108 of the Act. Any wider interpretation of the revisional powers to revise audit reports would effectively obliterate the adjudicatory framework stipulated by the statute under Sections 73 and 74 of the Act. Such powers may effectively transform revisional jurisdiction into an independent mechanism for determination of tax liability, which is clearly contrary to the legislative intent of the Act.

Footnotes

1. Section 263 of the Income Tax Act, 1961, Section 377 of the Income Tax Act, 2025.

2. Section 108 of the Central Goods and Services Tax Act, 2017

3. M/s Armour Security (India) Ltd v. Commissioner, CGST, Delhi East Commissionerate & Anr. 2025-VIL-63-SC

4. Section 2(13) of the Central Goods and Services Tax Act, 2017

5. Section 65(6) of the Central Goods and Services Tax Act, 2017

6. Section 65(7) of the Central Goods and Services Tax Act, 2017

7. ABT Ltd. vs. Additional Commissioner of GST & Central Excise (Audit), Coimbatore (2024) 15 Centax 188 (Mad.).

8. M/s Navayuga Engineering Company Limited v. Joint Commissioner of Commercial Taxes. W.P. No. 26955/2025(T-res)

9. Agrometal Vendibles Pvt. Ltd v. State of Gujarat, 2022 (63) G.S.T.L. 212 (Guj.)

10. Ravi Enterprises v. Commissioner of State Tax (2023) 4 Centax 15 (Uttarakhand)

11. Kesari Nandan Mobile v. Assistant Commissioner of State Tax, Enforcement (2025) 27 Centax 398 (Guj.)