Need for an appeal mechanism :
Why do we at all need appeal mechanisms? Or, more generally, why do we need dispute resolution mechanisms? The simple answer is: because there are disputes.
But, why do we have disputes?
Tax laws (or any laws, for that matter) impose obligations. Such obligations are broadly of two kinds: tax-related and procedure-related. The taxpayer’s compliance with these obligations is verified by the tax officer (by various instruments such as audit, antievasion, SIB, etc.), as a result of which sometimes there are situations of actual or
perceived non-compliance. If the difference in views persists, it results into a dispute, which is then required to be resolved.
The initial resolution of this dispute is done by a departmental officer by a quasijudicial process resulting into the issue of an initial order known by various names – assessment order, adjudication order, order-in-original, etc. Section 2(4) of the Model GST Act defines the phrase “adjudicating authority” as any authority competent to pass any order or decision under this Act, but does not include the Board, the First Appellate Authority and the Appellate Tribunal. Thus, in a way, any decision or order passed under the Act is an act of “adjudication”. Some examples are :- cancellation of registration under Section 21; best judgment assessment under Section 46; decision on a refund claim under Section 38, decision on a demand show cause notice issued under Section 51; imposition of a penalty under Section 66. There can be several other situations involving an “adjudication”.
Tax law recognizes that on any given set of facts and laws, there can be different opinions or viewpoints. Hence, it is likely that the assessee may not agree with the “adjudication order” so passed by the tax officer. It is equally possible that the Department may itself not be in agreement with the adjudication order in some cases. It is for this reason that the statute provides further channels of appeal, to both sides.
However, since the right to appeal is a statutory right, the statute also places reasonable fetters on the exercise of that right (by way of time limits, pre-deposits, etc., as discussed later).