In a recent ruling, the Madras High Court has invalidated a Goods and Services Tax ( GST ) demand order, subject to a 10% pre-deposit condition, highlighting that mere change in management does not excuse non-response to both the Show Cause Notice ( SCN ) and intimation. The bench emphasised that the demand was upheld based on discrepancies found in GSTR 3B, GSTR 1, and GSTR 9 filings.
The Petitioner Zulaikha Motors Private Limited filed two writ petitions, challenging the orders pertaining to the assessment period 2017-2018 on the ground of breach of principles of natural justice.
The petitioner’s argument centred on the assertion that a change in management occurred, with the new leadership taking over on January 1, 2024. Consequently, they claimed that the current management was unaware of the proceedings leading to the contested orders.
During the proceedings, the petitioner’s counsel highlighted that the tax demand was confirmed primarily due to the petitioner’s failure to respond to a SCN, and no reasons were provided in support of the tax demand.
Mr. T.N.C. Kaushik, representing the government, acknowledged receipt of the petitioner’s concerns. He pointed out that the tax demand was confirmed because the petitioner failed to respond to either the intimation or the SCN.
Upon examining the orders in question, a Single bench of Justice Senthilkumar Ramamoorthy found that the petitioner indeed failed to respond to both the intimation and the SCN.
The court observed that “A change in management does not justify the failure to respond to the show cause notice.”
Moreover, it noted the discrepancies between the GSTR 3B, GSTR 1 and GSTR 9 returns was the basis for confirming the tax demand. It was also noted that the impugned order contains no reasons in support of the tax demand except the failure of the petitioner to reply to the show cause notice. Thus, it was appropriate to give a chance to contest the demand.
The court, while acknowledging the petitioner’s willingness to remit 10% of the disputed tax demand, opted to quash the orders subject to this condition. It mandated that the petitioner remit the agreed-upon amount within two weeks of receiving the court’s order. Additionally, the petitioner was given the opportunity to submit a reply to the SCN within the same timeframe.
Once the remittance was received and the petitioner’s reply was submitted, the respondent was directed to provide a reasonable opportunity, including a personal hearing, and issue fresh orders within two months. Accordingly, the writ petition was disposed of.
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