In a recent ruling, the Madras High Court set aside an assessment order. The court found that the non-response to the Show Cause Notice under Goods and Services Tax ( GST ) was on the genuine impression that they could not respond due to registration being cancelled.
Tvl.B.S.Construction, the petitioner contested the order pertaining to the period 2017-18, arguing that they could not respond to a show cause notice due to the cancellation of their GST registration.
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It received an ASMT-10 notice on July 3, 2023, citing a Rs. 69 lakh mismatch between FORM 26AS and FORM GSTR-1. This was followed by a show cause notice in FORM DRC-01 on September 15, 2023, with a deadline to respond by October 14, 2023.
However, the petitioner’s GST registration was cancelled effective August 8, 2023, and formal cancellation occurred on October 10, 2023. This cancellation led the petitioner to believe they could not respond to the show cause notice, as no personal hearing date or time was specified.
B.S.Construction discovered the impugned order only in July 2024, following the revocation of their registration on July 19, 2024. They argued that the order was arbitrary and violated principles of natural justice since they had been unable to respond due to the registration cancellation.
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There was no restriction preventing the petitioner from uploading a response to the GST portal despite the registration’s cancellation, argued that the Government Advocate ( Taxes ). Nonetheless, the petitioner’s counsel maintained that the cancellation led to a genuine belief that responding was impossible.
Justice Krishnan Ramasamy admitted the petitioner’s genuine misunderstanding and noted that the petitioner had already settled their GST liability for Tamil Nadu, with no additional outstanding amounts. Thus, the Court concluded that the respondent’s failure to provide an opportunity for the petitioner to respond constituted a violation of natural justice.
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The High Court, thus set aside the impugned order and remitted the matter back to the department for reconsideration.
Mr.B.Syed Abdul Wakeel for Mr. N. Chandirasekar and Mr. V.Prashanth Kiran Government Advocate ( Taxes ) appeared from the petitioner and department respectively.
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