Auditor fails to Respond to GST Notices due to Illness: Madras HC directs to Provide Hearing Opportunity on 10% Pre-deposit [Read Order]

The Madras High Court quashed the Goods and Services Tax ( GST ) and directed the respondents to provide hearing opportunity to the Petitioner on 10% pre-deposit condition. The demand order was issued with regards to the discrepancy between their monthly ( GSTR-3B ) return filings and the auto-populated GSTR-2A and was confirmed due to auditor’s failure to respond to the GST notices.

On June 23, 2023, the Deputy State Tax Officer issued an order demanding GST from the petitioner due to a mismatch between their GSTR-3B filings and the auto-populated GSTR-2A.

The petitioner, represented by S. Kannan, challenged the order. They asserted that their GST compliances were entrusted to an auditor who became unavailable due to illness during the relevant period. This, they claimed, prevented them from responding to the department's notices or contesting the tax demand on its merits.

The petitioner submitted that the confirmed tax proposal pertains to an alleged mismatch between the petitioner's GSTR 3B returns and the auto populated GSTR 2A.

It is further argued that the respondent committed an error in computing the difference by only relying on the returns for December 2020. If provided the opportunity, they could explain the Input Tax Credit ( ITC ) claim and justify the difference in the tax filings.

The department, represented by C. Harsha Raj, countered the petitioner's arguments. They confirmed that all due procedures were followed, including issuing notices in Form GST ASMT 10, a show cause notice, and three reminders before the final order.

The bench of Justice Senthilkumar Ramamoorthy acknowledged the tax demand arose due to the mismatch between the GSTR-3B and GSTR-2A filings. However, the Court observed that the confirmation of the demand solely relied on the petitioner's failure to respond to any of the notices.

Considering the exceptional circumstances, the reliance on an unavailable auditor, and the claim of unawareness about the proceedings, the Court held that the principles of natural justice warranted another opportunity for the petitioner to present their case.

The court quashed the impugned order on the condition that the petitioner deposit 10% of the disputed tax demand within two weeks from receiving a copy of the order. The petitioner is also allowed to submit a reply to the show cause notice within the same period.

Upon receiving the reply and confirmation of the deposit, the department has been directed to provide a reasonable opportunity to the petitioner, including a personal hearing. The department must then issue a fresh order within three months of receiving the petitioner's reply.

To Read the full text of the Order CLICK HERE

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