In a recent ruling, the Madras High Court ruled that Court interference is needed on GST ( Goods and Services Tax ) orders which raises liabilities not addressed in the SCN ( Show Cause Notice ).
The petitioner, Banyan Engineers Contractors, Represented by Proprietor sought condonation of delay in filing an appeal against an order dated December 28, 2023.
The petitioner, an ex-serviceman engaged in construction work for government projects, received a show cause notice on September 26, 2023. The notice called for an explanation regarding the significant difference between the turnover reflected in the GSTR-2A for supplies and the outward supplies reflected in the petitioner’s GSTR-3B returns.
In a reply dated December 26, 2023, the petitioner explained that the value of supplies in the GSTR-3B was lower due to the nature of the business, where it takes time for purchases to convert into outward supplies. The petitioner also addressed the mismatch in Input Tax Credit ( ITC ). Despite this, the order dated December 28, 2023, was issued, prompting the petitioner to seek leave to file an appeal.
The petitioner’s counsel argued that the show cause notice was limited to the difference between the value of purchases and the outward supplies in the petitioner’s GSTR-3B returns. However, the impugned order addressed a mismatch between the ITC claimed in the GSTR-3B returns and the auto-populated GSTR-2A, which the petitioner was not given a reasonable opportunity to contest.
On the contrary, the respondent’s counsel contended that the order was issued following the principles of natural justice. He submitted that the show cause notice pertained to the lack of proportionality between the outward supplies in the petitioner’s GSTR-1 statement and the purchase value in the GSTR-2A.
A single bench of Justice Senthilkumar Ramamoorthy noted that the confirmed GST proposal related to excess transitional credit claimed by the petitioner, an issue not raised in the show cause notice. This discrepancy warranted interference.
However, as the petitioner failed to challenge the order within the limitation period, necessitating conditions were issued by the court for reconsideration. On instructions, the petitioner’s counsel agreed to remit 10% of the disputed tax demand as a condition for reconsideration.
Thus, the court ordered to treat the impugned order as a show cause notice to enable the petitioner to respond to the issue of the mismatch between the GSTR-3B return and the auto-populated GSTR-2A.
Further directed the petitioner to remit 10% of the disputed tax demand within 15 days from the receipt of a copy of this order. Within this period, the petitioner was also permitted to submit a reply to the show cause notice.
Upon receipt of the petitioner’s reply and confirmation of the 10% remittance, the first respondent was directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within three months from the date of receiving the petitioner’s reply.
Mr.A.P.Ravi appeared for the petitioner and Mr.T.N.C.Kaushik, AGP (T) appeared for the respondents.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
