50% Disputed GST Demand deposited in Wrong Head: Madras HC sets aside Matter on 10% Pre-deposit out of remaining 50% [Read Order]

The Madras High Court recently quashed a GST demand order, citing procedural lapses and violations of natural justice. Even though the 50% disputed tax was deposited in the wrong head, the court noted severe procedural lapses in the matter.

Kayram Builders filed a writ petition challenging the order issued on August 20, 2024, in FORM GST DRC – 07, which was uploaded on the GST portal without direct notice to the petitioner.

The petitioner argued that the impugned order was passed without prior physical notice or a personal hearing, thereby depriving them of the opportunity to present their case.

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It was contended that 50% of the disputed tax liability had already been paid but was mistakenly deposited under the wrong tax head. This discrepancy led to the demand arising from mismatches between FORM GSTR-1 and GSTR-3B. Since all notices were uploaded only under the "View Additional Notices" section of the GST portal, the petitioner remained unaware of the proceedings, leading to an ex parte order against them.

During the hearing, the Government counsel acknowledged the petitioner’s claim and suggested that the matter could be reconsidered if the petitioner deposited 10% of the remaining 50% of the disputed tax amount.

The court found merit in the petitioner’s argument, noting that the absence of direct communication and denial of a personal hearing constituted a violation of natural justice principles.

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Justice Krishnan Ramasamy set aside the impugned GST demand order. However, it imposed a condition that the petitioner must deposit 10% of the remaining disputed tax amount within four weeks.

The court also directed the petitioner to submit their objections and relevant documents within two weeks of making the pre-deposit. Upon receiving the reply, the GST authorities must provide a 14-day notice for a personal hearing before issuing a fresh order in accordance with the law.

Adv. K.A.Parthasarathy and Adv. V.Prashanth Kiran (Government Advocate - Tax) appeared for the Petitioner and respondents respectively.

To Read the full text of the Order CLICK HERE

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