In a recent ruling, the Madras High Court set aside Goods and Service Tax (GST) demand order and recovery notice passed without providing a hearing opportunity, which violated the principles of natural justice. The court found that the entire GST demand was recovered without providing hearing.
Petitioner, Bright Power Projects India Pvt. Ltd, a company based in Salem, Tamil Nadu filed a writ petition under Article 226 of the Constitution of India against the recovery notice issued by the Assistant Commissioner (ST) and to quash the notice as it had violated the principles of natural justice.
The petitioner-company faced discrepancies between GSTR 2A and GSTR 3B filings, which led to the tax authorities denial of their Input Tax Credit (ITC) claim that the petitioner had violated the provision under section 16 of the TNGST/CGST Act, 2017. The tax authorities issued an order and a subsequent recovery notice without allowing the petitioner to present their case.
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The petitioner-company represented by U.V. Kamath relied on the Kerala High Court case of M/s.Diya Agencies Vs. State Tax Officer in W.P.(C), 2023 where it was held that the difference between GSTR 2A and GSTR 3B should not be the sole basis for denial of the claim for ITC when there is evidence on record to prove that the claim of ITC is bona fide and genuine. The counsel argued that the order was uploaded in the GST portal’s “Additional Notices/Orders” column which the petitioner was unaware of.
The counsel of the petitioner argued that the petitioner was unaware of the orders and notices until he got a call from the Axis Bank Manager (third respondent) saying that the recovery action had been initiated. Thus, the order passed violated the principles of natural justice.
The counsel further submitted that after filing the writ petition, the entire tax demand was recovered from the petitioner by the respondent. The counsel prayed to set aside the impugned order.
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The respondents was represented by G.Nanmaran (Special Government Pleader), argued that the notices and orders were properly issued through the GST portal, and thus there was no breach of natural justice.
A single bench of Justice Krishnan Ramasamy observed that the petitioner had no reason to view the Additional Notices Column and impugned the order passed without allowing the petitioner to present their case, which clearly violated principles of natural justice.
The court noted that the entire tax demand was recovered without following due process, further justifying the petitioner’s claim of a violation of their rights. Thus it set aside the impugned order and consequential recovery notice. The matter was remanded.
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