GST Demand Confirmed Without GSTR 9C Consideration: Madras HC Orders Pre-deposit of Rs. 2.50 Crore [Read Order]

The Madras High Court ordered a pre-deposit of Rs. 2.50 crores for setting aside the Goods and Services Tax ( GST ) demand which was confirmed without the consideration of GSTR 9C.

Renaatus Projects Private Limited, the petitioner, is a company specialising in works contracts and turnkey projects, including government projects, across Tamil Nadu, Puducherry, and Mauritius. With a substantial turnover of approximately Rs. 200 crore in the Financial Year 2017-18, the petitioner's operations span diverse geographical regions.

The initiation of proceedings against the petitioner commenced with the issuance of a show cause notice dated 27.09.2023, ultimately leading to the contested order dated 23.12.2023.

The petitioner asserted that their inability to respond to the show cause notice or participate in the proceedings stemmed from a lack of awareness regarding the said proceedings. Consequently, the present writ petition was filed against this backdrop, following the submission of a rectification petition dated 14.03.2024.

Counsel representing the petitioner contended that the impugned order exceeded the scope outlined in the show cause notice. By directing attention to the specifics of the show cause notice, it is highlighted that the petitioner was called upon to address an aggregate tax proposal of Rs.12,56,99,874.83. However, the confirmed tax proposal under the impugned order significantly deviates, amounting to Rs.78,23,18,587/-.

A further contention concerns the issue regarding the discrepancy in turnover between the petitioner's annual return in Form GSTR 9 and their profit and loss account. It is pointed out that while the respondent noted a total turnover in the profit and loss account around the Rs. 200 crore mark, instead of calculating the variance between this figure and the turnover as per the GSTR 9, an error was made by simply summing the two figures, resulting in an inflated total turnover of approximately Rs. 330 crore. This miscalculation consequently led to a tax liability of Rs. 59.56 crore under this category.

Moreover, it is asserted that the discrepancy between the turnovers as per the GSTR 9 and the profit and loss account was duly explained in the reconciliation statement, accompanied by a Chartered Accountant's certificate.

Specifically, it was highlighted that a significant portion of the turnover pertained to the pre-GST period between April 2017 and June 2017, amounting to Rs. 64,95,26,013.18. Additionally, non-GST turnover of Rs. 3,04,05,275/- was also included in the total turnover.

The petitioner’s counsel submitted that, on instructions,  the petitioner agreed to remit a sum of Rs.2.5 crore as a condition for remand.

Mr. C. Harsha Raj, Additional Government Pleader, pointed that the petitioner was duly notified and called upon to address the proposal concerning the computation of tax based on a total turnover of Rs. 330 crore, reflecting the variance between the turnover in the profit and loss account and the GSTR 9 return. Asserting compliance with the principles of natural justice in substance, he contends that the petitioner, being a sizable corporate entity, cannot claim ignorance of such proceedings.

The bench noted that the respondent calculated tax based on the combined turnover from both the profit and loss account and the GSTR 9 return, resulting in a sum of Rs. 330 crore. However, since the tax proposal revolves around the turnover difference, it is imperative to consider the variance between the two turnovers. In this aspect, the impugned order warrants intervention.

Addressing the contention raised by the Additional Government Pleader, a Single bench of Justice Senthilkumar Ramamoorthy observed that the record indicated sufficient opportunities provided to the petitioner, including intimation dated 20.09.2023, show cause notice dated 27.09.2023, and approximately three reminders in December 2023.

Despite the petitioner's claim of unawareness, particularly given its corporate stature, substantial liability was imposed without due consideration of pertinent documents such as the GSTR 9C reconciliation statement. Considering these circumstances cumulatively, it is deemed just and necessary to afford the petitioner an opportunity to contest the tax demand, albeit under certain conditions.

Accordingly, the impugned order was set aside, subject to the condition that the petitioner remits a sum of Rs. 2.50 crore within four weeks from the receipt of a copy of this order. Within the stipulated period, the petitioner is authorised to submit a reply to the show cause notice, enclosing all relevant documents.

Upon receipt of the petitioner's reply and confirmation of the receipt of Rs. 2.50 crore towards the disputed tax demand, the first respondent is directed to afford a reasonable opportunity to the petitioner, including a personal hearing, and subsequently issue a fresh order within three months from the receipt of the petitioner's reply.

To Read the full text of the Order CLICK HERE

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