GST Demand raised on Difference of Tamil Nadu and All India Turnover: Madras HC sets aside Order on 10% Pre-Deposit [Read Order]

The Court noted that while some discrepancies were based on comparisons of profit and loss accounts and GST returns, an auditor's certificate provided indicated that the Tamil Nadu turnover was accurately reported.
Madras High Court - GST - Pre-Deposit - Taxscan

The Madras High court considered the auditor’s certificate submitted by the petitioner particularly showing the turnover in Tamil Nadu state when they raised the GST ( Goods and Services Tax ) demand based on ‘All India Turnover’ and set aside the order on 10% pre-deposit condition.

The petitioner argued that they did not have a fair opportunity to contest the tax demand, asserting that their business operates across multiple states, including Maharashtra, Andhra Pradesh, Gujarat, Odisha, Chhattisgarh, and Tamil Nadu.

During the relevant financial year 2018-2019, the petitioner claimed they made minimal taxable supplies in Tamil Nadu, leading to a lack of attention to the GST portal and failure to respond to the show cause notice issued against them.

The counsel for the petitioner submitted that the tax demand in the show cause notice was confined to two discrepancies: a mismatch between the petitioner’s GSTR 3B returns and GSTR 1 returns, amounting to approximately ₹6.60 lakhs, and another difference between GSTR 3B and the auto-populated GSTR 2A, amounting to ₹4,62,546.

Complete Draft Replies of GST ITC Related Notices, Click Here

However, the impugned order confirmed multiple tax proposals aggregating to ₹6,65,76,994, which the petitioner contended was excessive and not aligned with the provisions of Section 73 of the GST Act, which mandates a detailed indication of proposed tax liabilities.

The petitioner also pointed out that a significant portion of the demand arose from discrepancies between the reported turnover in their returns and the profit and loss statement.

With a Tamil Nadu turnover of ₹11,78,63,417 against an All India turnover of ₹43,95,66,187, the petitioner claimed that taxing the total difference of ₹32,17,02,770 was erroneous. They submitted an auditor’s certificate from Sanjay C. Shah & Associates, dated July 30, 2024, affirming that the Tamil Nadu turnover was fully reported in their returns.

In contrast, the respondents argued that the proceedings were initiated after thorough scrutiny and that the petitioner failed to respond to several communications, thereby forfeiting their opportunity to contest the tax proposals.

Complete Draft Replies of GST ITC Related Notices, Click Here

The Court noted that while some discrepancies were based on comparisons of profit and loss accounts and GST returns, an auditor’s certificate provided indicated that the Tamil Nadu turnover was accurately reported.

Justice Senthilkumar Ramamoorthy observed that imposing GST on the entire differential turnover seems prima facie unjustifiable. However, the assessing officer must verify this by closely examining all relevant documents.

The court observed that the discrepancies between the GSTR returns and the financial statements, seemingly prepared on an All India basis, require reconsideration. Noting the petitioner’s lack of engagement in proceedings despite multiple opportunities, the court established terms for the petitioner.

Complete Draft Replies of GST ITC Related Notices, Click Here

The bench set aside the previous order, requiring a pre-deposit of 10% and granted the petitioner the chance to submit a reply to the show cause notice, ensuring a fair hearing before the assessing officer re-evaluates the case.

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