The Madras High Court has ruled that the Goods and Services Tax ( GST ) Department should thoroughly verify the correctness of tax returns before initiating action under Section 73 of the Tamil Nadu Goods and Services Tax ( TNGST ) Act, 2017. Thus, the court set aside the demand order.
The assessee, A K M Balu filed a writ petition challenging an order dated May 30, 2024, related to the assessment year 2019-2020.
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The petitioner contested the order issued by the GST authorities, which followed a Show Cause Notice in Form DRC-01A dated May 16, 2024. The notice highlighted discrepancies in the annual returns filed by the petitioner in GSTR 9 and demanded the payment of tax along with interest.
The petitioner was given an opportunity to file objections and attend a personal hearing, which they duly did. The objections were submitted in response to the discrepancies cited in the notice, arguing that the proceedings under Section 73 could not be initiated without a prior verification under Section 61 of the Act.
Despite the petitioner’s detailed response, the GST authorities proceeded with the impugned order without acknowledging or addressing the objections filed. This led to the petitioner filing a writ petition, seeking another opportunity to present their case and participate in the proceedings before the GST department.
In defence, the Additional Government Pleader for the respondent argued that the petitioner had not fulfilled the conditions specified in clause (b) of sub-section (3) of Section 15 of the Act, which justified the impugned order. However, the court found that the GST authorities’ failure to follow due procedure was a significant issue.
Justice Krishnan Ramasamy observed that although there was no evident irregularity concerning the value of credit notes in the proceedings, the GST authorities’ direct action under Section 73, bypassing the necessary preliminary steps under Section 61, was procedurally flawed. Given the petitioner’s request for a fair chance to present their case, the court decided to annul the order and remanded the matter for proper review.
Consequently, the court directed the petitioner to submit an additional reply or objection within three weeks from the receipt of the court’s order, including all relevant documents.
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The GST department was instructed to review the matter afresh, considering the petitioner’s additional submissions, and provide an opportunity for a personal hearing, ensuring that the decision was made based on the merits of the case and in accordance with the law.
With these directions, the writ petition was disposed of, and the connected miscellaneous petitions were closed.
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