GST Liability on Non-Payment of Tax under RCM: Madras HC Sets Aside Order on 10% Pre-Deposit [Read Order]

The Madras High Court recently set aside an order issued on non-payment of GST ( Goods and Services Tax ) under RCM ( Reverse Charge Mechanism ). The court instructed the petitioner to respond to the show-cause notice. It noted that the GST liability arises from an inadvertent error in filing GSTR 3B returns.

The petitioner, Kwatra Karteek asserted that he was unaware of proceedings culminating in the order impugned herein because the part time Accountant engaged by the petitioner had not informed the petitioner about these proceedings. An order original dated 28.12.2023 was challenged on the ground of breach of principles of natural justice.

The counsel for the petitioner asserted that the tax proposal arose as a result of the petitioner committing an inadvertent error while filling up Form GSTR 3B. If provided an opportunity, he submitted that the petitioner would be in a position to establish that the petitioner did not make short payment of GST.

Responding to the petition, Mr. V. Prasanth Kiran, learned Government Advocate, acknowledged the issuance of a show-cause notice dated 30.09.2023 preceding the impugned order.

The bench of Justice Senthilkumar Ramamoorthy, examining the impugned order stated that the tax proposal pertains entirely to non payment of tax under reverse charge mechanism.

Further stated that the counsel for the petitioner pointed out that such a tax proposal was a result of the petitioner making an inadvertent error while filling up GSTR 3B returns. In these circumstances, albeit by putting the petitioner on terms, it is just and necessary that the petitioner be provided an opportunity to contest the tax demand on merits.

The High court set aside the impugned order dated 28.12.2023, with the condition that the petitioner remit 10% of the disputed tax demand within a maximum period of three weeks from the receipt of the court's order.

Furthermore, the petitioner was granted permission to submit a reply to the show-cause notice within the specified timeframe. Once the respondent received the reply and confirmed the receipt of the 10% disputed tax demand, they were directed to provide the petitioner with a reasonable opportunity, including a personal hearing, and issue a fresh assessment order within three months from receiving the petitioner's reply.

Mr. D.Vijayakumar  and Mr.V.Prasanth Kiran, GA (T) appeared for the petitioner and respondents respectively.

To Read the full text of the Order CLICK HERE

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