In a recent ruling, the Madras High Court set aside the Goods and Services Tax ( GST ) demand order which confirmed the demand claiming the Input Tax Credit ( ITC ) wrongly availed on the vehicle purchased for the commercial purposes. The matter was remanded for reconsideration.
The petitioner, Sri Uma Plastics is engaged in the business of purchase and sale of plastic scrap. According to the petitioner, a commercial vehicle was purchased for business purposes and ITC was availed in respect thereof. By asserting that the petitioner was unaware of proceedings culminating in the impugned order, the present writ petition was filed.
The petitioner’s counsel submitted that the total tax demand is a sum of Rs.4,28,936/-. Upon attachment of the petitioner’s bank account, he submits that a sum of Rs.2 lakhs was appropriated therefrom and that this amount represents almost 50% of the disputed tax demand.
Mrs. K. Vasanthamala, Government Advocate (Tax), pointed out that the impugned order was preceded by notice in Form GST ASTM10, an intimation dated 05.05.2023 and show cause notice dated 06.06.2023.
Examining the impugned order, Justice Senthilkumar Ramamoorthy presiding as the sole bench, clarified that the tax proposal revolved around the alleged wrongful availment of ITC concerning the purchase of a motor vehicle.
In addition it was noted that the petitioner’s counsel strongly contended that the vehicle purchase was made for legitimate business purposes, and thus, ITC was rightfully claimed. Supporting this argument, documentary evidence indicated that a sum of Rs. 2 lakhs had already been allocated towards the total tax liability, which amounted to approximately Rs. 4.28 lakhs.
Given these circumstances, the Justice deemed it just and imperative to afford the petitioner an opportunity to contest the disputed tax demand on its merits.
Accordingly, the order was set aside and the matter is remanded for reconsideration. The petitioner was also permitted to submit a reply to the show cause notice within two weeks from the date of receipt of a copy of this order.
Upon receipt of the petitioner’s reply, the high court directed the first respondent to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of petitioner’s reply.
To eliminate any ambiguity, the court explicitly stated that the sum of Rs. 2,00,000, which was debited from the petitioner’s bank account, will be subject to the outcome of the remanded proceedings. With the assessment order being invalidated, the bank attachments were lifted. Consequently, the writ petition stands disposed of.
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