GST Registered Person must Respond to SCN Despite dropped Scrutiny Proceedings: Madras HC [Read Order]

The Madras High Court, in its recent ruling observed that the GST registered person must respond to show cause notice despite the scrutiny proceedings dropped. According to the court, one has to respond to the SCN issued by the GST department even if such proceedings are dropped.

The bench of Justice Senthilkumar Ramamoorthy observed that “As a registered person under applicable GST enactments, the petitioner cannot be absolved of the responsibility of responding to the show cause notice merely on the ground that scrutiny proceedings were dropped.”

The assessee-petitioner, M/s.Sri Velavan Traders, Represented by its Proprietor, T. Dhanalakshmi, submitted that she could not participate in the GST proceedings as she was unaware of proceedings. She was under the impression that no further action would be taken with regard to the alleged discrepancies in GST returns.

The assessee’s counsel referred to notice Form ASMT-10 and its reply. After these proceedings were dropped, the counsel argued that the respondent lacked jurisdiction to initiate Section 73 proceedings concerning return discrepancies.

The contested order was issued without considering the available reconciliation statement in Form 9C, which was accessible for review by the respondent. Regarding the confirmed tax proposal, counsel highlighted that approximately Rs. 80 lakhs pertained to disputed excess GST Input Tax Credit  (ITC ) due to alleged non-reconciliation, submitted the counsel Mr. S. Rajasekar.

On the contrary, the GST department’s counsel submitted before the high court that the petitioner had been given numerous opportunities to engage in proceedings, including a show cause notice dated 28.12.2023 and reminders on 31.01.2024, 14.02.2024, and 28.02.2024.

The counsel asserted that discontinuation of scrutiny proceedings did not prevent the assessing officer from commencing adjudication under Section 73 of relevant GST laws.

The court observed that the assessee admitted not responding or participating in the hearing. Despite this, the assessee’s counsel argued that the reconciliation statement was overlooked when confirming the tax proposal related to the GST ITC claim due to non-reconciliation of information.

Since this confirmation occurred without granting the petitioner a hearing, the court opined that it is necessary to to have a reconsideration of the case, however on condition of pre-deposit.

Based on instructions, the assessee agreed to remit 5% of the disputed GST demand concerning the alleged excess ITC claimed due to non-reconciliation, and 10% of the disputed tax demand related to other issues addressed in the contested order.

Consequently, the High Court set aside the challenged order and the assessee was also permitted to respond to the show cause notice within 3 weeks period.

To Read the full text of the Order CLICK HERE

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