GST Returns not filed and Taxes not Paid during COVID period: Madras HC sets aside Demand Order on Rs. 2L pre-deposit condition [Read Order]

In a recent ruling, the Madras High Court set aside the demand order on Rs. 2 lakhs pre-deposit condition. The court noted that GST (Goods and Services Tax) returns were not filed and the taxes were not paid during the COVID period due to multiple reasons.

The Petitioner, Nagoorar Enterprises  asserted that he was unable to file returns and pay taxes on time during the relevant assessment periods on account of multiple reasons, including bereavements in the family, nonpayment by suppliers and the onset of the COVID-19 pandemic. Eventually, the GST returns were filed and requisite taxes were paid. Orders imposing interest liability are challenged in these circumstances.

The counsel for the petitioner submitted that a personal hearing was not provided before the impugned orders were issued. He also submits that the petitioner had requested the respondents to permit the petitioner to make payments in instalments by taking into account the financial situation of the petitioner.

Further submitted that such request could have been placed before the appropriate authority under Section 80 of the applicable GST enactments. The last submission is that a circular was issued for the imposition of interest at lower rates during specific months during the COVID-19 pandemic.

After pointing out that the petitioner has paid about Rs.2 lakhs towards the aggregate demand of about Rs.12 lakhs, the counsel seeks another opportunity to place these contentions before the respondents.

On instructions, he submits that the petitioner agrees to remit an additional sum of Rs.2 lakhs as a condition for remand and as a condition for raising the garnishee orders.

On behalf of the respondents, Mr. V. Prashanth Kiran, Government Advocate, argued that interest imposition follows statutory mandates, leaving no room for discretion by assessing officers. He contended h that the assessing officer has no discretion in the matter and that no purpose would be served by remanding the matter.

The bench of Justice Senthilkumar Ramamoorthy, examining the challenged orders, noted that orders pertain only to interest. In the affidavit in support of these writ petitions, the petitioner has set out details of payment of requisite taxes in respect of the relevant assessment periods.

In addition, the court stated that the petitioner has also placed on record proof of payment of about Rs. 2 lakhs towards interest. In sub-section 4 of Section 75 of the applicable GST enactments, a personal hearing is mandatory if requested for or if an order adverse to the taxpayer is proposed to be issued.

Furthermore, under Circular No.13/2020-TNGST dated 17.08.2020, taxpayers had the benefit of reduced rate of interest during specific months of the COVID-19 pandemic period. By taking into account all the aforesaid factors, the court found it necessary to interfere with the order on conditions.

Consequently, the court set aside the interest orders, subject to the condition that the petitioner remit an additional sum of Rs. 2 lakhs within three weeks. Upon receiving the aggregate sum of Rs. 4 lakhs, the first respondent was directed to afford the petitioner a reasonable opportunity, including a personal hearing, and issue fresh orders within three months. Additionally, the garnishee orders were revoked upon receipt of the aggregate sum of Rs. 4 lakhs.

The writ petition was disposed of accordingly. Mr.K.A.Parthasarathy and Mr.N.Chandirasekar appeared for the petitioner. Mr.V.Prashanth Kiran Government Advocate represented the respondents.

To Read the full text of the Order CLICK HERE

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