The Madras High Court Single Bench of Justice Senthilkumar Ramamoorthy recently quashed the Goods and Services Tax ( GST ) Show Cause Notice ( SCN ) on the entire Input Tax Credit ( ITC ) balance for reversal in ignorance of Certificate by CA for trade payables for the State of Tamil Nadu.
The petitioner challenged an order issued by the State Tax Officer for the assessment year 2017-2018 related to the petitioner’s claim for Input Tax Credit (ITC) under Section 16 of the CGST Act.
The petitioner alleged that the impugned order, referencing GST No.33AABCT1296R1ZU/2017-2018, was arbitrary, illegal, and violated the principles of natural justice. The petitioner contended that the order contravened the second proviso to clause (d) of sub-section (2) of Section 16 of the GST Act and Articles 14, 19(1)(g), and 265 of the Constitution of India.
The petitioner, represented by G. Natarajan, argued that a show cause notice had been issued concerning non-payment to suppliers for a period exceeding 180 days. Despite the petitioner’s response and submission of supporting documents, including a Chartered Accountant‘s certificate dated 20.12.2023, the impugned order was issued based on the total trade payables of the petitioner.
K. Vasanthamala, Government Advocate representing the respondent argued that the total trade payables of the company were considered due to the petitioner’s failure to provide a proper break-up of net trade payable specific to the State of Tamil Nadu.
The Single Bench noted that, “Under the Companies Act, 2013, every company is required to file financial statements in respect of its entire operations and there is no provision for filing State-specific financial statements. However, the petitioner has submitted a certificate from a Chartered Accountant stating that the trade payables attributable to the State of Tamil Nadu are Rs.1816.48 millions. Learned counsel for the petitioner also submits that the petitioner would provide all the invoices issued by the suppliers with regard to the aggregate sum of Rs.1816.48 millions.”
Upon careful consideration, the Madras High Court observed that the assessing authority had not applied its mind before drawing conclusions. It was observed that, “The assessing authority has clearly not applied its mind before drawing the conclusions extracted above.”
The court thus found the impugned order to be arbitrary and, therefore, quashed it.
The matter has been remanded for reconsideration by the assessing authority, with a directive to consider all relevant documents provided by the petitioner and issue a fresh order within two months from the date of order.
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