Inadequate Notice Service Makes GST Order Unenforceable: Madras HC [Read Order]

The Madras High Court has recently ruled that a Goods and Services Tax ( GST ) order is unenforceable if the taxpayer is not properly served with notices. The court emphasized that merely uploading notices on the GST portal without personal delivery or registered post does not constitute valid service.

The petitioner, Silver Cloud Estates Private Limited, a construction company registered under the Goods and Services Tax Act, 2017, filed its tax returns and paid the required taxes for the 2018-19 financial year. However, upon verifying the monthly returns, the tax authorities identified discrepancies, including an input mismatch between GSTR-3B and GSTR-2A, an output mismatch, a TCS mismatch between GSTR-8 and GSTR-1, and interest liability for late filing of returns.

From Notices to Verdicts – Decode GST Litigations with Confidence! - Click Here

Read More: ITC Denied Invoking S. 17(5) of GST Act without Indicating Reason: Madras HC Sets Aside Order

As a result, a DRC-01A notice was issued on May 4, 2023, followed by a Show Cause Notice (DRC-01) on March 5, 2023, with reminders sent on August 14, 2023, and December 5, 2023. However, the petitioner neither responded nor appeared for a personal hearing. Consequently, the tax authorities passed the final assessment order, confirming the tax demand.

G. Derrick Sam, counsel appearing on behalf of the petitioner, argued that the tax authorities failed to properly serve the show cause notices and the final assessment order. Rather than delivering them personally or sending them through Registered Post with Acknowledgment Due (RPAD), the notices were merely uploaded under the ‘View Additional Notices’ section of the GST portal.

From Notices to Verdicts – Decode GST Litigations with Confidence! - Click Here

Read More: Clerical Errors in Reassessment Notices can be Rectified but Ignoring Apparent Mistakes in Assessment Order is Unsustainable: Delhi HC

As a result, the petitioner remained unaware of the proceedings. Without proper communication, they could not respond or participate in the adjudication process, which ultimately led to the passing of the assessment order without their involvement.

The petitioner’s counsel argued that if given an opportunity, the petitioner could explain the discrepancies in the tax assessment. To support this, the petitioner cited a recent Madras High Court ruling in M/s. K. Balakrishnan, Balu Cables vs. Assistant Commissioner of GST & Central Excise (2024) where the court remanded a similar case for reconsideration on the condition that 25% of the disputed tax was paid.

From Notices to Verdicts – Decode GST Litigations with Confidence! - Click Here

The petitioner expressed willingness to make this payment and requested a final chance to present their objections before the adjudicating authority.

C. Harsha Raj, Additional Government Pleader appearing for the respondent, did not raise any objections to this request.

Read More: Nullity: Madras HC quashes GST Assessment Order against Deceased

The single-judge bench led by Justice Mohammed Shaffiq set aside the GST assessment order, agreeing with the petitioner that the notices were not properly served. The court noted that merely uploading notices on the GST portal without direct communication was insufficient. Since the petitioner was unaware of the proceedings, they missed the opportunity to present their case.

From Notices to Verdicts – Decode GST Litigations with Confidence! - Click Here

By consent of both parties, the court disposed of the writ petition and allowed the petitioner to challenge the tax demand, provided they deposit 25% of the disputed tax within four weeks. If this condition is met, the assessment order will be treated as a show cause notice, allowing the petitioner to submit objections.

Failure to comply with this condition will result in the reinstatement of the original order. Additionally, the court directed that any bank account attachments or recovery actions be lifted once the partial payment is made.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates