The Madras High Court found that the reply provided to the Show Cause Notice (SCN) of GST (Goods and Services Tax) is inadequate and does not explain itself. Thus, the court allowed the assessee to contest the GST order on 10% pre-deposit.
Sri Sakthi Industries, the assessee, is engaged in providing job work services to Sakthi Auto Component Limited. The company procured capital goods in the financial year 2017-18, which were then used for job work in the following financial year.
On receiving a show cause notice, the petitioner responded, clarifying that the capital goods were purchased in the financial year 2017-18 and that outward supply during that year was lower than inward supply.
Referring to the reply submitted by the assessee, the counsel of the assessee asserted that such reply was not taken into consideration while issuing the impugned GST order. Further he stated that the assessee agreed to remit 10% of the disputed tax demand as a condition for remand.
The counsel for the respondents – GST department, submitted that the petitioner’s reply contains no details. The reply of the assessee was quoted by the counsel that: “We purchases capital during current year 2017-18. Hence outward is less than inward supply.”
The bench of Justice Senthilkumar Ramamoothy observed that “The above reply is terse and cannot be construed as self explanatory. It is, however, noticeable that such reply does not find mention in the impugned order.”
According to the court, there is fault on both assessee-petitioner and the GST authorities. Thus, by balancing revenue interest, the bench set aside the order and remanded the matter on 10% pre-deposit. Further, as the GST assessment order was set aside, the bank attachment was also raised.
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