Madras HC quashes Adverse GST Order issued due to Non-Appearance, grants Reconsideration with Conditions [Read Order]

In a recent case, the Madras High Court ( Madras HC ) has quashed a adverse GST ( Goods and Services Tax ) order passed against the petitioner by the department due to the petitioner’s non-appearance during the hearing, and remanded the matter back for reconsideration with certain conditions.

The case is a writ petition filed under Article 226 of the Constitution of India, where the petitioner, Umesh Electricals, sought a Writ of Certiorarified Mandamus against an order passed by the first respondent, the Commercial Tax Officer, a government authority.

The petitioner aimed to have the impugned order, dated 20.02.2024, related to the assessment year 2017-18, quashed on the grounds of illegality and requested the matter be reconsidered.

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The background of the case starts with the assessment year 2017-18, during which the petitioner was issued several notices from the first respondent, including ASMT-10 dated 14.03.2023, DRC 01A dated 21.07.2023, and DRC 01 dated 05.09.2023. These notices were served to the petitioner through the GST common portal, including a notice for a personal hearing scheduled for 11.09.2023. The core of the issue stems from an alleged mismatch between the petitioner's returns filed under GSTR 1 and GSTR 3B.

Despite these notices, the petitioner failed to act in time, neglecting the opportunity to respond or appear for the hearing, which led to the issuance of the adverse order dated 20.02.2024. The petitioner argued that he had a valid case to establish that there was no such mismatch and requested an opportunity to explain and rectify the situation. The petitioner also asserted that he could substantiate the case on other issues that were raised in the earlier proceedings.

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In response, the learned Additional Government Pleader, representing the first respondent, opposed the petitioner's claims, arguing that the writ petition was time-barred and should be dismissed. The counsel referred to the decision of the Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others vs. Glaxo Smith Kline Consumer Health Care Limited, contending that the petitioner had delayed his appeal beyond the permissible period, as outlined under Section 107 of the GST enactments. Further, the respondent's counsel cited another Supreme Court decision in Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur and others, to support the argument that the appellate remedy had also become time-barred.

A single bench of Justice C Saravanan, after considering the submissions of both the petitioner's and respondent's counsels, weighed the merits of the case. Although the writ petition was argued to be time-barred, the Court determined that the petitioner may indeed have a case worth considering on merits. Thus, in the interest of fairness, the Court chose to exercise its discretion partly in favor of the petitioner.

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The Court quashed the impugned order passed by the first respondent and remitted the case back for reconsideration. However, this relief was conditional. The petitioner was required to deposit 25% of the disputed tax amount into the electronic cash register of the first respondent within 30 days from the receipt of the Court's order. Furthermore, the Court stated that the impugned order, although quashed, would serve as an addendum to the show-cause notices previously issued.

Additionally, the Court instructed the petitioner to file a reply within 30 days from the date of receiving the order, along with the deposit. The first respondent was directed to issue a fresh order on merits after this period, ensuring the petitioner was granted a fair hearing before any new decision was made. The Court also provided that, upon compliance with the deposit requirement, the petitioner's frozen bank account should be de-freezed. Alternatively, the same amount could be recovered directly from the petitioner's bank account as a pre-deposit.

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Ultimately, the writ petition was disposed of with these directions, and all connected miscellaneous petitions were closed. The Court did not impose any costs in this matter.

To Read the full text of the Order CLICK HERE

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