In a recent ruling, the Madras High Court remanded the matter concerning the Goods and Service Tax (GST) demand order alleged suppression of table turnover citing Tax Authorities’ failure to consider the petitioner’s submission.
S.P. Mani and Mohan Dairy (India) Pvt. Ltd., the petitioner engaged in the manufacturing and sale of milk and milk products. The petitioner was issued a show-cause notice on 02.03.2024 for tax irregularities, identifying ten defects.
After reviewing the petitioner’s response, the revenue dropped seven defects but confirmed tax for two defects (accepted by the petitioner, with penalties) and imposed further tax and penalties for Defect No. 8 alleging outward suppression of taxable turnover.
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The petitioner challenged the tax demand order before the Madras HC arguing that the Covid-19 pandemic caused disruptions leading to reduced sales, but not reduced power consumption due to storage needs for goods in freezers.
The petitioner’s counsel contended that the respondent did not properly consider the explanations provided or the supporting documents and passed the order without offering an opportunity for a personal hearing which violated the principles of natural justice.
On the contrary, the respondent’s counsel argued that the tax demand was based on a comparison of taxable turnover and electricity consumption, suggesting sales suppression. The counsel submitted that the petitioner’s explanation regarding electricity consumption was not convincing. Thus, the tax demand and penalty were justified.
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Justice Krishnan Ramasamy observed that the petitioner had provided a reasonable explanation regarding excess power consumption due to storage requirements during the pandemic. The court found that the respondent had not provided any contrary evidence to substantiate the alleged suppression of sales and the explanation by the petitioner regarding the relationship between electricity consumption and sales should have been considered.
The court noted that the impugned order was passed without granting the petitioner an adequate opportunity for a hearing, which violates the principles of natural justice.
Therefore, the court set aside the impugned orders and remanded the matter to the respondent for reconsideration of Defect No. 8 after providing the petitioner with a personal hearing. The petitioner’s writ petition was allowed.
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