No Hearing Provided Post-Issuance of Second Corrigendum of GST SCN Enhancing ITC and Demand Order: Madras HC remands for Fresh Consideration [Read Order]

The Madras High Court has set aside a GST ( Goods and Services Tax ) demand order passed without affording the petitioner an opportunity of personal hearing after the issuance of a second corrigendum that enhanced the Input Tax Credit ( ITC ) amount.

Justice Krishnan Ramasamy observed that “If any order is passed against the petitioner with demand, that order has to be passed after giving an opportunity of personal hearing to the petitioner otherwise, it will amount to depriving the interest of the petitioner and the same amounts to violation of principles of natural justice.

The petitioner, M/s.Regma Ceramics Limited,  had challenged the order dated 30.07.2024 issued by the GST department confirming a liability of ₹5,89,369 under Section 74 of the Central GST Act for the assessment years 2017-18 to 2021- 22.

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The original show cause notice was issued on 29.12.2023, followed by a corrigendum on 16.01.2024. The petitioner submitted a reply and appeared for a personal hearing on 03.07.2024. However, a second corrigendum dated 23.07.2024 was issued, enhancing the ITC discrepancy from ₹59,784 to ₹3,02,334.

The impugned order was passed just a week later, without granting another hearing. A rectification order followed on 31.07.2024, and further recovery action was initiated under Section 79(1)(c), directing a dealer to withhold over ₹18 lakh, paralysing the petitioner’s business operations.

The petitioner asserted that the second corrigendum introduced a huge change in the demand, and no opportunity of hearing was provided thereafter.

The respondent- GST department claimed that the petitioner had already been heard and that due process was followed.

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The court found that the enhanced demand post-second corrigendum required a fresh hearing, which had not been granted. The bench citing principles of natural justice, observed that any demand against a taxpayer must be preceded by a fair hearing.

The absence of such a hearing, especially after a material revision in the demand, rendered the proceedings procedurally flawed, added the court.

Therefore, the bench quashed both the impugned order and the subsequent rectification order, and remanded the matter to the authorities for fresh consideration.

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As the petitioner volunteered to deposit 25% of the disputed tax amount within four weeks, the court set aside the order. Thereafter, the petitioner was instructed to submit a fresh reply along with supporting documents within two weeks.  The GST authorities have been instructed to provide a clear 14 day notice for a personal hearing and to pass a reasoned order on merits thereafter.

Mr. M. Karthikeyan, Advocate  and Mr. B. Ramanakumar, Advocate, Senior Standing Counsel (Taxes) appeared for the petitioner and respondents respectively.

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To Read the full text of the Order CLICK HERE

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