No opportunity given to justify ITC availed on Merits: Madras HC sets aside GST Demand Order [Read Order]

The Madras High Court set aside an order concerning a GST dispute due to a mismatch between input tax credit ( ITC ) claims and the records. The court emphasised the importance of adhering to principles of natural justice and granted a conditional remand, providing the petitioner with an opportunity to justify the ITC availed of on merits.

The writ petition, filed by Palani Paramanandam, proprietor of M/s. Vignesh Binding Works, sought to quash the impugned order dated 20.07.2023, issued by the State Tax Officer / Commercial Tax Officer of the Avadi Assessment Circle. The petitioner contended that the order was contrary to the provisions of the CGST Act, 2017, and TNGST Act, 2017, and violated principles of natural justice. The petitioner claimed that the show cause notice and other communications were only uploaded on the GST portal and were not communicated through any other mode, leaving him unaware of the proceedings.

P. Rajkumar, counsel for the petitioner, argued that the petitioner had availed only of an eligible Input Tax Credit ( ITC ). He contended that the petitioner was unaware of the proceedings culminating in the impugned order because the show cause notice and other communications were only uploaded on the GST portal.

The petitioner further submitted that if provided an opportunity to justify the ITC availed of on merits, the petitioner would be able to substantiate the claims. On instructions, he stated that the petitioner agreed to remit 10% of the disputed demand relating to tax and cess as a condition for remand.

The respondent, represented by T.N.C. Kaushik, maintained that principles of natural justice were complied with. He pointed out that the respondent had issued an intimation on March 14, 2023, a show cause notice on May 17, 2023, and a reminder on June 13, 2023. He highlighted that the petitioner failed to respond to the show cause notice and did not attend the personal hearing.

The bench of Justice Senthilkumar Ramamoorthy set aside the impugned order on the condition that the petitioner remits 10% of the disputed demand towards tax and cess within two weeks from the date of receipt of a copy of this order.

The petitioner is also permitted to submit a reply to the show cause notice within the same period. Upon receipt of the reply and confirmation of the 10% payment, the respondent is directed to provide a reasonable opportunity for the petitioner to contest the tax demand, including a personal hearing. The respondent is then required to issue a fresh order within three months from the date of receipt of the petitioner’s reply.

To Read the full text of the Order CLICK HERE

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