The Madras High Court set aside a demand order issued by the State Tax Officer ( STO ) due to the department’s failure to provide a personal hearing on allegations of under-declaration of output tax and excess claim of Input Tax Credit ( ITC ).
The writ petition, filed by Sri Vijayalakshmi Supplyer, challenged the impugned order on the ground that a personal hearing was not offered to the petitioner.
By issuing a show cause notice, proceedings were initiated against the petitioner in respect of two defects. The said defects were under the declaration of output tax and the excess claim of Input Tax Credit (ITC). The petitioner stated that the turnover for March 2019 was inadvertently reported as Rs.99,77,487/- instead of Rs.67,34,525/- because one bill was inadvertently reported twice.
The petitioner also stated that the correct turnover was reported in the GSTR 3B return and that the mistake was rectified in April 2019. The petitioner also replied with regard to availment of ITC by stating that only eligible ITC was availed of in respect of building materials.
S.Ramanan, counsel for the petitioner, submitted that no personal hearing was offered and that the impugned order was issued by referring to the petitioner’s reply.
T.N.C.Kaushik, Additional Government Pleader, representing the respondent, countered that the petitioner’s reply was taken into consideration and that the petitioner opted out of the personal hearing in reply.
The court noted that as per sub-section (4) of Section 75 of applicable GST enactments, a personal hearing is required to be provided either if requested for or if an order adverse to the taxpayer is proposed to be issued.
The bench of Justice Senthilkumar Ramamoorthy observed that a personal hearing should have been offered to the petitioner and that the impugned order cannot be sustained on account of infraction of a mandatory statutory prescription.
The High Court set aside the impugned order, and the matter was remanded for reconsideration. The petitioner is permitted to submit an additional reply along with documents, if any, within two weeks from the date of receipt of a copy of this order.
The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of three months from the date of receipt of the petitioner’s reply.
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