Receipt of SCN on date of hearing: Madras HC quashes order directing Reversal of ITC [Read Order]

The Madras High Court quashed an order directing reversal of input tax credit ( ITC ) as the show cause notice ( SCN ) was received on the date of hearing.

This writ petition is directed against the order in respect of the assessment year 2018 - 2019. The petitioner states that it is a registered person under the current GST regime. The respondent initially issued a notice proposing to block the petitioner's Input Tax Credit ( ITC ) under Rule 86-A of the TNGST / CGST Rules, 2017 in respect of purchases made from M/s.Quality Traders on the ground that they are not in existence or are bill traders. A reply was issued to such notice on the same date. Thereafter, it is stated that the respondent issued show cause notice dated 09.10.2023.

The petitioner asserted that the said show cause notice was served on the petitioner by e-mail on 25.10.2023. The show cause notice fixed the personal hearing on the same date at 02.00 pm, i.e. within two hours from the time of receipt of e-mail. Consequently, the petitioner contends that a reasonable opportunity was not provided to the petitioner to submit relevant documents and, more importantly, explain the facts and circumstances. The present writ petition was filed in the said facts and circumstances.

The Additional Government Pleader, accepted notice on behalf of the respondent. He submits that the show cause notice dated 09.10.2023 was despatched to the petitioner by registered post with acknowledgment due. Therefore, it was submitted that the petitioner was provided a reasonable opportunity and that no case is made out for interference.

As a consequence of the impugned order, the petitioner has been directed to reverse ITC of a substantial value. Such action has been taken pursuant to a show cause notice dated 09.10.2023, which the petitioner asserts was received on the date of hearing.

A Single Bench of Justice Senthil Kumar Ramamoorthy observed that “These facts reveal that a reasonable opportunity was not provided to the petitioner to submit necessary documents and provide an explanation to the respondent. On this limited ground, albeit without expressing any opinion on the merits in the matter, the impugned order calls for interference.”

To Read the full text of the Order CLICK HERE

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