Sales Turnover assumption as 110% of Purchase Turnover: Madras HC Orders Reconsideration of GST Liability [Read Order]

In a recent ruling, the Madras High Court ordered reconsideration of the GST ( Goods and Services Tax ) liability confirmed on proceeding on the assumption that the sales turnover would be 110% of the purchase turnover.

K V M Textiles, the assessee claimed that they were not properly notified of the proceedings, as the show cause notice and other communications were only accessible via the "view additional notices and orders" tab on the GST portal, and not through any other mode of communication.

The GST order was challenged by the assessee before the High Court on the ground that inadequate opportunity for the assessee to contest the tax demand on its merits.

The assessee’s counsel submitted that due to a personal emergency—specifically, the petitioner’s son's accident—the petitioner was unable to manage business affairs during the critical period.

The counsel further contended that the GST dispute arose from a discrepancy between the purchase turnover and sales turnover. The assessee is prepared to demonstrate that the outward supply turnover reflected in their returns is accurate. As part of the remand request, the assessee has agreed to remit 10% of the disputed tax demand.

In response, Mrs. K. Vasanthamala, the Government Advocate, argued that due process was followed. This included sending an intimation, a show cause notice on November 19, 2023, and offering a personal hearing.

The bench of Justice Senthilkumar Ramamooorthy noted that the impugned GST order, however, was based on an assumption that the sales turnover should be 110% of the purchase turnover.

Given that the assessee was not heard prior to the confirmation of the tax proposal, the court deemed a remand necessary to uphold the principles of natural justice.

Consequently, the court has set aside the order, on the condition that the petitioner remits 10% of the disputed tax demand within fifteen days from receiving a copy of the court’s order.

During this period, the assessee is also permitted to submit a reply to the show cause notice. The GST department directed to issue a new order after receiving the payment and the reply of the assessee.

To Read the full text of the Order CLICK HERE

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