State GST Authority issues Demand order based on Total Turnover: Madras HC directs to Issue Fresh Assessment Order [Read Order]

A Single Bench of the Madras High Court has remanded a Goods and Services Tax ( GST ) Assessment and Demand Order, issued based on all India turnover instead of State-wise turnover.

Pursuant to an inspection carried out by the respondent in November 2022, an intimation in Form DRC-01A was issued to the petitioner in January 2023. In response thereto, the petitioner had sought further time for issuing a reply. This was followed by the show cause notice and the impugned assessment order challenged in the present case.

The counsel for the petitioner pointed out that the tax imposed is based on transactions carried out by the petitioner on an all India basis.  For instance, he pointed out that the turnover relating to Tamil Nadu was only Rs. 2.7 Crores, whereas the assessing officer has erroneously taken the total turnover and imposed tax on the difference between the all India turnover and the declared turn over.

He also submitted that the total expenditure of the petitioner on all India basis was taken as the amount on which Goods and Service Tax should be imposed on reverse charge basis. Therefore, he contends that the impugned assessment order calls for interference not only on the ground of lack of jurisdiction but also on the ground of non-application of mind.

T N C Kaushik, Additional Government Pleader, accepts notice on behalf of the respondent. At the outset, he pointed out that the State Tax Officer was not made a party to the writ petition. Secondly he points out that the assessment order was preceded by an intimation and show cause notice and that the assessing officer had no choice but to confirm the proposals since the petitioner did not participate in proceedings and contest the tax demand.

The Bench noted that, “On examining the impugned assessment order, it is noticeable that the assessing officer has taken into consideration the closing balance of creditors on all India basis. Similarly, based on the profit and loss account of the petitioner, the total revenue and expenditure of the corporate entity were made the basis for imposing GST.”

It was then observed by the Single Bench of Justice Senthilkumar Ramamoorthy that, “These conclusions clearly reflect non-application of mind. At the same time, it should be recognized that an intimation and show cause notice preceded the assessment order. There is also a time lag of about two months between the show cause notice and the assessment order. Therefore, it follows that the petitioner was negligent in not responding to the show cause notice and participating in proceedings.”

However, when it was submitted that the petitioner is ready and willing to remit a reasonable portion of the impugned tax demand as a condition for remand. However, he pointed out that 10% of the total disputed tax demand would be excessive in as much as this includes the all India turn over.

It was thus held that, “the impugned assessment order is quashed subject to the condition that the petitioner remits 5% of the disputed tax demand as a condition for remand. The petitioner is also permitted to file a reply to the show cause notice within a maximum period of two weeks from the date of receipt of a copy of this order along with 5% of the disputed tax demand.”

It was also noted by the Madras High Court bench that, “Subject to receipt of the reply and upon being satisfied that 5% of the disputed tax demand is received, the assessing officer is directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh assessment order in accordance with law within a maximum period of two months thereafter.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates