The Madras High Court recently overturned a Goods and Services Tax ( GST ) order, requiring a pre-deposit of 10%. The order had confirmed the tax liability based on alleged wrongful availment of Input Tax Credit ( ITC ) and failure to respond to the Show Cause Notice ( SN ). The matter was remanded for reconsideration.
The petitioner, Sebon Creations is engaged in the business of trading in readymade garments. The petitioner asserts that he was unaware of proceedings culminating in the impugned order since the notices and order were uploaded on the GST portal but not communicated to the petitioner through any other mode.
The Counsel for the petitioner submitted that the confirmed tax proposal pertained to the discrepancy between the petitioner’s GSTR-3B returns, on the one hand, and the GSTR-1 statement and auto-populated GSTR-2A, on the other.
He pointed out that the petitioner did not avail of ITC in relation to the purchase of granites since such purchase pertained to the construction carried out by the petitioner for non-business purposes.
It was further submitted that if provided an opportunity, the petitioner would be able to explain the discrepancy. On instructions, counsel for the petitioner submitted that the petitioner is willing to remit 10% of the disputed tax demand as a condition for remand.
Mr. T.N.C. Kaushik, Additional Government, by referring to the impugned order, he points out that such order was preceded by intimation dated 11.09.2023, show cause notice dated 21.07.2023 and a personal hearing notice.
The Court noted that the tax proposal was confirmed because the petitioner did not reply to the show cause notice or attend the personal hearing. In these circumstances, the interest of justice warrants that an opportunity be provided to the petitioner after putting the petitioner on terms.
A Single bench of Justice Senthilkumar Ramamoorthy set aside impugned order and the matter is remanded for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand within two weeks from the date of receipt of a copy of this order. The petitioner was also permitted to submit a reply to the show cause notice within the aforesaid period.
Upon receipt of the petitioner’s reply to the show cause notice and upon being satisfied that 10% of the disputed tax demand was received, the respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner’s reply. Accordingly, the writ petition was disposed of.
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