Unawareness of Proceedings as GST Compliance entrusted to a Local Auditor: Madras HC sets aside Demand Order on 10% Pre-deposit Condition [Read Order]

The Madras High Court set aside a demand order as the petitioner was unaware of the proceedings due to entrusting Goods and Services Tax ( GST ) compliances to a local auditor.

The petitioner, Tvl. Samikannu Mariappan, filed a writ petition under Article 226 of the Constitution of India to quash the demand order and the consequential Form GST DRC-07 on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits.

It was asserted by the petitioner that he had entrusted GST compliances to a local auditor and was unaware of these proceedings until he received a letter dated 07.02.2024.

P. Jayalakshmi, counsel for the petitioner, submitted that the petitioner is an octogenarian and was unaware of the proceedings. She also noted that the petitioner's turnover is below the prescribed threshold for GST compliance.

The counsel further submitted that if provided an opportunity, the petitioner would be able to establish that the tax proposal is liable to be dropped. The petitioner agreed to remit 10% of the disputed tax demand as a condition for remand.

V.Prashanth Kiran, appearing for the respondents, pointed out that principles of natural justice were complied with by issuing intimation, show cause notice, and offering a personal hearing.

The bench of Justice Senthilkumar Ramamoorthy observed, “It is evident that the tax proposal was confirmed because the petitioner did not respond to the show cause notice or appear at the personal hearing. Since the petitioner was not heard before the order was issued and the petitioner asserts that he was unaware of proceedings, the interest of justice warrants reconsideration, albeit by putting the petitioner on terms.”

The court set aside the order on condition that the petitioner remits 10% of the disputed tax demand as agreed to within two weeks from the date of receipt of a copy of this order. Within this period, the petitioner is permitted to reply to the show cause notice.

The department has been directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within three months from the date of receipt of a copy of the petitioner's reply.

To Read the full text of the Order CLICK HERE

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