2024 (6) TMI 1314 - HC - GST

Violation of principles of natural justice - non-application of mind and failure to consider the material placed on record by the petitioner - lack of territorial jurisdiction - petitioner's principal place of business is at T.Nagar, Chennai, whereas jurisdiction has been unlawfully exercised by the State Tax Officer, Gudiyatham - difference between the GSTR 1 and GSTR 3B returns - Tax proposal relating to trade payables - Tax proposal relating to excess input tax credit being availed. Difference between the GSTR 1 and GSTR 3B returns - HELD THAT - There is no indication in tax proposal No.3 relating to the assessment period 2018-19 that the difference between the GSTR 1 and GSTR 3B returns for July 2017 was excluded therefrom. Therefore, it appears prima facie that the two tax proposals overlap. As regards the tax proposal relating to the rate of tax on road works, the petitioner has placed on record relevant notifications. These notifications indicate prima facie that the tax rate on road works is 12%, even if the service is not provided directly to the government. Therefore, the matter requires reconsideration on this aspect. Tax proposal relating to trade payables - HELD THAT - On examining the impugned order, it appears that such order was passed by assuming that 5% of the trade payables reflected in the financial statement were not paid within 180 days period. This conclusion is entirely speculative and, therefore, calls for interference. Tax proposal relating to excess input tax credit being availed - HELD THAT - In respect of supplies where the difference in ITC is more than Rs. 5 lakhs, the petitioner should have produced certificates from the chartered accountants of the suppliers concerned. This does not appear to have been done by the petitioner. It is just and necessary that the matter be remanded for reconsideration. Since a substantial tax demand is involved, even after excluding amounts payable with regard to tax proposals that appear to be prima facie untenable, revenue interest is required to be protected. Towards such end, the petitioner is directed to remit a sum of Rs. 25 lakhs towards the disputed tax demand within 15 days from the date of receipt of a copy of this order. On instructions, learned counsel for the petitioner submits that the petitioner agrees to make such remittance. The impugned order dated 10.11.2023 is set aside on condition that the petitioner remits a sum of Rs. 25 lakhs towards the disputed tax demand within 15 days from the date of receipt of a copy of this order - Petition disposed off.

Summary

Issues:
Challenge to order on grounds of non-application of mind and failure to consider material placed on record; Jurisdictional issue regarding the place of business; Compliance with principles of natural justice; Consideration of petitioner's reply to show cause notice; Overlapping tax proposals; Rate of tax on road works; Trade payables assessment; Availment of excess input tax credit; Protection of revenue interest; Remand for reconsideration; Requirement of remittance by petitioner; Setting aside of impugned order with conditions; Provision of opportunity for personal hearing; Tentative nature of observations; Closure of Writ Petition and connected petitions.

Analysis:
1. The judgment concerns the challenge to an order dated 26.12.2023 on the grounds of non-application of mind and failure to consider material placed on record by the petitioner. The petitioner received a show cause notice in respect of multiple heads of demand, to which a detailed reply was provided. The petitioner's counsel argued that certain tax proposals overlapped and were contrary to relevant notifications. Additionally, a jurisdictional issue was raised regarding the State Tax Officer's jurisdiction over the petitioner's place of business.

2. The respondent, represented by the Government Advocate, contended that principles of natural justice were followed, and the petitioner's reply was duly considered before issuing the impugned order. However, upon examination, the court found discrepancies in the tax proposals. For instance, it was noted that the tax proposal on road works did not align with relevant notifications, and the assessment of trade payables was deemed speculative. The court directed a remand for reconsideration to protect revenue interest.

3. To safeguard revenue interest, the court instructed the petitioner to remit Rs. 25 lakhs towards the disputed tax demand within 15 days. The impugned order was set aside with the condition of remittance. The respondent was directed to provide a fresh order within three months, ensuring a reasonable opportunity for the petitioner, including a personal hearing. The court clarified that its observations were tentative and not binding on the assessing officer during the fresh assessment.

4. Ultimately, the Writ Petition was disposed of based on the terms outlined in the judgment. The connected miscellaneous petitions were also closed, signifying the resolution of the legal proceedings in this matter. The judgment emphasized the need for a thorough reconsideration of the tax proposals and the protection of revenue interest while providing the petitioner with a fair opportunity to present their case.