2024 (7) TMI 1383 - HC - GST

Challenge to impugned order and demand notices - impugned order was passed pursuant to the SCN based on a Special Audit Report - no reasons for passing impugned order - violation of principles of natural justice - HELD THAT - It is apparent from the reading of the impugned order that the issue regarding mismatch between the GST returns filed by the petitioner and the credit entries in its bank account is the basis of majority of the demand. However, the impugned order does not refer to any of the contentious issues and respondent no.2 s analysis on the same. It merely mentions that the demand raised in the SCN is confirmed. The impugned order is bereft of any reasons. It is also apparent that the Adjudicating Authority/respondent no.2 has failed to consider the contentious issues. The matter is remanded to the Adjudicating Authority for considering afresh - Petition allowed by way of remand.

Summary

Issues:
Impugning order and demand notices under CGST Act based on Special Audit Report.

Analysis:
The petitioner challenged an order and demand notices under the Central Goods and Services Tax Act, 2017 (CGST Act) based on a Special Audit Report for the tax period from April 2018 to March 2019. The petitioner's response to the Special Audit Report was deemed incomplete by the respondent, leading to proposed tax demands of significant amounts, along with interest and penalties. Despite the petitioner's detailed reply countering the allegations, the impugned order confirmed the demand without addressing the contentious issues adequately. The petitioner contested the discrepancy between revenue disclosed in GST returns and bank statements, explaining the use of a common bank account for multiple GST registrations. The impugned order lacked reasoning and failed to consider the petitioner's submissions effectively, leading to its setting aside and remand for a fresh consideration by the Adjudicating Authority.

The petitioner's case highlighted the mismatch between total receipts in the bank account and outward supplies reported in GST returns, leading to a substantial tax demand. The petitioner argued against the assumptions made by the Special Auditor, emphasizing the legitimate use of a single bank account for operations across multiple states with separate GST registrations. Citing a relevant case, the petitioner emphasized the importance of accurate assessment considering the nature of operations spanning different regions. The petitioner maintained that all proceeds were received through banking channels, and GST liabilities were duly discharged, challenging the validity of the demand based on the alleged discrepancies.

The Adjudicating Authority's failure to provide adequate reasons and address the contentious issues in the impugned order led to its setting aside by the High Court. The Court directed a fresh consideration by the Adjudicating Authority, instructing a thorough review of the petitioner's submissions and additional materials. The Court emphasized the importance of affording the petitioner a fair opportunity to present their case and directed the Adjudicating Authority to gather any necessary documents for a well-informed decision-making process. Ultimately, the petition was allowed, and all pending applications were disposed of accordingly.