2024 (8) TMI 1250 - HC - GST

Violation of principles of natural justice - errors apparent on the face of record - petitioner asserts that it was unable to respond to the show cause notice or participate in proceedings on account of not being aware of such proceedings - HELD THAT - It is evident that the respondent added the total turnover as per the profit and loss account and the turnover as per the annual return in GSTR 9. As a consequence, tax was computed on the sum of Rs.330 crore. Since the tax proposal pertains to turnover difference, the difference between the turnover as per the profit and loss account and the turnover as per the GSTR 9 should have been taken into consideration. To that extent, the impugned order calls for interference. The explanation of the petitioner that it was unaware of proceedings cannot be accepted especially in view of the petitioner being a large corporate entity. However, substantial liability was imposed on the petitioner without taking into consideration documents on record such as the GSTR 9C reconciliation statement. When these facts and circumstances are considered cumulatively, it is just and necessary to provide an opportunity to the petitioner to contest the tax demand, albeit on terms. The impugned order is set aside subject to the condition that the petitioner remits a sum of Rs.2.50 crore within four weeks from the date of receipt of a copy of this order. Within the aforesaid period, the petitioner is permitted to submit a reply to the show cause notice by enclosing all relevant documents - Petition disposed off.

Summary

Issues:
1. Breach of principles of natural justice in the impugned order
2. Errors apparent on the face of the record in the impugned order

Analysis:
1. The petitioner challenged an order dated 23.12.2023 on the grounds of breach of natural justice principles and apparent errors on the face of the record. The petitioner, a company engaged in works contracts and projects, claimed it was unaware of the proceedings initiated against it, leading to the inability to respond to the show cause notice. The petitioner contended that the confirmed tax proposal under the impugned order significantly differed from the tax proposal in the show cause notice. The petitioner highlighted discrepancies in the turnover calculations between its annual return and profit and loss account, emphasizing that the impugned order incorrectly computed a tax liability of Rs.59.56 crore. The petitioner also provided a reconciliation statement and a Chartered Accountant's certificate to explain the turnover difference. The petitioner agreed to remit Rs.2.5 crore as a condition for remand.

2. The Additional Government Pleader argued that the principles of natural justice were substantially complied with, as the petitioner was given ample opportunity to contest the tax demand. It was contended that the petitioner, being a large corporate entity, could not claim ignorance of the proceedings. The impugned order computed tax based on the total turnover of Rs.330 crore, combining the turnover from the profit and loss account and the GSTR 9 return. However, the High Court observed that the tax proposal should have considered the turnover difference, warranting interference with the impugned order. Despite the petitioner's claim of unawareness, the court acknowledged that the petitioner was provided with multiple opportunities to participate in the proceedings.

3. Considering the facts and circumstances, the High Court set aside the impugned order subject to the condition that the petitioner remits Rs.2.50 crore within four weeks. The petitioner was allowed to submit a reply to the show cause notice with relevant documents. Upon receiving the reply and the payment, the first respondent was directed to provide a reasonable opportunity for the petitioner to contest the tax demand, including a personal hearing, and issue a fresh order within three months. The court disposed of the petition on these terms, emphasizing the importance of providing an opportunity to be heard and considering relevant documents before imposing substantial liabilities.