2025 (3) TMI 543 - HC - GST

Violation of principles of natural justice - Service of proper SCN - petitioners were not aware of the passing of the order-in-original which was uploaded on the GST portal - discrepancy between Form GSTR-1 and Form GSTR-3B - HELD THAT - It is apparent that due to error the petitioner has shown the taxable supply twice in Form GSTR-1 once at the time of advance received and secondly at the time of issuing invoice - In the facts of the case the petitioners in response to the notice in Form GST ASMT-10 filed a reply in Form GST ASMT-11 showing that there was a duplication of the amount shown in Form GSTR-1 disclosing the taxable supply for the particular month. The petitioners in reply in Form GST ASMT-11 categorically stated that there is no difference due to data reconciliation along with Form GSTR-9 to point out that such data was reconciled and there was no discrepancy in the return in Form GSTR-3B and Form GSTR-9. However without taking into consideration such reply and without issuing Form GST DRC-01A respondent issued the impugned notice in Form GST DRC-01 under section 73 of the GST Act and thereafter without providing any opportunity of hearing to the petitioners contrary to the provisions of section 75(4) of the GST Act has passed the impugned order-in-original. The matters are remanded to respondent no.3 for passing fresh de novo order after giving an opportunity of hearing to the petitioners - Petition allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the issuance of the show cause notice and the subsequent order-in-original by the respondent authority was justified under the provisions of the GST Act, given the alleged discrepancy between Form GSTR-1 and Form GSTR-3B.

2. Whether the petitioners were provided with adequate opportunity to rectify the alleged discrepancies and whether the procedural requirements under the GST Act were followed by the respondent authorities.

3. Whether the appellate authority erred in dismissing the appeal due to delay, considering the petitioners' claim of sufficient cause for the delay.

ISSUE-WISE DETAILED ANALYSIS

1. Justification of Show Cause Notice and Order-in-Original

- Relevant legal framework and precedents: The proceedings were initiated under Section 73 of the GST Act, which deals with the determination of tax not paid or short paid. The relevant forms involved were GSTR-1 for outward supplies and GSTR-3B for tax payment.

- Court's interpretation and reasoning: The Court noted that the petitioners had shown the taxable supply twice in Form GSTR-1 due to an error. The respondents issued a show cause notice based on this discrepancy without considering the petitioners' explanation and reconciliation provided in Form GSTR-9.

- Key evidence and findings: The petitioners had filed replies explaining the duplication error and provided reconciliation in the annual return Form GSTR-9, which showed no discrepancy. The respondents disregarded these explanations.

- Application of law to facts: The Court found that the respondents failed to provide an opportunity for the petitioners to rectify the error and did not follow the procedural requirements under Section 75(4) of the GST Act, which mandates an opportunity of hearing.

- Treatment of competing arguments: The petitioners argued that the discrepancy was due to a clerical error and was reconciled, while the respondents insisted on the correctness of their demand based on the unrectified Form GSTR-1. The Court sided with the petitioners, emphasizing procedural fairness.

- Conclusions: The Court concluded that the issuance of the show cause notice and the order-in-original were not justified as the procedural requirements were not met, and the petitioners' explanations were not duly considered.

2. Adequacy of Opportunity to Rectify and Procedural Compliance

- Relevant legal framework and precedents: Section 75(4) of the GST Act requires that an opportunity of hearing be provided before passing an order.

- Court's interpretation and reasoning: The Court observed that the respondents did not issue Form GST DRC-01A, which is a pre-consultation notice, and proceeded with the order without a hearing.

- Key evidence and findings: The petitioners had responded to the initial notices and provided explanations, but the respondents did not engage with these responses adequately.

- Application of law to facts: The Court found that the respondents' actions were contrary to the statutory requirements, as they did not provide the petitioners with an opportunity to rectify the error or explain their position adequately.

- Treatment of competing arguments: The respondents argued that the petitioners should have rectified the error in Form GSTR-1, but the Court emphasized the need for procedural compliance and fair hearing.

- Conclusions: The Court held that the procedural lapses by the respondents invalidated the order-in-original, necessitating a remand for fresh consideration.

3. Dismissal of Appeal Due to Delay

- Relevant legal framework and precedents: Section 107(4) of the GST Act limits the appellate authority's power to condone delays in filing appeals.

- Court's interpretation and reasoning: The Court recognized the petitioners' claim of sufficient cause for the delay due to their consultant's health issues but acknowledged the statutory limitation on condoning delays.

- Key evidence and findings: The petitioners filed the appeal beyond the prescribed period due to their consultant's inability to inform them about the order.

- Application of law to facts: While the Court sympathized with the petitioners' situation, it noted the appellate authority's lack of power to condone the delay as per the statute.

- Treatment of competing arguments: The petitioners sought leniency due to exceptional circumstances, but the respondents emphasized the strict statutory limits on delay condonation.

- Conclusions: The Court did not find fault with the appellate authority's decision but highlighted the need for procedural fairness in the initial proceedings.

SIGNIFICANT HOLDINGS

- The Court emphasized that "procedural fairness and adherence to statutory requirements are paramount in tax proceedings." The lack of a hearing opportunity and failure to consider the petitioners' explanations rendered the order-in-original invalid.

- The Court established that discrepancies due to clerical errors, if adequately explained and reconciled, should not form the sole basis for tax demands without procedural compliance.

- The Court quashed the impugned orders and remanded the matter for a fresh de novo order, directing the respondents to provide an opportunity of hearing to the petitioners as per Section 75(4) of the GST Act.