2025 (4) TMI 1508 - HC - GST

Impermissible multiple or triple taxation - third demand for the same taxable period - Violation of principles of natural justice - Demand of GST by state authorities while demand was already raised by Central GSt authorities - HELD THAT - This Court finds that the impugned order was passed without proper consideration of the overlapping demand for the same period as well as the failure to provide the petitioner with adequate notice of the order which was issued ex-parte through the GSTN portal. Furthermore the issue of triple taxation raised by the petitioner requires further examination. This Court concludes that the principles of natural justice were not fully adhered to and as such the impugned order is set aside. The matter is remitted back to the respondent for a fresh consideration including a detailed examination of the issues raised by the petitioner such as the overlap in demand the method of communication and the triple taxation issue. Petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the impugned assessment order dated 25.02.2025 constitutes a third demand for the same taxable period and issue, thereby resulting in impermissible multiple or triple taxation;

(b) Whether the impugned order was passed in violation of principles of natural justice, particularly regarding the adequacy of notice and opportunity to be heard, given that communication was made solely through the GSTN web portal;

(c) Whether the State GST authorities had jurisdiction to issue a separate demand for GST under the State GST Act, distinct from the Central GST assessment, based on discrepancies between GSTR-9 and GSTR-3B filings;

(d) Whether the penalties imposed under the impugned order were justified and in accordance with statutory provisions;

(e) Whether the petitioner had sufficient opportunity and means to respond to the show cause notice issued through the GSTN portal;

(f) The validity of the contention that the impugned order amounts to triple taxation, and if so, the legal consequences thereof.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Whether the impugned order constitutes a third demand and triple taxation

The petitioner contended that the impugned order represents a third demand for the same taxable period (2020-2021) and issue, following earlier assessments by the Central GST officers and State Tax Officers, thereby amounting to triple taxation. The petitioner relied on the fact that a detailed investigation had already been conducted by the Central GST officers in Trichy, resulting in an assessment order confirming a differential GST demand of Rs. 71,97,634/- for the period 2017-2018 to 2020-2021. The petitioner argued that the impugned order imposed an additional demand on the same taxable turnover, thus violating the principle against multiple taxation for the same transaction.

The respondent, however, submitted that the impugned order was not a third demand on the same issue or period but a separate and distinct demand under the State GST Act. The demand was based on discrepancies found between the GSTR-9 annual return and GSTR-3B monthly returns, which were not fully addressed in the earlier Central GST assessment. The respondent emphasized that Central GST and State GST are governed by different statutes and represent distinct components of the integrated GST regime, thereby permitting separate assessments and demands.

The Court examined the statutory framework governing GST, which bifurcates tax administration between Central and State authorities, each empowered to assess and collect their respective components of GST. The Court noted that while the petitioner's concern about triple taxation is valid in principle, the mere fact of separate demands by Central and State authorities does not ipso facto amount to triple taxation if the demands pertain to distinct components or aspects of taxable turnover.

However, the Court found that the impugned order was passed without adequately considering whether there was an overlap or duplication in the demand, especially since the petitioner had already been subjected to a comprehensive assessment covering the relevant period. The Court observed that the respondent failed to demonstrate conclusively that the demand under the State GST Act was for a genuinely distinct taxable turnover or issue, separate from the Central GST demand.

Therefore, the Court held that the issue of triple taxation and overlapping demands required further examination in a fresh proceeding, ensuring that the petitioner is not subjected to multiple demands for the same taxable event beyond the statutory framework.

(b) Adequacy of notice and opportunity to be heard

The petitioner submitted that the impugned order was communicated solely through the GSTN web portal and that the petitioner had no actual notice or opportunity to respond to the show cause notice before the order was passed. The petitioner contended this violated the principles of natural justice and rendered the order ex-parte and unsustainable.

The respondent contended that the show cause notice was issued through the GSTN portal on 25.11.2024 in accordance with statutory procedure and that it was the petitioner's responsibility to monitor the portal regularly. The respondent argued that the petitioner had the opportunity to view and respond to the notices but failed to do so, and thus cannot now claim lack of notice.

The Court analyzed the procedural requirements under the GST laws and the constitutional mandate of audi alteram partem (right to be heard). While electronic communication through the GSTN portal is a recognized mode of service under the statute, the Court emphasized that mere availability of the notice on the portal does not suffice if the petitioner was not effectively informed or given a reasonable chance to respond.

The Court found that the impugned order was passed ex-parte without ensuring that the petitioner had actual knowledge of the show cause notice or was afforded an adequate opportunity to present their case. The Court held that principles of natural justice require that the authorities must take reasonable steps to ensure effective communication and hearing, especially in matters involving substantial demands and penalties.

(c) Jurisdiction of State GST authorities to issue separate demand

The respondent asserted that the State GST authorities have independent jurisdiction to issue demands under the State GST Act, distinct from the Central GST authorities, based on discrepancies in returns such as GSTR-9 and GSTR-3B, which were not fully addressed earlier. The respondent relied on the statutory scheme of GST, which divides tax administration between Central and State authorities, each empowered to assess and collect their respective components.

The Court recognized the dual structure of GST, where Central GST and State GST are separate taxes with separate legislative frameworks and enforcement mechanisms. The Court held that the State GST authorities are competent to issue demands under the State GST Act, even if the Central GST authorities have conducted their own assessments, provided that the demand relates to the State GST component and is not duplicative.

However, the Court stressed that such jurisdiction must be exercised in a manner consistent with the avoidance of double or multiple taxation and with adherence to principles of natural justice. The Court observed that the impugned order did not adequately demonstrate that the demand was for a distinct taxable turnover or issue not covered by the Central GST assessment.

(d) Justification and legality of penalties imposed

The respondent submitted that the penalties imposed under the impugned order were in accordance with statutory provisions for non-compliance with GST laws. The petitioner did not specifically challenge the quantum or applicability of penalties but argued that the order itself was unsustainable.

The Court noted that penalties under GST law are contingent upon the validity of the underlying demand and the compliance failures found. Since the Court set aside the impugned order on grounds of procedural infirmity and overlapping demand, the penalties imposed thereunder could not be sustained at this stage. The Court directed the authorities to reconsider penalties in the fresh proceeding, in accordance with law and after affording the petitioner an opportunity to be heard.

(e) Responsibility of the petitioner to monitor GST portal and respond

The respondent argued that the petitioner had a duty to regularly monitor the GSTN portal and respond to any notices issued. The Court acknowledged that electronic communication is a legitimate mode of service under the GST regime and that registered persons are expected to keep track of such communications.

However, the Court emphasized that this responsibility does not absolve authorities from ensuring effective communication and adherence to natural justice. The Court held that where the petitioner demonstrates lack of actual notice or opportunity to be heard, the authorities must provide a reasonable opportunity before passing adverse orders.

3. SIGNIFICANT HOLDINGS

"The impugned order was passed without proper consideration of the overlapping demand for the same period, as well as the failure to provide the petitioner with adequate notice of the order, which was issued ex-parte through the GSTN portal."

"The principles of natural justice were not fully adhered to and as such, the impugned order is set aside."

"The matter is remitted back to the respondent for a fresh consideration, including a