2024 (10) TMI 205 - HC - GST

Confirmation of tax with interest and penalty - various defects in SCN - suppression of sales - violation of principles of natural justice - HELD THAT - There is no dispute on the aspect that during the year 2020, Covid-19 was at peak, during which period, there was complete shut down. The petitioner is engaged in the business of manufacture/sale of milk and milk allied products. Due to Covid-19 lock down restrictions, the petitioner could not run the business successfully as they did before, which resulted in the goods being stagnated in the godowns, and that since the petitioner is carrying out the manufacturing process as a Job Worker, the final products manufactured for the third party has to be stored in the deep freezer facility installed in the petitioner's business premises till the final products are supplied to the principal suppliers, viz., Co-operatives Societies, i.e. for 200 MT under (-20 degree Celsius) for which purpose, the petitioner has to run the plant for 24 hours for storage of the goods under -20 degree Celsius, which contributed to the excess consumption of electricity, and despite the fact that the said aspect was answered by the petitioner in the form of reply, clearly stating that EB units consumed are not directly linked with the sales of the petitioner and also explained the reason for the difference in turnover during the period subject period with supporting documents, the respondent failed to consider the said vital aspect and passed the impugned orders. This Court also feels that the respondent ought to have taken into consideration of the aforesaid vital aspect before passing the impugned orders, in the absence of any contrary evidence available to substantiate the alleged suppression of sale, as rightly pointed out by the learned counsel for the petitioner. Hence, this Court is inclined to set aside the impugned orders. The matter is remanded to the respondent for reconsideration with regard to the said defect alone - Petition allowed by way of remand.

Summary

Issues:
Challenge to tax orders, imposition of penalty under TNGST Act, alleged sales suppression, violation of natural justice.

Analysis:
The Writ Petitions challenge orders confirming tax amounts and penalties under the TNGST Act due to alleged sales suppression. The petitioner responded to show cause notices, explaining discrepancies, but the respondent confirmed tax demands for one defect related to a decrease in taxable turnover. The petitioner argued that Covid-19 lockdowns caused stagnation of goods, leading to increased electricity consumption. Despite explanations and supporting documents, the respondent upheld the tax demand without proper consideration, violating natural justice principles. The petitioner sought a remand for reconsideration of this specific defect.

The respondent contended that discrepancies in taxable turnover indicated sales suppression, justifying the tax demands and penalties. The respondent highlighted the lack of convincing explanations, especially regarding electricity consumption, which affected the production calculations. The respondent defended the impugned order's validity, suggesting dismissal of the Writ Petitions or directing the petitioner to appeal through the appropriate channels.

Upon review, the Court noted the petitioner's business disruptions due to Covid-19 and the unique circumstances leading to increased electricity consumption. The Court agreed with the petitioner's arguments, finding the respondent's failure to consider crucial aspects before passing the impugned orders. Consequently, the Court set aside the orders concerning the specific defect related to sales suppression and remanded the matter to the respondent for reevaluation.

The Court issued specific orders: setting aside the impugned orders related to the identified defect, remanding the matter for reconsideration, allowing the petitioner to submit additional replies with relevant documents, directing a clear notice for a personal hearing, and instructing the respondent to take immediate steps to unfreeze the petitioner's bank account. The Writ Petitions were allowed on these terms, with no costs incurred, and connected Miscellaneous Petitions were closed.