Court Orders De Novo GST Trial to Resolve Duplicate Demands Subject to 50% Tax Deposit.

Court Orders De Novo GST Trial to Resolve Duplicate Demands Subject to 50% Tax Deposit.

The Dispute: Duplicate Demands & Procedural Silence

The Conflict: For FY 2019-20, the Revenue issued a DRC-01 alleging two discrepancies:

1. Under-declaration of Output Tax.

2. Excess claim of Input Tax Credit (ITC).

• The Petitioner’s Predicament: The petitioner failed to file a reply to the SCN, leading to an Ex-parte Order confirming the full demand, interest, and penalty.

• The “Double Counting” Argument: The petitioner pointed out that the ITC portion of this demand had already been adjudicated in a separate, collateral proceeding for the same tax period. In that parallel case, the demand had been successfully challenged and dropped on appeal.

• The Offer: To prove their bona fides (good faith), the petitioner offered to pre-deposit 50% of the disputed tax (significantly higher than the standard 10% required for appeals) to have the matter reopened.

The Judicial Verdict: Remand with Conditions

The High Court quashed the order and remanded the matter, prioritizing factual accuracy over procedural lapses:

1. Correction of Overlapping Demands

The Court recognized that if a demand for the same period and same issue (ITC) had already been dropped in an appeal, confirming it again in a separate order would be inherently unjust. A fresh adjudication was necessary to reconcile these “collateral proceedings.”

2. The “50% Pre-deposit” Price for Admission

Since the taxpayer had ignored the initial SCN, the Court imposed a stricter condition than the usual Section 107 requirement. The remand was made conditional upon the deposit of 50% of the disputed tax within 30 days.

3. Order as an “Addendum”

In a unique procedural move, the Court directed the petitioner to file their reply to the original SCN, treating the now-quashed assessment order as an “addendum” to the notice. This ensures that the arguments raised in the initial order are also addressed in the new round of litigation.

4. Lifting of Bank Attachment (Section 83)

The petitioner’s bank accounts had been attached under Provisional Attachment (Section 83). The Court ordered that this attachment be lifted, provided the 50% deposit was made and the petitioner was not in arrears for any other tax period.

Strategic Takeaways for Taxpayers in 2026

• Monitor Collateral Proceedings: Always check if a GST audit and a separate “Scrutiny of Returns” (ASMT-10) are covering the same issues. If they are, inform the officers in writing immediately to avoid duplicate DRC-01s.

• The Power of Pre-deposit: If you have missed the 30-day window to reply to an SCN, offering a higher pre-deposit (like 25% or 50%) in a Writ Petition is often a successful strategy to convince the High Court to grant a “De Novo” hearing.

• Bank Attachment Relief: This case confirms that once a taxpayer complies with the Court’s deposit conditions, the Revenue can no longer justify the “provisional attachment” of bank accounts. This provides vital working capital relief to the business.

• Natural Justice (Section 75): Even if you are at fault for not replying, the principle that an order should be based on “merits” and “correct facts” (and not just your silence) remains a strong legal pillar.