GST Assessment Order Set Aside for Lack of Opportunity; Matter Remanded with Directions of 10% Deposit

Issue: Whether a GST assessment order is valid when it is passed without considering the assessee’s request for additional time to respond and without providing a reasonable opportunity of hearing.

Facts:

The assessee, a registered transport contractor under GST, was subjected to a surprise inspection by the revenue authorities.
The inspection revealed discrepancies, including differences in outward supply and excess Input Tax Credit (ITC) claims.
A show cause notice was issued, followed by hearing notices.
The assessee requested two months’ time to respond to the notice but the assessment order was passed without considering this request.

Decision:

The court set aside the assessment order, subject to the assessee depositing 10% of the disputed tax amount within four weeks.
The set-aside order is to be treated as a show cause notice, and the assessee is allowed to file objections with supporting documents.
The revenue authorities are directed to pass fresh orders after providing a reasonable opportunity of hearing to the assessee.
Upon the assessee’s compliance with the deposit requirement, the bank attachment and garnishee proceedings initiated by the revenue are to be withdrawn.

Key Takeaways:

This case highlights the importance of granting assessees a reasonable opportunity of hearing and considering their requests for additional time to respond to show cause notices in GST proceedings.
Passing an assessment order without considering the assessee’s request for time and without providing a proper hearing can invalidate the order.
The court’s decision to set aside the order and provide the assessee with another opportunity to respond while also protecting the revenue’s interest by requiring a partial deposit demonstrates a balanced approach.
This case reinforces the principles of natural justice and procedural fairness in GST assessments.

HIGH COURT OF MADRAS

Tvl. P. Rajesekaran

State Tax Officer

Mohammed Shaffiq, J.

W.P. No. 37959 of 2024
W.M.P. Nos. 41040 and 41042 of 2024

DECEMBER 17, 2024

T. Ramesh, for the Petitioner. TNC. Kaushik, Additional Government Pleader, for the Respondent.

ORDER

1. The present writ petition is filed challenging the impugned order dated 07.08.2024 on the premise that the impugned order suffers from violation of principles of natural justice inasmuch as the impugned order came to be passed without considering the petitioner’s request for time.

2. The petitioner is registered as a contractor with Tamil Nadu Power Generation and Distribution Corporation Limited for providing “Transport of Goods Services”. The petitioner is registered under the Goods and Services Tax Act, 2017. During the relevant period 2017-18, the petitioner had filed returns and paid appropriate taxes. While so, there was a surprise inspection of the petitioner’s place of business in terms of Section 167 of the Tamil Nadu Goods and Services Tax Act, 2017 (hereinafter referred to as the “TNGST Act”) by the Intelligence Wing authorities. During the course of such inspection, the following defects were noticed:

(i)

Difference in outward supply as per Income Tax Form 26AS;

(ii)

Difference in outward supply as per accounts;

(iii)

Excess availment of input tax credit;

(iv)

Tax under RCM for transport service availed as per accounts.

3. It is submitted by the learned counsel for the petitioner that an intimation notice in DRC-01A was issued on 13.05.2024, a show cause notice in DRC-01 was issued on 05.06.2024 followed by personal hearing notices on 05.07.2024, 23.07.2024 and 30.07.2024. The petitioner had filed letter dated 27.06.2024 seeking two months time. Thereafter, the impugned order came to be passed on 07.08.2024 confirming the proposal, without considering the petitioner’s request for time. It is thus submitted that the impugned order is bad.

4. To the contrary, it is submitted by the learned counsel for the Respondents that pursuant to the notice in DRC-01 dated 27.06.2024, opportunity of personal hearing was offered to the petitioner on three occasions i.e., on 05.07.2024, 23.07.2024 and 30.07.2024, however the petitioner did not avail the opportunity of personal hearing extended. It is submitted that the challenge laid by the petitioner to the impugned order on the ground of violation of principles of natural justice cannot be sustained.

5. At this juncture, the learned counsel for the petitioner would place reliance upon the recent judgment of this Court in the case of Sree Manoj International v. Deputy State Tax Officer in W.P.No.10977 of 2024 dated 25.04.2024, to submit that this Court has remanded the matter back in similar circumstances subject to payment of 10% of the disputed taxes. It was further submitted that even before the time for filing of appeal has expired, the Respondents proceeded with recovery proceedings and garnishee proceedings has been issued and bank accounts have been attached.

6. It was further submitted that the petitioner is ready and willing to pay 10% of the disputed tax and that he may be granted one final opportunity before the adjudicating authority to put forth their objections to the proposal, to which the learned Additional Government Pleader appearing for the respondent does not have any serious objection.

7. In view thereof, the impugned order dated 07.08.2024 is set aside and the petitioner shall deposit 10% of the disputed tax within a period of four weeks from the date of receipt of a copy of this order. On complying with the above condition, the impugned order of assessment shall be treated as show cause notice and the petitioner shall submit its objections within a period of four weeks from the date of receipt of a copy of this order along with supporting documents/material. If any such objections are filed, the same shall be considered by the respondent and orders shall be passed in accordance with law after affording a reasonable opportunity of hearing to the petitioner. If the above deposit is not paid or objections are not filed within the stipulated period, i.e., four weeks respectively from the date of receipt of a copy of this order, the impugned order of assessment shall stand restored. It is open to the Respondents to appropriate 10% of the disputed tax and on such appropriation, the bank attachment shall be lifted and garnishee proceedings issued by TANGEDCO shall also be withdrawn on complying with the above condition.

8. Accordingly, the Writ Petition stands disposed of. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.