GST Demand Order Set Aside for non-consideration of reconciliation report of GSTR 2A with GSTR 3B .; Matter Remanded

Issue: Whether a GST demand order issued under Section 73 is valid when it rejects the assessee’s explanation and reconciliation report without providing any reasons.

Facts:

The assessee claimed sufficient input tax credit (ITC) balance after adjustments towards IGST, CGST, and SGST.
The revenue issued a show cause notice under Section 73, alleging a mismatch between GSTR-2A and GSTR-3B, without prior intimation in Form GSTASMT-10.
The assessee submitted a detailed reconciliation report showing an excess credit of Rs. 1,40,684.
The revenue rejected the explanation with a one-line order, without providing any reasons.

Decision:

The court held that the order rejecting the assessee’s explanation without considering the reconciliation report and providing reasons cannot be sustained.
The impugned order was set aside, and the matter was remanded for fresh consideration of the show cause notice and the assessee’s reply.
The court directed the revenue to complete the reconsideration within four weeks.

Key Takeaways:

This case highlights the importance of providing detailed reasoning when rejecting an assessee’s explanation in GST proceedings, especially when a reconciliation report is submitted.
Orders passed without proper consideration and reasoning can be set aside as they violate the principles of natural justice.
The decision emphasizes the need for transparency and fairness in GST proceedings, ensuring that assessees’ submissions are given due consideration and that decisions are based on proper evaluation of evidence and arguments.

HIGH COURT OF MADRAS

R A Metal Finishers (P.) Ltd.

State Tax Officer

Ms. P.T. Asha, J.

W.P.No.36706 of 2024
W.M.P.Nos.39607 & 39608 of 2024

DECEMBER 3, 2024

A.N.R. Jayaprathap for the Appellant. T.N.C. Kaushik, AGP(T) for the Respondent.

ORDER

1. The Writ Petition is filed to call for the records on the files of the Respondent herein in GSTIN 33AAGCR6798D1Z3/2019-20 dated 06.08.2024 and quash the same.

2. The facts that has given rise to the above Writ Petition is hereinbelow set out:-

2(i). The petitioner is a registered dealer under the provisions of the Tamil Nadu Goods and Service Tax Act 2017 (hereinafter referred as the “TNGST Act”)/Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”)/Integrated Goods and Services Tax Act (hereinafter referred as the “IGST Act”) on the file of the State Jurisdiction Officer having registration in GSTIN.33AAGCR6798D1Z3.

2(ii). The petitioner would submit that he complies with the applicable provisions of the Act and the Goods and Services Tax Rule, 2017 (hereafter after referred to as the “Rules”). The petitioner would submit that the input tax credits available on purchases are being adjusted on the output sales. The petitioner would further submit that he has been very regular in the filing of GST returns and has been making payments without any default.

2(iii). The petitioner would submit that without serving an intimation in FORM GSTASMT-10, the respondent has directly issued a show cause notice in FORM GRT DRC-01 dated 30.05.2024. The allegation was that there was a mismatch between FORM GSTR2A and GSTR3B. The petitioner had immediately sent a reply to this show cause notice, annexing a detailed reconciliation report. However, the petitioner’s explanation was not considered and by the impugned order the respondent had confirmed the demand notice together with interest at 18% as envisaged in Section 50 of the TNGST Act 2017. The total abstract of the proposed demand was a sum of Rs.7,25,094/-. The petitioner would question the impugned order on the ground that there is a gross violation of the principles of natural justice in as much as his explanation has not been considered and the same has been rejected with a one line order which is hereinbelow extracted:-

“ Taxpayer reply was not accepted. Hence the above proposal is confirmed”

2(iv). The petitioner would submit that they have sufficient balance of the input tax credit after utilising the same towards IGST, CGST and TNGST. Therefore, the very demand and the impugned order passed is in gross violation of principles of natural justice.

3. Heard the counsels on either side.

4. A perusal of the records would indicate that the respondent had issued a summary of show cause notice dated 31.05.2024 to the petitioner for the tax period April 2019 to March 2020 under Section 73 of the TNGST Act, 2017, stating that for the period April 2019 and March 2020 there was a due of Rs.3,79,929/- each towards SGST and CGST and had called the petitioner for enquiry on 30.06.2024.

5. The petitioner had not responded to the said notice and therefore a reminder was sent on 06.07.2024. The petitioner had sent a reply to the show cause notice on 06.07.2024 through online portal clearly stating that according to the comparison sheet under the GST system between GSTR 3B v. GSTR-2A, the petitioner had excess credit of Rs.1,40,684/-. He had also attached the reconciliation report. A perusal of the reconciliation report clearly shows that after adjusting the amount towards IGST, CGST and SGST, an amount of Rs.1,40,684/- was still available. This reconciliation statement has not been taken note of by the respondent. On the contrary, the respondent would simply state that the reply is not accepted. The reason for not accepting the explanation has not been spelt out in the impugned order. The impugned order is a one line non-speaking order. Such an order cannot be sustained.

6. Therefore, the Writ Petition is allowed, the impugned order is set aside and the matter is remitted back to the respondent to consider the afresh the demand in the show cause notice and the reply. The said exercise shall be completed within a period of 4 weeks from the date of receipt of a copy of this order. No costs. Consequently, the connected Miscellaneous Petitions are closed.