ITC Claim Remanded; Partial Deposit Required; Fresh Opportunity for Objections

Issue: Whether an ITC claim rejected under Section 16(2) of the CGST Act, 2017, due to a mismatch between GSTR-3B and GSTR-2A returns, should be remanded for fresh adjudication, and what conditions should be imposed.

Facts:

The revenue rejected the assessee’s ITC claim under Section 16(2) due to a mismatch between GSTR-3B and GSTR-2A returns.
An assessment order was passed after a show cause notice.
The appeal was rejected as time-barred.

Decision:

The court set aside the assessment order, subject to the assessee paying 25% of the disputed tax within four weeks.
The pre-deposit made in the appeal was to be adjusted against the 25% payment.
Upon compliance with the 25% payment, the assessment order was to be treated as a show cause notice.
A fresh opportunity was to be provided to the assessee for filing objections with supporting documents.
The matter was remanded for passing fresh orders after providing a hearing.
The writ petition was disposed of.

Key Takeaways:

Remand for Fresh Adjudication: The matter was remanded to provide the assessee with a fair opportunity to present their case and address the mismatch issue.
Partial Deposit: The 25% deposit requirement ensures the assessee’s commitment to the proceedings while balancing the revenue’s interest.
Adjustment of Pre-Deposit: The court allowed for the adjustment of the pre-deposit made in the appeal against the 25% payment.
Treatment as Show Cause Notice: Treating the assessment order as a show cause notice provides the assessee with a clear opportunity to respond.
Fresh Opportunity for Objections: The court emphasized the importance of providing a fresh opportunity to file objections with supporting documents.
Opportunity of Hearing: The court mandated a hearing before passing fresh orders to ensure fairness.
The court is taking a balanced approach, and allowing the tax payer to present their case, while also ensuring that the revenue is not unduly delayed and that the tax payer is committed to the process.

HIGH COURT OF MADRAS

Chinnadurai Saravanan

Deputy State Tax Officer

Mohammed Shaffiq, J.

W.P.No.376 of 2025
W.M.P.Nos.421 and 422 of 2024

JANUARY 7, 2025

Jayaprathap A N R, for the Petitioner. C. Harsha Raj, Addl. Govt. Pleader for the Respondent.

ORDER

1. The present Writ Petition is filed challenging the impugned order passed by the first respondent dated 29.04.2024 relating to the assessment year 2018-19.

2. The petitioner is a proprietary firm and is registered under Goods and Services Act, 2017. During the relevant period, the petitioner had filed its return and paid appropriate taxes. However, on verification of the monthly returns, it was found that there was mismatch between GSTR -3B and GSTR-2A.

2.1. Pursuant thereto, a notice in DRC-01A was issued to the petitioner on 09.07.2022, followed by a show cause notice in DRC 01 on 24.11.2023 and reminder on 12.04.2024. Further, personal hearing was offered on 16.04.2024. The petitioner filed its reply on 23.12.2023. However, the same was rejected on the premise that the taxpayer has failed to substantiate their claim as per Section 16(2) of CGST Act/TN GST Act of 2017 and the impugned order came to be passed, confirming the proposal. Aggrieved by the same, the petitioner had filed an appeal and the same was rejected on the ground of barred by limitation.

3. The learned counsel for the petitioner would place reliance upon the recent judgment of this Court in the case of M/s.K.Balakrishnan, Balu Cables v. O/o. the Assistant Commissioner of GST & Central Excise in W.P.(MD)No.11924 of 2024 dated 10.06.2024. It was further submitted that the petitioner is ready and willing to pay 25% 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. It is further submitted that subsequent to the passing of the impugned order, the petitioner had filed an appeal along with 10% pre-deposit and his only request is that the same may be adjusted towards 25% of the disputed tax, to which the learned Government Advocate appearing for the respondent does not have any serious objection, while seeking liberty to verify the correctness of the statement relating to remittance made by the petitioner.

4. By consent of parties, the writ petition stands disposed of on the following terms:

(a)

The impugned order dated 29.04.2024 is set aside

(b)

The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order.

(c)

If any amount has been recovered or paid out of the disputed taxes, including by way of pre-deposit in appeal, the same would be reduced/adjusted, from/towards the 25% of disputed taxes directed to be paid. The assessing authority shall then intimate the balance amount out of 25 % of disputed taxes to be paid, if any, within a period of one week from the date of receipt of a copy of this order. The petitioner shall deposit such remaining sum within a period of three weeks from such intimation.

(d)

The entire exercise of verification of payment, if any, intimation of the balance sums, if any, to be paid for compliance with the direction of payment of 25% of the disputed taxes, after deducting the sums already paid and payment by the petitioner of the balance amount, if any, on intimation in compliance of the above direction, shall be completed within a period of four weeks from the date of receipt of copy of this order.

(e)

Failure to comply with the above condition viz., payment of 25% of disputed taxes within the stipulated period i.e., four weeks from the date of receipt of a copy of this order shall result in restoration of the impugned order.

(f)

If there is any recovery by way of attachment of Bank account or garnishee proceedings, the same shall be lifted /withdrawn on complying with the above condition viz., payment of 25 % of the disputed taxes.

(g)

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 (4) 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. It is made clear that if the above conditions viz., 25% of disputed taxes is not complied or objections are not filed within the stipulated period, four weeks respectively from the date of receipt of a copy of this order, the impugned order of assessment shall stand restored.

5. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.