J.P. Polymers Private Limited Vs State Tax Officer (Group-2) (Madras High Court)
Summary: The Madras High Court, in J.P. Polymers Private Limited Vs State Tax Officer (Group-2), set aside two GST demand orders dated 2 March 2024 because the adjudicating authority had failed to properly consider the taxpayer’s detailed written replies and supporting reconciliations. Justice Krishnan Ramasamy held that merely referring to a taxpayer’s reply in an adjudication order, without examining its contents and recording reasons for rejecting the explanations, was insufficient. The Court directed the State Tax Officer to reconsider the matters after providing an opportunity of personal hearing. The judgment reinforces the requirement that GST adjudication orders must demonstrate meaningful consideration of the taxpayer’s submissions rather than mechanically confirming the proposed demands.
The dispute arose following an inspection conducted at the petitioner’s premises on 3 November 2022. The department issued preliminary notices in Form GST DRC-01A under Section 74 of the CGST Act, 2017. The petitioner filed replies enclosing detailed reconciliations addressing the allegations. However, according to the petitioner, those replies were not considered, and the respondent subsequently issued show-cause notices in Form GST DRC-01 reiterating the same allegations. The petitioner again submitted replies through Form GST DRC-06 and appeared personally before the department. Despite these submissions, the authority confirmed the demands through orders issued in Form GST DRC-07 bearing reference numbers ZD330324009770S and ZD3303240101339.
The petitioner relied upon an earlier judgment involving the same company, namely J P Polymers Private Limited Vs Commercial Tax Officer, decided on 13 June 2024 in W.P. Nos. 14655, 14658, 14825 and 14827 of 2024. In that decision, the Madras High Court had set aside GST adjudication orders because the authority failed to address the taxpayer’s detailed explanations concerning alleged discrepancies, including differences between GSTR-3B and GSTR-1. Although the department had stated that the taxpayer’s replies were not in order, the adjudication orders did not explain why the submissions were rejected. The Court had therefore directed fresh consideration with an opportunity for the petitioner to furnish additional documents and receive a personal hearing.
In the present proceedings, the Government Advocate appearing for the State Tax Officer did not dispute the petitioner’s submission concerning non-consideration of the replies. The High Court examined the earlier order and observed that the same deficiency affected the impugned orders. It held that the taxpayer’s explanations had not been properly considered and that sufficient reasons for rejecting them had not been recorded. The Court accordingly set aside both orders and directed the petitioner to submit its replies or objections, along with any necessary supporting documents, within two weeks of receiving the judgment. The respondent was directed to issue a clear notice of fourteen days, schedule a personal hearing and thereafter pass fresh orders on merits in accordance with law as expeditiously as possible.
The writ petitions were disposed of without costs, and the connected miscellaneous petitions were closed. The Court did not determine the underlying tax liability or conclusively decide the correctness of the disputed reconciliations. Instead, it restored the adjudication proceedings for proper consideration of the taxpayer’s submissions. The decision highlights that the principles of natural justice require more than a formal opportunity to file a reply: the adjudicating authority must examine the material submitted, address the relevant explanations and provide reasons supporting its conclusions. GST demands cannot be sustained merely through non-speaking orders that disregard detailed taxpayer replies.
Cases Discussed
1. J P Polymers Private Limited Vs Commercial Tax Officer (Madras High Court); W.P. Nos. 14655, 14658, 14825 & 14827 of 2024; 13/06/2024 — Followed for holding that GST adjudication orders cannot be sustained where the officer fails to consider the taxpayer’s detailed replies and record reasons for rejecting the explanations. The earlier proceedings were remanded for fresh consideration.
FULL TEXT OF THE ORDER OF MADRAS HIGH COURT
These writ petitions have been filed to quash the Orders-in-Original in Form GST DRC-07 bearing reference Nos. ZD330324009770S and ZD3303240101339, both dated 02.03.2024, and to direct the respondent to pass a de novo order.
2. The learned counsel for the petitioner submits that subsequent to the inspection conducted by the respondent at the petitioner’s premises on 03.11.2022, notices in Form GST DRC-01A were issued under Section 74 of the CGST Act. The petitioner filed replies enclosing detailed reconciliations as required by the impugned notices. However, without considering the replies, the respondent again issued show cause notices in Form GST DRC-01 proposing to demand tax on the same allegations as stated in the earlier notices. The petitioner again filed replies in Form GST DRC-06 and appeared in person. Nevertheless, without considering the replies submitted, the respondent passed the impugned orders in Form GST DRC-07 confirming the demand. The learned counsel further submits that in similar circumstances, involving the same petitioner company, this Court in W.P.Nos.14655 of 2024 and connected matters, by an order dated 13.06.2024, set aside the orders for non-consideration of the petitioner’s replies. Hence, the counsel prays for a similar order in these writ petitions.
3. The learned Government Advocate (Taxes) appearing for the respondent also does not dispute this contention.
4. At this juncture, considering the submissions made by the learned counsel for the petitioner and the learned Government Advocate and the material placed before this Court, it becomes evident that the crux of the issue revolves around the non-consideration of the petitioner’s replies. The relevant portion of the order dated 13.06.2024 in W.P.No.14655 of 2024 and connected matters is extracted hereunder:
4. On perusal of the impugned orders, it is noticeable that the petitioner-s reply to the show cause notice is referred to therein but no findings are recorded in respect of reasons for rejecting such reply. By way of illustration, the findings in respect of defect no.1 are set out below:
?The reply has been scrutinized and identified that reply is not in order due to neither filed any relevant document to the payment of difference of tax liability Rs.182673/- nor document of proof to substantiate no difference turnover between GSTR 3B and GSTR 1. Therefore the proposal of levy tax Rs.182673/- is hereby confirmed?
Similar findings were recorded in respect of each defect. The petitioner has placed on record the replies to the show cause notice. The petitioner has replied separately to each defect. On examining the reply, for instance in respect of defect no.1 relating to the difference between the petitioner-s GSTR 3B and GSTR 1 statement, it is noticeable that the petitioner has explained the discrepancy in considerable detail. I find no discussion on the explanation of the petitioner. Instead, it is recorded that the reply is not in order. On account of the failure of the respondent to duly consider the petitioner’s reply and record reasons for rejecting such reply, orders impugned herein cannot be sustained.
5. For reasons set out above, the impugned orders in original are set aside and these matters are remanded for reconsideration. The petitioner is permitted to submit additional documents, if any, within a period of two weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh orders within three months from the date of receipt of additional documents from the petitioner.
6. These writ petitions are disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
Even in these matters, although the petitioner had filed replies, they were not considered, and the impugned orders were passed without providing sufficient reasons for rejecting the petitioner’s explanations. In view of the above, the orders impugned herein are set aside. The petitioner shall file their replies/objections along with any required documents to the respondent within two weeks from the date of receipt of a copy of this order. Upon receipt, the respondent shall issue a 14-day clear notice, schedule a personal hearing, and thereafter pass appropriate orders on merits and in accordance with the law as expeditiously as possible.
5. With the above directions, these writ petitions are disposed of. No costs. Consequently, the connected miscellaneous petitions are closed.
