ABT Limited Vs Additional Commissioner of GST & Central Excise (Madras High Court)
Introduction: In a significant judgment dated January 30, 2024, the Hon’ble Madras High Court dealt with the case of M/s. ABT Ltd. v. The Additional Commissioner of GST and Central Excise [Writ Petition No. 1756 of 2024 dated January 30, 2024] , focusing on the procedural and legal facets of GST audits under Section 65 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). This case highlights the complexities surrounding tax audits, the initiation of actions under Sections 73 or 74 of the CGST Act, and the judicial oversight on such matters.
The Hon’ble Madras High Court in this case of dismissed the writ petition and held that during the conduct of GST Audit under Section 65 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), if it indicates that tax was not paid or short paid or that Input Tax Credit (“ITC”) was wrongly availed or utilized, the proper officer may initiate the action under Section 73 or 74 of the CGST Act under Section 65(7) of the CGST Act.
Facts:
M/s. ABT Ltd. (“the Petitioner”) was a public limited company engaged in the business of supplying light vehicles, their parts, and also the servicing of such vehicles. The Petitioner was a registered person under GST laws in respect of multiple places of business. The books of account of the Petitioner for the financial years 2017-2018 to 2020-2021 were audited by an audit group by issuing notice in Form GST ADT-01 under Section 65 of the CGST Act. Pursuant to such audit, a draft audit report containing audit observations was issued. This was followed by a revised draft audit report and eventually the issuance of an audit report in Form GST ADT-02 on September 07, 2023. Thereafter, a show cause notice dated September 13, 2023 (“the Impugned SCN”) was issued under Section 73 of the CGST Act in respect of about 11 audit observations and a separate show cause notice under Section 74 of the CGST Act on December 14, 2023 (“the Impugned SCN”) in respect of about 5 audit observations was issued.
The Petitioner challenged the Impugned SCN on about three grounds:
1. The Audit Report did not record findings of fraud, willful-misstatement or suppression of fact in respect of any of the observations made therein and in the absence of such findings in the audit report, the proper officer does not have the jurisdiction to proceed under Section 74 of the CGST Act.
2. Intimation in Form GST DRC-01A was not issued to the Petitioner and Rule 142(1) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) were amended by replacing the word ‘shall’ with ‘may’,
3. The Impugned SCN was related to a particular unit of the Petitioner and therefore, expenditure relating to only such unit should have been taken into consideration. Thus, expenses were taken from the consolidated balance sheet was arbitrary.
Issue:
Whether the Proper Officer can initiate action under section 73 or 74 of the CGST Act after issue of Aduit Report?
Held:
The Hon’ble Madras High Court Writ Petition No. 1756 of 2024 in held as under:
