Case Law Details
Alpha City Chennai IT Park Projects Private Limited Vs STO (Madras High Court)
The Madras High Court recently addressed a significant case involving Alpha City Chennai IT Park Projects Private Limited against the State Tax Officer regarding the denial of GST transitional credit/Input Tax Credit worth Rs. 14 lakhs. The lack of clarity in the show cause notice (SCN) prompted the court’s intervention, leading to crucial directives to provide clear reasons for the denial.
The case revolves around an order dated 27.12.2023, where the petitioner, a construction company, received a show cause notice on 25.09.2023 regarding the denial of GST transitional credit/Input Tax Credit. Despite requesting additional time to respond, the petitioner’s concerns over the lack of clarity in the notice remained unaddressed. The petitioner’s argument highlighted the absence of specific reasons for the denial of transitional credit amounting to Rs. 14,05,211/-.
The court noted discrepancies in the show cause notice, emphasizing the necessity for clear grounds for calling upon the petitioner to justify the ineligible Input Tax Credit (ITC). It was observed that the impugned order primarily confirmed the tax demand due to the petitioner’s failure to submit documents or attend a personal hearing. However, the court found that the petitioner’s reply dated 07.11.2023, though submitted manually, should have been duly considered.
In light of these observations, the court issued directives to treat the impugned order as a show cause notice. The State Tax Officer was directed to furnish a supplementary explanation outlining the reasons for denying transitional credit to the petitioner within two weeks. Subsequently, the petitioner was granted an opportunity to respond, followed by a directive for the State Tax Officer to issue a fresh order within two months post-receipt of the petitioner’s reply.
The Madras High Court’s intervention in the case of Alpha City Chennai IT Park Projects Private Limited vs. State Tax Officer underscores the importance of procedural clarity and the right to a fair hearing in tax disputes. By ordering the State Tax Officer to provide clear reasons for denying transitional credit and granting the petitioner an opportunity to contest the tax demand, the court upholds principles of transparency and justice in GST proceedings. This judgment serves as a reminder of the judiciary’s role in safeguarding taxpayers’ rights and ensuring the proper administration of tax laws.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 27.12.2023 is challenged in this writ petition.
2. The petitioner is a company involved in the construction of buildings. Upon receipt of show cause notice dated 25.09.2023, the petitioner requested for additional time to reply. Thereafter, by reply dated 07.11.2023, the petitioner stated that the notice does not indicate why the petitioner was not entitled to transitional credit of Rs.14,05,211/-. The petitioner further stated that the TRAN 1 data was previously verified by the Superintendent of GST & Central Excise, Chennai South Division, and found to be in order. The impugned order was issued in these circumstances. After also filing a rectification petition on 09.01.2024, the present writ petition was filed.
3. Learned counsel for the petitioner referred to the show cause notice and pointed out that it cannot be discerned from such show cause as to the reason for calling upon the petitioner to show cause with regard to ineligible ITC of Rs.14,05,211/-. In the absence of necessary particulars in the show cause notice, she submits that the impugned order is unsustainable.
4. T.N.C.Kaushik, learned Additional Government Pleader, accepts notice for the respondent. He submits that a rectification petition was filed by the petitioner and that the same would be considered and disposed of in accordance with law. He further submits that the tax demand was confirmed upon verification of the TRAN 1 return of the petitioner.
5. On examining the show cause notice, as contended by learned counsel for the petitioner, it is unclear as to the reason for issuing such show cause notice with regard to the allegedly ineligible ITC of about Rs.14,05,211/-. The impugned order confirms the tax demand primarily because the petitioner did not submit documents or appear for a personal hearing. In effect, it appears that the petitioner’s reply dated 07.11.2023 was not taken into account probably because such reply was submitted manually and not uploaded in the portal. In these circumstances, it is just and necessary to provide the petitioner an opportunity to contest the tax demand.
6. Since it is asserted that the show cause notice does not contain necessary particulars, the impugned order shall be treated as the show cause notice and W.P.No.8711 of 2024 is disposed of with the following directions:
(i) the impugned order shall be treated as a show cause notice. The respondent is directed to issue a supplement setting out the reasons for denying transitional credit to the petitioner. Such supplement shall be issued within a maximum period of two weeks from the date of receipt of a copy of this order.
(ii) Upon receipt thereof, the petitioner shall reply within a further period of two weeks.
(iii) Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of two months from the date of receipt of the reply from the petitioner. Consequently, connected miscellaneous petitions are closed. No
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