Case Law Details
Teena Jacob Vs State Tax Officer (Kerala High Court)
In the case of Teena Jacob vs. State Tax Officer before the Kerala High Court, the petitioner, a registered dealer under the CGST/KSGST Rules, 2017, had opted for the composition scheme during the tax period 2017-18. However, the proper officer found that the petitioner was engaged in works contract activities, which made them ineligible for the composition scheme. Consequently, the officer issued a show cause notice rejecting the composition scheme application and also issued a notice under Section 61(3) to determine the tax and other dues under Section 73(1). Despite being granted time to respond, the petitioner did not reply to the notice.
The petitioner’s counsel argued that the procedure followed by the tax officer was flawed. They contended that the officer should have first determined the eligibility of the petitioner for the composition scheme before issuing a notice under Section 73(1) to determine tax liability. However, in this case, the notice under Section 73(1) was issued before any order rejecting the composition scheme application was passed.
The court acknowledged that there had been a violation of the statutory scheme by the tax officer. According to the court, the officer should have first determined the petitioner’s eligibility for the composition scheme before proceeding to determine tax liability under Section 73 of the Act. Issuing a notice under Section 73(1) without first rejecting the composition scheme application was deemed a complete violation of the Act’s scheme.
As a result, the court set aside the impugned order and remitted the matter back to the tax officer. The officer was directed to first determine the petitioner’s eligibility for the composition scheme. The petitioner was given ten days to file a reply to the show cause notice for rejection of the composition scheme application. The officer was instructed to adjudicate the show cause notice after affording an opportunity for the petitioner to be heard. Only if the application for the composition scheme was rejected, should a notice under Section 73(1) be issued to determine tax liability.
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