Case Law Details
Sri Uma Plastics Vs Deputy State Tax Officer-2 (Madras High Court)
The case of Sri Uma Plastics vs. Deputy State Tax Officer-2, adjudicated by the Madras High Court, revolves around the contentious issue of Input Tax Credit (ITC) availed on the purchase of a commercial vehicle. The petitioner, engaged in the plastic scrap business, challenges a tax demand order asserting inadequate opportunity to contest the claim.
The crux of the dispute lies in the petitioner’s assertion that the commercial vehicle purchase was legitimate for business purposes, warranting the availing of Input Tax Credit. However, the tax authorities contested this claim, leading to a substantial tax demand of Rs. 4,28,936. The petitioner, feeling aggrieved by the lack of opportunity to present their case effectively, filed a writ petition before the Madras High Court.
Upon examination of the facts, the High Court found merit in the petitioner’s plea regarding the insufficient opportunity to contest the tax demand. The court noted discrepancies in the proceedings leading to the order, including inadequate communication and procedural lapses. Notably, a significant portion of the disputed tax demand was already appropriated from the petitioner’s bank account, further underscoring the urgency of the matter.
In light of these findings, the Madras High Court set aside the original order dated 11.10.2023 and remanded the case for reconsideration. The petitioner was granted the opportunity to submit a detailed reply to the show-cause notice within two weeks, followed by a fair hearing by the tax authorities. The court emphasized the necessity for a thorough review of the case, ensuring the petitioner’s rights are upheld.
Furthermore, the court clarified that the sum of Rs. 2,00,000 previously appropriated from the petitioner’s bank account would be subject to the outcome of the remanded proceedings. With the assessment order nullified, the bank attachment was lifted, providing relief to the petitioner pending the resolution of the dispute.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 11.10.2023 is challenged on the ground that the petitioner did not have reasonable opportunity to contest the tax demand.
2. The petitioner is engaged in the business of purchase and sale of plastic scrap. According to the petitioner, a commercial vehicle was purchased for business purposes and Input Tax Credit (ITC) was availed in respect thereof. By asserting that the petitioner was unaware of proceedings culminating in the impugned order, the present writ petition was filed.
3. Learned counsel for the petitioner submits that the total tax demand is a sum of Rs.4,28,936/-. Upon attachment of the petitioner’s bank account, he submits that a sum of Rs.2 lakhs was appropriated therefrom and that this amount represents almost 50% of the disputed tax demand.
4. Mrs. K. Vasanthamala, learned Government Advocate (Tax), accepts notice on behalf of the first and second respondents. She points out that the impugned order was preceded by notice in Form GST ASTM-10, an intimation dated 05.05.2023 and show cause notice dated 06.06.2023.
5. On perusal of the impugned order, it is evident that the tax proposal pertains to wrongful availment of ITC in respect of purchase of a motor vehicle. Learned counsel for the petitioner contends that such purchase was for business purposes and ITC was not wrongly availed. The documents on record evidence that a sum of Rs.2 lakhs was appropriated towards the total tax liability of about Rs.4.28 lakhs. In these circumstances, it is just and necessary to provide an opportunity to the petitioner to contest the disputed tax demand on merits.
6. For reasons set out above, the impugned order dated 11.10.2023 is set aside and the matter is remanded for reconsideration. The petitioner is also permitted to submit a reply to the show cause notice within two weeks from the date of receipt of a copy of this order. Upon receipt of the petitioner’s reply, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of petitioner’s reply.
7. For the avoidance of doubt, it is made clear that the sum of Rs.2,00,000/- (Rupees two lakhs only), which was appropriated from the petitioner’s bank account, shall abide by the outcome of the remanded proceedings.
8. In view of the assessment order being set aside, the bank attachment is raised.
9. W. P.No.10744 of 2024 is disposed of on the above terms. No costs. Consequently, the connected miscellaneous petitions are also closed.
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