Case Law Details
Tvl. Kwatra Karteek Vs Assistant Commissioner (ST)(FAC) (Madras High Court)
Introduction: In a significant ruling, the Madras High Court set aside an order regarding GST liability due to non-payment under the Reverse Charge Mechanism (RCM). The case, Tvl. Kwatra Karteek Vs Assistant Commissioner (ST)(FAC), hinged on the breach of natural justice principles and the petitioner’s inadvertent error while filing Form GSTR 3B. This judgment underscores the importance of due process and fair hearing in tax assessments.
Detailed Analysis
The case stemmed from an original order dated December 28, 2023, which Tvl. Kwatra Karteek challenged, citing a breach of natural justice. The petitioner claimed unawareness of the proceedings leading to the order due to a lapse by their part-time accountant. This oversight resulted in the petitioner not receiving crucial information regarding the tax demand.
The crux of the issue was an alleged short payment of GST, attributed to an inadvertent error in filling Form GSTR 3B. The petitioner’s counsel argued that given an opportunity, they could prove no short payment occurred. The defense highlighted the procedural lapse, emphasizing that the impugned order was issued without adequate notice and opportunity for the petitioner to present their case.
The respondent, represented by Mr. V. Prasanth Kiran, noted that the order followed a show cause notice dated September 30, 2023. Despite this, the court found that the tax demand focused solely on non-payment under RCM, resulting from the petitioner’s filing error. This error could potentially be rectified if the petitioner was allowed to contest the demand on its merits.
Upon reviewing the case, the court acknowledged the necessity of providing the petitioner a fair chance to address the tax demand. Consequently, the court set aside the original order, conditional upon the petitioner remitting 10% of the disputed tax within three weeks from receiving the court’s order. Additionally, the petitioner was permitted to respond to the show cause notice within this period.
The court directed that upon receipt of the 10% payment and the petitioner’s reply, the respondent must provide a reasonable opportunity for a personal hearing. Following this, a fresh assessment order should be issued within three months.
Conclusion: The Madras High Court’s decision in Tvl. Kwatra Karteek Vs Assistant Commissioner (ST)(FAC) highlights the judiciary’s role in ensuring adherence to principles of natural justice in tax matters. By setting aside the original order and mandating a 10% pre-deposit, the court balanced the need for compliance with fair hearing procedures. This ruling serves as a reminder of the critical importance of due process in the administration of tax laws, ensuring taxpayers are given a fair opportunity to contest and clarify tax demands.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 28.12.2023 is assailed on the ground of breach of principles of natural justice. The petitioner asserts that he was unaware of proceedings culminating in the order impugned herein because the part time Accountant engaged by the petitioner had not informed the petitioner about these proceedings.
2. Learned counsel for the petitioner submits that the tax proposal arose as a result of the petitioner committing an inadvertent error while filling up Form GSTR 3B. If provided an opportunity, he submits that the petitioner would be in a position to establish that the petitioner did not make short payment of GST.
3. Mr. V. Prasanth Kiran, learned Government Advocate, accepts notice for the respondent. He points out that the impugned order was preceded by show cause notice dated 30.09.2023.
4. On perusal of the impugned order, it appears that the tax proposal pertains entirely to non payment of tax under reverse charge mechanism. Learned counsel for the petitioner pointed out that such tax proposal was a result of the petitioner making an inadvertent error while filling up GSTR 3B returns. In these circumstances, albeit by putting the petitioner on terms, it is just and necessary that the petitioner be provided an opportunity to contest the tax demand on merits.
5. For reasons set out above, the impugned order dated 28.12.2023 is set aside, subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of three weeks from the date of receipt of a copy of this order. Within the aforementioned period, the petitioner is also permitted to submit a reply to the show cause notice. Upon receipt thereof and upon being satisfied that 10% of the disputed tax demand was received, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within a period of three months from the date of receipt of the petitioner’s reply.
6. W.P.No.12559 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.13709 and 13711 of 2024 are closed.
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