Case Law Details
Tvl. Ziss Enterprises Pvt. Ltd. Vs State Tax Officer (ST) (Madras High Court)
Introduction: In a recent judgment, the Madras High Court addressed the case of Tvl. Ziss Enterprises Pvt. Ltd. versus the State Tax Officer (ST), focusing on the alleged wrongful availment of Input Tax Credit (ITC) and the breach of principles of natural justice. The court set aside the impugned order and remanded the matter for further review, subject to the petitioner fulfilling certain conditions. This article provides a detailed analysis of the case, the court’s decision, and its implications for GST-related disputes.
Background of the Case
Tvl. Ziss Enterprises Pvt. Ltd., a trader in leather goods, faced issues with GST proceedings after its registration was canceled on October 14, 2020. The petitioner was unaware of the proceedings leading to the impugned order dated October 31, 2023. The dispute arose over the alleged wrongful availment of ITC due to an error in filing GSTR 3B returns, where amounts were mistakenly entered in the reverse charge mechanism (RCM) column instead of the ‘all other ITC’ column.
Petitioner’s Argument
The petitioner argued that the tax demand resulted from an inadvertent error and not intentional wrongdoing. The counsel for the petitioner highlighted that due to the cancellation of their GST registration, they were not informed about the proceedings. They agreed to remit 10% of the disputed tax demand for each assessment period as a condition for remand, seeking an opportunity to contest the demand on its merits.
Respondent’s Stance
The State Tax Officer’s representative, Mr. V. Prasanth Kiran, contended that the principles of natural justice were upheld, as the petitioner was issued a show cause notice on September 11, 2023, and a personal hearing was offered on September 14, 2023. The tax proposal was confirmed due to the petitioner’s failure to respond to the notice or attend the hearing.
Court’s Observations
The Madras High Court found that the principles of natural justice were indeed compromised. The petitioner did not receive proper notice due to the cancellation of their GST registration, which led to their unawareness of the proceedings. The court emphasized that the petitioner should be given a fair opportunity to present their case.
Judgment and Implications
The court set aside the impugned order dated October 31, 2023, on the condition that the petitioner remits 10% of the disputed tax demand within two weeks from receiving a copy of the judgment. The petitioner was also allowed to submit a reply to the show cause notice within this period. The State Tax Officer was directed to provide a reasonable opportunity for a personal hearing and to issue fresh assessment orders within three months of receiving the petitioner’s reply.
This judgment underscores the importance of adhering to the principles of natural justice in tax disputes. It also highlights the necessity for tax authorities to ensure proper communication with taxpayers, especially when their registration is canceled.
Conclusion: The Madras High Court’s decision to remand the case of Tvl. Ziss Enterprises Pvt. Ltd. versus the State Tax Officer reaffirms the significance of natural justice in GST disputes. By setting aside the impugned order and providing the petitioner an opportunity to contest the tax demand, the court has ensured that fairness and due process are maintained. This ruling serves as a crucial precedent for similar cases, emphasizing the need for clear communication and proper procedural conduct by tax authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 31.10.2023 is assailed on the ground of breach of principles of natural justice. The petitioner states that it was a trader in leather goods and that its GST registration was cancelled on 14.10.2020. Consequently, it is stated that the petitioner was unaware of proceedings culminating in the impugned order.
2. Learned counsel for the petitioner submits that the confirmed tax proposal pertains to the alleged wrongful availment of Input Tax Credit (ITC). He submits that such tax proposal arose as a result of an inadvertent error committed by the petitioner while filling up the GSTR 3B returns in as much as amounts were specified against the RCM column instead of ‘all other ITC’ column. On instructions, he submits that the petitioner agrees to remit 10% of the disputed tax demand in respect of each assessment period as a condition for remand.
3. Mr.V.Prasanth Kiran, learned Government Advocate, accepts notice for the respondents. He points out that the principles of natural justice were complied with by issuing show cause notice dated 11.09.2023 and by offering a personal hearing to the petitioner on 14.09.2023.
4. On perusal of the impugned order, as contended by learned counsel for the petitioner, it appears that the GST proposal pertains to the availment of ITC after specifying amounts in the reverse charge column in the GSTR 3B returns. It is also noticeable that the tax proposal was confirmed because the petitioner did not reply to the show cause notice or attend the personal hearing. In these circumstances, the interest of justice warrants that an opportunity be provided to the petitioner to contest the tax demand on merits, albeit by putting the petitioner on terms.
5. For reasons set out above, the impugned orders dated 31.10.2023 are set aside, subject to the condition that the petitioner remits 10% of the disputed tax demand in respect of each assessment period as agreed to within a maximum period of two 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 fresh assessment orders within a period of three months from the date of receipt of the petitioner’s reply.
6. W.P.Nos.12420 and 12423 of 2024 are disposed of on the above terms. No costs. Consequently, W.M.P.Nos.13555, 13556, 13559 and 13560 of 2024 are closed.
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