Case Law Details
Sakthi Industries Vs Deputy State Tax Officer-I (Madras High Court)
In a significant ruling, the Madras High Court addressed the petition filed by Sakthi Industries challenging an order dated 27.12.2023. The petitioner argued that the order breached the principles of natural justice. The court set aside the order, remanding the case for reconsideration, subject to the petitioner remitting 10% of the disputed tax demand. This article provides a detailed analysis of the judgment, the arguments presented, and the implications for similar cases.
Sakthi Industries, engaged in providing job work services to Sakthi Auto Component Limited, challenged an order dated 27.12.2023. The petitioner asserted that capital goods were procured in the financial year 2017-18 and deployed in job work in the subsequent financial year. Upon receiving a show cause notice on 25.09.2023, the petitioner responded on 21.12.2023, explaining the discrepancy between outward and inward supplies for that year.
Petitioner’s Arguments
The petitioner’s counsel contended that the reply to the show cause notice, dated 21.12.2023, was not considered in the impugned order. Despite this, the petitioner agreed to remit 10% of the disputed tax demand as a condition for remand. The counsel highlighted that the failure to consider the reply constituted a breach of natural justice principles.
Mr. K. Vasanthamala, the learned Government Advocate, accepted notice on behalf of the respondents. She argued that the principles of natural justice were adhered to, with intimation dated 14.09.2023, a show cause notice dated 25.09.2023, and an offer of a personal hearing. She also claimed that the petitioner’s reply lacked necessary details.
The court noted that the petitioner’s reply was brief and not self-explanatory. However, the reply did not appear in the impugned order. Balancing the interests of revenue, the court found that a remand was warranted, provided the petitioner remitted 10% of the disputed tax demand within fifteen days.
The Madras High Court set aside the impugned order dated 27.12.2023, subject to the petitioner remitting 10% of the disputed tax demand within fifteen days. The petitioner was permitted to submit an additional reply along with relevant documents. The first respondent was directed to offer a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh assessment order within three months of receiving the additional reply. Consequently, the bank attachment was also lifted.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 27.12.2023 is challenged in this writ petition on the ground of breach of principles of natural justice. The petitioner asserts that she is engaged inter alia in the business of providing job work services to Sakthi Auto Component Limited. In relation thereto, it is stated that capital goods were procured in financial year 2017-18 and that such goods were deployed in undertaking job work in the following financial year. Therefore, on receipt of show cause notice dated 25.09.2023, by reply dated 21.12.2023, the petitioner stated that the capital goods were purchased in financial year 2017-18 and that outward supply during the said year was lower than inward supply.
2. By referring to the aforesaid reply, learned counsel submits that such reply was not taken into consideration while issuing the impugned order. Without prejudice, she submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
3. Mr. K. Vasanthamala, learned Government Advocate, accepts notice for respondents 1 and 2. She submits that principles of natural justice were complied with by issuing intimation dated 14.09.2023, show cause notice dated 25.09.2023 and by offering a personal hearing. She also submits that the petitioner’s reply contains no details.
4. In the petitioner’s reply, it is stated as under:
“We purchases capital during current year 2017-18. Hence outward is less than inward supply.”
5. The above reply is terse and cannot be construed as self-explanatory. It is, however, noticeable that such reply does not find mention in the impugned order. In these circumstances, by balancing revenue interest, a remand is warranted subject to putting the petitioner on terms.
6. For reasons aforesaid, impugned order dated 27.12.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand, as agreed to, within fifteen days from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit an additional reply and enclose relevant documents. Upon receipt of the petitioner’s reply and on being satisfied that 10% of the disputed tax demand was received, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within three months from the date of receipt of the petitioner’s additional reply. On account of the assessment order being set aside, the bank attachment is raised.
7. W.P.No.16961 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18674, 18676 and 18678 of 2024 are closed.
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