Case Law Details
National Contracting Company Limited Vs Assistant Commissioner (ST) (Madras High Court)
In National Contracting Company Limited vs Assistant Commissioner (ST), the Madras High Court addressed a writ petition challenging an assessment order under the CGST Act, 2017. The petitioner argued that the order exceeded the scope of the Show Cause Notice (SCN) and ignored objections submitted in response. The dispute centered on discrepancies in TDS deductions for works contracts with government departments. Specifically, the petitioner contended that TDS for supplies made in FY 2018-19 was deducted only in FY 2019-20 due to delayed payments. This caused a mismatch between GSTR-3B and GSTR-7 filings, which was highlighted in the SCN. However, the final order raised additional issues, such as advances, asset sales, and non-GST supplies, which were not part of the SCN.
The Court found the impugned order invalid under Section 75(7) of the CGST Act, which prohibits assessing authorities from exceeding the grounds specified in the SCN. The Court also noted a failure to consider the petitioner’s objections adequately, violating principles of natural justice. While the respondent argued that the matter was appealable and outside the purview of writ jurisdiction, the Court held that writ relief was justified due to these procedural lapses. It set aside the order, treating it as a new SCN and directing the petitioner to submit fresh objections for re-evaluation. The ruling underscores the importance of adhering to procedural safeguards and statutory limits in tax assessments.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The present writ petition is filed challenging the impugned order dated 17.08.2024 on the premise that the impugned order traverses beyond the Show Cause Notice and also in view of the fact that there is non-application of mind to the objection which was filed by the petitioner in response to the notice.
2. The learned counsel for the petitioner would submit that that the petitioner is engaged in the execution of works contracts primarily with Government Departments. In terms of Section 51 of the CGST Act, 2017, the Government Departments, while making payments to contractors, are required to deduct TDS at the rate of 2%. The learned counsel for the petitioner would contend that that they had entered into contracts with various Government Departments including the Tamil Nadu Transmission Corporation Limited. These contracts were executed during the financial years viz., 2018-19 and 2019-20. It is further submitted that payments in respect of the invoices raised by the petitioner during the financial year 2018-19 were made by the petitioner’s recipient only in the subsequent financial year 2019-20. Correspondingly, deductions under Section 51 of the CGST Act, 2017 were also made during the financial year 2019-20. It is submitted that the taxable event for the supply of services had occurred during the financial year 2018-19 and the appropriate taxes are stated to have been remitted during the relevant assessment year.
3. It is further submitted by the learned counsel for the petitioner that the Show Cause Notice proceeds on the premise that there was an alleged discrepancy between the petitioner’s GSTR-3B and GSTR-7 returns. The discrepancy pertained to the TDS made by the employer, viz., Tamil Nadu Transmission Corporation Limited, in terms of Section 51 of the CGST Act, 2017, in view of the fact that the employer had deducted TDS in respect of the supplies made during the financial year 2018-19. The TDS deducted during the relevant assessment year 2019-20 did not correspond to the supplies made, as it also included supplies that were stated to have been made in the previous financial year viz., 2018-19. The learned counsel further submits that a statement containing invoices was submitted along with the petitioner’s reply, which would indicate that payments for the assessment year 2018-19 were received only in the financial year 2019-20, and accordingly, TDS was deducted during the financial year 2019-20. The above objections were however rejected by the respondent on the premise that there was a discrepancy between GSTR-3B and GSTR 9/9C which, according to the petitioner, was being set out for the first time in the impugned order of assessment. Apart from this, several other issues were raised for the first time in the impugned order including inter alia Advances adjusted, Sale of fixed assets, Amendment made, Non-GST supply and Interest Income. It was submitted that none of the above 5 issues were subject matter of the Show Cause Notice. It was submitted by the learned counsel for the petitioner that the impugned order thus traverses beyond the Show Cause Notice and therefore cannot be sustained in terms of Section 75(7) of the GST Act, which reads as under:
“(7) The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.”
4. To the contrary, the learned counsel for the respondent would submit that this is an order which is appealable, therefore, this Court ought not to entertain the writ petition.
5. Heard both sides and perused the material on record.
6. Considering the submission made on either side, this Court is conscious of the fact that writ petition under Article 226 of the Constitution of India would not be entertained normally if statutory remedy is availed. However, existence of alternate remedy is not an embargo or an absolute bar to exercise power under Article 226 of the Constitution of India but a self-imposed restriction and the following circumstances viz., violation of principles of natural justice or lack of jurisdiction or error apparent on the face of the record are some of the exceptions carved out to the rule of alternate remedy for exercise of discretion under Article 226 of the Constitution of India.
7. This Court is of the view that the impugned order warrants interference for more than one reason. The impugned order does not deal with objection submitted by the petitioner dated 16.05.2024 wherein it has been specifically stated that any alleged escapement of turnover was only due to the fact that it related to the value of supplies effected during the previous year. More importantly, the impugned order traverses beyond the Show Cause Notice and is thus hit by Section 75(7) of the Act.
8. In view thereof, the impugned order is set aside inasmuch as there is non-application of mind to the reply which has been filed by the petitioner. It is trite law that when a reply is filed, it is incumbent on the assessing authority to apply its mind to the objections raised and return findings on the issues so raised. Failure to do so, would vitiate the proceedings. That apart, the impugned order is hit by Section 75(7) insofar as it traverses beyond the Show Cause Notice. The impugned order shall be treated as a Show Cause Notice. The petitioner shall submit its objections within a period of two (2) weeks from the date of receipt of a copy of this order along with supporting documents/material. If any such objections are filed, the same shall be considered by the respondent and orders shall be passed in accordance with law after affording a reasonable opportunity of hearing to the petitioner.
9. Accordingly, the Writ Petition stands disposed of. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.
