Assessment Order quashed when Assessee incorrectly reported turnover in GSTR-1 but correctly in GSTR-3B

Southern Engineering Services Vs Deputy State Tax Officer – 1 (Madras High Court)

Assessment Order quashed when Assessee incorrectly reported turnover in GSTR-1 but correctly in GSTR-3B

The Hon’ble Madras High Court in the case of Southern Engineering Services v. Deputy State Tax Officer-1 [WP No. 6523 of 2024 dated March 14, 2024] allowed the writ petition and set aside the Assessment Order thereby holding that, the Assessment Order is liable to be quashed in case where Assessee incorrectly reported turnover in GSTR-1 but correctly in GSTR-3B.

Facts:

Southern Engineering Services (“the Petitioner”) supplied services Dell International Services Private Limited, which is a SEZ unit without charging any GST as the said supply was zero rated supply. The Petitioner reported the turnover under the column taxable value in Form GSTR-1 but correctly reported the zero-rated supply in Form GSTR-3B. Also, the Petitioner could not file a proper reply to the proceedings initiated as the said notices were uploaded in the column ‘View Additional Notices and Orders’ tab on GST Portal.

However, the Revenue Department (“the Respondent”) passed Assessment Order dated November 21, 2023 (“the Impugned Order”) against the Petitioner. Aggrieved by the Impugned Order passed by the Respondent, the Petitioner filed a writ petition before the Hon’ble High Court.

Issue:

Whether Assessment Order is to be quashed when Assessee incorrectly reported turnover in GST-1 but correctly in GSTR-3B?

Held:

The Hon’ble Madras High Court in the case of WP No. 6523 of 2024 held as under:

• Noted that, as per the invoice placed on the record by the Petitioner, the supply was made to the SEZ unit and therefore, the said supply would fall within the purview of zero-rated supply and the error in return was at the time of introduction of GST.
• Opined that, the Petitioner is entitled to an opportunity for hearing as per the facts and circumstances of the case.
• Held that, the Impugned Order is quashed and matter is remitted back for reconsideration.
• Directed that, the Petitioner be permitted by the Respondent to file the reply to Show Cause Notice and proper opportunity be granted to the Petitioner including personal hearing.

Conclusion: The Southern Engineering Services case underscores the judiciary’s role in ensuring fairness and equity in tax matters. The judgment serves as a reminder to tax authorities to exercise discretion judiciously, considering the complexities and challenges faced by taxpayers, particularly during transitional periods like the introduction of GST.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner assails an assessment order dated 21.11.2023. The petitioner supplied services to Dell International Services India Private Limited, which is a SEZ unit without charging GST since it was a zero rated supply. Such supply was made in July 2017, which was at the inception of the GST regime. While filing the GSTR-1 return, the petitioner asserts that the turnover was inadvertently reported under the column taxable value. In the GSTR-3B return on the other hand, it was correctly reported as a zero rated supply which does not attract GST. The petitioner further asserts that she could not participate in proceedings since the notices and order were uploaded in the “view additional notices and orders” tab of the GST portal. This writ petition was filed in the said facts and circumstances.

2. Learned counsel for the petitioner invited my attention to the invoice and pointed out that the invoice indicates clearly that no GST is leviable since it is a zero rated supply. He also pointed out that this supply was correctly reported in the GSTR-3B return, whereas, while filing the GSTR-1 return, the petitioner inadvertently reported it as a taxable supply. By referring to the g-mail spam folder of the petitioner, it is submitted that the e-mails received from the GST authorities were diverted to the spam folder.

3. Mr.T.N.C.Kaushik, learned Additional Government Pleader, accepts notice for the respondent. He submits that the petitioner is a registered person and is, therefore, required to regularly monitor the GST portal. Since the impugned assessment order was preceded by an intimation and show cause notice, he submits that principles of natural justice were complied with.

4. The petitioner has placed on record the relevant tax invoice. Such tax invoice indicates prima facie that the supply was made to a SEZ unit and that it consequently qualifies as a zero rated supply. The GSTR-3B return of the petitioner is in line with the supply being zero rated. It is also noticeable from the invoice and returns that the supply pertained to the July quarter of assessment period 2017-18. This was during the nascent stage of GST implementation.

5. By taking into account the above facts and circumstances, I am of the view that this is an appropriate case to provide an opportunity to the petitioner. Consequently, the impugned assessment order is quashed and the matter is remanded for re-

6. The petitioner is permitted to submit a reply to the show cause notice within a maximum period of fifteen days from the date of receipt of a copy of this order by enclosing all relevant documents. Upon receipt thereof, the assessing officer 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 two months.

7. W.P.No.6523 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.7251 and 7252 of 2024 are closed.

******

(Author can be reached at info@a2ztaxcorp.com)