Two different authorities cannot pass two orders for confirming & dropping demand

Asir Automobiles Private Limited Vs Assistant Commissioner (ST) (Madras High Court)

Summary: In the case of Asir Automobiles Private Limited Vs Assistant Commissioner (ST), the Madras High Court addressed the legal implications of conflicting orders issued by different authorities regarding tax demands. The petitioner, Asir Automobiles, contested two assessment orders related to the Goods and Services Tax (GST). The first order, dated August 16, 2023, confirmed a tax demand despite the petitioner having reversed credits for returned supplies, which were supported by credit notes from suppliers. The second order, issued on November 7, 2023, denied the rectification request for the mistakes claimed in the first order. The petitioner argued that they had not availed input tax credit on ineligible inputs, emphasizing that the Assistant Commissioner had overlooked key facts during the assessment process. The crux of the matter revolved around whether two different authorities could simultaneously issue contradictory orders—one confirming a demand while the other dropped it. The Hon’ble Court found such an approach unreasonable, leading to the decision to set aside the impugned orders. The case was remanded back to the Assistant Commissioner for reassessment, emphasizing the need for a fresh order that considers all relevant submissions and evidence. The Court mandated that this process be completed within three months and required that the petitioner be given a fair hearing in the remand proceedings.

Introduction: The Hon’ble Madras High Court in the case of Asir Automobiles (P.) Ltd. v. Assistant Commissioner (ST), Tuticorin [Writ Petition (MD) No. 3785 to 3789 of 2024 dated July 24, 2024] held that when the Assessee had reversed credit availed on the supplies that were returned for which the supplier had issued the credit note, but without considering the same, the Authority confirmed demand and further, two Orders were passed by the two different authorities, one for confirming the demand and one for dropping the demand. Hence, the assessment order was set aside, and the matter was to be remitted to pass the fresh order.

Facts:

M/s Asir Automobiles (P.) Ltd (“the Petitioner”) had challenged the Assessment Order dated August 16, 2023 (“the Impugned Order-1”) and the consequential Order November 07, 2023 (“the Impugned Order-2”) passed under Section 161 of the Central Goods and Services Act, 2017 (“the CGST Act”) rejecting the request of the Petitioner for rectification of the purported mistakes committed in the respect of the Impugned Order-1.

The Petitioner reversed the credit availed on the returned supplies for which the supplier had issued the credit note. The Assistant Commissioner (“the Respondent”) without considering the same, had issued demanded vide the Impugned Order-1 & 2.

The Petitioner had never availed the Input Tax Credit (“ITC”) on ineligible inputs as blocked credits. During the writ petition’s pendency, the Respondent passed a fresh Order dated March 31, 2024 for dropping the demand.

Hence, aggrieved by the Impugned Orders the Petitioner filed the writ petition before the Hon’ble Madras High Court.

Issue:

Whether the two different authorities can pass the two orders for confirming demand and dropping demand?

Held:

The Hon’ble Madras High Court, in the case of Writ Miscellaneous Petition (MD) No. 3785 to 3789 of 2024 held as under:

• Held that, two different Orders were passed by the two different authorities, one for confirming the demand and one for dropping the demand, which is unreasonable. Hence, the Impugned Orders were set aside, and the cases were remitted back to the Respondent to pass the fresh Order within three months.

Our Comments:

Section 161 of the CGST Act governs “Rectification of errors apparent on the face of record”. It states that without prejudice to the provisions of section 160, and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under the State Goods and Services Tax Act or an officer appointed under the Union Territory Goods and Services Tax Act or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be:

However, that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document:

Further that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission:

Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

By this common order, all these Writ Petitions are being disposed of.

2. In these Writ Petitions, the petitioner has challenged the respective Assessment Orders dated 16.08.2023 and the consequential order passed under Section 161 of the TNGST Act, 2017, on 07.11.2023 rejecting the request of the petitioner for rectification of the purported mistakes committed in the respective Assessment Orders dated 16.08.2023.

3. It is the case of the petitioner that the petitioner had reversed the credit availed on the notices that were returned for which the Supplier had issued a Credit Note. However, without considering the same, the respondent had confirmed the demand vide impugned orders for the respective Assessment Years.

4. That apart, it is submitted that the petitioner had never availed input tax credit on ineligible inputs as blocked credits. However, the respondent has ignored the same despite the fact that the petitioner had uploaded the information giving the particulars. It is submitted that post-facto, during the pendency of the present Writ Petitions, the Assistant Commissioner [ST] [IU], has passed fresh orders all dated 31.03.2024 dropping most of the issues.

5. In view of the above, the learned counsel for the petitioner submits that the impugned orders in these Writ Petitions may be set aside and the cases be remitted back to the respondent to pass a fresh order in terms of the following orders for the respective Assessment Years.

6. The submissions of the petitioner appears to be reasonable as there are two orders, one confirming the demand and one dropping the demand by two different authorities. Under these circumstances, the impugned orders are set aside and the cases are remitted back to the respondent to pass a fresh order in the light of the above mentioned orders passed by the Assistant Commissioner [ST] [IU]. This exercise may be carried out by the respondent as expeditiously as possible, preferably within a period of three months from the date of receipt of a copy of this order. Needless to state the petitioner shall also be heard before passing final orders in the remand proceedings.

7. These Writ Petitions stand allowed with the above direction. No costs. Consequently, connected Miscellaneous Petitions are closed.

*******

(Author can be reached at [email protected])