Case Law Details
Kamatchi Stores Vs State Tax Officer (Madras High Court)
Introduction: In the case of Kamatchi Stores vs State Tax Officer, the Madras High Court addressed the issue of GST cess liability and the procedural fairness in the early days of GST implementation. The petitioner, Kamatchi Stores, challenged an order imposing cess liability and penalty, arguing that they were unaware of such liability during the initial period of GST implementation and were not provided a personal hearing. The court’s decision highlights important aspects of procedural rights and compliance obligations under GST law.
Detailed Analysis: The dispute arose from an order dated December 29, 2023, which imposed cess liability and penalties on Kamatchi Stores. The petitioner contended that they were not aware of the cess liability under the Goods and Services Tax (Compensation to States) Act, 2017, during the early stages of GST implementation. Additionally, they argued that they were not given an opportunity for a personal hearing, which is a crucial procedural right.
Arguments from the Petitioner:
1. Lack of Awareness: Kamatchi Stores claimed that during the initial period of GST implementation, they were unaware of the cess liability. They asserted that this was a common issue faced by many businesses transitioning to the new tax regime.
2. Procedural Fairness: The petitioner pointed out that the impugned order was issued without offering a personal hearing. According to Section 75(4) of the GST Act, a personal hearing must be provided if an order adverse to the taxpayer is proposed. Kamatchi Stores argued that the absence of a personal hearing was a violation of their procedural rights.
3. Electronic Credit Ledger: The petitioner noted that they had sufficient credit in their electronic credit ledger to cover the cess liability, implying that there was no intent to evade tax.
Respondent’s Position: The State Tax Officer, represented by K. Vasanthamala, contended that the petitioner had admitted liability for the cess. Therefore, they argued that there was no significant ground for the court to interfere with the order.
Court’s Findings: The Madras High Court, after reviewing the impugned order and the arguments presented, found that the petitioner was not given a personal hearing, which is mandated under Section 75(4) of the GST Act. The court recognized that while the petitioner admitted to the cess liability, the lack of procedural fairness warranted interference.
Conclusion: The Madras High Court set aside the impugned order dated December 29, 2023, and remanded the matter for reconsideration. The court conditioned this remand on Kamatchi Stores remitting 15% of the cess amount within two weeks. Additionally, the petitioner was allowed to submit a detailed reply to the show cause notice. The court directed the State Tax Officer to provide a reasonable opportunity for a personal hearing and to issue a fresh order within three months of receiving the petitioner’s reply. The court also lifted the bank attachment placed on Kamatchi Stores.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 29.12.2023 imposing liability for cess along with penalty thereon is challenged in this writ petition on the ground of not provided a personal hearing to the petitioner. The petitioner states that the liability is limited to cess payable under the Goods and Services Tax (Compensation to States) Act, 2017. Since it was the initial period of GST implementation, the petitioner asserts that it was not aware of such liability.
2. Learned counsel for the petitioner referred to the impugned order and pointed out that a personal hearing was not provided to the petitioner merely because the petitioner did not request for a personal hearing. By further contending that requisite credit was available in the petitioner’s electronic credit ledger, he seeks an opportunity of personal hearing.
3. Mr. K. Vasanthamala, learned Government Advocate, accepts notice for the respondent. She points out that the petitioner admits liability with regard to payment of cess. Therefore, she contends that no case is made out for interference.
4. On perusal of the impugned order, it is evident that such order was preceded both by an intimation and a show cause notice. In reply to such cause notice, the petitioner replied by submitting details of purchases made by him and outward supplies made by him. It is also clear from the impugned order that a personal hearing was not offered to the petitioner because the petitioner did not opt for the same. Sub-section (4) of Section 75 mandates that a personal hearing be provided if an order adverse to the tax payer is proposed to be issued. Therefore, interference is warranted but by taking into account the fact that the petitioner’s liability for payment of cess, from the electronic credit ledger or otherwise, is not seriously disputed, the interest of justice warrants that the revenue interest be protected.
5. Accordingly, the impugned order dated 29.12.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 15% of the amounts payable towards cess under the impugned order within a period of two weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a detailed reply to the show cause notice within the aforesaid period. Upon receipt of the petitioner’s reply and upon being satisfied that 15% of the amounts payable towards cess was received, the 1st respondent is directed to provide a reasonable opportunity to Petitioner, including a personal hearing, and thereafter issue a fresh order within a period of three months from the date of receipt of the petitioner’s reply. Since the assessment order has been set aside, the bank attachment is raised.
6. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
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