Case Law Details
KPR Concrete Readymix Vs STO (Madras High Court)
Introduction: The recent decision by the Madras High Court in the case of KPR Concrete Readymix vs. State Tax Officer (STO) has significant implications for the classification of services under GST. The dispute revolves around the SAC, GST rates, and the issuance of notices challenging the classification by the State Tax Officer.
The Hon’ble Madras High Court in the case of KPR Concrete Readymix v. State Tax Officer [Writ Petition Nos. 35949, 35953 of 2023 January 08, 2024] held that the dispute revolves around the classification of services, which does not fall within the limited category of cases in which a Show Cause Notice may be assailed in proceeding under Article 226 of the Constitution of India. Therefore, the Court decided not to interfere with the Impugned Notice.
Facts:
KPR Concrete Readymix (“the Petitioner”) is engaged in providing transportation services to customers. The Petitioner classified its services under the Service Accounting Code (“SAC”) 996511 and paid a GST rate of 12% on such services. The State Tax Officer (“the Respondent”) issued a notice in FORM DRC-01A, alleging short payment of tax on the services provided by the Petitioner should be classified under SAC 996601, which attracts a GST rate of 18%.
The Petitioner contended that its services are classifiable under SAC 996511 and provided relevant documents and consignment notes. The Respondent did not consider the reply of the Petitioner and issued a notice in FORM DRC-01 (“the Impugned Notice”).
Hence, aggrieved by the Impugned Notice the present writ petition was filed by the Petitioner.
Issue:
Whether dispute revolving around the classification of services provided by the Assessee can be the subject matter of the writ petition?
Held:
The Madras High Court in Writ Petition Nos. 35949, 35953 of 2023 held as under:
- Opined that, there are limited circumstances in which a show cause notice may be interfered with. The foremost of such circumstances is if the show cause notice was issued without jurisdiction. A show cause notice may also be interfered with if no case is made out even assuming that the statements made in the show cause notice are correct. In the Impugned Notices, the Respondent has taken the view that the services provided by the Petitioner qualify as rental services which are classifiable under the SAC 996601 because of the extent of control exercised by the person availing of the services.
- Held that, upon examining the notices in FORM DRC-01, the replies thereto and the Impugned Notices, this case does not fall within the limited category of cases in which a Show Cause Notice may be assailed in proceeding under Article 226 of the Constitution of India. The Impugned Notice was issued in respect of a dispute revolving around the classification of services provided by the Petitioner. Therefore, the Court did not interfere with the writ petition.
- Directed that, the Petitioner has liberty to reply to the Impugned Notices and raise all the objections in respect thereof. In turn, the Respondent is directed to consider all the objections before deciding the matter. Hence, the two writ petitions were disposed of.
Conclusion: In conclusion, the Madras High Court’s decision in the KPR Concrete Readymix vs. STO case underscores the importance of adhering to legal procedures in GST disputes. Classification issues require careful consideration, and taxpayers should engage with authorities through proper channels. While the court refrained from interfering in this case, it highlighted the avenue for the petitioner to present objections and seek a fair resolution. This case serves as a reminder for businesses to stay informed on legal nuances and explore available remedies within the GST framework.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner assails two separate notices issued on 31.08.2023 in Form GST DRC-01 in these two writ petitions. Except for the assessment periods being different, the issue is common and is, therefore, disposed of by this common order.
2. The petitioner states that transportation services are provided to customers and that such services are classifiable under Services Accounting Code (SAC). Accordingly, the petitioner paid GST at 12% on such services. In those circumstances, it is stated that the respondent issued a notice in Form DRC-01A alleging short payment on the ground that the services provided by the petitioner should be classified under SAC 996601, which attracts GST at 18%. The petitioner replied to the said notice and explained that its services are classifiable under SAC 996511 and also produced relevant documents such as the consignment note. A notice in Form DRC-01 came to be issued thereafter by not accepting the reply of the petitioner. The present writ petition was filed in the said facts and circumstances.
3. Learned counsel for the petitioner submits that the impugned notices are in the nature of an adjudicatory order. He further submits that the nature of services provided by the petitioner cannot reasonably be classified under any heading other than SAC 996511. Since the impugned notices are in the nature of adjudicatory orders, learned counsel submits that replying thereto could become an empty formality.
4. In response to these contentions, Mr.Prasanth Kiran, learned Government Advocate, who accepts notice on behalf of the respondent, submits that the impugned notices are undoubtedly show cause notices. He also points out that the petitioner responded to the show cause notices by seeking further time. Even if adverse orders were to be issued after examining the petitioner’s reply, learned counsel submits that the petitioner is entitled to file statutory appeals in respect thereof. Therefore, learned counsel submits that the impugned notices contain no infirmity and that no interference is called for.
5. In exercise of discretionary jurisdiction, there are limited circumstances in which a show cause notice may be interfered with. The foremost of such circumstances is if the show cause notice was issued without jurisdiction. A show cause notice may also be interfered with if no case is made out even assuming that the statements made in the show cause notice are correct. In the case on hand, the dispute revolves around the classification of services provided by the petitioner. In the impugned notices, the respondent has taken the view that the services provided by the petitioner qualify as rental services which are classifiable under the SAC 996601 because of the extent of control exercised by the person availing of the services.
6. Upon examining the notices in Form DRC-01, the replies thereto and the impugned notices, I am of the view that this case does not fall within the limited category of cases in which a show cause notice may be assailed in a proceeding under Article 226 of the Constitution of India.
For reasons set out above, W.P.Nos.35949 and 35953 of 2023 are disposed of by declining to interfere with the impugned order. The petitioner is at liberty to reply to the impugned show cause notices and raise all objections in respect thereof. The respondent, in turn, is directed to consider all such objections before taking a decision in the matter. Consequently, W.M.P.Nos.35948, 35949, 35952 of 2023 are closed.
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