GST assessment order traversed beyond scope of notice: HC directs to treat order as SCN

S.P.K. Enterprises Vs Deputy State Tax Officer-I (Madras High Court)

In the matter abovementioned Hon’ble HC disposed off the writ petition after observing that impugned order traversed beyond the scope of SCN.

Petitioner is engaged in execution of works contract and is registered under GST. During 2018-19, the petitioner filed its return and paid the appropriate taxes. During scrutiny, it was found that there was a short payment of taxes due to excess claim of ITC and alleged mismatch between GSTR-3B vs. GSTR-2A/GSTR-2B. Accordingly, notices were issued to recover short payment of taxes. Reminders were also issued however no compliance was made on behalf of the petitioner. Impugned order was passed on the premise that there are certain discrepancies between GSTR-3B and GSTR-2A/GSTR-2B.

It was argued on behalf of the petitioner that alleged discrepancies between GSTR-3B vs. GSTR-2A/GSTR-2B were never the subject matter of notice and thus the impugned order cannot be sustained. Reliance was also placed on Section 75(7) of the GST Act which provide that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice. Impugned order traverses beyond the SCN, the impugned order is liable to be set-aside. On the other hand, revenue argued that petitioner may submit their response treating the impugned order
as SCN and submit its reply along with supporting materials within a period of two weeks.

Hence writ petition disposed with treating the impugned order as SCN.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The present writ petition is filed challenging the impugned order 24.04.2024 on the premise that it traverses beyond the Show Cause Notice thereby denying the petitioner’s opportunity to put forth his case.

2. The petitioner is engaged in execution of works contract and is registered under Goods and Services Act, 2017. During the relevant period viz., 2018-19, the petitioner filed its return and paid the appropriate taxes. However, during the scrutiny of the petitioner’s monthly return, it was found that there was a short payment of taxes due to excess claim of Input Tax Credit and alleged mismatch between GSTR-3B vs. GSTR-2A/GSTR-2B. Apart there from the notice also proposed to recover short payment of taxes on the basis of alleged discrepancies between GSTR-1 and GSTR-7. The relevant portion of the notice is extracted hereunder:

“GSTIN:33AERPBO0982K12C/2018-19

O/o the Assistant Commisioner (ST),
Ponneri Assessment Circle.

Dated: 10.03.2022

NOTICE

1) Defect: TTC Mismatch

On verification of Form GSTR-3B returns with Form GSTR-2A details. Its noticed that you have excess claimed ITC as detailed below:

Therefore, you are liable to pay the Taxes in account of TVC reversal along with interest payable thereon under Section 50 and a penalty equivalent to 10 percent of the Tax or 10.000 whichever is higher, as per the provisions of Section 73 of the Act as follows:

2) Defect: Tax not paid on Additional Liability reported in Form GSTR-7

On verification of Form GSTR-1 outward supplies with Form GSTR-7, it is noticed that there is an additional tax liability in respect of GSTR-7 as detailed below:

Therefore, you are liable to pay the short paid Taxes along with interest payable thereon under Section 0 and a penalty equivalent to 10 percent of the Tax or 10,000 whichever is higher, as per the provisions of Section 73 of the Act, as follows:

3) Defect: Interest payable (Late return filing)

………..”

Pursuant thereto, a Show Cause Notice in Form DRC-01 was issued to the petitioner on 10.03.2022, followed by reminders on 24.02.2024 for 29.02.2024 and on 22.03.2024 for 27.03.2024. However, the petitioner had neither filed its reply nor availed the opportunity for a personal hearing. Hence, the impugned order came to be passed, confirming the proposal.

3. The impugned order has been passed on 24.04.2024, after granting the petitioner an opportunity of hearing on more one occasion. However, the impugned order has been passed on the premise that there are certain discrepancies between GSTR-3B and GSTR-2A/GSTR-2B and that this results in a differential amount of Rs.804538/- under the CGST and SGST Act, respectively. It is the case of the petitioner that the alleged discrepancies between GSTR-3B vs. GSTR-2A/GSTR-2B were never the subject matter of notice and thus the impugned order cannot be sustained. In this regard, reliance was also placed by the learned counsel for the petitioner on 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. It was submitted by the learned counsel for the petitioner that inasmuch as the impugned order traverses beyond the Show Cause Notice, the impugned order is liable to be set-aside.

5. The learned counsel for the respondents would submit that in view of the apparent discrepancies between the Show Cause Notice and the order of assessment, the petitioner may submit their response treating the impugned order as Show Cause Notice and submit its reply along with supporting materials within a period of two weeks.

6. In view thereof, the impugned order is set aside and the same shall be treated as a Show Cause Notice. The petitioner shall submit its objections within a period of four (4) 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. It was submitted that pursuant to the impugned order of assessment, recovery proceedings were initiated and petitioner’s bank accounts have been attached. In view of the order passed herein, the bank attachment shall be lifted forthwith.

7. Accordingly, the Writ Petition stands disposed of. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.