Shreeji Developers & Anr. Vs State of Gujarat & Ors. (Gujarat High Court)
Summary: The Gujarat High Court considered a batch of writ petitions involving identical issues concerning demands raised under Section 73 of the Goods and Services Tax Act, 2017, due to discrepancies between Form GSTR-1 and Form GSTR-3B for the financial year 2019-20. The petitioners, engaged in providing construction services, contended that their accountant had inadvertently reported the same taxable supply twice in Form GSTR-1, first when advances were received and again when invoices were issued. However, the corresponding GST liability had been discharged only once through Form GSTR-3B, as required under the Act. Following detection of the mismatch, the department issued Form GST ASMT-10 on 13 July 2021. The petitioners responded through Form GST ASMT-11, explaining that the discrepancy resulted from duplication of entries rather than short payment of tax. They also relied on reconciliation reflected in their annual return in Form GSTR-9 to demonstrate that no additional tax remained payable.
Despite the explanations submitted by the petitioners, the department issued show cause notices proposing recovery of tax based on the difference between GSTR-1 and GSTR-3B. The petitioners reiterated that the mismatch had been reconciled in their annual returns and that the same transactions had merely been disclosed twice in GSTR-1. Nevertheless, the adjudicating authority passed an order dated 12 May 2023, rejecting the explanation as unsatisfactory and raising a demand. The petitioners claimed that they became aware of the adjudication order only in February 2024, when a lien was imposed on their bank account for recovery. They attributed their failure to receive timely information about the order to serious health issues in their consultant’s family. Their appeal filed on 4 March 2024 was dismissed on 25 July 2024 because it was beyond the period for which delay could be condoned under Section 107(4) of the GST Act.
Before the High Court, the petitioners argued that the proceedings under Section 73 were unsustainable because the department had relied exclusively on differences between the two returns without properly examining whether any tax had actually been short-paid. They submitted that their reconciliation statements and Form GSTR-9 established that the discrepancy arose solely from duplication of taxable supplies. They further contended that the adjudicating authority had disregarded their replies and passed the demand order without granting a personal hearing, contrary to Section 75(4) of the GST Act. The Revenue maintained that Sections 37 and 39 required taxpayers to report correct information in their statutory returns and that errors in GSTR-1 ought to have been rectified through the prescribed return mechanism. According to the department, reconciliation in the annual return could not substitute for correction of the original outward-supply statement, and the petitioners had also been negligent in responding to the proceedings and pursuing their statutory appeal.
After examining the record, the Gujarat High Court observed that the petitioners had disclosed taxable supplies twice in Form GSTR-1, once upon receiving advances and again upon issuing invoices. Their reply in Form GST ASMT-11 had specifically explained the duplication and relied on reconciliation with Form GSTR-9 and GSTR-3B to demonstrate the absence of any discrepancy in tax payment. The Court found that the adjudicating authority had proceeded without properly considering this explanation and had issued Form GST DRC-01 without first issuing Form GST DRC-01A. More importantly, the impugned order had been passed without providing the petitioners an opportunity of personal hearing, contrary to Section 75(4). Accordingly, the High Court quashed the impugned orders and remanded the matters to respondent No. 3 for fresh adjudication, directing that the petitioners be given an opportunity of hearing and that the exercise be completed within 12 weeks from receipt of the Court’s order. The petitions were allowed to that extent, without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Uchit N. Sheth for the petitioners and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.
2. Having regard to the controversy involved which is in a narrow compass, with the consent of learned advocates for the respective parties, the matter is taken up for hearing.
3. Rule returnable forthwith. Learned Assistant Government Pleader Ms. Shrunjal Shah waives service of notice of rule on behalf of the respondent State.
4. Since issues arising in these petitions are identical, for the sake of convenience, facts are recorded from Special Civil Application No.15930/2024.
5. The petitioner No.1 is a partnership firm duly registered under the provisions of Goods and Service Tax Act, 2017 (For short “the GST Act”) and are engaged in providing construction services.
6. In the year 2019-2020, the accountant of the petitioners erroneously showed liability of tax twice in the statement of outward supplies filed in Form GSTR-1 i.e. both at the time of receipt of advances as well as at the time of issuance of invoice for providing service. However the tax was paid only once as required under the provisions of GST Act in the monthly returns filed in Form GSTR-3B.
7. Respondent in view of mismatch between Form GSTR-1 and Form GSTR-3B issued notice on 13.07.2021 in Form GST ASMT-10.
8. The petitioners thereafter received a reminder dated 16.09.2021 which was responded by filing reply dated 20.09.2021 in Form GST ASMT-11 pointing out that the difference between Form GSTR-1 and Form GSTR-3B was only because of duplication of the data which was reconciled and reflected even in the Annual Return Form GSTR-9 filed by the petitioners wherein there was no discrepancy.
9. However, respondent authority disregarding the reply filed by the petitioners and issued show cause notice dated 21.03.2022 proposing to demand tax on the ground of difference between Form GSTR-1 and Form GSTR-3B.
10. The petitioners filed reply dated 17.03.2023 reiterating what was stated in the reply in Form GST ASMT-11 pointing out that the difference between Form GSTR- 1 and Form GSTR-3B was only because of error of duplication made in the Form GSTR-1 statement which was rectified in annual return and reconciliation statement.
11. The petitioners thereafter received another show case notice dated 01.04.2023 for the same period reiterating the same grounds proposing the demand of tax on the difference between Form GSTR-1 and Form GSTR-3B.
12. Thereafter the impugned order-in- original dated 12.05.2023 was passed observing that reply of the petitioners was not satisfactory.
13. It is the case of the petitioners that the petitioners were not aware of the passing of the order-in-original which was uploaded on the GST portal as the same was handled by consultant of the petitioners who was facing serious health issues in the family and could not inform the petitioners about the impugned order so as to enable the petitioners to file appeal under the provisions of section 107 of the GST Act within the statutory prescribed period.
14. The petitioners came to know about the passing of the impugned order in February, 2024 upon noticing lien imposed on the bank account of the petitioners by the respondent for recovery of demand raised in the order.
15. The petitioners thereafter preferred an appeal before the appellate authority on 04.03.2024 pointing out that delay in filing appeal was because of serious health issues in the family of the consultant. However, the appellate authority dismissed the appeal by order dated 25.07.2024 relying upon the provisions of section 107(4) of the GST Act which provides that the appellate authority has no power to condone the delay beyond the prescribed period for filing of appeal.
16. Learned advocate Mr. Uchit Sheth appearing for the petitioners submitted that the issuance of show cause notice as well as impugned order-in-original passed by the respondent authority are without jurisdiction as the show cause notice issued under section 73 of the GST Act and subsequent proceedings on the basis of show cause notice has been issued solely on the ground of difference between Form GSTR-1 and Form GSTR-3B without considering the reply filed by the petitioners or without any investigation or establishing that there is a short payment of tax on part of the petitioners which is a necessary concomitant for assumption of jurisdiction under section 73 of the GST Act.
17. It was further submitted that the impugned order-in-original only takes note of difference between Form GSTR-1 and Form GSTR-3B and the explanation tendered by the petitioners is brushed aside coupled with the fact that in the Annual Return in
Form GSTR-9, there is no difference and reconciliation was provided by the petitioners. It was therefore, submitted that the impugned show cause notice and order-in-original are liable to be quashed and set aside.
18. It was submitted that the appellate authority ought to have considered the grounds to condone the delay in the facts of the case as consultant of the petitioners could not inform about passing of the impugned order and the petitioners were therefore prevented by sufficient cause for not filing appeal.
19. It was therefore, prayed that the impugned orders may be quashed and set aside and the matter may be remanded to the respondent authorities to pass fresh de novo order after providing an opportunity of hearing to the petitioners as per the provisions of section 75(4) of the GST Act.
20. Per contra, learned Assistant Government Pleader Ms. Shrunjal Shah submitted that the respondent authorities have passed the impugned order considering the provisions of the GST Act as the petitioners have failed to file rectified Form GSTR-1 so as to remove the duplicate entries which are forming part of reconciliation submitted by the petitioners. It was submitted that in absence of rectification in Form GSTR-1, respondents were justified in passing the impugned order by raising the demand by calculating the tax payable on supply shown in Form GSTR-1 and actual tax paid as per Form GSTR-3B.
21. In support of her submissions, reliance was placed on the provisions of sections 37 and 39 of the GST Act to point out that the GST Act is a self assessment scheme and it was incumbent upon the petitioners to provide correct information in Form GSTR-1 and if any mistake is found out by the petitioners, the same ought to have been rectified by revising Form GSTR- 1 only and the petitioners could not have relied upon Annual Return in Form GSTR-9.
22. It was submitted that the impugned notice and order passed under section 73 of the GST Act are required to be considered in light of the conduct of the petitioners as the petitioners have remained negligent since 2021 after filing reply in Form GST ASMT 11. It was pointed out that show cause notice was issued on 21.03.2022 and reply to the show cause notice was filed by the petitioners after a year on 17.03.2023 which shows that the petitioners have remained negligent in proceedings initiated by the respondent authorities under section 73 of the Act. It was further submitted that the respondents have passed a detailed order in Form GST DRC-07 explaining the difference between Form GSTR-1 and Form GSTR-3B resulting into short payment of tax considering Form GSTR-1 as the correct supply in case of the petitioners for the period under consideration.
23. It was further submitted that the petitioners therefore, ought to have challenged the order-in-original in Form GST DRC-07 before the appellate authority within the prescribed period and as the appeal filed by the petitioners was beyond the prescribed period o as per the provisions of section 107 of the GST Act, the appellate authority has rightly rejected the appeal.
24. It was submitted that the impugned order was also passed after considering the reply filed by the petitioners in Form GST ASMT 11 as the petitioners failed to produce any evidence for difference between Form GSTR-1 and Form GSTR-3B.
25. Having heard the learned advocates for the respective parties and considering the facts of the case, it is apperant that due to error the petitioner has shown the taxable supply twice in Form GSTR-1, once at the time of advance received and secondly at the time of issuing invoice.
26. In the facts of the case, the petitioners in response to the notice in Form GST ASMT-10 filed a reply in Form GST ASMT-11 showing that there was a duplication of the amount shown in Form GSTR-1 disclosing the taxable supply for the particular month.
27. The petitioners in reply in Form GST ASMT-11 categorically stated that there is no difference due to data reconciliation along with Form GSTR-9 to point out that such data was reconciled and there was no discrepancy in the return in Form GSTR-3B and Form GSTR-9. However, without taking into consideration such reply and without issuing Form GST DRC-01A respondent issued the impugned notice in Form GST DRC-01 under section 73 of the GST Act and thereafter without providing any opportunity of hearing to the petitioners contrary to the provisions of section 75(4) of the GST Act has passed the impugned order-in-original.
28. In view of above, the impugned orders are quashed and set aside and the matters are remanded to respondent no.3 for passing fresh de novo order after giving an opportunity of hearing to the petitioners. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order.
29. Rule is made absolute to the aforesaid extent. No order as to costs.
