Cosmos Business Machines Partnership Firm Through Ashok Kisan Sawant Vs Union of India & Ors. (Gujarat High Court)
Summary: The Gujarat High Court, in Cosmos Business Machines Partnership Firm Through Ashok Kisan Sawant Vs Union of India & Ors., set aside two GST adjudication orders concerning alleged discrepancies between annual return Form GSTR-9 and reconciliation statement Form GSTR-9C for financial year 2017-18. The Court held that an adjudicating authority cannot confirm a demand merely because the taxpayer failed to attend a personal hearing, particularly where a detailed written reply and supporting documents had already been submitted. The Division Bench comprising Justice Bhargav D. Karia and Justice D.N. Ray found that the authorities had not properly examined the petitioners’ explanations and documentary evidence before confirming the disputed tax demands. The Court consequently quashed the orders and remanded both matters for fresh adjudication.
The dispute arose from show-cause notices issued under Section 73 of the Central Goods and Services Tax Act, alleging differences between turnover reported in GSTR-9 and the un-reconciled gross turnover appearing in Table 5R of GSTR-9C. The petitioners submitted their replies on 27 October 2023, explaining that the apparent discrepancy arose because the GSTR-9C reconciliation statement inadvertently reflected nationwide turnover rather than turnover attributable specifically to Gujarat. They asserted that the amounts relating to Maharashtra and Delhi had already been subjected to GST in the respective jurisdictions. According to the petitioners, the incorrect reporting was an inadvertent reconciliation error and did not establish any additional taxable supply or unpaid GST liability in Gujarat.
The petitioners challenged Order-in-Original No. 71/CGST/Ahmd-South/JC/SR/23-24 dated 6 December 2023 and Order-in-Original No. 69/CGST/Ahmd-South/JC/SR/23-24 dated 5 December 2023. They contended that the adjudicating authority had failed to consider their written explanations and supporting records. Although an objection concerning Notification No. 9 of 2023 and extension of time had initially been raised, the petitioners expressly did not press that contention. Their principal submission was that the mere absence of a representative at the personal hearing could not justify disregarding the documentary material already forming part of the proceedings. The Revenue’s counsel fairly acknowledged before the High Court that the adjudicating authority had not taken the petitioners’ replies and supporting documents into consideration and had confirmed the demands substantially on the basis of discrepancies between the two forms.
Examining the adjudication orders, the High Court noted that the authority had referred to the taxpayer’s explanation but concluded that no documentary evidence had been supplied. The authority had also observed that the taxpayer acknowledged an inadvertent reporting error and that such error did not necessarily indicate an intention to misrepresent or evade tax. Nevertheless, the demand for tax, interest and penalty had been confirmed on the reasoning that the taxpayer failed to substantiate the explanation and did not attend the personal hearing. The High Court found this approach unsustainable because the supporting documents were actually annexed to the written reply, as demonstrated by the material on record in Special Civil Application No. 4160 of 2024. The adjudication orders contained no substantive discussion of those documents or the explanation that the disputed turnover related to other States.
The High Court held that the adjudicating authority was required to consider the reply and supporting records before reaching its conclusion. The petitioners’ absence from the personal hearing did not entitle the authority to presume that no supporting evidence existed. Consequently, the Court quashed both orders and directed the adjudicating authority to reconsider the matters de novo, taking into account the replies and documents submitted by the petitioners. The authority was further directed to provide an opportunity of hearing, while the petitioners undertook to cooperate with the proceedings. The fresh adjudication was required to be completed within twelve weeks from receipt of the Court’s order. The petitions were disposed of without costs. Importantly, the High Court did not determine whether the turnover difference was ultimately taxable; that issue was left for reconsideration on the evidence. The ruling reinforces that GST adjudication must involve meaningful examination of the taxpayer’s written reply and supporting documents, and a demand cannot be sustained merely on account of non-appearance at a hearing.
FULL TEXT OF THE JUDGMENT OF GUJARAT HIGH COURT
1. Heard learned advocate Mr.Uchit Sheth with learned advocate Mr.Prithu Parimal for the petitioner.
2. Rule returnable forthwith. Learned advocate Mr.C.A.Mehta waives service of notice of Rule for the respondent no.1 to 4.
3. By this petition under Article 227 of the Constitution of India, the petitioner has challenged the order in original for the period in respect of 2017-18 in case of the petitioner-firm as well as the Private Limited Company.
4. As the facts of both the petitions are identical, the same were heard together and are being disposed of by this common order.
5. The respondent authority issued show-cause notice under Section 73 of the Central Goods and Service Tax Act alleging mismatch in turn over between annual return in Form GSTR-9 and Financial Statement in Form GSTR-9C by demonstrating un-reconciled gross turnover in Table 5R of Form GSTR-9C for the period 2017-18.
6. Petitioner filed the reply to the show-cause notice on 27.10.2023. The respondent authority, after considering the reply and granting personal hearing to the petitioner, confirmed dis-allowance on account of the difference between the aforesaid two Forms.
7. Being aggrieved, the petitioner has preferred these petitions challenging the Order In Original No.71/CGST/Ahmd-South/JC/SR/23-24, dtd.06/12/2023 by way of the Special Civil Application No.4160 of 2024 and Order In Original No.69/CGST/Ahmd-South/JC/SR/23-24, dtd.05.12.2023 by way of the Special Civil Application No.4170 of 2024.
8. Learned advocate Mr.Uchit Sheth for the petitioner submitted that the impugned orders in original are not sustainable as the Adjudicating Authority has not taken into consideration the reply filed by the petitioner pointing out that the difference is not subject to taxation as reported turnover pertains to Maharashtra and Delhi and GST has been duly paid on such turnover in accordance with the applicable provisions. Learned advocate Mr.Uchit Sheth for the petitioner further submitted that inconsistency in Forms GSTR 9 and 9C was due to inadvertent error in submission of such Forms and in the GST Audit, the nationwide turnover was incorrectly reported instead of the actual Gujarat-specific turnover and as such, there is a difference in turnover in both the returns. It was submitted that the assesses – petitioner ought to have reported the Gujarat turnover in Table A of GSTR 9C. However, due to oversight, the turnover for all states i.e. Pan-India turnover was reported in Table 6 of GSTR 9C.
9. It was pointed out that the petitioner furnished the details and explanation of the difference between the Forms GSTR 9 and 9C.
10. It was further submitted that though the petitioner has raised an objection with regard to the Notification No.9 of 2023 for extension of time, the same is not pressed under instruction.
11. It was further submitted that though the petitioner could not appear before the Adjudicating Authority, it does not mean that the Adjudicating Authority without considering the reply confirms the show-cause notice resulting into total non application of mind.
12. On the other hand, Learned Advocate Mr.Chirayu Mehta for the respondent fairly submitted that the Adjudicating Authority has not taken into consideration the reply, the details and documents submitted by the petitioner and only because the petitioner did not appear before the Adjudicating Authority, the impugned orders in original are passed on account of the difference between the Forms GSTR 9 and 9C on the ground that there is contravention of the Section 44 of the GST Act.
13. Considering the submissions made by both the sides, it would be germane to refer to the findings of the respondent – Adjudicating Authority for upholding the difference in Forms GSTR 9 and 9C without considering the reply filed by the petitioner as under :-
“12.9 Upon careful consideration of the submissions made by the taxpayer, I observe that while the taxpayer has explained the variance in turnover, no documentary evidence has been provided to substantiate the claim that the reported turnover pertains to Maharashtra and Delhi and has been appropriately taxed. However, it is crucial to emphasize that such errors, especially when leading to substantial financial discrepancies, demand a higher degree of diligence in the filing process. I therefore find that even though the taxpayer has themselves acknowledged the inadvertent error while filing the GSTR-9C which leads me to believe that it is not their intention to misrepresent or evade tax, I also find it imperative to verify the authenticity of the claim made by the taxpayer through verifiable documentation. In this regard, I find that the taxpayer has failed to provide any supporting documents in contention of their reply. I further find that the taxpayer has not appeared for personal hearing to represent their case despite being given ample opportunities to do so. I therefore find that the taxpayer has failed to discharge the burden of proof and provide evidence to support its claims. Therefore, the demand for tax, interest and penalty must be upheld.”
14. On perusal of the aforesaid observations as well as the impugned order as a whole, we are unable to find any discussion on the reply filed by the petitioner except the reference made thereto in the defence submission in para 6, but, in the discussion and findings, the Adjudicating Authority has not referred to the details submitted by the petitioner and merely because the petitioner did not appear before the respondent authority, it was presumed that the petitioner failed to provide the supporting documents in connection with the reply though the same were annexed with the reply as is evident on perusal of the reply placed on record at page 47 in the Special Civil Application No.4160 of 2024.
15. In view of the above facts, the impugned orders in original are not tenable and accordingly, are quashed and set-aside and the matters are remanded back to the Adjudicating Authority to pass de-novo fresh order taking into consideration the reply filed by the petitioner. The Adjudicating Authority shall also provide an opportunity of hearing to the petitioner and learned advocate Mr.Uchit Sheth on behalf of the petitioner, under instructions, has made a statement at bar that the petitioner shall cooperate in hearing of the matter. Such exercise shall be completed within 12 (twelve) weeks from the date of receipt of the copy of this order.
16. With the aforesaid directions, the present petitions are disposed of. Rule is made absolute to the aforesaid extent. No order as to costs.
