Summary: In Nanjappan Senthilkumar v. Deputy Commercial Tax Officer [W.P. No. 11439 of 2024], the Madras High Court ruled that GST orders issued under Section 73 of the CGST Act are invalid if they confirm a tax demand higher than that stated in the Show Cause Notice (SCN) without proper reasoning. In this case, the SCN issued to the petitioner demanded Rs. 5,570, while the final order imposed a tax demand of Rs. 1,07,410, which lacked justification for the increased amount. The court set aside the impugned order, allowing the tax authorities to initiate fresh proceedings in line with the law. The judgment emphasizes that under Section 73(7) of the CGST Act, the tax demand cannot exceed the amount specified in the SCN, and no additional grounds can be introduced beyond those outlined in the SCN. A similar ruling was made in Horizon Packs (P.) Ltd. v. Union of India, where an order exceeding the SCN’s tax demand was quashed. This reinforces the principle that tax authorities must strictly adhere to the limits established in the SCN.
The Hon’ble Madras High Court in the case of Nanjappan Senthilkumar v. Deputy Commercial Tax Officer, Erode [Writ Petition No. 11439 of 2024 dated June 3, 2024] held that if the Order passed under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) confirming tax demand is unreasoned and exceeds amount specified in Show Cause Notice (“SCN”) without any explanation, such order is liable to be set aside.
Facts:
Nanjappan Senthilkumar (“the Petitioner”) received a Show Cause Notice dated June 22, 2023 (“SCN”), in relation to discrepancies in the returns filed by the Petitioner. The Petitioner replied to the SCN on April 11, 2023 and the proceedings were concluded by passing the Order dated October 10, 2023 (“the Impugned Order”) under Section 73 of the CGST Act.
The Petitioner contended that the total tax demand under the SCN was for a sum of Rs. 5,570/- whereas the total tax demand in the Impugned Order was for sum of Rs. 1,07,410/- making the Impugned Order unreasoned.
Hence, aggrieved by the Impugned Order, the Petitioner filed the present writ petition before the Hon’ble Madras High Court.
Issue:
Whether an Order can sustain if the demand exceeds in the amount specified in the SCN?
Held:
The Hon’ble Madras High Court in Writ Petition No. 11439 of 2024 held under as:
- Held that, there was no evident reason specified in the Impugned Order and the tax demand under the Impugned Order exceeds the specified amount in the SCN. Hence, the Impugned Order cannot sustain. Hence, the Impugned Order, is set aside by leaving it open to the Respondent to initiate the fresh proceedings in accordance with the law.
Our Comments:
Section 73 of the CGST Act governs “Determination of tax, pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.” Further, Section 73(7) of the CGST Act states that 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.
In a pari materia case of Horizon Packs (P.) Ltd. v. Union of India [WPMS No. 525 of 2024 dated April 03, 2024], the Hon’ble High Court of Uttarakhand where amount of tax and penalty demanded in impugned order was much more than amount specified in show cause notice, impugned order was to be quashed.
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