Case Law Details
Neelan Pharmacy and General Vs Deputy State Tax Officer (Madras High Court)
In a significant ruling, the Madras High Court addressed the grievance of Neelan Pharmacy and General regarding a GST demand based on discrepancies between GSTR 2A and GSTR 4 returns. The court set aside the original GST order, emphasizing the necessity of providing a fair opportunity to the taxpayer to present their case, especially when external circumstances prevent participation in hearings.
Neelan Pharmacy and General, a partnership firm engaged in retail trading of medical, surgical, and pharmaceutical products, was under scrutiny for discrepancies in their tax returns. The issue arose when the firm’s GSTR 2A return, which reflects the inward supplies, did not align with the turnover reported in their GSTR 4/CMP-08 return.
The dispute began with a show cause notice dated 17th October 2023, calling for an explanation of the disparity. Despite submitting replies in February 2024, the petitioner was unable to participate in the personal hearing due to the closure of their shop caused by metro rail construction in the vicinity. This inability to attend the hearing led to the rejection of their reply as they did not provide the necessary profit and loss account and stock details.
The petitioner’s counsel argued that the disparity was due to the non-consideration of closing and opening stock and stressed the genuine reasons for missing the personal hearing. A proposal to remit 10% of the disputed tax demand was made as a condition for remand.
The respondent’s counsel acknowledged the procedural adherence but maintained that the petitioner’s explanations were unsatisfactory without the supporting documents. The court, upon review, noted that while the petitioner’s replies were considered, the absence of crucial documents and the failure to attend the personal hearing due to valid external reasons warranted reconsideration.
In its judgment dated 1st April 2024, the court set aside the original order and remanded the case for a fresh decision, conditional upon the petitioner paying 10% of the disputed tax within two weeks. The court instructed the petitioner to submit all relevant documents to support their reply. The respondent was directed to provide a reasonable opportunity for a personal hearing and issue a new order within three months.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 01.04.2024 is challenged in this writ petition on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits.
2. The petitioner is a partnership firm engaged in the retail trading of medical, surgical and pharmaceutical products. They had availed of the composition scheme. Upon scrutiny of the return, show cause notice dated 17.10.2023 was issued. Such show cause notice called upon the petitioner to explain the disparity between the purchase value as per the GSTR 2A return and the turnover reported in the petitioner’s GSTR 4/CMP-08 return. The petitioner submitted replies dated 07.02.2024 and 09.02.2024. The
3. Learned counsel for the petitioner submits that the disparity is on account of not taking into consideration the closing stock and opening stock. He further submits that the petitioner could not participate in the personal hearing because the shop was closed on account of the metro rail work being undertaken in the vicinity of the shop. On instructions, learned counsel submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
4. Mr. T.N.C.Kaushik, learned Additional Government Pleader, accepts notice for the respondent. By referring to the impugned order, he submits that the order was preceded by show cause notice dated 17.10.2023 and multiple reminders. He also points out that the petitioner’s reply was taken into consideration.
5. On examining the impugned order, it follows that the petitioner’s 3/6 reply was referred to but was rejected as not acceptable. The reason for such rejection is that the petitioner did not enclose the profit and loss account and stock details for verification. Learned counsel for the petitioner contended that the petitioner could not participate in the personal hearing on account of the shop being closed due to metro rail work. As a result, it appears that the petitioner was unable to produce relevant documents at the personal hearing. These documents could, however, have been enclosed with the petitioner’s reply. Therefore, it becomes necessary to put the petitioner on terms.
6. For reasons set out above, the impugned order dated 01.04.2024 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order. The petitioner is permitted to submit documents in support of the reply within the aforesaid period. Upon receipt thereof and upon being satisfied that 10% of the disputed tax demand was received, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of three months
7. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
Author Bio
