Case Law Details
Sri Velavan Traders Vs State Tax Officer (Madras High Court)
The Madras High Court recently ruled on a crucial aspect of GST compliance in the case of Sri Velavan Traders versus the State Tax Officer. The judgment addressed the obligation of GST-registered individuals to respond to show cause notices (SCNs) even after scrutiny proceedings have been dropped.
The case arose from an order dated 10.04.2024, which was challenged primarily due to the dropping of scrutiny proceedings earlier on 12.09.2023. Despite the cessation of scrutiny, the petitioner received a show cause notice (SCN) and subsequent reminders urging participation in adjudication proceedings under Section 73 of GST laws. The petitioner argued that since scrutiny was dropped, no further action could be taken, and she was unaware of subsequent proceedings leading to the impugned order.
The High Court examined the legality of initiating Section 73 proceedings after the conclusion of scrutiny. It was contended that the impugned order did not consider a reconciliation statement crucial to the assessment, which detailed discrepancies in input tax credit (ITC) claims. The petitioner insisted on reconsideration, offering to remit a portion of the disputed tax demand.
On behalf of the respondent, it was argued that dropping scrutiny does not preclude the initiation of adjudication proceedings under GST laws. The court noted that despite dropping scrutiny, the petitioner, as a GST-registered entity, had a statutory obligation to respond to the SCN and participate in adjudication proceedings. The failure to do so was not justified merely on the grounds of dropped scrutiny.
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