Case Law Details
Rethinasamy Gandhi Vs Thedeputy State Tax Officer- I (Madras High Court)
Madras High Court has set aside an order imposing GST liability on Rethinasamy Gandhi for transportation services rendered to TASMAC (Tamil Nadu State Marketing Corporation), remitting the matter back to the tax authorities for fresh consideration. The court noted that the original order failed to account for the Reverse Charge Mechanism (RCM) provisions under GST law.
The petitioner, Rethinasamy Gandhi, had approached the High Court challenging an impugned order dated December 30, 2023, which imposed tax liability for the period 2017-18. This order followed a notice in DRC-01A (September 11, 2023), a Show Cause Notice (SCN) in DRC-01 (September 25, 2023), and a subsequent reminder. While the petitioner submitted a reply, the court observed it was “superficial” and lacked clear explanation.
The core of the petitioner’s argument was that his services, primarily the transportation of bottles for TASMAC, fell under the Reverse Charge Mechanism. He contended that under Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 (and an identical State notification), the GST liability lay with the recipient of the service, i.e., TASMAC, and not with him as the service provider.
The High Court, after reviewing the arguments, found a prima facie indication that the tax should indeed have been paid on a Reverse Charge Basis by the recipient, as per Sl. No. 11 of the said Notification. Crucially, the court highlighted that this significant aspect had “not been considered in the impugned order.”
Despite the petitioner approaching the court considerably after the impugned order’s issuance, the High Court decided to set aside the order. This decision was made conditional on the petitioner depositing 25% of the disputed tax amount within 30 days. The quashed order is now to be treated as a corrigendum/addendum to the original show cause notice.
The court directed the petitioner to file a fresh, comprehensive reply to the show cause notice within 30 days, along with the required deposit. Following this, the Deputy State Tax Officer-I is mandated to pass a fresh order on merits, expeditiously, preferably within three months, after affording the petitioner a proper hearing.
No specific judicial precedents were cited in the provided order. The Writ Petition was disposed of with these observations, and no costs were imposed. The ruling ensures that the RCM aspect is duly examined before a final tax liability is determined.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition is disposed of at the time of admission after hearing the learned counsel for the petitioner and learned counsel for the respondent.
2. The petition is before this Court against the impugned order, dated 30.12.2023, wherein the petitioner has been mulched with tax liability for the tax period 2017-18.
3. The impugned order has been preceded with notice in DRC 01A, dated 11.09.2023 followed by Show Cause Notice in DRC 01, dated 25.09.2023, to which the petitioner has replied and thereafter, a reminder was issued to the petitioner on 18.11.2023.
4. It is noticed that the petitioner has given superficial reply, however, not clearly explained the position in the reply.
5. It is the specific case of the petitioner that the petitioner appears to be engaged in transportation of bottles from TASMAC and that the petitioner was not required to pay GST as tax liability was on the recipient of service, namely, TASMAC in terms of Notification No.11/2017-Central tax (Rate), dated 28.06.2017 of the Central Government and an identical Notification issued by the State Government for the purpose of TN GST Act, 2017.
6. Having considered the arguments advanced by the learned counsel for the petitioner and the learned counsel for the respondent, I am of the considered view that in terms of the Sl.No.11 to the said Notification, prima facie, there is an indication that the tax has to be paid on Reverse Charge Basis on the recipient, however, this aspect has not been considered in the impugned order.
7. However, it is noticed that the petitioner has come long after the impugned order that was passed by the respondent on 30.12.2023. Considering the consistent view of this Court, this Court is inclined to set aside the impugned order subject to the petitioner depositing 25% of the disputed tax within a period of 30 days from the date of receipt of a copy of this order.
8. The impugned order, which stands quashed, shall be treated as corrigendum/addendum to the show cause notice that preceded the impugned order.
9. The petitioner shall file a reply to the show cause notice that preceded the impugned order within a period of 30 days from the date of receipt of a copy of this order, along with the said deposit.
10. The respondent shall, thereafter, proceed to pass fresh orders on merits and in accordance with law as expeditiously as possible preferably within a period of three (3) months. Needless to state, the petitioner shall be heard before passing such order.
11. This Writ Petition is disposed of, with the above observations. No costs. Consequently, connected miscellaneous petition is closed.
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