Case Law Details
Silk Junction Vs Deputy State Tax Officer (Madras High Court)
In a significant development, the Madras High Court has ordered a reconsideration in the case of Silk Junction vs Deputy State Tax Officer concerning discrepancies between the petitioner’s GSTR 1 returns and the e-way bill portal. The court’s decision revolves around the alleged mismanagement of Input Tax Credit (ITC) and turnover mismatches.
Case Background
The dispute between Silk Junction and the Deputy State Tax Officer involves discrepancies in the petitioner’s GST returns. Specifically, the issues pertain to mismatches between the GSTR 1 returns and the e-way bill portal, as well as inconsistencies in the Input Tax Credit (ITC) reported in the GSTR 3B returns. The original order dated January 30, 2024, was challenged on the grounds that the petitioner’s responses were not adequately considered by the tax authorities.
Key Issues and Arguments
1. ITC Mismatch: The petitioner argued that their claim for ITC, as per the GSTR 2A, was greater than what was reported in GSTR 3B. This discrepancy was not duly addressed in the impugned order. The petitioner contended that the order incorrectly stated that no objections were filed, although a detailed response was submitted.
2. Turnover Mismatch: The petitioner also highlighted that the turnover mismatch between their GSTR 1 returns and the e-way bill portal was inaccurately recorded. Despite the petitioner’s submission that taxes related to the mismatch had been paid and declared in their returns, this was not reflected in the order.
3. Legal Concerns: The petitioner’s legal team noted that Section 16(4) was mentioned in the order without being part of the original show cause notice. This raised concerns about procedural fairness and adherence to principles of natural justice.
4. Financial Impact: A significant aspect of the case was the recovery of approximately Rs. 3,11,280 from the petitioner’s bank account, which was executed based on the impugned order. This recovery was challenged as unjust, given the discrepancies in the order.
Court’s Rationale
The Madras High Court examined the discrepancies between the petitioner’s assertions and the impugned order. It was found that:
- The petitioner’s arguments regarding the ITC mismatch and turnover discrepancies were not duly considered.
- The procedural fairness was compromised as the order contained issues not originally included in the show cause notice.
- The financial recovery imposed on the petitioner was based on an incorrect evaluation of the facts.
Consequently, the court decided to set aside the impugned order and remand the case for reconsideration. The first respondent was directed to issue a fresh order within three months, ensuring a thorough review of all submissions and providing the petitioner a reasonable opportunity for a personal hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 30.01.2024 is assailed on the ground that the petitioner’s reply was not taken into consideration. Upon scrutiny of the petitioner’s return, an ASMT 10 notice was issued on 15.03.2023. Since the petitioner did not reply thereto, show cause notice dated 14.12.2022 was issued. Such show cause notice inter alia dealt with the mismatch between the petitioner’s GSTR 3B returns and the auto populated GSTR 2A as regards Input Tax Credit. It also dealt with the turnover mismatch between the petitioner’s GSTR 1 and the e-way bill portal. By reply dated 06.06.2022, the petitioner stated that the Input Tax Credit available, as per GSTR 2A, if checked month wise, is greater than the Input Tax Credit (ITC) claimed in GSTR 3B. As regards turnover mismatch, it was stated that the petitioner had paid Rs.5,82,887/- and declared the same in the returns. The impugned order was issued in these facts and circumstances.
2. Learned counsel for the petitioner referred to the above mentioned reply and thereafter to the impugned order. As regards the issue relating to ITC mismatch, he submits that contradictory findings were entered to the effect that the tax payer did not file objections and that the tax payer’s reply was considered. He also points out that an issue relating to Section 16(4) was raised in the impugned order although not mentioned in the show cause notice. With regard to the e-way bill mismatch, he submits that it was erroneously recorded that the tax payer did not respond thereto, whereas the petitioner had stated that taxes due on account of such turnover mismatch were discharged and reflected in the returns. In conclusion, he points out that a sum of about Rs.3,11,280/- was recovered from the petitioner’s bank account pursuant to the impugned order.
3. Mr. C. Harsha Raj, learned Additional Government Pleader, accepts notice for the first and second respondents. After submitting that principles of natural justice were complied with, he submits that the matter may be remanded for re-consideration especially in view of the recovery of a sum of Rs.3,11,280/-.
4. On examining the impugned order in comparison to the petitioner’s reply, it is noticeable that the petitioner’s assertion that the ITC available in GSTR 2A exceeds that availed of in GSTR 3B was not considered. Similarly, with regard to the turnover mismatch between the petitioner’s GSTR 1 return and the e-way bill portal, the petitioner’s reply to the effect that the tax liability was discharged was not taken into consideration. Consequently, the matter requires re-consideration.
5. For reasons aforesaid, impugned order dated 30.01.2024 is set aside and the matter is remanded for re-consideration. After providing a reasonable opportunity to the petitioner, including a personal hearing, the first respondent is directed to issue a fresh order within three months from the date of receipt of a copy of this order. In view of the assessment order being set aside, the bank attachment is raised.
6. W.P.No.17003 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18737, 18739 and 18740 of 2024 are closed.
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