Case Law Details
Banyan Engineers Contractors Vs Deputy State Tax Officer-2 (Madras High Court)
In the case of Banyan Engineers Contractors vs. Deputy State Tax Officer-2, the Madras High Court addressed an issue concerning the discrepancy between GSTR 3B returns and GSTR 2A data, specifically focusing on Input Tax Credit (ITC) and turnover in the context of GST compliance.
The petitioner, an ex-serviceman engaged in construction work for government projects, received a show cause notice on 26th September 2023. This notice highlighted significant differences between the turnover reported in the petitioner’s GSTR 3B returns and the outward supplies reflected in GSTR 2A. The petitioner responded on 26th December 2023, explaining that delays in converting purchases into outward supplies accounted for the lower values in GSTR 3B. They also addressed the mismatch in Input Tax Credit claimed.
Subsequently, an order was issued on 28th December 2023, which the petitioner sought to appeal, requesting condonation of the delay in filing the appeal against this order.
During the proceedings, the petitioner’s counsel argued that the show cause notice did not originally encompass the issue of ITC mismatch, which was central to the order. This discrepancy, they contended, warranted interference since the petitioner was not given an opportunity to address this specific aspect before the order was issued.
On the other hand, the Additional Government Pleader representing the respondents argued that the order had been issued in compliance with principles of natural justice and that the issues raised in the order were justified.
The Court observed that while the show cause notice initially focused on the difference between purchase values and outward supplies in GSTR 3B, the subsequent order addressed additional issues related to transitional credits, which were not explicitly covered in the notice. Acknowledging this mismatch, the Court found merit in the petitioner’s argument that they were not adequately informed or given a chance to respond to these specific claims.
Despite recognizing this procedural flaw, the Court noted that the petitioner had failed to file their appeal within the prescribed time limit. Therefore, as a compromise, it directed that the impugned order should be treated as a show cause notice. This decision aimed to rectify the procedural gap by allowing the petitioner another opportunity to respond to the issues raised regarding the mismatch between GSTR 3B and auto-populated GSTR 2A.
Furthermore, the Court mandated that the petitioner pay 10% of the disputed tax demand within 15 days of receiving the court’s order. This payment was set as a condition for reconsideration of the case by the tax authorities. Upon receipt of this payment and the petitioner’s response to the ‘show cause notice’, the Deputy State Tax Officer-2 was instructed to provide a fair opportunity, including a personal hearing, and to issue a fresh order within three months.
In conclusion, the writ petition (W.P. No. 15553 of 2024) was disposed of under these terms, emphasizing the importance of procedural fairness in tax disputes. The court did not award costs to either party, and related miscellaneous petitions were closed accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this writ petition, the petitioner seeks condonation of delay in filing an appeal against the order dated 28.12.2023.
2. The petitioner states that he is an ex-service man engaged in construction work for Government projects. A show cause notice dated 26.09.2023 was received by the petitioner. In such show cause notice, the petitioner was called upon to show cause with regard to the significant difference between the turnover reflected in the GSTR 2A with regard to supplies and the outward supplies reflected in the petitioner’s GSTR 3B returns. By reply dated 26.12.2023, the petitioner pointed out that the value of supplies in the GSTR 3B is lower on account of the nature of business in as much as it takes time for the purchases to get converted into outward supplies. The petitioner also provided an explanation with regard to the mismatch in Input Tax Credit (ITC). The order dated 28.12.2023 was issued in these facts and circumstances. The petitioner seeks leave to file an appeal against such order.
3. Learned counsel for the petitioner points out that the show cause notice was limited to the difference between the value of purchases and the outward supplies in the petitioner’s GSTR 3B returns, whereas the impugned order deals with the mismatch between the ITC claimed in the petitioner’s GSTR 3B returns and the auto-populated GSTR 2A. Since a reasonable opportunity to show cause against the said mismatch was not provided, learned counsel submits that interference is warranted.
4. Mr. T.N.C.Kaushik, learned Additional Government Pleader, accepts notice for the respondents. He points out that the order in original was issued after complying with principles of natural justice.
5. The show cause notice clearly indicates that the tax proposal ns to the lack of proportionality between the outward supplies reflected in the petitioner’s GSTR 1 statement and the purchase value reflected in the GSTR 2A. By contrast, on examining the impugned order, the confirmed tax proposal relates to the excess transitional credit claimed by the petitioner. Since this issue was not raised in the show cause notice, as contended by learned counsel for the petitioner, interference is warranted.
6. However, the petitioner failed to challenge the order within the limitation period and, therefore, it is necessary to put the petitioner on On instructions, learned counsel for the petitioner agrees to remit 10% of the disputed tax demand as a condition for reconsideration.
7. In these circumstances, it is just and appropriate that the impugned order be treated as a show cause notice so as to enable the petitioner to respond to the issue relating to mismatch between the petitioner’s GSTR 3B return and the auto-populated GSTR 2A.
8. Accordingly, W.P. No. 15553 of 2024 is disposed of by directing he order dated 28.12.2023 be treated as a show cause notice. The petitioner shall remit 10% of the disputed tax demand as agreed to within 15 days from the date of receipt of a copy of this order. Within the aforesaid period, the petitioner is permitted to submit a reply to the show cause notice. Upon receipt of the petitioner’s reply and upon being satisfied that 10% of the disputed tax demand was received, the 1st 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 from the date of receipt of the petitioner’s reply.
9. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
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