Case Law Details
Yesem Marketing Vs Deputy Commercial Tax Officer (Madras High Court)
GST liability due to non-response to SCN: HC provides opportunity to contest tax demand on merits with a 10% pre-deposit
In a recent ruling, the Madras High Court addressed a crucial case involving Yesem Marketing and the Deputy Commercial Tax Officer regarding Goods and Services Tax (GST) liability. The court’s decision was centered on allegations of a breach of natural justice due to the inability of the petitioner to respond to a show cause notice (SCN).
Background of the Case
Yesem Marketing challenged an order dated 17th October 2023, which upheld a tax proposal against them. The petitioner argued that personal difficulties prevented them from responding to the show cause notice, thereby denying them a fair opportunity to contest the tax demand on its merits. The primary contention was that the tax liability was based solely on discrepancies between GSTR 1 statements and GSTR 3B returns.
Legal Arguments
The petitioner’s counsel argued a violation of natural justice, emphasizing that statutory rules were flouted as the proceedings were initiated without proper verification and solely on mismatch grounds. They contended that given an opportunity, they could demonstrate that the tax proposal was unfounded and should be dropped. As a condition for remand, the petitioner agreed to pre-deposit 10% of the disputed tax amount.
On the other hand, the Government Advocate representing the respondent highlighted the issuance of the show cause notice and subsequent reminders as per procedural requirements. It was pointed out that Rule 88C of the Central Goods and Services Tax Rules, 2017, cited by the petitioner, did not apply to assessments for the relevant period.
Court’s Decision
Upon reviewing the facts and arguments presented, the Madras High Court found merit in the petitioner’s plea regarding the denial of adequate opportunity to present their case. The court set aside the impugned order and remanded the matter back to the Deputy Commercial Tax Officer. The remand was conditional upon the petitioner remitting 10% of the disputed tax amount within two weeks and submitting a detailed reply to the show cause notice.
Furthermore, the court directed the tax authority to provide a reasonable opportunity to the petitioner, including a personal hearing, and to issue a fresh order within three months from the receipt of the petitioner’s reply. This decision underscored the importance of procedural fairness and adherence to principles of natural justice in tax assessment proceedings.
Conclusion
The case of Yesem Marketing vs. Deputy Commercial Tax Officer before the Madras High Court serves as a significant precedent emphasizing the rights of taxpayers to fair and just treatment in tax assessments. The court’s ruling not only corrected procedural lapses but also ensured that the petitioner had a genuine opportunity to contest the tax liability imposed due to non-response to the show cause notice. This judgment reaffirms the judiciary’s role in safeguarding the interests of taxpayers and upholding the rule of law in GST matters.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 17.10.2023 is assailed on the ground of breach of principles of natural justice. The petitioner asserts that she was unable to respond to the show cause notice on account of personal difficulties. Since the petitioner was unable to defend the tax proposal on merits, the present writ petition was filed.
2. Apart from the denial of reasonable opportunity of hearing, learned counsel for the petitioner submits that statutory rules were violated by initiating action entirely on the basis of a mismatch between the GSTR 1 statement and GSTR 3B returns. If provided an opportunity, he submits that the petitioner would be in a position to establish that the tax proposal should be dropped. On instructions, he submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
3. Mrs. K.Vasanthamala, learned Government Advocate, accepts notice for the respondent. She points out that the impugned order was preceded by a show cause notice dated 13.03.2023 and about three reminders. She also submits that Rule 88C of the Central Goods and Services Tax Rules, 2017 is inapplicable to the present proceedings and that the said rule would only apply in relation to assessments for the period subsequent to 07.01.2022.
4. On perusal of the impugned order, it is evident that the confirmed tax proposal relates entirely to a mismatch between the GSTR 1 statement and the GSTR 3B return. Such proposal was confirmed because the petitioner did not reply to the show cause notice or attend personal hearing. In these circumstances, albeit by putting the petitioner on terms, it is just and necessary that the petitioner be provided an opportunity to contest the tax demand on merits.
5. Solely for reasons set out above, the impugned order dated 17.10.2023 is set aside and the matter is remanded for reconsideration condition on 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. 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 the 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 from the date of receipt of the petitioner’s reply.
6. 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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