HC Sets Aside Ex-Parte GST Order, Permits ITC Verification in GSTR-3B/GSTR-2A Mismatch

Tvl. VARS Enterprises Vs Assistant Commissioner (State Tax) (Madras High Court)

The writ petition challenged an assessment order dated 29.08.2024 passed under Section 73 of the Tamil Nadu GST Act, 2017.

The assessment order had been passed ex parte because the petitioner did not utilize the opportunities provided during the assessment proceedings. The assessment was based on four discrepancies: reconciliation issues between GSTR-1 and GSTR-3B, input tax credit (ITC) mismatch between GSTR-3B and GSTR-2A, declaration of ineligible ITC, and invalid ITC under Section 16(4) of the GST Act.

Before the Court, the petitioner contended that there was no difference in the reconciliation of GSTR-1 and GSTR-3B and sought an opportunity to submit a detailed reply with supporting records. Regarding the ITC mismatch, the petitioner asserted that there was no excess ITC claim under Section 16 and stated that compliance with Circular No. 183/15/2022 dated 27.12.2022 would eliminate any GST liability. Concerning the allegation of ineligible ITC, the petitioner maintained that ITC had been claimed only on business-related goods and therefore no ineligible credit had been availed. As regards the alleged invalid ITC under Section 16(4), the petitioner argued that the credit was eligible under Section 16(5), introduced through Section 128A, and therefore the issue of a belated ITC claim did not arise.

The petitioner explained that the assessment order had been uploaded on the GST portal without the petitioner’s knowledge and that the accountant had not informed the petitioner about the proceedings, resulting in non-participation.

The Court considered the nature of the discrepancies, the explanations offered on merits, and the reasons given for not availing the opportunities. It observed that an opportunity could be granted to the assessee to submit explanations and supporting documents before the assessing officer. The Court noted that such opportunities are generally granted on equitable grounds, subject to appropriate conditions.

The Court further observed that it normally directs deposit of 25% of the disputed tax amount as a condition for granting relief. However, since the petitioner contended that a substantial portion of the disputed tax demand related to the benefit claimed under Section 16(5) of the GST Act, the Court held that the requirement to deposit 25% would apply only to the balance disputed tax amount excluding the portion relating to Section 16(5).

Accordingly, the Court allowed the writ petition and directed the petitioner to deposit 25% of the disputed tax amount, excluding the issue raised under Section 16(5), within four weeks. Upon such deposit, the assessment order dated 29.08.2024 would stand set aside and the matter would be remanded to the assessing officer for fresh consideration. The petitioner was directed to appear before the assessing officer and submit replies and supporting documents, and the respondent was directed to reconsider the matter and pass orders in accordance with law. The Court also ordered that any bank account attachment made pursuant to the impugned assessment order would stand lifted upon setting aside the assessment. No costs were awarded.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This writ petition challenges the impugned order dated 29.08.2024 which is an assessment order passed under Section 73 of the TNGST Act, 2017.

2. I have heard the learned counsel for the petitioner and the learned Government Standing Counsel for the respondent.

3. By the impugned order, the assessment was made ex-parte because the petitioner did not utilise the opportunities provided. The discrepancies and grounds on which the assessment order was issued, the dealer’s explanation on merits, and the reasons for not participating in the assessment proceedings are summarised briefly and presented in a table below:

4. Considering the nature of the discrepancies noted, the explanation provided by the assessee and the reason given before this Court for not availing the opportunity, I believe that an opportunity can be granted to the assessee to present their submissions and produce the relevant supporting documents before the respondent assessing officer. This Court has been extending such opportunities on equitable grounds; however, under appropriate conditions.

5. Normally, this Court imposes a condition on the petitioner to deposit 25% of the disputed tax amount. However, it is the contention of the learned counsel for the petitioner that a substantial portion of the disputed tax amount is covered by the ground raised with reference to the Amendment to Section 16 of the Act by way of Section 16(5) of the Act. In view thereof, with reference to the portion that is claimed to be coming within the exemption granted under Section 16(5) of the Act, for the balance portion alone, 25% of the disputed tax amount may be deposited.

6. In view thereof, this Writ Petition is allowed on the following terms:

(i) Within four weeks from the date of receipt of a web copy of the order, the petitioner shall deposit 25% of the disputed tax amount except issue raised under Section 16(5) of the GST Act with the respondent, without waiting for a certified copy of the order;

(ii) Upon such deposit, the impugned order dated 29.08.2024 shall stand set aside, and the matter shall stand remanded back to the file of the respondent;

(iii) The assessee shall appear before the respondent without fail and submit their reply and documents in support of their claim, and it is for the respondent to consider the matter afresh and pass orders in accordance with law;

(iv) Since the impugned order of assessment is set aside, any attachment of the bank account made pursuant to the impugned order shall stand raised;

(v) No costs. Consequently the connected miscellaneous petition is closed.