ITC demand confirmed without petitioner being heard: HC set aside the order

Sanjai Gandhi Vs Deputy Commercial Tax Officer (ST) (Madras High Court)

Sanjai Gandhi challenges an order dated 31.08.2023, contesting the confirmation of an Input Tax Credit (ITC) demand without being afforded a reasonable opportunity to be heard. The case involves discrepancies in GST returns related to water purifiers and R.O. systems supply and services.

Key Points

1. Sanjai Gandhi, engaged in the business of water purifier supply and services, received a notice in Form GST ASMT 10 on 13.12.2021, concerning discrepancies in his GST returns. He responded on 12.01.2022, but claims he couldn’t reply to subsequent notices uploaded on the GST portal.
2. Sanjai’s counsel argues that the confirmed tax demand stemmed from inconsistencies between his GSTR 3B return and auto-populated GSTR 2B, as well as GSTR 3B and GSTR 7 returns. They assert that a detailed explanation was provided earlier and agree to remit 10% of the disputed tax demand for remand.
3. The Government Advocate acknowledges receipt of the notice and multiple opportunities given to Sanjai. However, the impugned order confirming the tax demand was issued without Sanjai’s hearing.
4. The court observes that the confirmed tax demand was based on discrepancies without Sanjai’s hearing and accepts his agreement to remit 10% of the disputed amount. It sets aside the order, directing Sanjai to remit the agreed amount within two weeks and submit a reply to the show cause notice.
5. Upon receipt of Sanjai’s reply and remittance, the respondent is directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within two months.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

An order dated 31.08.2023 is assailed on the ground that the petitioner did not have a reasonable opportunity.

2. The petitioner is engaged in the business of supplying water purifiers and R.O. systems and providing services in relation thereto. Upon examining the returns of the petitioner, a notice in Form GST ASMT 10 was issued on 13.12.2021. The petitioner replied thereto on 12.01.2022. Thereafter, the petitioner asserts that he could not reply to the intimation or show cause notice since the same was uploaded on the GST portal and not served on the petitioner through any other mode.

3. Learned counsel for the petitioner submits that the impugned order pertains to discrepancies between the petitioner’s GSTR 3B return and the auto-populated GSTR 2A as also between the GSTR 3B and GSTR 7 returns. She further submits that a detailed explanation was provided upon receipt of a notice in Form GST ASMT 10. On instructions, she submits that the petitioner is willing to remit 10% of the disputed tax demand as a condition for remand.

4. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. By referring to the impugned order, learned counsel submits that the petitioner was provided multiple opportunities to contest the tax demand.

5. On perusal of the impugned order, it is evident that the confirmed tax demand relates to the discrepancies between the Input Tax Credit (ITC) claimed by the petitioner in Form GSTR 3B on comparison with the GSTR 2B. Such tax demand was confirmed without the petitioner being heard. The petitioner has also agreed to the payment of 10% of the disputed tax demand as a condition for remand. In these circumstances, it is just and necessary that the petitioner be provided an opportunity.

6. For reasons set out above, the impugned order is set aside on condition 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. The petitioner is also permitted to submit a reply to the show cause notice within the aforesaid period. 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 two months from the date of receipt of the petitioner’s reply.

7. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.