Kerala HC Sets Aside GST Order for Discarding Reply with Just a Sentence

Masany Constructoin Equipment Pvt . Ltd Vs State Tax Officer (Kerala High Court)

The Kerala High Court heard a case involving Masany Construction Equipment Pvt. Ltd., which challenged an order under Section 73(9) of the CGST Act, 2017, imposing tax, interest, and a penalty. The petitioner, a supplier of construction equipment and heavy machinery, received a show-cause notice for discrepancies between GSTR-1 and GSTR-3B filings for the 2019-20 financial year. The petitioner explained that the mismatch was due to an error in GSTR-1 entries, which they were unable to correct, but had corrected in the GSTR-3B filings. They asserted that there was no tax liability due to sufficient Input Tax Credit (ITC) and no intention to evade tax.

Despite the petitioner’s reply and a subsequent hearing opportunity, which the petitioner did not attend, the State Tax Officer issued an order that simply dismissed the petitioner’s explanation as “not convincing” and “non-explanatory.” The Kerala High Court found this order to be a non-speaking order. The court emphasized that discarding a reply with a mere sentence is insufficient, especially when the petitioner claimed no tax liability and attributed the error to a data entry mistake. The officer, according to the court, should have verified the validity of the mistake, and if necessary, examined the records.