Madras HC Grants Gillette India Ltd. Chance to Respond to GST Demand with Rs. 1 Crore Payment

Gillette India Limited Vs Assistant Commissioner (Madras High Court)

Madras High Court, in the case of Gillette India Limited vs Assistant Commissioner, granted the company a final opportunity to respond to a GST demand of Rs. 6.57 crore, contingent on a deposit of Rs. 1 crore. Gillette, a registered GST dealer, had faced scrutiny due to mismatches between its GSTR 3B and GSTR 2A/2B filings. The original tax demand, which had exceeded the proposed sum in the show cause notice by over Rs. 240 crore, was challenged by Gillette on the grounds of exceeding the scope of the notice and jurisdictional issues regarding transactions outside Tamil Nadu. The Court found procedural lapses in issuing the impugned order, particularly the additional demand beyond the show cause notice. It quashed the order, allowing Gillette to file its reply after depositing the required Rs. 1 crore. The Court also directed the GST authorities to reassess the matter while giving Gillette a fair opportunity to present its case. This judgment underscores the importance of following the statutory framework, respecting jurisdictional boundaries, and ensuring taxpayers’ right to a fair hearing before finalizing demands.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The present writ petition is filed challenging the impugned order dated 13.08.2024 on the premise that the impugned order levies tax on supplies outside the State of Tamil Nadu, thereby suffers from want of jurisdiction. The impugned order is also challenged on the premise that it raises demand in excess of the amount of taxes proposed in the show cause notice thereby violating the mandate contained in Section 75(7) of the Act and thus violates principles of natural justice.

2. The petitioner is engaged in manufacturing and trading of various personal grooming and oral care products. The petitioner is a registered dealer under Goods and Services Act, 2017. During the relevant period, the petitioner had filed its return and paid appropriate taxes. While scrutinizing the petitioner’s return, it was found that there was mismatch between GSTR 3B and GSTR 2A/2B. Subsequently, a notice in ASMT-10 was issued on 15.11.2023 and another notice was issued in DRC-01A to the petitioner on 28.05.2024 followed by reminders on 11.07.2024, 20.07.2024 and 03.08.2024. Thereafter, the impugned order came to be passed.

3. The learned Senior Advocate appearing for the petitioner would submit that for the first time by way of the impugned order the Respondent had quantified an excess demand of Rs.247,32,89,021/- in addition to the demand of taxes proposed in the show cause notice which was to the tune of Rs.10,60,28,802/-. The impugned order by levying an additional demand to an extent of 247.82 crores traverses beyond the show cause notice and thus hit by Section 75(7) of the Tamil Nadu Goods and Services Tax Act, 2017(hereinafter referred to as “the Act”). The quantum of demand alleged in show cause notice vis-a-vis the demand raised in the impugned order is summarized in the table below:

i) ​Show Cause Notice dated 05. 2024:

ii) ​Order issued dated08.2024:

4. It is also the submission of the learned Senior Advocate for the petitioner that the enhanced/ increased demand is in view of the fact that the impugned order levies tax on transactions of supply effected at PAN India level i.e., levy of tax in respect of supplies effected outside the State of Tamil Nadu which is wholly bad for want of jurisdiction. It was also submitted that the majority of the supplies have also been subject to tax particularly in Mumbai where they have the Head Office. Thus, the impugned order could possibly result in levy of tax on supplies which have already suffered tax in other jurisdiction.

5. To the contrary, the learned counsel for the Respondents would submit that the petitioner had not even responded to the reply. Having failed to file its reply, it may not be open for the petitioner to question the impugned order.

6. At this juncture, the learned Senior Advocate for the petitioner would submit that they were unable to participate only in view of the fact that adjournments were sought for to collate the documents which were voluminous. That said it was submitted that in any view the impugned order cannot be sustained insofar as it proceeds to demand taxes in excess of the amounts of taxes proposed in the show cause notice for it would then be hit by sub-section (7) to Section 75 of the Act. There is merit in the submission of the learned Senior Advocate for the petitioner insofar as the excess demand to the tune of Rs.247.32 crores, there was never an opportunity for the petitioner to respond and the impugned order would also fall foul of sub-section (7) to Section 75 of the Act which provides that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice.

7. It is trite law that show cause notice forms the foundation, thus departure from Show Cause Notice or if order traverses beyond Show Cause Notice, it is necessary that the petitioner is put on notice on the basis of which the order was intended to be made. Else, as submitted by the learned counsel for the petitioner, the opportunity to reply becomes illusory and the notice would be an empty formality if the order is made on new / different grounds from the notice^*.

8. The learned counsel for the petitioner would place reliance upon the recent judgment of this Court in the case of Sree Manoj International Vs. Deputy State Tax Officer in P.No.10977 of 2024 dated 25.04.2024, to submit that this court has remanded the matter back in similar circumstances subject to payment of 10% of the disputed taxes. The learned Senior Advocate for the petitioner would also submit that they may be provided with one final opportunity to put forth their objections and would submit that they are ready and willing to pay 10% of disputed taxes of Rs.6,56,80,225/- as proposed in the show cause notice i.e., Rs.65,68,022/-.

9. The learned counsel for the Respondents would submit that the petitioner may be directed to pay Rs.1 crore within a period of two weeks from the date of receipt of a copy of this order, agreed to by the learned counsel for the

10. In view of the submissions/ consent of the counsel appearing on behalf of the petitioner and the Respondents, the impugned order is set aside and the petitioner shall remit a sum of Rs.1 crore within a period of two weeks from the date of receipt of a copy of this order. Subject to complying with the above condition, it is open to the petitioner to submit its reply within a period of two weeks thereafter treating the impugned order as show cause notice. If any reply/ documents are filed, the Respondent authority shall proceed to complete the assessment in accordance with law after affording the petitioner a reasonable opportunity of hearing.

11. The writ petition stands disposed No costs. Consequently, the connected miscellaneous petitions are closed.

Notes:

*CCE v. Gas Authority of India Ltd., (2007) 15 SCC 91;

CCE v. Brindavan Beverages (P) Ltd., (2007) 5 SCC 388;

CCE v. Ballarpur Industries Ltd., (2007) 8 SCC 89;

Madura Coats P. Ltd. v. CESTAT, (2023) 24 GSTR-OL 208