Case Law Details
Vela Agencies Vs Assistant Commissioner ST FAC (Madras High Court)
In the case of Vela Agencies versus Assistant Commissioner ST FAC before the Madras High Court, the petitioner challenged an order dated 23.06.2023 on the grounds that it deviated from the show cause notice. The petitioner had received an intimation dated 24.11.2022 and a show cause notice dated 29.12.2022. In response, the petitioner explained that their business as a distributor of Aircel Limited ceased due to the closure of Aircel’s business after 28.02.2018. However, the impugned order was issued imposing a tax liability of Rs.14,97,072/-, significantly higher than the initial estimate of Rs.8,27,252/- based on sales suppression.
The petitioner’s counsel argued that the imposition of tax liability was based on a comparison between the petitioner’s GSTR 3B return and the GSTR 2A, and that a reversal of Input Tax Credit from the petitioner’s electronic credit ledger had also been made. Hence, the counsel contended that the matter required reconsideration.
The learned Government Advocate representing the respondent accepted notice and argued that, considering the petitioner’s response to the intimation, they were not entitled to Input Tax Credit, thereby justifying the imposition of tax liability.
Upon examination of the intimation and show cause notice, the court found discrepancies between the initial tax proposal and the imposed tax liability in the impugned order. While the initial proposal was based on sales suppression, the order deviated from this basis. Furthermore, the petitioner’s electronic credit ledger had been debited, indicating a change in circumstances.
Consequently, the court set aside the impugned order and directed the respondent to initiate fresh proceedings by issuing a show cause notice to the petitioner. The court emphasized that if the respondent intended to modify the tax proposal, a fresh show cause notice should have been issued instead of deviating from the original basis without proper notice.
In conclusion, the court’s decision highlighted the importance of adherence to procedural fairness and the need for proper notice and justification in tax proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 23.06.2023 is assailed on the ground that the impugned order proceeds on a completely different basis from the show cause notice. The petitioner received intimation dated 24.11.2022 and show cause notice dated 29.12.2022. The petitioner replied to the intimation on 28.12.2022 by stating that the petitioner was a distributor of Aircel Limited (Aircel) and that the petitioner was unable to conduct business after 28.02.2018 due to the closure of the business of Aircel. The impugned order was issued in these circumstances.
2. Learned counsel for the petitioner referred to the intimation and show cause notice and pointed out that the petitioner was called upon to show cause as to why tax liability of Rs.8,27,252/- should not be imposed with regard to sales suppression, which was estimated on the basis of the Input Tax Credit availed of by the petitioner. In contrast, learned counsel submits that tax liability of Rs.14,97,072/-was imposed under the impugned order by comparing the petitioner’s GSTR 3B return and the GSTR 2A. Learned counsel also points out that a reversal was made of Input Tax Credit from the electronic credit ledger of the petitioner to the extent of Rs.7,52,047/-on 15.02.2024. Therefore, he submits that the matter requires reconsideration.
3. Mrs. V.Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. In view of the petitioner’s reply to the intimation, learned counsel submits that the petitioner is clearly not entitled to Input Tax Credit. Consequently, he submits that the impugned order does not contain any infirmity.
4. On perusal of the intimation and show cause notice, it is evident that the petitioner was called upon to show cause with regard to a sum of Rs.8,27,252/-, which was arrived at on the assumption that there was sales suppression. By contrast, the impugned order imposes tax liability of Rs.14,97,072/- and an equal amount by way of penalty. It is also clear that the impugned order does not proceed on the basis of sales suppression. If the respondent intended to modify the tax proposal in light of the petitioner’s reply, a fresh show cause notice should have been issued. It is also noticeable that the petitioner’s electronic credit ledger was debited to the extent of Rs.7,52,047/-. In these circumstances, the impugned order cannot be sustained.
5. Therefore, impugned order dated 23.06.2023 is set aside by leaving it open to the respondent to initiate fresh proceedings by issuing a show cause notice to the petitioner.
6. W.P.No.11030 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.12108 and 12109 of 2024 are closed.
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