Case Law Details
Ralco Synergy Pvt. Ltd Vs Joint Commissioner of State Tax (Madras High Court)
Introduction: In a recent case, Ralco Synergy Pvt. Ltd. challenged an assessment order issued by the State GST Authority, citing violations of natural justice and jurisdictional errors. The Madras High Court’s judgment addresses the legality of the demand order and directs a fresh assessment.
Detailed Analysis: The petitioner contested the assessment order primarily on the grounds of jurisdictional issues and procedural irregularities. The assessment stemmed from an inspection conducted by the respondent in November 2022, leading to an intimation and subsequent show cause notice to the petitioner. However, the petitioner alleges that the tax imposition was based on incorrect calculations, considering the total turnover instead of the declared turnover for Tamil Nadu alone. Additionally, discrepancies were noted in assessing GST based on the petitioner’s all India transactions.
While the State Tax Officer was not initially named as a party, the court suo motu included them. Upon examination, the court found that the assessment order failed to reflect a thorough consideration of the petitioner’s financial details, indicating a lack of due diligence. Despite this, the court acknowledged that the petitioner failed to respond to the show cause notice and participate in the proceedings, contributing to the negligence.
To address the situation, the court quashed the assessment order with the condition that the petitioner remits 5% of the disputed tax demand. The petitioner was also granted two weeks to respond to the show cause notice and provide the required payment. Upon satisfaction of these conditions, the assessing officer was directed to conduct a fresh assessment within two months, ensuring compliance with legal standards.
Conclusion: The Madras High Court’s decision in Ralco Synergy Pvt. Ltd Vs Joint Commissioner of State Tax offers insights into the intricacies of GST assessment and the importance of procedural fairness. By nullifying the demand order and mandating a fresh assessment, the court upholds principles of natural justice while emphasizing the responsibilities of both tax authorities and taxpayers in the assessment process. This ruling sets a precedent for similar cases and underscores the significance of adherence to legal procedures in tax matters.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 23.12.2023 is challenged primarily on the ground of breach of principles of natural justice and lack of jurisdiction.
2. Pursuant to an inspection carried out by the respondent in November 2022, an intimation in Form DRC-01A was issued to the petitioner in January 2023. In response thereto, the petitioner sought further time for issuing a reply. This was followed by the show cause notice and the impugned assessment order.
3. Learned counsel for the petitioner referred to paragraph 4 of the affidavit and pointed out that the tax imposed under serial nos.2, 10 and 11 thereof is based on transactions carried out by the petitioner on an all India basis. For instance, he points out that the turn over relating to Tamil Nadu was only Rs.2.7 Crores, whereas the assessing officer has erroneously taken the total turn over and imposed tax on the difference between the all India turn over and the declared turn over. With reference to serial no.11 thereof, he submits that the total expenditure of the petitioner on all India basis was taken as the amount on which GST should be imposed on reverse charge basis. Therefore, he contends that the impugned assessment order calls for interference not only on the ground of lack of jurisdiction but also on the ground of non-application of mind.
4. Mr. T.N.C.Kaushik, learned Additional Government Pleader, accepts notice on behalf of the respondent. At the outset, he points out that the State Tax Officer was not made a party to the writ petition. Secondly he points out that the assessment order was preceded by an intimation and show cause notice and that the assessing officer had no choice but to confirm the proposals since the petitioner did not participate in proceedings and contest the tax demand.
5. Since an objection was raised that the State Tax Officer was not arrayed as a party, he is impleaded suo motu as the second respondent. The Registry is directed to issue the order copy after carrying out the amendment in the petition. On examining the impugned assessment order, it is noticeable that the assessing officer has taken into consideration the closing balance of creditors on all India basis. Similarly, based on the profit and loss account of the petitioner, the total revenue and expenditure of the corporate entity were made the basis for imposing GST. These conclusions clearly reflect non-application of mind. At the same time, it should be recognized that an intimation and show cause notice preceded the assessment order. There is also a time lag of about two months between the show cause notice and the assessment order. Therefore, it follows that the petitioner was negligent in not responding to the show cause notice and participating in proceedings.
6. On instructions, learned counsel for the petitioner submits that the petitioner is ready and willing to remit a reasonable portion of the impugned tax demand as a condition for remand. However, he points out that 10% of the total disputed tax demand would be excessive in as much as this includes the all India turn over.
7. Therefore, the impugned assessment order is quashed subject to the condition that the petitioner remits 5% of the disputed tax demand as a condition for remand. The petitioner is also permitted to file a reply to the show cause notice within a maximum period of two weeks from the date of receipt of a copy of this order along with 5% of the disputed tax demand. Subject to receipt of the reply and upon being satisfied that 5% of the disputed tax demand is received, the assessing officer is directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh assessment order in accordance with law within a maximum period of two months thereafter.
8. W.P.No.5554 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.6148 and 6150 of 2024 are closed.
Author Bio
