Madras HC quashes GST Order Due to Denied Hearing; Orders 10% Tax Deposit for Reassessment

Tvl. P. Rajesekaran Vs State Tax Officer (Roving Squad-II) (Madras High Court)

Madras High Court set aside the impugned GST assessment order against Tvl. P. Rajasekaran, a contractor with the Tamil Nadu Power Generation and Distribution Corporation Limited, citing a violation of natural justice. The dispute arose from a surprise inspection under Section 167 of the Tamil Nadu Goods and Services Tax Act, 2017, which revealed discrepancies in outward supply figures and input tax credit claims. The petitioner received multiple notices, including a show cause notice and personal hearing notices. However, he had sought additional time to respond, which was allegedly not considered before the final order was passed. The petitioner contended that the order was unfairly confirmed without providing him adequate opportunity to present his objections. Conversely, the respondents argued that the petitioner had been given multiple chances for a hearing but failed to appear.

Considering a recent judgment in a similar case, the High Court ruled in favor of the petitioner, provided he deposits 10% of the disputed tax within four weeks. Upon compliance, the assessment order would be treated as a show cause notice, allowing the petitioner to submit objections with supporting documents. The court also directed that if the deposit is made, the bank account attachment and garnishee proceedings be lifted. However, failure to meet the conditions would lead to the restoration of the original order. With this conditional relief, the writ petition was disposed of without costs, ensuring a fair adjudication process while safeguarding the revenue interests.

The present writ petition is filed challenging the impugned order dated 07.08.2024 on the premise that the impugned order suffers from violation of principles of natural justice inasmuch as the impugned order came to be passed without considering the petitioner’s request for time.

2. The petitioner is registered as a contractor with Tamil Nadu Power Generation and Distribution Corporation Limited for providing “Transport of Goods Services”. The petitioner is registered under the Goods and Services Tax Act, 2017. During the relevant period 2017-18, the petitioner had filed returns and paid appropriate taxes. While so, there was a surprise inspection of the petitioner’s place of business in terms of Section 167 of the Tamil Nadu Goods and Services Tax Act, 2017 (hereinafter referred to as the “TNGST Act”) by the Intelligence Wing authorities. During the course of such inspection, the following defects were noticed:

i) Difference in outward supply as per Income Tax Form 26AS;

ii) Difference in outward supply as per accounts;

iii) Excess availment of input tax credit;

iv) Tax under RCM for transport service availed as per

3 It is submitted by the learned counsel for the petitioner that an intimation notice in DRC-01A was issued on 13.05.2024, a show cause notice in DRC-01 was issued on 05.06.2024 followed by personal hearing notices on 05.07.2024, 23.07.2024 and 30.07.2024. The petitioner had filed letter dated 27.06.2024 seeking two months time. Thereafter, the impugned order came to be passed on 07.08.2024 confirming the proposal, without considering the petitioner’s request for time. It is thus submitted that the impugned order is bad.

4. To the contrary, it is submitted by the learned counsel for the Respondents that pursuant to the notice in DRC-01 dated 27.06.2024, opportunity of personal hearing was offered to the petitioner on three occasions i.e., on 05.07.2024, 23.07.2024 and 30.07.2024, however the petitioner did not avail the opportunity of personal hearing extended. It is submitted that the challenge laid by the petitioner to the impugned order on the ground of violation of principles of natural justice cannot be sustained.

5. At this juncture, the learned counsel for the petitioner would place reliance upon the recent judgment of this Court in the case of Sree Manoj International Deputy State Tax Officer in W.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. It was further submitted that even before the time for filing of appeal has expired, the Respondents proceeded with recovery proceedings and garnishee proceedings has been issued and bank accounts have been attached.

6. It was further submitted that the petitioner is ready and willing to pay 10% of the disputed tax and that he may be granted one final opportunity before the adjudicating authority to put forth their objections to the proposal, to which the learned Additional Government Pleader appearing for the respondent does not have any serious objection.

7. In view thereof, the impugned order dated 07.08.2024 is set aside and the petitioner shall deposit 10% of the disputed tax within a period of four weeks from the date of receipt of a copy of this order. On complying with the above condition, the impugned order of assessment shall be treated as show cause notice and the petitioner shall submit its objections within a period of four weeks from the date of receipt of a copy of this order along with supporting documents/material. If any such objections are filed, the same shall be considered by the respondent and orders shall be passed in accordance with law after affording a reasonable opportunity of hearing to the petitioner. If the above deposit is not paid or objections are not filed within the stipulated period, i.e., four weeks respectively from the date of receipt of a copy of this order, the impugned order of assessment shall stand restored. It is open to the Respondents to appropriate 10% of the disputed tax and on such appropriation, the bank attachment shall be lifted and garnishee proceedings issued by TANGEDCO shall also be withdrawn on complying with the above condition.

8. Accordingly, the Writ Petition stands disposed of. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.