Case Law Details
Tvl. Harshini Exports Vs e State Tax Officer (FAC) (Madras High Court)
The Madras High Court recently addressed a contentious GST assessment in the case of Tvl. Harshini Exports vs. e State Tax Officer (FAC). This case highlights significant issues regarding the application of GST rules, specifically Rule 30 of the CGST Rules, 2017.
The petitioner, Tvl. Harshini Exports, challenged an order dated 30th December 2023, alleging violations of natural justice and disputing the merits of the tax assessment. The company, involved in textile trade, argued that the assessing officer erred by applying Rule 30, which typically pertains to disputes over related-party transactions, to their case. They contended that proper communication channels were not utilized, leading to their unawareness of the proceedings until May 2024, when a bank attachment notice was received.
The crux of the petitioner’s defense rested on the assertion that their closing stock could have resolved any discrepancies between inward and outward supplies, had the assessing officer invoked statutory powers to request this information. The petitioner, while disputing the application of Rule 30, expressed willingness to remit 10% of the disputed tax amount as a gesture of cooperation pending a remand of the assessment.
In response, the Additional Government Pleader argued that all requisite notices and opportunities were duly provided to the petitioner, satisfying principles of natural justice. However, the court noted procedural lapses in the assessment process, particularly the assumption made by the assessing officer regarding the outward supply value.
Ultimately, the Madras High Court set aside the order dated 30th December 2023, contingent upon Tvl. Harshini Exports remitting 10% of the disputed tax demand within fifteen days. The court granted the petitioner an opportunity to submit a detailed reply to the show cause notice, accompanied by all pertinent documents. Upon receipt and verification of the remittance, the first respondent was directed to conduct a fresh assessment within three months, following a personal hearing to the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 30.12.2023 is assailed both on breach of principles of natural justice and on merits. The petitioner is engaged in trade relating to textiles. According to the petitioner, materials were purchased in the financial year 2017-18 and a large proportion thereof was sold in the following financial year. The petitioner asserts that GST compliances were entrusted to a consultant. Since the show cause notice and other notices were uploaded on the “view additional notices and orders” tab in the GST portal but not communicated to the petitioner through any other mode, it is stated that the petitioner was unaware of proceedings until May 2024 when a bank attachment notice was served.
2. Learned counsel for the petitioner submits that the impugned order is patently flawed in as much as the assessing officer confirmed the tax proposal by reference to Rule 30 of applicable GST Rules. He submits that Rule 30 is applicable in limited circumstances wherein goods are supplied to related parties and there is a dispute with regard to the value of supply. He further submits that the petitioner’s closing stock would have satisfactorily explained the disparity between the value of inward supply and outward supply. If the assessing officer had called for the details of closing stock by exercising power under Section 70 or Section 71 of applicable GST statutes, he submits that the dispute would have been resolved. Without prejudice, learned counsel submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
3. Mr. T. N. C. Kaushik, learned Additional Government Pleader, accepts notice for the first respondent. He submits that principles of natural justice were complied with by issuing intimation dated 31.08.2023, show cause notice dated 30.09.2023 and by offering a personal hearing to the petitioner.
4. On perusal of the impugned order, it is evident that the tax proposal was confirmed on account of the non receipt of objections from the tax payer. It also appears that the assessing officer estimated the outward supply value at 110% of the purchase value by invoking Rule 30 of the CGST Rules, 2017. Learned counsel for the petitioner contended that Rule 30 is not applicable in the circumstances and that the assessing officer could have issued summons and obtained clarification. These facts and circumstances justify re-consideration on terms.
5. For reasons set out above, impugned order dated 30.12.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand, as agreed to, within fifteen days from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit a reply to the show cause notice by annexing all relevant documents. Upon receipt of the petitioner’s reply and on being satisfied that 10% of the disputed tax demand was received, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within three months from the date of receipt of the petitioner’s reply. On account of the assessment order being set aside, the bank attachment is raised.
6. W.P.No.16976 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18696, 18697 and 18698 of 2024 are closed.
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