Case Law Details
Sri Rajaa Store Vs State Tax Officer (Madras High Court)
The case of Sri Rajaa Store vs State Tax Officer came before the Madras High Court concerning an assessment order dated 29th December 2023. The petitioner challenged the order, citing a breach of natural justice principles.
The petitioner, a business operating on thin margins, contended that their entire tax liability was offset by Input Tax Credit (ITC). Upon receiving a show cause notice in September 2023, they responded in October, highlighting that their outward supplies didn’t generate tax liability after adjusting ITC. However, due to unforeseen circumstances like cyclone Michaung, they couldn’t attend the hearing scheduled for December 13, 2023.
The crux of the matter lay in the absence of annexed documents with the petitioner’s reply. Despite stating their intention to submit relevant documents, the entire ITC availed by the petitioner was re-versed, leading to a significant tax liability. The court acknowledged the petitioner’s claim regarding the availability of proper documentation and the non-generation of tax liability from outward supplies.
The Madras High Court set aside the assessment order on the condition that the petitioner remit Rs. 5,00,000 towards the disputed tax liability within three weeks and submit additional documents sup-porting their reply within the same period. Upon receipt and verification of these documents and the mentioned sum, the respondent was directed to provide a reasonable opportunity for the petitioner to present their case, followed by the issuance of a fresh order within two months.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 29.12.2023 is assailed on the ground of breach of principles of natural jus-tice.
2. The petitioner asserts that he carries on business with a thin margin. Consequently, it is asserted that the entire tax liability is subsumed in the available Input Tax Credit (ITC). Upon receipt of show cause no-tice dated 29.09.2023, the petitioner replied on 27.10.2023 and pointed out that the outward supplies do not give raise to tax liability after setting off the ITC. After such reply was received, a hearing notice dated 07.12.2023 was issued fixing a personal hearing on 13.12.2023. According to the petitioner, such hearing could not be attended and the notice could not be replied to because of cyclone Michaung. The impugned order was issued in these facts and circumstances.
3. Learned counsel for the petitioner referred to the reply dated 27.10.2023 and pointed out that such reply was also uploaded on the portal. He further submits that the petitioner had stated that he would submit all relevant documents to establish that ITC was availed of in respect of genuine purchases. If provided an opportunity, he submits that the petitioner would placed all such documents before the assessing officer. By further pointing out that the entire ITC availed of by the petitioner was reversed and tax liability was imposed, on instructions, he submits that the petitioner agrees to remit Rs.5,00,000/- as a condition for remand.
4. Mrs. K. Vasanthamala, learned Government Advocate, accepts notice on behalf of the respondent. She submits that even a person operating on a thin margin would be liable to pay some amount of tax. In the factual context of the petitioner paying no tax on outward supplies, she submits that the impugned order is justified. She also points out that a reasonable opportunity was offered by way of a personal hearing on 13.12.2023.
5. On examining the impugned order, it is evident that tax liability was imposed because the petitioner replied without annexing documents. As a consequence of such order, ITC to the extent of about Rs.1.04 crore was reversed. In the petitioner’s reply, the petitioner has stated that outward supplies do not give rise to tax liability after setting off ITC. The petitioner has also asserted that proper bills and other documents are available. In these circumstances, it is just and appropriate that an opportunity be provided by the petitioner to contest the tax demand on merits albeit by putting the petitioner on terms.
6. Therefore, the impugned order dated 29.12.2023 is set aside on condition that the petitioner remits a sum of Rs.5,00,000/-towards disputed tax liability as agreed to within three weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit additional documents in support of the reply within the aforesaid period. Subject to receipt of the petitioner’s reply and upon being satisfied that the above mentioned sum of Rs.5,00,000/ was received towards the disputed tax demand, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of the petitioner’s additional documents.
7. W.P.No.9597 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.10618 and 10619 of 2024 are closed.
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