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Case Law Details

Case Name : Rainbow Stones Private Limited Vs Assistant Commissioner (ST)(FAC) (Madras high court)
Appeal Number : W.P. No. 4510 of 2024
Date of Judgement/Order : 26/02/2024
Related Assessment Year :

Rainbow Stones Private Limited Vs Assistant Commissioner (ST)(FAC) (Madras High Court)

Introduction: In a significant ruling, the Madras High Court quashed a GST assessment order issued on 31.12.2023 against Rainbow Stones Private Limited, highlighting the critical importance of reasoned judgments in tax assessments. The case revolved around discrepancies between the Input Tax Credit (ITC) claimed under GSTR-3B and that reflected in GSTR-2A, as well as differences between ITC declared in GSTR-9 and reported in GSTR-3B.

Detailed Analysis: The petitioner, Rainbow Stones Private Limited, challenged the assessment order primarily on the grounds that it was unreasoned. After receiving a show cause notice based on an audit report by State GST officials, the petitioner submitted a detailed reply. However, the assessment order merely stated that the petitioner’s reply was not acceptable, without providing any reasoning for such rejection.

The Madras High Court, upon reviewing the impugned order, noted that the assessing officer failed to provide reasons for rejecting the petitioner’s explanations regarding the alleged discrepancies in ITC claims. The court underscored the absence of reasoning in at least four issues addressed in the order. By illustrating with issue no.1, the court demonstrated how the assessing officer merely acknowledged the petitioner’s reply without explaining why it was deemed unacceptable.

The lack of detailed reasoning in the assessment order was deemed sufficient grounds for interference by the court. The judgment emphasized the necessity of providing a reasoned order, especially in cases involving tax assessments where discrepancies in ITC claims are in question.

Conclusion: The Madras High Court’s decision to quash the GST assessment order issued against Rainbow Stones Private Limited underscores the judiciary’s insistence on transparency and detailed reasoning in administrative decisions. This ruling sets a precedent for tax authorities, reminding them of the importance of articulating clear reasons in their orders, particularly when rejecting a taxpayer’s explanations or claims. The case reaffirms the principle of natural justice and the right of taxpayers to understand the rationale behind adverse decisions affecting their tax liabilities. The court’s directive to issue a fresh reasoned order after providing the petitioner a reasonable opportunity for a personal hearing further emphasizes the critical role of due process in tax assessments.


An assessment order dated 31.12.2023 is assailed primarily on that ground such order is unreasoned. The petitioner is a registered person under applicable GST laws. Pursuant to an audit by a State GST officials, an audit report was issued on 29.09.2023. Thereafter, upon receipt of a show cause notice on 29.09.2023, the petitioner issued a reply dated 21.12.2023. The order impugned herein came to be issued thereafter on 31.12.2023.

2. Learned counsel for the petitioner invited my attention to the impugned order. With specific reference to the discussion therein on the claim arising out of alleged difference between the Input Tax Credit (ITC) claimed under GSTR 3B and that reflected in GSTR 2A, he pointed out that the assessing officer merely recorded that such reply is not acceptable. By also referring to the conclusion with regard to the alleged difference between ITC declared in GSTR 9 and that reported in GSTR 3B, learned counsel submits that similar unreasoned findings were recorded.

3. K.Vasanthamala, learned Government Advocate, appears on behalf of the respondent. She submits that the impugned order was issued after adhering to principles of natural justice in as much as it was preceded by a show cause notice and the petitioner’s reply thereto was considered.

4. The findings in respect of at least four issues, namely issue no.1, issue no.3, issue no.4 and issue no.5 are identical. By way of illustration, the findings recorded in respect of issue no.1 are set out below:

“The dealers reply and conclusion of the proper officer:

The dealer had given the detailed reply on: 21.12.2023 against SCN issued in DRC-01 regarding this aspect, thus the dealer have refused the defects raised by the proper officer and is not acceptable. Hence, the proposed levy of tax, interest, and penalty is confirmed.”

5. The above extract reveals that the assessing officer merely referred to the reply dated 21.12.2023 to the show cause notice and recorded that the reply is not acceptable. On that basis, the proposed levy of tax, interest and penalty was confirmed. The said findings clearly do not contain any reasons for rejecting the petitioner’s reply and for confirming the proposed levy of tax, interest and penalty notwithstanding such reply. Therefore, the impugned order, which is completely unreasoned, calls for interference.

6. For reasons set out above, W.P.No.4510 of 2024 is allowed by quashing the impugned assessment order dated 31.12.2023. As a corollary, the matter is remanded for re-consideration. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh reasoned order within a maximum period of two months from the date of receipt of a copy of this order. No costs. Consequently, W.M.P.Nos.4872 and 4875 of 2024 are closed.

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April 2024