Case Law Details
Dhirani Metal Industries Vs Assistant Commissioner (ST) (Madras High Court)
In the landmark case of Dhirani Metal Industries Vs Assistant Commissioner (ST), the Madras High Court addressed the issue of GST liability arising from mismatches between GSTR-3B returns and auto-populated GSTR-2A data. The court set aside the initial assessment order and remanded the matter for reconsideration, emphasizing the importance of fair communication and the right to contest tax demands on merits. This article delves into the details of the judgment, the arguments presented, and the implications for businesses facing similar issues.
Dhirani Metal Industries filed a writ petition challenging both the original assessment order and the subsequent rejection of their rectification petition. The issue arose from a show cause notice issued on August 26, 2022, which led to an assessment order on June 22, 2023. The petitioner claimed ignorance of the proceedings as the notices and orders were uploaded on the GST portal without any additional communication.
The petitioner contended that they had resolved the mismatch issue by filing the annual return (GSTR-9) and reconciliation statement (GSTR-9C) before the impugned assessment order was issued. Despite these actions, their rectification petition was rejected. Moreover, the entire tax demand, along with interest and penalty amounting to Rs. 3,54,558, was appropriated from the petitioner’s bank account in March 2024. The petitioner sought another opportunity to contest the tax demand on its merits.
The court observed that the core issue pertained to a mismatch between the GSTR-3B return filed by the petitioner and the auto-populated GSTR-2A data. The petitioner had already placed the relevant documents on record, including the annual return and reconciliation statement. The court noted that the entire liability was appropriated from the petitioner’s bank account, which necessitated a fair opportunity for the petitioner to contest the demand.
In its judgment, the Madras High Court set aside the impugned order dated December 26, 2023, and remanded the matter for reconsideration. The court directed the petitioner to submit a reply to the show cause notice within two weeks from the date of receipt of the court order. The respondent was instructed to provide a reasonable opportunity for the petitioner, including a personal hearing, and to issue a fresh assessment order within three months from receiving the petitioner’s reply.
The court also clarified that the appropriated sum of Rs. 3,54,558 would be subject to the outcome of the remanded proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this writ petition, the petitioner assails both the original assessment order and the order rejecting the rectification petition.
2. Pursuant to the show cause notice dated 26.08.2022, assessment order dated 22.06.2023 was issued. The petitioner asserts that he was unaware of proceedings because the show cause notice and the order were uploaded in the “View Additional Notices are orders” tab on the GST portal and not communicated to the petitioner through any other mode. In spite of rectifying the alleged mismatch by filing GSTR-9 and GSTR-9C returns, it is stated that the rectification petition was rejected.
3. Learned counsel for the petitioner submits that the petitioner uploaded the annual return and reconciliation statement before the impugned assessment order was issued and thereby resolved the issue arising out of the mismatch between the GSTR-3B and the auto-populated GSTR-2A. She also submits that the entire tax demand, interest and penalty of Rs.3,54,558/- was appropriated from the petitioner’s bank account in March 2024. She seeks another opportunity for the petitioner to contest the tax demand on merits.
4 On perusal of the impugned order, it is evident that the tax proposal pertains to a mismatch between the GSTR-3B return and the auto-populated GSTR-2A. The petitioner also placed on record the annual return in Form GSTR-9 and reconciliation statement in Form GSTR-9C. The documents on record disclose that the entire liability towards tax, interest and penalty was appropriated from the petitioner’s bank account. In these circumstances, the interest of justice warrants that the petitioner be provided an opportunity to contest the tax demand on merits.
5. For reasons set out above, the impugned order dated 26.12.2023 is set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice within two weeks from the date of receipt of a copy of this order. Upon receipt thereof, the 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.
6. For the avoidance of doubt, it is made clear that the sum of Rs.3,54,558/-, which was appropriated from the petitioner’s bank account, shall abide by the outcome of the remanded proceedings.
7. The Writ Petition is disposed of on the above terms. There shall be no order as to costs. Consequently, the connected miscellaneous petitions are also closed.
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