NIL GST Return Filed Due to Inadvertent Error: Taxpayer’s Reply Not Considered, HC Directs Fresh Order

Lids Advertisers Vs Deputy State Tax Officer (Kerala High Court)

Lids Advertisers, a petitioner under the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts of 2017, filed their GSTR-3B returns for December 2017, January to March 2018, and April 2018 to March 2019 as ‘NIL’. This error occurred due to a mistake by their accountant. Despite this, the petitioner asserted that they had paid the necessary taxes for these periods on time, as evidenced by provided receipts and chalans. However, the Deputy State Tax Officer (the respondent) issued orders (Exts.P10 and P11) demanding significant sums, including interest for the alleged late payment of taxes for the fiscal years 2017-18 and 2018-19.

Petitioner’s Claim:

• The petitioner contended that they had paid the taxes within the stipulated time under Section 39(7) of the Act, substantiated by Ext.P2 series of payment receipts and Ext.P3 series of chalans.
• They challenged the respondent’s orders (Exts.P10 and P11) which imposed hefty demands and interest, asserting that their payments were timely and the demands were unjustified.

Respondent’s Stand:

• Following the High Court’s directive dated 24.05.2024, the Government Pleader, representing the respondent, acknowledged that the petitioner’s arguments regarding the interest on the delayed tax payments had been considered but ultimately rejected in the orders.
• In Ext.P10, the respondent noted that the petitioner had an opportunity for a hearing on 4.08.2023 and submitted a manual reply on 12.08.2023, explaining that the tax amounts were already remitted into the electronic cash ledger and paid via DRC-03 forms. The petitioner requested the dropping of the interest demand based on these payments. However, the reply was dismissed without detailed reasons.
• Similarly, in Ext.P11, the petitioner had a hearing on 17.01.2024, and a manual reply was submitted on 03.01.2024, stating that the taxes were paid and the IGST was incorrectly mentioned as the services were intra-state. Despite this, the petitioner’s response was again rejected without detailed justification.

High Court’s Analysis and Decision:

• The High Court scrutinized Exts.P10 and P11 and found them deficient as they did not specify reasons for rejecting the petitioner’s replies. The principles of natural justice necessitate that when an authority issues a show cause notice and receives a reply, it must record clear reasons for not accepting the reply.
• The lack of detailed reasons for rejection in the orders indicated a breach of these principles. Consequently, Exts.P10 and P11 were set aside.

Directions for Reconsideration:

• The High Court directed the respondent to revisit Exts.P10 and P11, taking into account the petitioner’s submissions more comprehensively.
• The petitioner was instructed to appear before the respondent on 18.06.2024 at 11 a.m.
• The respondent was ordered to pass new, well-reasoned orders within one month from the petitioner’s appearance.

Conclusion

The writ petition was disposed of with the High Court emphasizing adherence to natural justice principles. It mandated a reassessment of the case, requiring the respondent to provide clear reasons for any decisions made, ensuring transparency and fairness in the administrative process.

Key Takeaways

• Importance of Detailed Reasoning: Authorities must provide clear and specific reasons when rejecting replies to show cause notices to comply with natural justice principles.
• Reassessment Ordered: The case was remanded for a fresh assessment, with the petitioner given a fair opportunity to present their case.
• Timely Compliance Emphasized: Despite procedural errors, the petitioner’s timely tax payments were acknowledged, necessitating a reconsideration of the interest demands imposed.

This case underscores the judiciary’s role in ensuring administrative decisions are made transparently and justly, reinforcing the necessity for detailed reasoning in official orders

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner is an assessee under the CGST/SGST Acts, 2017. According to the petitioner, GSTR-3B returns for the months of December 2017, January to March 2018 and April 2018 to March 2019 were filed as ‘NIL’ due to an inadvertent error on the part of the petitioner’s accountant. The petitioner submits that tax for all the aforesaid months has been paid within the time provided as per Section 39(7) of the Act as evidenced by Ext.P2 series of payment receipts and Ext.P3 series of chalans. However, the 1st respondent by Exts.P10 and P11 orders has raised huge demands including interest on the alleged delay in payment of tax for the period 2017-18 and 2018­-19 respectively.

2. Pursuant to the direction of this Court dated 24.5.2024, the learned Government Pleader on instructions submits that in Exts.P10 and P11 orders, the contentions of the petitioner as regards interest on belated payment of tax was taken into consideration and rejected.

3. In Ext.P10 as regards the interest on delayed payment of tax, it is stated as follows:-

“The Tax Payer was also provided an opportunity of being heard on 4.08.2023 at 11 .00 AM in the office of the State Tax Officer, Thiruvalla. The tax payer appeared on 12.08.2023 and filed a reply manually. The tax payer replied that the amounts are already remitted to the electronic cash ledger and paid the above tax through DRC 03 by utilizing the amounts already in the electronic cash ledger. Hence the proposal to demand interest on delayed payment of tax may be dropped. But the reply filed by the tax payer is not acceptable”.

4. In Ext.P11, as regards the interest on delayed payment of tax, it is stated as follows:-

“The Tax Payer was also provided an opportunity of being heard on 17.01.2024 at 11.00 AM in the office of the State Tax Officer, Thiruvalla. The tax payer appeared on 03.1-2024 and filed a reply manually. The tax payer replied that the amounts are already remitted to the electronic cash ledger and paid the above tax through DRC 03 by utilizing the amounts already in the electronic cash ledger. Hence the proposal to demand interest on delayed payment of tax may be dropped. In the case of IGST demand the tax payer replied that the IGST was wrongly mentioned, the entire services are intra state only. Hence the IGST liability does not exist. But he has not made any amendments in his returns. Hence the reply filed by the tax payer is not acceptable.”

5. In Exts.P10 and P11, no reasons are stated for not accepting the reply of the petitioner. When a show cause notice is issued and a reply is submitted, the authority issuing the show cause notice shall record the reason as to why the reply is not acceptable. Exts.P10 and P11 are set aside being passed in violation of the principles of natural justice.

6. The 1^st respondent shall have a revisit of Exts.P10 and P11. The petitioner shall appear before the 1^st respondent on 18.06.2024 at 11 a.m and the 1st respondent shall pass fresh orders within a period of one month therefrom.

The writ petition is disposed of.