Case Law Details
GG Organics Care Private Limited Vs State Tax Officer (Madras High Court)
The Madras High Court addressed the challenge to an order dated 22.12.2023 in the case of GG Organics Care Pvt. Ltd. Vs State Tax Officer. The petitioner, a demerged entity from GG Organics Pvt. Ltd., contested proceedings initiated against them following an audit and the issuance of a show-cause notice.
Counsel for the petitioner argued that the audit wasn’t conducted within the stipulated three-month period as required by Section 65(4) of the GST enactments. Additionally, the petitioner’s explanation regarding non-filing of Form ITC-02 was not duly considered. They contended that no Input Tax Credit (ITC) was transferred to the consumer division, hence the form wasn’t required.
The court acknowledged the petitioner’s willingness to remit 10% of the disputed tax demand as a condition for remand. However, the Additional Government Pleader highlighted that the objection to the audit’s duration was belated.
Given the circumstances, the court set aside the impugned order and remanded the matter for reconsideration. The petitioner was instructed to remit 10% of the disputed tax demand within two weeks. Once confirmed, the State Tax Officer was directed to provide a reasonable opportunity to the petitioner for a fresh hearing and issue a new order within two months. The petitioner was also given the opportunity to file Form ITC-02 during this process.
In conclusion, the Madras High Court’s directive in GG Organics Care Pvt. Ltd. Vs State Tax Officer emphasizes the importance of procedural fairness and allows the petitioner a chance to contest the tax demand effectively.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 22.12.2023 is the subject of challenge in this writ petition.
2. The petitioner’s parent company, GG Organics Private Limited, was engaged in the business of manufacture of leather speciality chemicals. The entity also had a manufacturing facility in Sriperumpudhur to undertake business in consumer goods. By way of a demerger, the assets and liabilities of the consumer division were transferred to a new entity, GG Organics Care Private Limited, i.e. the petitioner herein. Pursuant to an audit and the issuance of audit report dated 25.09.2023, proceedings were initiated against the petitioner. In this regard, a show cause notice was issued on 25.09.2023 and the impugned order on 22.12.2023.
3. Learned counsel for the petitioner assails the impugned order on the ground that the audit was not conducted in accordance with subsection (4) of Section 65 of applicable GST enactments. In particular, he submits that such audit was required to be concluded within three months from the date of commencement thereof unless extended in accordance with the proviso to sub-section (4). In this regard, he submits that the audit commenced on 16.05.2023 and was concluded on 18.08.2023, which is beyond the three month period. His next contention is that the reply in relation to audit slip no.7, which pertains to the non filing of Form ITC-02, was not duly considered while issuing the impugned order. By referring to the impugned order in this regard, he submits that the petitioner had explained that there was no transfer of Input Tax Credit (ITC) to the consumer division and that, therefore, it was not necessary to file Form ITC-02.
4. On instructions, learned counsel for the petitioner submits that the petitioner is willing to remit about 10% of the disputed tax demand as a condition for remand.
5. Mr. C. Harsha Raj, learned Additional Government Pleader, accepts notice for the respondents. At the outset, he submits that it is too late for the petitioner to complain about the manner in which the audit was conducted. He points out that the audit report was made available to the petitioner in September 2023 and that the petitioner proceeded to participate in the assessment proceedings without raising any objection with regard to the duration of the audit. As regards non submission of Form ITC-02, he submits that the petitioner was liable to submit a nil return if no ITC was transferred to the consumer division.
6. The contention of the petitioner that the duration of audit exceeded the time limit specified in sub-section (4) of Section 65 of applicable GST enactments cannot be countenanced at this juncture. It should also be noticed in this connection that the explanation to subsection (4) provides that the date of commencement of audit would be the date on which records and other documents called for by the tax authorities were made available by the registered person. It is unclear from the documents on record as to when all the documents called for in GST ADT-01 were provided by the petitioner. As regards the contention relating to non filing of ITC-02, the petitioner’s contention is that no ITC was availed of by the consumer division and that there was no transfer thereof as a consequence. It is just and necessary to provide another opportunity to the petitioner to place all relevant documents on record in this connection to effectively contest the tax demand. However, it also necessary to protect revenue interest while remanding the matter for reconsideration.
7. For reasons set out above, the impugned order dated 22.12.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order. Upon being satisfied that 10% of the disputed tax demand was received, the 1st 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 remittance of 10% of the disputed tax demand. Meanwhile, it is open to the petitioner to file Form ITC-02 in accordance with the procedure prescribed in such regard.
8. The writ petition is disposed of on the above terms. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed.
Author Bio
