Case Law Details
Rathna Traders Vs State Tax Officer (Madras High Court)
The case of Rathna Traders Vs State Tax Officer before the Madras High Court pertains to the challenge against an order dated 30.12.2023. The petitioner’s returns for the assessment periods 2017-18 to 2021-22 underwent an audit, resulting in an audit report issued on 30.09.2023. Responding to this report and subsequent notices, the petitioner submitted replies, including one on 29.12.2023. However, the impugned order was issued on 30.12.2023, allegedly without considering the petitioner’s submissions.
The petitioner’s counsel meticulously dissected the procedural irregularities and substantive issues underlying the case. Firstly, emphasis was placed on the alleged violation of statutory provisions, particularly Section 65 of the Tamil Nadu Goods and Services Tax Act and Rule 101(5) governing the issuance of audit reports. The argument posited that the audit report was issued in contravention of these provisions, raising questions about its validity.
Moreover, the petitioner contended that their responses to the various notices were disregarded. Despite submitting detailed replies, including supporting documents such as ledgers and electronic copies of invoices, the impugned order failed to reflect these submissions adequately. This led to discrepancies between the findings of the audit report and the actual evidence provided by the petitioner.
The counsel meticulously pointed out instances where the petitioner had furnished extensive documentation to refute the audit findings. For instance, in the case of trade receivables, detailed ledgers were submitted, along with electronic copies of invoices. Similarly, for zero-rated supplies, documents such as the SEZ invoice and a letter of undertaking were provided, yet these were purportedly overlooked in the final assessment.
By highlighting these discrepancies, the petitioner sought to demonstrate the arbitrariness and lack of thoroughness in the assessment process. The failure to consider the petitioner’s submissions rendered the impugned order unsustainable in the eyes of the court, underscoring the importance of procedural fairness and the duty of authorities to diligently review all relevant evidence before reaching a decision.
In light of the arguments presented and the examination of the impugned order, the Madras High Court concluded that the order lacked validity. Consequently, the assessment order dated 30.12.2023 was set aside, and the recovery notice was quashed. The matter was remanded for re-consideration, with a directive to provide the petitioner with a reasonable opportunity, including a personal hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 30.12.2023 is the subject of challenge in this writ petition. An audit of the petitioner’s returns was conducted in relation to the assessment periods 2017-18 to 2021-22. In relation thereto, an audit report was issued on 30.09.2023. The petitioner replied to such audit report on 30.10.2023. A show cause notice notice was also issued on the same date when the audit report was issued. Such show cause notice was replied to on 02.11.2023. It was followed by a final notice dated 01.12.2023, which was replied to on 29.12.2023. The impugned order was issued thereafter on 30.12.2023.
2. Learned counsel for the petitioner submits that the audit observations were not placed before the petitioner and that an audit report was issued in contravention of Section 65 of the Tamil Nadu Goods and Services Tax Act read with Rule 101(5) of the rules framed in relation thereto. He further submits that the contentions raised in the reply dated 29.12.2023 to the final notice were not taken into account while issuing the impugned order. He also submits that no personal hearing was provided after such reply.
3. By referring to the impugned order and, in particular, the findings relating to defect no.2 pertaining to trade receivables, learned counsel submits that the petitioner had provided several documents along with the reply dated 29.12.2023. By referring to page 98 of the typed set, learned counsel submits that the detailed ledger was submitted. He also points out that invoice copies were provided in electronic form. In these circumstances, he submits that the finding recorded in respect of trade receivables at page 112 to the effect that the tax payer had not produced payment details, invoice copy, etc., is untenable. Likewise, by referring to the findings recorded in relation to zero rated supplies without payment of tax, learned counsel submits that the petitioner had enclosed the SEZ invoice and the letter of undertaking issued by Mr. L. Sudhakar Reddy, Assistant Commissioner, Anna Nagar Division, dated 30.10.2017. He points out that these documents were not taken into consideration while confirming the tax demand on the ground that no supporting documents were produced.
4. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. He submits that, by final notice dated 01.12.2023, the petitioner was called upon to reply on or before 08.12.2023 and also appear at a personal hearing on the said date. Instead of adhering to the time limit specified therein, he submits that the petitioner replied on 29.12.2023, which was just before the expiry of the limitation period. In these circumstances, he submits that it was not possible to take into account the petitioner’s reply.
5. On examining the impugned order, it appears that a finding was recorded in relation to several defects such as those relating to zero rated supplies without payment of tax and trade receivables on the ground that documents were not produced by the petitioner. By the reply to final notice dated 29.12.2023, the petitioner appears to have annexed documents in relation to each defect forming the subject of the final notice. Since the reply and the documents annexed thereto were not considered in the impugned order, the said order is not sustainable.
6. Therefore, the assessment order dated 30.12.2023 is set aside and, as a corollary, the recovery notice is quashed and 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 order within two months from the date of receipt of a copy of this order.
7. W.P.Nos.8661 and 8663 of 2024 are disposed of on the above terms. No costs. Consequently, W.M.P.Nos.9646, 9647, 9650 and 9651 of 2024 are closed.
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