Category: Adjudication

Detailed Reply submitted is not considered – Matter remanded back for re-adjudication

Citation:

Sethia Enterprises Vs. Commissioner, Delhi Goods and Service Tax

Delhi High Court – W.P. (C) No. 7730 of 2024

[2024] 163 taxmann.com 381 (Delhi)

Facts:

  1. Show Cause Notice was issued u/s. 73 dated 12th December 2023 for demand of Rs. 12,42,094 proposing penalty and Order was issued dated 24th April 2024.
  2. Demand is raised under the headings:
    • Net tax under declared due to non-reconciliation of turnovers in other returns and E-way bill information,
    • reconciliation of GSTR-1 with GSTR-3B;
    • excess claim of Input Tax Credit (ITC);
    • excess ITC claimed on account of non-reconciliation and
    • Excess ITC availed in GSTR-3B compared to GSTR-2A/2B.
  3. Petitioner states that he has submitted a detailed reply dated 12th January 2024 along with relevant documents under each of the given heads, but the same is not taken into consideration in the Order and the Order is cryptic.
  4. Order States that reply is not satisfactory as the taxpayer has not attached sufficient documents in support of the reply. Extracts from the Order:
    • And whereas, it is noticed that the Taxpayer filed reply/explanation within stipulated period and did not appear for Personal Hearing before Proper Officer on the given date and time.
    • Further, another opportunity to submit reply and for the sake of natural justice opportunity for Personal Hearing, as per provisions of Section 75(4) DGST Act, was also provided to the taxpayer by issuing reminder through the GST portal.
    • Now, since no satisfactory explanation has been received from the taxpayer despite sufficient and repeated opportunities, which indicate that the taxpayer has nothing to say in the matter.
    • The taxpayer has not attached sufficient documents in support of his reply i.e. invoices, proof of payment etc. Hence, in view of aforesaid circumstances, the undersigned is left with no other option to create demand ex-parte.
  5. Findings of the Hon’ble Delhi High Court:
    • The observation in the impugned order dated 24.04.2024 is not sustainable for the reasons that the reply dated 12.01.2024 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is not satisfactory and taxpayer has not attached sufficient documents in support of his reply which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
    • Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.
  6. Held by Hon’ble Delhi High Court that:
    • Impugned Order dated 24th April 2024 is set aside. The Show Cause Notice is remitted to the Proper Officer for re-adjudication.
    • Petitioner can file a further reply within 30 days. After granting personal Hearing, the PO shall pass a speaking order within the period prescribed u/s. 75(3)
    • The Court has not commented upon the Merits.

Section 75(3) of CGST Act: Where any order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction.

Section 75(4) of CGST Act: An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.

Counterpart Department cannot initiate proceedings where one Department is assigned to the assessee

In the case of:

Ram Agencies Vs. Assistant Commissioner of Central Tax, 

W.P. (MD) No. 8674 of 2024,

[2024] 162 taxmann.com 240 (Madras),

Hon’ble High Court of Madras has held that when an assessee has been allocated either to Central Tax Authorities or State Tax Authorities, considering the decision on the case of Tvl Vardhan Infrastructure Vs. The Special Secretary, [2024] 160 taxmann.com 771 (Madras), in the absence of notification for cross empowerment, the Authorities from the counterpart Department cannot initiate proceedings, i.e., where the assessee is assigned to CGST Authorities, then SGST authorities cannot initiate proceedings and vice versa.

In the above decision of Tvl.Vardhan Infrastructure v. The Special Secretary, [2024] 160 taxmann.com 771 (Madras), it was observed that:

  1. We need to take note of whether the State tax authorities and the Central tax authorities enjoy concurrent jurisdiction, the issue of cross-empowerment of the State tax authorities and the Central tax authorities. 
  2. GST Council, in its meeting held during January 2017, has decided that both the Central and State tax administrations have the power to take intelligence-based enforcement action in respect of the entire value chain.
  3. Based on such decision of the GST Council, the CBEC issued clarification dated 05.10.2018. It is clear from the said clarification that if an intelligence-based enforcement action is taken against a taxpayer, which is assigned to State tax authority, the Central tax authority is entitled to proceed with the matter and take it to the logical conclusions and the same principle is applicable vice versa.

Note 1 – Section 6(2)(b) of CGST Act:

Provisions of Section 6(2)(b) of CGST Act are relevant in this regard, which provide that:

If a Proper officer under SGST/UTGST Acts has initiated a proceeding on a subject matter, then no proceedings shall be initiated by Proper officer under CGST Act on the same subject matter.

Note 2 – Circular dated 05.10.2018:

The Circular as referred to above, i.e., Circular No. 68/42/2018-GST dated 05.10.2018 states at Para 4 that (Relevant for Cross-empowerment):

Notification No. 16/2017 – Central Tax (Rate) dated 28.06.2017 shall be applicable for the purpose of Refund of Compensation Cess to UN and specified international organizations, foreign diplomatic missions or consular posts in India or diplomatic agents or career consular offices posted therein.

Order passed holding SCN reply as “Not Satisfactory” is Set Aside

In the case of:

Decolene Fibers (P.) Ltd. Vs. Commissioner, Directorate General of GST

High Court of Delhi

W.P. (C) No. 5429 of 2024

Facts of the Case:

An Order dated 30.12.2023 has been passed under Section 73 of CGST Act, against a detailed reply dated 17.10.2023 to the Show Cause Notice (SCN) dated 24.09.2023

SCN contains separate headings viz, Excess Claim of ITC, scrutiny of ITC availed on Reverse charge, ITC to be reversed on non-business transactions & exempt supplies and under declaration of Ineligible ITC, to which the petitioner has submitted detailed reply giving disclosures under each head

However, the order simply states that “And whereas, in response to the DRC-01, the Taxpayer submitted his reply in DRC-06 and the reply of the registered person, as well as data available on GST Portal has been checked / examined and the reply / submission of the taxpayer is not found to be satisfactory“.

Findings of the Court:

  1. The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply dated 17.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is unsatisfactory, which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
  2. Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.

Held that:

  1. The Impugned order dated 30.12.2023 cannot be sustained and is set aside and the matter is liable to be remitted back to the proper officer for Re-Adjudication.
  2. This court has neither considered nor commented upon the merits of the contentions of either party.

Assessee awaiting particulars from supplier, needs to be given time to explain difference in GSTR-3B Vs. 2B

In the case of:

Tvl. Lakshmi Tex Vs. Deputy State Tax Officer-1

W.P. No. 7005 of 2024

[2024] 160taxmann.com627 (Madras)

  1.  The petitioner is a dealer of woven fabrics in cotton and readymade garments. He states that he could not submit reply to the SCN (with regard to with regard to disparity between the GSTR-3B and GSTR-2B returns) issued pursuant to scrutiny of the returns, as he was awaiting particulars from his supplier.
  2.  The petitioner had enclosed the relevant purchase invoice to establish that there was no discrepancy and that consequently no tax liability is imposable. He also agrees to remit the pre-deposit of 10% of disputed tax.
  3. The petitioner submitted appeal on the ground that reasonable opportunity was not provided to contest the tax demand.

It was observed by the Hon’ble High Court of Madras that:

  1. On examining the show cause notice and impugned order, it is clear that the entire tax liability is with regard to disparity between the GSTR-3B and GSTR-2B returns. The petitioner has, subsequent to the issuance of such order, explained that ITC was validly availed of by submitting documents in support thereof.
  2. Undoubtedly, the petitioner was negligent in not doing so upon receipt of SCN.
  3. Nonetheless, if the explanation of the petitioner is valid, the interest of justice would be prejudiced unless the petitioner is provided an opportunity to explain the alleged disparity.
  4. For the reasons set out above, the impugned order is quashed subject to the condition that the petitioner remits the pre-deposit of 10% of disputed tax within 2 weeks.

GSTR-3B Vs. 1 Vs. 2A Notice – Order passed without considering the reply – Tables of SCN were contradictory — Order Set Aside

In the case of:

Ambika Stores Vs. Deputy State Tax Officer

W.P. No. 6320 of 2024

[2024] 160taxmann.com433 (Madras)

It was observed by Hon’ble High Court of Madras that:

  1. On examining the show cause notice, it is evident that two tables are set out therein. In the first table, the CGST and SGST amounts in GSTR-3B are shown as Rs. 3,33,787/-, whereas in the second table dealing with the difference between the GSTR-3B return and the auto populated GSTR-2A return, the GSTR-3B amounts are specified as Rs. 5,19,362/- both for CGST and SGST. The sum of Rs. 5,19,362/- tallies with the ITC availed of by the petitioner.
  2. Thus, the show cause notice is contradictory.
  3. In addition, it appears that the reply of the petitioner was not considered in the assessment order.
  4. The order simply states “It has been noticed that you have filed both GSTR 1 and GSTR-3B for the period from July – 2017 to March – 2018 thereby collecting the tax. During the scrutiny of the return for the above tax period difference between liability declared in GSTR-1 and tax paid under GSTR-3B as detailed below which shows that there was a mismatch between GSTR 1 and GSTR 3B returns.”
  5. The above order indicates clearly that the assessing officer did not take into account the reply dated 29.09.2023 and record reasons as to why such reply is not satisfactory.
  6. Therefore, the impugned assessment order is quashed and department can issue a fresh SCN.

Notices uploaded only through Portal – Reply could not be filed – Assessee is not acquainted with technology – Order Set aside

In the case of:

Abitha Timber Traders Vs. Assistant Commissioner (ST)(FAC)

W.P. (MD) No. 3838 of 2024

[2024] 160taxmann.com379 (Madras)

It was observed by Hon’ble High Court of Madras that:

  1. Petitioner is a Timber Trader and not acquainted with the advanced technology of following the notices, which has been uploaded in the portal. He submits his returns only through the Auditor.
  2. The impugned order has been passed after issuing notice in Form ASMT-10 dated 13.05.2022 and notice in Form DRC 01A dated 05.11.2022 and notice in Form DRC 01 dated 03.12.2022, all of them uploaded only through Portal.
  3. Though Section 169(d) of TNGST Act 2017, enables the respondent to issue notice through the common portal, other modes are also made available to the respondent under Section 169 of the TNGST Act 2017.
  4. In a similar case of Pushpam Reality v. State Tax Officer [2022] 136 taxmann.com 195 / 91 GST 417/2022 (63) G.S.T.L. 442 (Mad.), this court has held that:
    • Though Section 169 of the respective GST Acts allows the authorities to communicate any decision, etc. under this Act by any one of the methods specified, unless the proper conformation that notices and impugned orders which were uploaded in the web portal of the State Government in tngst.cid.tn.gov.in are auto populated, it cannot be said that there is sufficient compliances of the aforesaid Section.
    • GST Act was implemented in the year 2017 with effect from 01.07.2017. The web portal maintained by GST has faced problems on several occasions and steps were taken for correcting the technical glitches. Even as on date, there are problems arising out of intercommunication between the State GST and Central GST and the web portal which has to be resolved.
    • The respondents can therefore continue the service of notice through registered post or speed post or courier with acknowledgment to the petitioners at their last known place of business or residence and upload the same in the web portal. Till all problems are resolved on the technical side, the authority may simultaneously serve the notice of assessment and communications under the Act and Rules both through registered post or speed post or courier with acknowledgment as is contemplated Section 169(1)(b) of the Act and through web portal.
    • Once all technical problems are resolved, the practice of sending physical copy through registered post or speed post or courier with acknowledgment may be dispensed with.
  5. Considering the above decision, the impugned Order is set aside and the matter is remanded back to the respondent for fresh consideration.
  6. The respondent shall proceed with the assessment and pass orders afresh, after providing an opportunity of hearing to the petitioner. 
  7. In order to avoid such a situation, the respondent shall also find out the possibility of issuing the notices through other modes, which are also made available under Section 169 of the TNGST Act 2017.

Section 169(1) of CGST Act – Service of Notice:

(1) Any decision, order, summons, notice or other communication under this Act or the rules made thereunder shall be served by any one of the following methods, namely:—

  1. by giving or tendering it directly or by a messenger including a courier to the addressee or the taxable person or to his manager or authorised representative or an advocate or a tax practitioner holding authority to appear in the proceedings on behalf of the taxable person or to a person regularly employed by him in connection with the business, or to any adult member of family residing with the taxable person; or
  2. by registered post or speed post or courier with acknowledgement due, to the person for whom it is intended or his authorised representative, if any, at his last known place of business or residence; or
  3. by sending a communication to his e-mail address provided at the time of registration or as amended from time to time; or
  4. by making it available on the common portal; or
  5. by publication in a newspaper circulating in the locality in which the taxable person or the person to whom it is issued is last known to have resided, carried on business or personally worked for gain; or
  6. if none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence and if such mode is not practicable for any reason, then by affixing a copy thereof on the notice board of the office of the concerned officer or authority who or which passed such decision or order or issued such summons or notice.

Where proceedings are pending under SGST, CGST authorities cannot proceed with a Notice

Citation:

Rajesh Mittal Vs. Union of India – WP(C) No. 371 of 2024

High Court of Gujarat

[2024] 160 taxmann.com 49 (Gauhati)

Facts:

  1. Notice was issued in Form GST DRC-01A dated 29.11.2023 to the petitioner by SGST Authorities, alleging violation of Section 16(4) of the CGST Act – Input Tax Credit taken after the due date, i.e., 30th November (Due date for GSTR-3B for the month of September, prior to 1st October 2022)
  2. This was followed by Show Cause Notice dated 01.12.2023, to which the petitioner uploaded a reply on 31.12.2023.
  3. During these proceedings with SGST Authorities, another Show Cause Notice dated 27.12.2023 was issued by CGST Authorities on the same issue – alleged violation of Section 16(4) of the Act, for the same amount.

Arguments:

  1. The petitioner has submitted that Issue of SCN dated 27.12.2023 by CGST authorities during the pendency of SCN dated 01.12.2023 by SGST authorities is in violation of Section 6(2)(b) of CGST Act – Link Below contains Article on Section 6.
  2. Department has sought time to obtain instructions in this matter, since the petitioner has filed a representation before the CGST authorities.
  3. Department has also sought for listing on 07.02.2024.

Decision of the High Court:

  1. The Case is listed on 07.02.2024.
  2. Until the next date of listing, CGST authorities shall not proceed further in terms of SCN dated 27.12.2023.

Ingredients of Section 74 are not satisfied – Assessment Order is Set Aside

Citation:

Balaji Electrical & Hardwares Vs. State Tax Officer (ST) – WP No. 3458 of 2024

High Court of Madras

[2024] 159 taxmann.com 562 (Madras)

Facts:

  1. Assessment Order dated 14.07.2023 and Consequential Attachment Notice (Link below contains provisions relating to Provisional Attachment) dated 21.12.2023 were passed.
  2. Assessee states that he was filing all the required GST Returns and was unaware of the intimation, Show Cause Notice and the attachment order until the Attachment order was communicated to him, whereupon, he has filed a letter for Rectification dated 03.01.2024 (under Section 161 – Error apparent on the face of the record – Link below contains provisions relating to Section 161).

Arguments of Petitioner:

  1. Order is issued under Section 74, but the requirements for the same have not been fulfilled – no allegations of fraud, willful misstatement or suppression of facts.
  2. Order is completely unreasoned – No Shortfall in GSTR-1 Vs. GSTR-3B
  3. 10% of Tax Demand will be deposited if provided another Opportunity before the assessing officer.

Arguments of Department:

  1. The petitioner was provided sufficient opportunities by issuing an intimation, SCN and a Personal hearing.
  2. Principles of Natural Justice were adhered to. No case for interference under Article 226 of the Constitution.
  3. The Assessment Order states that the petitioner did not comply with the Tax Demand or file any objections. Hence, it cannot be said that Opportunity was not provided to respond to the tax demand.

Decision of the Hon’ble High Court:

  1. On examining the Impugned Order and the SCN, it is noticeable that the order is unreasoned.
  2. The Assessment Order and Consequential Attachment Notice are quashed subject to the condition that 10% of the Disputed Tax is deposited within 2 weeks.
  3. Assessing officer is directed to pass a fresh assessment order within 2 months after providing Personal hearing.

9 days is not reasonable time to reply to Show Cause Notice – Audi Alteram Partem Violated – SCN is invalid

Citation:

Raymond Ltd. Vs. Union of India

Writ Petition No. 26693 of 2022 – Hon’ble High Court of Madhya Pradesh

[2023] 157 taxmann.com 654 (Madhya Pradesh)

Facts of the Case:

  1. A Show Cause Notice (SCN) was issued on 03-09-2022 under Section 73 of CGST Act, 2017, affording 30 days of time for the petitioner (Raymond Ltd) to respond.
  2. Order of Demand was issued on 12-09-2022 (Within 9 days of issue of SCN).

Grounds for Filing the Petition:

The following three grounds were preferred:

  1. Denial of Reasonable Opportunity: Though the SCN has provided 30 days, Order was passed within 9 days, not providing reasonable time to reply to the SCN.
  2. Principle of Audi Alteram Partem Violated: SCN is not self-contained – It fails to inform about the material of adverse nature which constituted the foundation of the SCN, thereby disabling the petitioner to respond. Hence, Principle of Audi Alteram Partem (Hear the Other Side) was violated.
  3. Opportunity of Personal Hearing was not afforded.

Findings:

  1. Though Section 73 does not specify a time period to respond to SCN, the statute contemplates affording reasonable opportunity to reply. Section 73(2) states that SCN needs to be issued at least 3 months prior to the issue of the Order u/s. 73(10)
  2. Concept of reasonable Opportunity demands that reasonable time to reply should be not less than 15 days at least.
  3. As per Section 73(8), time period provided for payment of tax, interest, and penalty is 30 days from the date of SCN(For the proceedings in respect of the SCN to be considered as deemed to be concluded). Hence, the reasonable period for responding to the SCN ought to be 30 days.
  4. Any SCN should contain enough and adequate material which motivated the authority to take a view against the noticee. If the contents of the SCN are lacking in Material particulars or are vague in regard to any entries contained therein, then it would be vulnerable to judicial review.
  5. Hence, the present SCN falls short of minimum period of 30 days to afford reasonable opportunity to noticee to respond and also appears to be lacking in material particular.

Order:

  1. The Impugned SCN dated 03-09-2022 and the Order dated 12-09-2022 are set aside
  2. Revenue is at liberty to issue fresh and legal SCN and proceed after affording reasonable and sufficient opportunity of being heard, to the petitioner.
  3. The petitioner shall be entitled to a cost of Rs. 10,000 to be paid by the respondents and compliance report to be filed by them (respondents) in Registry within 60 days.

Relevant Provisions:

Section 73(1) and (2) of CGST Act:

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

Section 73(8):

Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

Section 73(10):

The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

Ex-Parte Order Passed – Assessee was allowed to file reply to SCN thereafter, on Medical Grounds

Citation:

Pragati Construction Vs. Commissioner of C.T. & G.S.T.,

W.P.(C) No. 41802 of 2023 December 21, 2023, Hon’ble High court of Orissa

[2023] 157 taxmann.com 681 (Orissa)

Facts:

  1. A Show Cause Notice dated 27-09-2023 was issued for the Tax Period 1st July 2017 to 31st March 2018.
  2. Assessee could neither reply to the Show Cause Notice (SCN) nor appear before the authority, due to his Medical Condition of “Reeling of Head and Imbalance of Gait” and was undergoing treatment.
  3. An Order dated 23-11-2023 was passed Ex Parte (Without appearance of the assessee) by the Deputy Commissioner of State Tax, CT & GST under Section 73 of OGST Act, 2017.
  4. Hence, the assessee has filed this petition, enclosing the medical certificate.

Decision:

Hon’ble High Court of Orissa has held that:

  1. The Impugned Order is set aside and the petitioner ought to be given one more chance to first reply to the SCN on or before 02-01-2024 and appear before the adjudicating authority.
  2. The Authority shall take up the matter before 08-01-2024 for a fresh Assessment Order to be passed within 2 months.
  3. If the petitioner is aggrieved by the order, he may seek appropriate remedies as per Law.