Sri Velavan Traders Vs State Tax Officer
Date: July 8, 2024
Subject Matter
Section 73 proceedings could be initiated despite the earlier conclusion of scrutiny
Summary
In the case of Sri Velavan Traders versus the State Tax Officer, the Madras High Court examined the duty of GST-registered persons to respond to show cause notices (SCNs) even after scrutiny proceedings were dropped. The petitioner contested an order dated 10.04.2024 following the earlier dropping of scrutiny on 12.09.2023, asserting that no further action should be taken due to this closure. However, they received an SCN and reminders related to adjudication proceedings under Section 73. - The High Court deliberated on whether Section 73 proceedings could be initiated despite the earlier conclusion of scrutiny. The petitioner emphasized a need for reconsideration based on a reconciliation statement outlining discrepancies in input tax credit (ITC) claims. In response, it was asserted that the end of scrutiny did not eliminate the responsibility of the petitioner to engage in the adjudication process. The court ultimately acknowledged that the petitioner was required, by law, to respond to the SCN and participate in the adjudication process, stating that the cessation of scrutiny proceedings did not absolve this obligation.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 10.04.2024 is assailed on multiple grounds, including the dropping of scrutiny proceedings by order dated 12.09.2023. Upon scrutiny of the petitioner’s returns, notice in Form ASMT-10 was issued on 07.08.2023. Upon considering the petitioner’s reply dated 07.09.2023, such proceedings were dropped by order dated 12.09.2023. Consequently, the petitioner asserts that she was under the impression that no further action would be taken with regard to the alleged discrepancies in returns. She further submits she was unaware of proceedings culminating in the impugned order and therefore could not participate in such proceedings.
2. Learned counsel for the petitioner referred to the notice in Form ASMT-10 and the reply thereto. Upon such proceedings being dropped, learned counsel submits that the respondent did not have the jurisdiction to initiate proceedings under Section 73 in respect of discrepancies in returns. He also submits that the impugned order was issued without taking into consideration the reconciliation statement in Form 9C, which was available for examination by the respondent. Out of the total confirmed tax proposal, he submits that about Rs.80 lakhs relates to the alleged excess input tax credit (ITC) claimed on account of non-reconciliation.
3. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. He submits that the petitioner was provided multiple opportunities to participate in proceedings by issuing show cause notice dated 28.12.2023 and three reminders dated 31.01.2024, 14.02.2024 and 28.02.2024. He further submits that the dropping of scrutiny proceedings does not preclude the assessing officer from initiating adjudication proceedings under Section 73 of applicable GST enactments.
4. The impugned order was issued after issuing show cause notice dated 28.12.2023. The admitted position is that the petitioner did not respond thereto or participate in the hearing. As a registered person under applicable GST enactments, the petitioner cannot be absolved of the responsibility of responding to the show cause notice merely on the ground that scrutiny proceedings were dropped. Learned counsel for the petitioner, however, contended that the reconciliation statement was not taken into consideration while confirming the tax proposal relating to the ITC claim on account of non-reconciliation of information. Since such tax proposal was confirmed without hearing the petitioner, reconsideration is required by putting the petitioner on terms. On instructions, learned counsel for the petitioner submits that the petitioner agrees to remit 5% of the tax demand as regards the alleged non-reconciliation in respect of ITC and 10% of the tax demand relating to other issues dealt with in the impugned order.
5. Therefore, the impugned order dated 10.04.2024 is set aside on condition that the petitioner remits 5% of the disputed tax demand as regards the proposal relating to excess ITC claimed on account of non-reconciliation of information and 10% of the disputed tax demand with regard to other heads of tax demand within three weeks from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the show cause notice within the said period. Upon receipt of the petitioner’s reply and on being satisfied that the above remittances were received, the respondent is directed to provide a reasonable opportunity, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner’s reply.
6. W. P. No. 16412 of 2024 is disposed of on the above terms. Consequently, W.M.P.Nos.17970 & 17971 of 2024 are closed. No costs.