Sakthi Industries Vs Deputy State Tax Officer-I
Date: July 11, 2024
Subject Matter
GST order set-aside for breach of principles of natural justice
Summary
The case revolves around Sakthi Industries, which challenged an order from the tax authorities claiming a breach of natural justice. The Madras High Court reviewed the situation where the industries provided job work services to another company, and the dispute stemmed from a tax demand related to capital goods procured in the financial year 2017-18. The sequence of events is as follows: - The petitioner received a show cause notice on September 25, 2023, and provided a reply on December 21, 2023, outlining discrepancies in their tax filings but claimed that their response was not considered in the order issued on December 27, 2023. - The industry’s counsel argued that this non-consideration amounted to a breach of their rights under principles of natural justice. - The Government Advocate defended the respondents, asserting that all procedural requirements had been met and the petitioner’s reply was insufficiently detailed. - The court noted that while the petitioner’s reply was indeed brief and lacked detailed explanation, it was absent from the impugned order entirely. - Finding that remanding the case would reconcile the interest of revenue while allowing the petitioner a fair opportunity, the court set aside the initial order on the condition that the petitioner remit 10% of the disputed tax demand within 15 days. - The petitioner was also allowed to submit additional documentation, and the tax authorities were instructed to provide an opportunity for a personal hearing, subsequently issuing a fresh order. In conclusion, the High Court aimed to balance the interests of natural justice and procedural correctness with the requirement to address tax compliance effectively. The bank attachment related to the case was also lifted upon this ruling.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 27.12.2023 is challenged in this writ petition on the ground of breach of principles of natural justice. The petitioner asserts that she is engaged inter alia in the business of providing job work services to Sakthi Auto Component Limited. In relation thereto, it is stated that capital goods were procured in financial year 2017-18 and that such goods were deployed in undertaking job work in the following financial year. Therefore, on receipt of show cause notice dated 25.09.2023, by reply dated 21.12.2023, the petitioner stated that the capital goods were purchased in financial year 2017-18 and that outward supply during the said year was lower than inward supply.
2. By referring to the aforesaid reply, learned counsel submits that such reply was not taken into consideration while issuing the impugned order. Without prejudice, she submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
3. Mr. K. Vasanthamala, learned Government Advocate, accepts notice for respondents 1 and 2. She submits that principles of natural justice were complied with by issuing intimation dated 14.09.2023, show cause notice dated 25.09.2023 and by offering a personal hearing. She also submits that the petitioner’s reply contains no details.
4. In the petitioner’s reply, it is stated as under:
“We purchases capital during current year 2017-18. Hence outward is less than inward supply.”
5. The above reply is terse and cannot be construed as self-explanatory. It is, however, noticeable that such reply does not find mention in the impugned order. In these circumstances, by balancing revenue interest, a remand is warranted subject to putting the petitioner on terms.
6. For reasons aforesaid, impugned order dated 27.12.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand, as agreed to, within fifteen days from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit an additional reply and enclose relevant documents. Upon receipt of the petitioner’s reply and on being satisfied that 10% of the disputed tax demand was received, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within three months from the date of receipt of the petitioner’s additional reply. On account of the assessment order being set aside, the bank attachment is raised.
7. W.P.No.16961 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18674, 18676 and 18678 of 2024 are closed.