Tvl. Harshini Exports Vs State Tax Officer (FAC)
Date: July 11, 2024
Subject Matter
GST Order remanded with 10% disputed GST payment condition
Summary
In the case of Tvl. Harshini Exports vs. e State Tax Officer (FAC), the Madras High Court dealt with a GST assessment issue involving allegations of natural justice violations. The petitioner, a textile exporter, contested an order made on December 30, 2023, asserting that the assessing officer wrongly applied Rule 30 of the CGST Rules to their situation, primarily concerned with related-party transactions. The company claimed they were unaware of the proceedings until May 2024 when they received a bank attachment notice, indicating a lack of proper communication. They argued that their closing stock could clarify discrepancies between inward and outward supplies if the assessing officer had sought this information. Although the petitioner was ready to pay 10% of the disputed tax to cooperate in the reassessment, the Additional Government Pleader contended that all necessary notices were issued, thus adhering to natural justice principles. However, the court identified procedural shortcomings, particularly in the assessment officer's assumptions about the outward supply value. The Madras High Court ultimately nullified the December 30 order, instructed Tvl. Harshini Exports to remit 10% of the disputed tax within fifteen days, and allowed them to submit a detailed response to a show cause notice. It also mandated a fresh assessment within three months, incorporating a personal hearing for the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order in original dated 30.12.2023 is assailed both on breach of principles of natural justice and on merits. The petitioner is engaged in trade relating to textiles. According to the petitioner, materials were purchased in the financial year 2017-18 and a large proportion thereof was sold in the following financial year. The petitioner asserts that GST compliances were entrusted to a consultant. Since the show cause notice and other notices were uploaded on the “view additional notices and orders” tab in the GST portal but not communicated to the petitioner through any other mode, it is stated that the petitioner was unaware of proceedings until May 2024 when a bank attachment notice was served.
2. Learned counsel for the petitioner submits that the impugned order is patently flawed in as much as the assessing officer confirmed the tax proposal by reference to Rule 30 of applicable GST Rules. He submits that Rule 30 is applicable in limited circumstances wherein goods are supplied to related parties and there is a dispute with regard to the value of supply. He further submits that the petitioner’s closing stock would have satisfactorily explained the disparity between the value of inward supply and outward supply. If the assessing officer had called for the details of closing stock by exercising power under Section 70 or Section 71 of applicable GST statutes, he submits that the dispute would have been resolved. Without prejudice, learned counsel submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand.
3. Mr. T. N. C. Kaushik, learned Additional Government Pleader, accepts notice for the first respondent. He submits that principles of natural justice were complied with by issuing intimation dated 31.08.2023, show cause notice dated 30.09.2023 and by offering a personal hearing to the petitioner.
4. On perusal of the impugned order, it is evident that the tax proposal was confirmed on account of the non receipt of objections from the tax payer. It also appears that the assessing officer estimated the outward supply value at 110% of the purchase value by invoking Rule 30 of the CGST Rules, 2017. Learned counsel for the petitioner contended that Rule 30 is not applicable in the circumstances and that the assessing officer could have issued summons and obtained clarification. These facts and circumstances justify re-consideration on terms.
5. For reasons set out above, impugned order dated 30.12.2023 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 a reply to the show cause notice by annexing all 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 reply. On account of the assessment order being set aside, the bank attachment is raised.
6. W.P.No.16976 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.18696, 18697 and 18698 of 2024 are closed.