Rajive And Company Vs Deputy Commissioner (Audit)

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The challenge raised in this writ petition is against the show cause notices issued under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017/ Kerala State Goods and Services Tax Act, 2017 (for short, ‘GST Act’) apart from a final audit report dated 08.07.2024.

2. Petitioner is conducting a jewellery by the name ‘Chungath Jwellery’ and is an assessee under the GST Act. For the period between 2017-18 to 2021-22, petitioner’s establishment was subjected to an audit under Section 65 of the GST Act. The statute prescribes that the audit should be completed within three months from the date of its commencement. The contention raised by the petitioner revolves around the non-compliance with the period stipulated for completing the audit. According to the petitioner, the show cause notices now issued and the final audit report filed based on an audit that was not completed within the time prescribed, has no legal basis and is therefore liable to be quashed.

3. A statement has been filed on behalf of the respondents stating that the audit was completed within three months from the date of its commencement as stipulated in the Explanation to Section 65(4) of the GST Act. According to the respondents, on 09.04.2024, in response to a direction to produce the documents, petitioner made the documents available on 06.05.2024 and hence the final audit report dated 08.07.2024 is within time.

4. Sri. Joseph Markos, the learned Senior Counsel, instructed by Sri. Abraham Joseph Markos, the learned counsel for the petitioner submitted that the audit was proposed to be commenced on 10.01.2024. However, since the records sought for were given on 19.02.2024, the commencement of audit gets extended. According to the Senior Counsel, the final audit report dated 08.07.2024 is beyond the period contemplated by the statute even when reckoned from the extended period. It was also submitted that the audit enquiry notice as contemplated under Rule 101 of the Kerala Goods and Services Tax Rules, 2017 was issued on 07.03.2024 and therefore under no circumstances can the commencement be extended before that. The learned Senior Counsel further submitted that the draft audit report is stated in Ext.P9 as having been prepared on 04.05.2024, as seen from Ext.P9, which itself indicates that the date of completion of the audit would certainly have been much before that.

5. Smt.M.M.Jasmine, the learned Government Pleader, on the other hand, submitted that the respondents received all the documents from the petitioner only on 06.05.2024 and hence the completion of the audit need to have been carried out only within three months from the said date. It was also submitted that from Ext.P5 itself, it is evident that petitioner had submitted additional documents only along with the said communication dated 09.04.2024 and therefore viewed in that perspective also, the respondents had time up till 08.07.2024 for completing the audit.

6. While considering the rival contentions, it is necessary to refer to Section 65 of the CGST Act which reads as below :-

* Section 65. Audit by tax authorities.-

(1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed.

(2) The officers referred to in sub-section (1) may conduct audit at the place of business of the registered person or in their office.

(3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed.

(4) The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit:

Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months.

Explanation.- For the purposes of this sub-section, the expression “commencement of audit” shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of audit at the place of business, whichever is later.

(5) During the course of audit, the authorised officer may require the registered person, –

(i) to afford him the necessary facility to verify the books of account or other documents as he may require;

(ii) to furnish such information as he may require and render assistance for timely completion of the audit.

(6) On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.

(7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73or section 74 1[or section 74A].

7. The audit contemplated under the above provision stipulates that it shall be completed within a period of three months from the date of commencement of the audit. The Commissioner is given the power to extend the said period by a further period not exceeding six months. However, the explanation to the aforesaid provision stipulates that the commencement of the audit shall mean the date on which the records and other documents called for by the Tax Authorities are made available or the actual institution of audit at the place of business whichever is later. Though a question can arise whether the time limit is mandatory or only directory in view of the use of the word ‘shall’, the said question is left open for consideration in appropriate case, considering the circumstances of this case.

8. In the statement filed by the respondents, it was specifically stated that the records called for by the respondents during the course of arguments were submitted only on 06.05.2024. However, there is nothing on record either in the form of an acknowledgment or any communication that it was received on that date. Hence, I am of the view that the contention that records were received only on 06.05.2024 cannot be accepted for the purpose of this case.

9. Nonetheless, in the communication dated 09.04.2024, which is produced as Ext.P5, petitioner itself had after referring to the notice of personal hearing issued on 26.03.2024 and stated as follows :- ‘the additional evidence as required by your goodself and informed to us on 26.03.2024 and 02.04.2024 as Annexure 2 herewith, in case your goodself were to inform us the list of any other evidence(s), which is required to be furnished by the RTP, then we can have the same compiled and arranged as well’. The hearing notice dated 26.03.2024 and 02.04.2024 have not been produced. However, it is evident from the Ext.P5 communication issued by the petitioner itself that additional evidences were called for by the respondents from the petitioner. The said additional records are stated to have been produced on 09.04.2024, as seen from Ext.P5. Therefore, it can safely be concluded that the date on which the documents called for by the respondents were produced by the petitioner on 09.04.2024.

10. In this context, it is necessary to refer to the Explanation to Section 65 which stipulates that the expression ‘commencement of audit shallmean the date on which the records and documents called for by the Tax Authorities are made available by the registered person’. Viewed in the above perspective, the documents called for by the Tax Authorities were made available by the petitioner on 09.04.2024 and the audit ought to have been completed within three months from the aforesaid date. Since the final report was filed within time, the contention raised by the petitioner on the basis of limitation stipulated in Section 65(4) of the GST Act has no application.

In view of the above, I find no merit in this writ petition and it is dismissed.