Facts of the Case

The petitioner, Tvl. 2918 Kannanoor PAC CS Ltd, challenged the assessment order dated 29.12.2023 passed by the respondent under Section 73 of the GST Act, 2017.

The assessment order was passed ex parte because the petitioner had not utilised the opportunities provided during the assessment proceedings.

The principal discrepancy concerned a difference between purchase tax and sales tax. According to the petitioner, it had two GST registrations. The username and password relating to the old GST registration had been lost, following which a new GST registration was applied for and obtained.

The petitioner explained that, during the disputed period, the purchase turnover was reflected under the old GST registration number, whereas the corresponding outward supply of goods was reported by the petitioner’s staff under the new GST registration number. The petitioner contended that no revenue loss had occurred to the Department and sought another opportunity to submit a reply along with the connected records.

As regards non-participation in the assessment proceedings, the petitioner stated that the show cause notice and the impugned order had been uploaded only on the GST online portal without its knowledge. It was further stated that the Accountant had never informed the petitioner about the impugned order, due to which the petitioner could not file a reply within time.

Issues Involved

The principal issues before the Madras High Court were:

  1. Whether the ex parte assessment order dated 29.12.2023 passed under Section 73 of the GST Act should be interfered with when the petitioner had failed to avail the opportunities granted during the assessment proceedings.
  2. Whether the petitioner’s explanation regarding two GST registrations, reporting of purchase turnover under the old GST registration and corresponding outward supplies under the new GST registration warranted a fresh opportunity to submit supporting records.
  3. Whether the petitioner’s explanation that the show cause notice and assessment order were uploaded on the GST portal without its knowledge constituted sufficient ground for granting another opportunity of hearing.
  4. Whether relief could be granted on equitable grounds subject to appropriate conditions, including deposit of a portion of the disputed tax amount.

Petitioner’s Arguments

The petitioner contended that it had two GST registrations and that the username and password relating to the old registration had been lost. Consequently, a new GST registration was applied for and obtained.

It was submitted that the purchase turnover was reflected under the old GST registration number, whereas the corresponding outward supply of goods had been reported by the petitioner’s staff under the new GST registration number.

The petitioner maintained that there was no revenue loss to the Department and sought one more opportunity to file a reply along with the relevant connected records.

The petitioner further explained that the show cause notice and the impugned order had been uploaded on the GST online portal without its knowledge. According to the petitioner, its Accountant had not informed it about the impugned order, resulting in failure to submit a reply within the prescribed time.

On these grounds, the petitioner sought quashing of the assessment order and an opportunity to place its explanation and supporting documents before the Assessing Officer.

Respondent’s Arguments

The respondent Revenue was represented by the Government Standing Counsel.

The impugned assessment had been made ex parte because the petitioner did not utilise the opportunities provided during the assessment proceedings.

The matter was considered in the context of the petitioner’s failure to participate in the original assessment proceedings and the subsequent request for another opportunity to submit its reply and supporting documents.

Court’s Findings / Order

The Madras High Court considered:

  • the nature of the discrepancies noted in the assessment proceedings;
  • the explanation offered by the assessee on merits; and
  • the reasons advanced for not availing the opportunity during the original proceedings.

The Court held that an opportunity could be granted to the assessee to present its submissions and produce relevant supporting documents before the respondent Assessing Officer.

The Court observed that such opportunities had been extended on equitable grounds, but under appropriate conditions. Accordingly, the petitioner was granted relief subject to deposit of 25% of the disputed tax amount.

The Writ Petition was allowed on the following terms:

  1. Deposit of 25% of disputed tax: Within four weeks from the date of receipt of the web copy of the order, the petitioner shall deposit 25% of the disputed tax amount with the respondent without waiting for a certified copy of the order.
  2. Assessment order to stand set aside upon deposit: Upon such deposit, the impugned assessment order dated 29.12.2023 shall stand set aside and the matter shall stand remanded to the respondent.
  3. Fresh reply and supporting documents: The assessee shall appear before the respondent without fail and submit its reply and documents in support of its claim.
  4. Fresh adjudication: The respondent shall consider the matter afresh and pass orders in accordance with law.
  5. Bank account attachment: Since the impugned assessment order was set aside, any attachment of the bank account made pursuant to the impugned order was directed to be raised.
  6. No costs: No order as to costs was passed, and the connected miscellaneous petition was closed.

Important Clarification

The High Court did not grant unconditional relief merely because the assessment order had been passed ex parte. The restoration of the matter was expressly made conditional upon the petitioner depositing 25% of the disputed tax amount within four weeks from receipt of the web copy of the order.

Only upon such deposit would the impugned assessment order dated 29.12.2023 stand set aside and the matter be remanded for fresh consideration.

The judgment also clarifies that, after remand, the assessee must appear before the respondent without fail and submit its reply together with supporting documents. The Assessing Officer is then required to reconsider the matter afresh and pass orders in accordance with law.

A further significant consequence of setting aside the assessment order is that any bank account attachment made pursuant to the impugned order was directed to be raised.

Key Legal Takeaway

The decision reinforces the principle that where a GST assessment under Section 73 has been completed ex parte and the assessee presents a plausible explanation both on the merits of the discrepancy and for failure to participate in the proceedings, the High Court may grant a fresh opportunity on equitable grounds. However, such relief may be made subject to a substantial protective condition, such as pre-deposit of a specified percentage of the disputed tax.

In the present case, the Madras High Court balanced the petitioner’s request for an effective opportunity to place records before the Assessing Officer with the interests of Revenue by directing a 25% deposit of the disputed tax amount as a condition for setting aside the ex parte assessment order and remanding the matter for fresh adjudication.

Section Involved

Section 73 of the GST Act, 2017 – Assessment proceedings relating to determination of tax in cases other than fraud, wilful misstatement or suppression of facts.

Article 226 of the Constitution of India – Writ jurisdiction of the High Court.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783057485_351compressed.pdf

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