Facts of the Case

The petitioner, M/s AMK Athencottasan Muthamizh Kazhagam Man Power Services, represented by its Director, approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India challenging an assessment order dated 29 May 2023 passed under Section 73 of the TNGST Act, 2017.

The impugned assessment order had been passed after rejecting the petitioner’s representation dated 21 January 2023.

The principal discrepancy alleged by the respondent was short payment of IGST on account of the difference between tax declared in Form GSTR-1 and tax paid through Form GSTR-3B for the assessment year 2021-22. The discrepancy was linked to an allegation of wrong claim of exemption on waste management service rendered to a local authority.

The proceedings also involved penalty under Section 73 and interest under Section 50 of the GST Act.

As specifically summarised in the detailed table appearing on page 3 of the judgment, the petitioner maintained that GSTR-1 is a statement intended for reporting invoice-wise outward supply details and is not itself a return for payment of tax. The petitioner asserted that the difference was purely a reconciliation issue arising from reporting discrepancies and did not represent short payment or evasion of tax.

Regarding failure to effectively avail the opportunity, the petitioner stated that the part-time accountant failed to notice issuance of the order and that the respondent had uploaded communications, summons, notices and orders only on the web portal. According to the petitioner, inability to access the web portal resulted in the impugned order.

Issues Involved

The principal issues arising from the judgment were:

  1. Whether the assessment order passed under Section 73 of the TNGST Act, 2017 should be interfered with where the petitioner claimed inability to effectively avail the opportunity due to failure to access communications uploaded on the GST web portal.
  2. Whether the difference between tax declared in GSTR-1 and tax paid through GSTR-3B represented actual short payment of IGST or merely a reconciliation/reporting discrepancy.
  3. Whether the petitioner had wrongly claimed exemption in respect of waste management service rendered to a local authority.
  4. Whether interest under Section 50 and penalty under Section 73 were sustainable where the petitioner asserted that there was no excess claim or wrong claim and no actual tax evasion.
  5. Whether the petitioner should be granted another opportunity to place submissions and supporting documents before the assessing officer.
  6. Whether such opportunity should be made conditional upon deposit of a portion of the disputed tax.
  7. Whether any bank account attachment pursuant to the impugned assessment order could continue once the assessment order was set aside upon compliance with the Court’s condition.

Petitioner’s Arguments

The petitioner contended that the discrepancy identified by the respondent had been incorrectly treated as short payment of IGST.

The petitioner specifically submitted that:

  • Form GSTR-1 is a statement meant for reporting invoice-wise outward supply details;
  • GSTR-1 is not itself a return for payment of tax;
  • the respondent failed to appreciate that the difference between GSTR-1 and GSTR-3B was purely a reconciliation issue arising from reporting discrepancies;
  • such difference did not represent short payment of tax or evasion of tax.

The petitioner further argued that, in the absence of any excess claim or wrong claim, the question of levying:

  • interest under Section 50; and
  • penalty under Section 73

did not arise on the facts of the case.

Regarding non-availing of the opportunity, the petitioner explained that:

  • the part-time accountant failed to notice issuance of the order;
  • the respondent had chosen to upload communications, summons, notices and orders only on the web portal;
  • due to these circumstances, the petitioner could not access the web portal; and
  • this resulted in the impugned order being issued without the petitioner effectively presenting its case.

These submissions are reflected in the Court’s tabular summary on page 3 of the order.

Respondent’s Arguments

The respondent Revenue was represented by the learned Additional Government Pleader.

The departmental case, as reflected in the judgment, was based on:

  • alleged short payment of IGST;
  • difference between tax declared in GSTR-1 and tax paid through GSTR-3B for assessment year 2021-22;
  • alleged wrong claim of exemption concerning waste management service rendered to a local authority;
  • consequential penalty under Section 73; and
  • interest under Section 50 of the GST Act.

The judgment does not separately record any extensive independent counter-submissions by the respondent beyond the Revenue’s representation and the grounds underlying the assessment order. Accordingly, no additional argument should be attributed to the respondent beyond what is expressly recorded in the judicial order.

Court Order / Findings

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 reason placed before the Court for failure to avail the opportunity.

The Court formed the view 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 subject to appropriate conditions.

Accordingly, the High Court granted relief subject to the petitioner depositing 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  1. Deposit of 25% disputed tax: Within four weeks from receipt of the web copy of the order, the petitioner must deposit 25% of the disputed tax amount with the respondent, without waiting for a certified copy.
  2. Assessment order to stand set aside upon deposit: Upon such deposit, the impugned assessment order dated 29 May 2023 shall stand set aside.
  3. Matter remanded: The matter shall stand remanded to the respondent assessing authority.
  4. Fresh reply and supporting documents: The assessee must appear before the respondent without fail and submit its reply and documents in support of its claim.
  5. Fresh decision according to law: The respondent shall consider the matter afresh and pass orders in accordance with law.
  6. Bank account attachment to be raised: Since the impugned assessment order is set aside, any attachment of the bank account made pursuant to that order shall stand raised.
  7. No costs: The writ petition was disposed of without costs, and the connected miscellaneous petition was closed.

Important Clarification

1. The High Court did not finally decide the GSTR-1 vs GSTR-3B mismatch on merits

The Court did not conclusively hold that the difference was merely a reconciliation issue. That was the petitioner’s explanation. The assessing officer must reconsider the matter after the petitioner submits its reply and supporting documents.

2. The Court did not finally uphold the claimed exemption for waste management service

The judgment does not conclusively determine whether the alleged exemption relating to waste management service rendered to a local authority was legally available. That substantive issue remains for fresh consideration by the assessing authority.

3. The assessment order is set aside only upon compliance with the 25% deposit condition

The operative direction is conditional. The petitioner must deposit 25% of the disputed tax amount within four weeks from receipt of the web copy of the order. Upon such deposit, the impugned order stands set aside and the matter is remanded.

4. The Court granted an equitable opportunity, not final tax relief

The High Court’s intervention restores an opportunity to place the case and supporting documents before the assessing officer. It does not amount to a final finding that no IGST, interest or penalty is payable.

5. Interest under Section 50 and penalty under Section 73 were not finally annulled on merits

The petitioner argued that, in the absence of excess or wrong claim, interest and penalty should not arise. The Court did not finally adjudicate this contention and instead remanded the matter.

6. Bank attachment relief follows the setting aside of the assessment order

The Court expressly directed that any bank account attachment made pursuant to the impugned assessment order shall stand raised because the underlying assessment order is set aside under the terms directed by the Court.

Sections / Legal Provisions Involved

·         Section 73 of the TNGST Act, 2017 / GST law — Provision concerning determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised in cases other than those involving fraud, wilful misstatement or suppression of facts to evade tax.

·         Section 50 of the GST Act — Provision concerning interest on delayed payment of tax.

·         Article 226 of the Constitution of India — Constitutional writ jurisdiction of the High Court.

·         Form GSTR-1 — Statement of invoice-wise outward supply details.

·         Form GSTR-3B — Summary GST return through which tax liability is reported and discharged.

Link to download the order - https://mytaxexpert.co.in/uploads/1783678800_1489compressed.pdf

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