Facts of the Case

The petitioner, M/s. C. Siva Anand, trading as Anand Hardwares and Electricals (GSTIN 33CUMPS7718F1Z8), challenged an order-in-original dated 26.06.2023 passed by the Superintendent of GST and Central Excise, Marthandam Range, demanding interest of Rs.6,04,427. The petitioner's case was that the entire tax for the relevant period had already been discharged through Input Tax Credit, and if this were accounted for, no tax liability — and by extension no interest liability — would remain. Despite this, the respondent imposed tax, interest, and penalty. The petitioner contended the impugned order failed to discuss any of the grounds raised in his reply dated 26.04.2023, being merely a one-line order stating that the interest amount was payable since the reply was “not tenable.”

Issues Involved

  1. Whether the impugned order, which failed to record any reasoning on the grounds raised by the petitioner, was a non-speaking order violating principles of natural justice.
  2. Whether the interest demand ought to have been examined in light of the principles laid down in M/s. Refex Industries Limited v. Assistant Commissioner of CGST & Central Excise.

Petitioner's Arguments

  • The entire tax liability for the period was discharged through ITC, and had this been accounted for, no tax (or consequential interest) would be payable.
  • The impugned order did not discuss any of the grounds raised in the petitioner's reply and was a one-line, non-speaking order.
  • The demand ought to be reconsidered applying the principles from Refex Industries, which addresses interest liability where tax has been discharged through available credit.

Respondent's Arguments

  • The respondent, appearing through the Senior Standing Counsel, defended the order as passed after considering the petitioner's reply, which was found untenable regarding non-payment of interest.

Court Order / Findings

  • The Court held that the impugned order was a non-speaking order, as it did not engage with or discuss any of the grounds raised by the petitioner in his reply.
  • The impugned order was accordingly quashed and the matter remitted to the respondent to reconsider the petitioner's case in light of the principles in M/s. Refex Industries Limited v. Assistant Commissioner of CGST & Central Excise, 2020(2) TMI 794-Madras.
  • The respondent was directed to pass a fresh order after affording an opportunity of personal hearing, to be completed within four months from receipt of the order.

Important Clarification

  • A GST demand order that fails to engage with the specific grounds raised in an assessee's reply, reducing the order to a bare conclusion, qualifies as a non-speaking order liable to be quashed for breach of natural justice.
  • Interest demands must be examined against the settled principle in Refex Industries concerning the interplay between available Input Tax Credit and interest liability.

Sections Involved

  • Section 75, GST Act, 2017 — general provisions relating to determination of tax, requiring a reasoned order and opportunity of hearing.
  • Section 50, GST Act, 2017 — interest on delayed payment of tax.

Decision – In Favour of

Assessee, in part. The impugned order was quashed and the matter remanded for fresh adjudication with a personal hearing; the merits of the interest liability remain to be decided afresh.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

Court: Madurai Bench of Madras High Court
Case No.: W.P.(MD).No.23752 of 2023
Coram: S. Srimathy, J.
Decision Date: 29.09.2023
Disposal Nature: Allowed; impugned order quashed and remanded

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