Facts of the Case

Vadakkoot Chackoo Devassy, aged 79, proprietor of Sadhu Hardware, Pavaratty, Thrissur District, filed WP(C) No.42265 of 2023 before the Kerala High Court against the Assistant State Tax Officer, Thrissur, along with the CBIC, GST Council, State of Kerala, and Union of India. His GST registration had already been cancelled by an order in Form GST REG-19 dated 19.04.2021 (Ext.P1). Despite this, a scrutiny notice in Form GST ASMT-10 under Rule 99(1) of the CGST/SGST Rules, 2017 was issued on 29.09.2023 (Ext.P2) for assessment year 2017-18, and the very next day a show cause notice under Section 73 of the CGST/SGST Act, 2017 (Ext.P3), along with a summary in Form GST DRC-01 (Ext.P4), was issued. Both notices were uploaded only on the GST portal. An assessment order under Section 73 (Ext.P5) and summary in Form GST DRC-07 (Ext.P6), both dated 03.11.2023, were passed confirming a demand for AY 2017-18, leading to the writ petition heard and decided on 21.12.2023 by Justice Dinesh Kumar Singh.

Issues Involved

  1. Whether the assessment order (Ext.P5) and DRC-07 summary (Ext.P6) were barred by limitation and violative of the principles of natural justice.
  2. Whether powers under Section 172 of the CGST/SGST Act should be invoked to remove difficulties faced by taxpayers claiming input tax credit through belated returns.
  3. Whether Section 16(4) of the CGST/SGST Act is ultra vires Sections 16(1) and 16(2) of the Act and unconstitutional.

Petitioner's Arguments

  • No official or physical copy of either the Form GST ASMT-10 notice or the Section 73 show cause notice was served on the petitioner; both were merely uploaded on the GST portal.
  • Since the petitioner's registration had already been cancelled on 19.04.2021, well before the notices of September 2023, he had no occasion to check the portal thereafter and hence could not respond to either notice.
  • No time at all was afforded to reply to the ASMT-10 notice before the Section 73 show cause notice was issued the very next day (29.09.2023 to 30.09.2023) — a clear violation of natural justice.
  • Section 16(4), restricting the time within which ITC can be availed through belated returns, is ultra vires Sections 16(1) and 16(2) and unconstitutional; alternatively, Section 172 ought to be invoked to remove this difficulty.
  • The assessment order (Ext.P5) confirming the demand for 2017-18 was, in any event, barred by limitation.

Respondent's Arguments

  • The order does not record any substantive opposition from the respondents; only the appearance of the Government Pleader is noted, and the timing of the two notices — issued a day apart and uploaded solely on the portal — was not disputed.

Court Order/Findings

  • The Court found prima facie substance in the petitioner's submission: Ext.P2 was dated 29.09.2023 and, the very next day, the Section 73 notice, Ext.P3, was issued, without allowing any time to reply to the ASMT-10 notice.
  • It was also undisputed that the petitioner's GST registration had already been cancelled before these notices were uploaded on the portal.
  • Holding that this amounted to a violation of the principles of natural justice, the Court set aside the assessment order Ext.P5 and remanded the matter to the Assessing Authority for a fresh order.
  • The petitioner was permitted to file a reply to the Section 73 notice (Ext.P3) within three days, and, on doing so, would be afforded an opportunity of hearing before a fresh assessment order is passed.
  • As a condition of relief, the petitioner-assessee was directed not to raise any limitation objection while the assessment for AY 2017-18 is finalised afresh; the constitutional challenge to Section 16(4) and the Section 172 relief were not decided.

Important Clarification

  • Where a taxpayer's GST registration stands cancelled, mere uploading of assessment notices on the GST portal, without any other mode of service, may not amount to effective communication, particularly since the taxpayer has no reason to keep monitoring the portal thereafter.
  • Issuing a Section 73 show cause notice the very next day after an ASMT-10 scrutiny notice, without allowing the time contemplated for a reply to the ASMT-10 notice, can vitiate the assessment on natural justice grounds.
  • Even while granting relief on procedural grounds, courts may protect revenue interest by directing that the taxpayer not raise a limitation defence when the matter is reconsidered on remand.
  • The broader constitutional challenge to Section 16(4) of the CGST/SGST Act was expressly left open, meaning the point remains available to be argued in an appropriate case.

Sections Involved

  • Section 73, CGST/SGST Act, 2017 — determination of tax not paid or short paid for reasons other than fraud.
  • Section 16(4), CGST/SGST Act, 2017 — time limit for availing input tax credit.
  • Section 172, CGST/SGST Act, 2017 — power to remove difficulties in giving effect to the Act.
  • Rule 99(1), CGST/SGST Rules, 2017 — scrutiny of returns via Form GST ASMT-10.

Decision – In Favour of

In favour of the Assessee — the assessment order was set aside for violation of natural justice and the matter remanded for fresh adjudication after a genuine opportunity of hearing, though qualified by a bar on raising a limitation defence and by the Court leaving the constitutional challenge to Section 16(4) undecided.

Related Case Laws

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

Case Details

  • Court: Kerala High Court, Ernakulam
  • Case No.: WP(C) No.42265 of 2023
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 21.12.2023
  • Disposal Nature: Assessment order set aside for violation of natural justice and remanded for fresh order

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