In a recent ruling, the Madras High Court remanded the matter to the State Tax Officer ( First Respondent ) concerning the supplier’s delayed filing of Goods and Services Tax ( GST ) returns under B2C instead of B2B. This misclassification led to the issuance of a GST demand order against the buyer.
Mohanasundaram Senthilvelu, the petitioner received a Show Cause Notice (SCN) on 22.12.2021 regarding an excess Input Tax Credit ( ITC ) of Rs.4,82,703 under the State Goods and Service Tax ( SGST ) and Central Goods and Service Tax ( CGST ) for the financial year 2018-2019. A subsequent Demand Notice under Section 73 was issued on 28.02.2022, followed by a Reminder Notice in November 2023 with an incorrect reference number.
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The petitioner complied with all the notices and the first respondent issued a system-generated order on 28.04.2024 regarding dropping the assessment and, another Form GST ASMT-12 was issued on 15.08.2024, accepting the petitioner’s reply.
Despite the system-generated order regarding dropping the case, a bank attachment notice was still issued. The counsel argued that issuing a Bank Attachment Notice after dropping the proceedings was illegal and violated Section 75(6) of the CGST Act and the petitioner was unaware of the notices because they were uploaded under the ‘Additional Notices’ tab instead of the ‘Notices’ tab.
Due to unawareness, the petitioner submitted a late reply explaining that the mismatch arose because the supplier had filed returns late and the supplier paid tax under B2C instead of B2B. The petitioner’s counsel argued that the petitioner was denied the opportunity to submit oral or written submissions which violated the principles of natural justice.
The petitioner’s counsel expressed the petitioner’s willingness to pay 10% of the demand if allowed to file a reply and present supporting documents. On the other hand, the respondent’s counsel did not object to the petitioner being granted relief.
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Justice Krishnan Ramasamy observed that the impugned order passed without giving a hearing opportunity which violated the principles of natural justice. The court agreed with the petitioner’s claim and directed the petitioner to pay 10% of the demand within four weeks. Upon payment, the court set aside the impugned order and remanded the matter to the State Tax Officer (First Respondent). Thus, the petitioner’s writ petition was disposed of without any order as to costs.
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