Perfect Assayers Private Limited vs State Tax Officer (ST), Coimbatore

An order in original dated 28.09.2023 is assailed on the ground that the petitioner’s reply to the show cause notice was not taken into consideration. Upon receipt of a show cause notice dated 27.04.2023 alleging a mismatch between the petitioner’s GSTR 3B returns and the GSTR 1 statement as well as between the petitioner’s GSTR 3B returns and the auto-populated GSTR 2A, the petitioner replied on 26.05.2023. The impugned order was issued in these facts and circumstances on 28.09.2023. Learned counsel for the petitioner invited my attention to the show cause notice and the reply thereto. As regards the discrepancy between the GSTR 3B return and GSTR 1 statement, learned counsel pointed out that such mismatch was on account of not taking into account the value of credit notes. By drawing reference both to the GSTR 1 statement and the annual return in GSTR 9, learned counsel pointed out that the total value of credit notes of Rs.68,91,320/- is mentioned therein. As regards the variation between the GSTR 2A and GSTR 3B, learned counsel pointed out that such difference was on account of one supplier, S.M. Network, not reflecting the invoices in returns filed by such supplier. Learned counsel also pointed out that the annual return and the relevant invoices were enclosed with the reply to the show cause notice. By turning to the impugned order, learned counsel points out that the petitioner’s explanation and the relevant documents were not taken into consideration. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. By inviting my attention to the show cause notice, learned counsel points out that the petitioner was put on notice about the mismatch and called upon to produce relevant documents. Since the petitioner failed to provide supporting documents, he submits that the tax proposal was confirmed. However, the petitioner contends that all necessary documents, including the annual return and invoices, were indeed provided in the reply to the show cause notice. The failure to consider these documents and explanations renders the impugned order arbitrary and unjust. It is argued that the discrepancy in GSTR 3B and GSTR 1 was due to credit notes, and the discrepancy between GSTR 3B and GSTR 2A was due to a supplier’s failure to reflect invoices. Therefore, the impugned order, issued without proper consideration of the petitioner’s detailed response and supporting documents, lacks a rational basis and should be set aside. The court must examine whether the petitioner’s response was adequately reviewed and whether the impugned order was passed with due consideration of all relevant facts and documents.

In the reply to the show cause notice, the petitioner has explained the alleged discrepancy between the GSTR 3B and GSTR 1 by pointing out that the discrepancy is on account of not reckoning the total value of credit notes. The petitioner has placed on record the GSTR 1 statement and the annual return in GSTR 9. Both these documents reflect the total value of credit notes as Rs.68,91,320/-. As regards the variation in input tax credit between the GSTR 3B returns of the petitioner and the auto-populated GSTR 2A, the petitioner has explained the difference by pointing out that one of the suppliers, S.M. Network, did not reflect invoices for supplies made by such supplier. The relevant invoices were enclosed with the reply. In this context, it is pertinent to examine the impugned order. The operative portion of the impugned order is as under: “The taxpayer failed to reply to the intimation as in the reference third cited. In continuation of the intimation, as per Rule 100(2) & 142(1)(a) of CGST Act 2017, show cause notice in DRC01 is issued to the taxpayer as in the reference fourth cited. The reply filed by the taxpayer without any supporting documents as in the reference fourth cited. In order to take further action, one reminder notice was sent to them with personal hearing but they failed to pay the tax. Hence an Assessment order issued under Section 73 of CGST ACT 2017 with tax, interest and penalty as due for payment.” The above operative portion is bereft of reasons. In spite of the petitioner’s GSTR 1 statement and the annual return in GSTR 9 being available, no reasons are specified as to why the petitioner’s explanation was rejected. Even with regard to the discrepancy between the petitioner’s GSTR 3B returns and the auto-populated GSTR 2A, in spite of the petitioner enclosing the relevant invoices to explain the discrepancy, the impugned order does not discuss the explanation and record reasons for rejecting the same. Consequently, the impugned order cannot be sustained. The petitioner contends that the failure to consider these documents and explanations renders the impugned order arbitrary and unjust. It is argued that the discrepancy in GSTR 3B and GSTR 1 was due to credit notes, and the discrepancy between GSTR 3B and GSTR 2A was due to a supplier’s failure to reflect invoices. Therefore, the impugned order, issued without proper consideration of the petitioner’s detailed response and supporting documents, lacks a rational basis and should be set aside. The court must examine whether the petitioner’s response was adequately reviewed and whether the impugned order was passed with due consideration of all relevant facts and documents.