DSV Air and Sea Pvt. Ltd. vs State of Tamil Nadu

The petitioner, a registered entity under the GST laws in Tamil Nadu, found themselves embroiled in legal proceedings following an audit and subsequent submission of an audit report on September 26, 2023. This led to the issuance of a show cause notice on September 30, 2023, initiating proceedings against the petitioner. The petitioner contends that the show cause notice was confined to addressing a proposed tax amounting to Rs. 43,66,708.14. Responding to the notice, the petitioner submitted their reply on October 30, 2023. However, the situation escalated when an order was issued on December 31, 2023, which the petitioner now challenges.

One of the primary arguments in the challenge is that the impugned order exceeded the boundaries set by the initial show cause notice. The petitioner asserts that the scope of the order went beyond what was specified in the notice, suggesting that it addressed issues not initially raised or contemplated during the proceedings.

Furthermore, the petitioner contends that the entire trade payables of the petitioner were subjected to GST, implying that the order’s implications extended beyond the intended scope or understanding of the petitioner’s tax liabilities.

In summary, the petitioner finds fault with the order issued on December 31, 2023, alleging that it strayed beyond the confines of the original show cause notice and inaccurately addressed the petitioner’s tax liabilities, including their trade payables under the GST framework.

The petitioner, a registered entity under the GST laws in Tamil Nadu, contested an order dated December 31, 2023, on various grounds, primarily arguing that the order exceeded the scope outlined in the initial show cause notice and erroneously subjected the entirety of the petitioner’s trade payables to GST.

The legal saga began with an audit and the subsequent submission of an audit report on September 26, 2023, which triggered proceedings against the petitioner via a show cause notice issued on September 30, 2023. The petitioner asserts that the show cause notice was limited to addressing a proposed tax amount of Rs. 43,66,708.14. In response, the petitioner replied to the show cause notice on October 30, 2023. However, the impugned order, issued on December 31, 2023, allegedly went beyond the bounds of the show cause notice.

Counsel for the petitioner highlighted discrepancies between the proposed tax amount in the show cause notice and the significantly higher tax liability confirmed in the impugned order, which amounted to over Rs. 90 crores. Furthermore, the petitioner contested the treatment of total trade payables amounting to Rs. 85,58,12,375/- as taxable supplies, arguing that GST was incorrectly imposed on them. The petitioner had purportedly clarified in their response to the show cause notice that Input Tax Credit (ITC) had been availed within the stipulated 180-day period by paying for supplies received from suppliers. Despite this, the respondents allegedly imposed GST on the total trade payables, leading to the petitioner’s contention that the impugned order was flawed.

Additionally, the petitioner challenged the imposition of GST on inward supplies, where taxes were supposed to be paid on a reverse charge basis, and on ITC availed on the import of services. The petitioner’s counsel argued that the impugned order lacked adequate reasoning for rejecting the petitioner’s explanations.

In essence, the petitioner’s challenge to the order rests on allegations of procedural irregularities, including exceeding the scope of the show cause notice, incorrect imposition of GST on trade payables, and insufficient reasoning behind the imposition of GST on certain supplies.

The petitioner, a registered entity under GST laws in Tamil Nadu, contested an order dated December 31, 2023, primarily on two grounds: first, that the order exceeded the scope of the initial show cause notice, and second, that it incorrectly subjected all trade payables to GST.

The proceedings began with an audit and the subsequent submission of an audit report on September 26, 2023. Following this, a show cause notice was issued on September 30, 2023, limited, according to the petitioner, to a proposed tax amount of Rs. 43,66,708.14. The petitioner responded to this notice on October 30, 2023. However, the impugned order was issued on December 31, 2023, revealing a vast disparity between the proposed tax and the confirmed liability, exceeding Rs. 90 crores. The discrepancy mainly stemmed from the treatment of trade payables, amounting to Rs. 85,58,12,375, as taxable supplies attracting GST. Despite the petitioner’s assertion that Input Tax Credit (ITC) was appropriately availed within the stipulated 180-day period for supplies received, the respondents imposed GST on the total trade payables, a move contested by the petitioner as erroneous.

Furthermore, the petitioner challenged the imposition of GST on inward supplies, subject to taxes under reverse charge mechanism, and the availing of ITC on imported services. They argued that the impugned order lacked reasoning for rejecting their submissions.

In response, Mr. C. Harsha Raj, learned Additional Government Pleader, accepted notice for the respondents but did not provide a substantive counter to the petitioner’s contentions.

In essence, the petitioner alleged that the impugned order went beyond the scope of the show cause notice, incorrectly treated all trade payables as taxable supplies, and lacked justification for disregarding their explanations regarding ITC availing and reverse charge mechanism.

The case in question involves a challenge to an order issued on December 31, 2023, on various grounds, including the assertion that the order exceeded the scope outlined in the show cause notice and that the petitioner’s entire trade payables were subjected to Goods and Services Tax (GST). The petitioner, a registered entity under GST laws in Tamil Nadu, became subject to proceedings following an audit and the submission of an audit report on September 26, 2023. A show cause notice was subsequently issued on September 30, 2023, which the petitioner responded to on October 30, 2023. The impugned order was then issued on December 31, 2023.

The petitioner argues that the show cause notice specifically mentioned a proposed tax liability of Rs. 43,66,708.14, whereas the order imposed a significantly higher tax liability exceeding Rs. 90 crores. Furthermore, the petitioner contests the imposition of GST on the total trade payables amounting to Rs. 85,58,12,375, despite having availed Input Tax Credit (ITC) within the specified period for payments made to suppliers. The petitioner also challenges the imposition of GST on inward supplies subject to reverse charge basis and the availed ITC on imported services, claiming that the order lacks justification for rejecting the petitioner’s explanations.

The government pleader, representing the respondents, argues that each discrepancy and proposed tax liability was clearly outlined in the show cause notice, implying that the amount mentioned in the notice cannot be equated with the petitioner’s final tax liability. Additionally, the pleader asserts that the petitioner has an appellate remedy available and that there are no grounds for judicial interference under Article 226 of the Indian Constitution.

The main contention of the petitioner centers around the imposition of GST on trade payables. The petitioner maintains that it fulfilled statutory requirements for availing ITC by making timely payments for goods or services received, as evidenced by filings in Form GSTR 1 and GSTR 3B. Consequently, the petitioner argues that the conclusion in the impugned order, which asserts GST liability on the total taxable supply as per the petitioner’s financial statements, appears prima facie unjustifiable.

In summary, the petitioner challenges the imposition of GST on its entire trade payables, asserting compliance with statutory requirements for availing ITC. The respondents argue that the show cause notice adequately outlined discrepancies and proposed tax liabilities, and the petitioner has recourse to appellate mechanisms. However, the petitioner contends that the order’s conclusion regarding GST liability on trade payables lacks justification.

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DSV Air And Sea Pvt. Ltd.

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Madras High Court

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