GG Organics Care Private Limited Vs The State Tax Officer

An order dated 22.12.2023 is the subject of challenge in this writ petition. The petitioner, GG Organics Care Private Limited, is a company formed following a demerger from its parent company, GG Organics Private Limited. The parent company was engaged in the manufacture of leather specialty chemicals and also operated a manufacturing facility in Sriperumpudhur for consumer goods. As a result of the demerger, the assets and liabilities of the consumer division were transferred to GG Organics Care Private Limited, the petitioner herein. Following this reorganization, an audit was conducted, and an audit report was issued on 25.09.2023. In response to the audit findings, proceedings were initiated against the petitioner, leading to the issuance of a show cause notice on 25.09.2023 and the impugned order on 22.12.2023. The petitioner’s learned counsel challenges the impugned order on several grounds, primarily arguing that the audit was not conducted in accordance with subsection (4) of Section 65 of the applicable GST enactments. Specifically, it is contended that the audit should have been concluded within three months from its commencement unless extended in accordance with the proviso to subsection (4). The audit in question began on 16.05.2023 and concluded on 18.08.2023, which is beyond the stipulated three-month period. Furthermore, the petitioner’s counsel asserts that the reply concerning audit slip no.7, which pertained to the non-filing of Form ITC-02, was not duly considered in the issuance of the impugned order. The petitioner had clarified that no transfer of Input Tax Credit (ITC) had occurred to the consumer division, rendering the filing of Form ITC-02 unnecessary. On instructions from the petitioner, learned counsel indicates a willingness to remit approximately 10% of the disputed tax demand as a condition for remand, seeking a reconsideration of the case. In response, Mr. C. Harsha Raj, learned Additional Government Pleader for the respondents, argues that the petitioner is raising concerns about the audit’s duration too late in the process. He points out that the audit report was made available to the petitioner in September 2023 and that the petitioner participated in the subsequent assessment proceedings without raising any objections regarding the duration of the audit. Additionally, Mr. Raj contends that the petitioner was liable to submit a nil return for Form ITC-02 if no ITC was transferred to the consumer division, and therefore, the claim regarding the non-submission of this form is unfounded.

The petitioner’s argument that the duration of the audit surpassed the time limit stipulated in subsection (4) of Section 65 of the applicable GST enactments cannot be sustained in the current context. This provision specifies that the audit should commence on the date when the registered person makes available the records and other documents requested by the tax authorities. However, the records available do not unequivocally establish when the petitioner provided all the necessary documents as per GST ADT-01. This ambiguity regarding the precise date of document submission complicates the determination of whether the audit indeed exceeded the permissible timeframe. Furthermore, the petitioner challenges the implications of the non-filing of Form ITC-02, asserting that no Input Tax Credit (ITC) was availed or transferred by the consumer division, thus negating the necessity to file this form. This assertion, if substantiated, implies that the petitioner had no obligation to submit Form ITC-02 under the given circumstances. To address these concerns fairly, it is both just and necessary to grant the petitioner an additional opportunity to present all relevant documentation and to effectively contest the tax demand. This additional chance would ensure that the petitioner can address any issues or discrepancies highlighted in the audit findings comprehensively. However, while remanding the case for reconsideration, it is essential to protect the interests of revenue collection and compliance. Consequently, the impugned order dated 22.12.2023 is hereby set aside, with the matter being remanded for a fresh examination under the condition that the petitioner remits 10% of the disputed tax demand, as previously agreed upon, within two weeks from the date of receipt of a copy of this order. Upon receiving confirmation of this remittance, the first respondent is mandated to provide the petitioner with a fair opportunity to present their case, including a personal hearing if necessary, and to issue a new order within two months from the date of the remittance. This arrangement ensures that the petitioner has a fair chance to address all relevant issues while maintaining the integrity of the revenue collection process. During this period, the petitioner is also allowed to file Form ITC-02 according to the prescribed procedure, which may help in resolving any outstanding issues related to the transfer of ITC. Thus, the writ petition is disposed of based on these terms, with no order as to costs. Consequently, the connected miscellaneous petitions are also closed. This decision aims to strike a balance by providing the petitioner with a fair opportunity to contest the tax demand and rectify any potential issues while ensuring that the process of revenue collection and compliance is upheld.

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