Yashwin Enterprises vs The Deputy Commissioner (ST), Chennal

The petitioner in this case challenges both an order dated May 31, 2023, and a subsequent recovery notice dated December 20, 2023. The petitioner is identified as a registered individual under the GST (Goods and Services Tax) laws. They claim to have been consistently filing returns and making tax payments in accordance with the law. However, the petitioner alleges that they only became aware of the challenged order upon receiving phone calls from HDFC Bank, notifying them of a recovery notice issued on December 20, 2023. Following this notification, the petitioner investigated further through the GST portal and discovered additional intimations, including a show cause notice and the impugned order itself. In response to these developments, the petitioner has initiated a writ petition, outlining the aforementioned circumstances.

Learned counsel for the petitioner is contesting the validity of the assessment order, arguing that Section 74 of the State Goods and Services Tax Act, 2017 was invoked without fulfilling its requirements. Additionally, they claim that the communication including the intimation, show cause notice, and assessment order were all posted in the ‘View Additional Notices’ tab on the GST portal. Furthermore, they highlight that the goods in question were purchased by the petitioner in 2020, while Input Tax Credit (ITC) was reversed due to the supplier allegedly not conducting business at their registered place in 2021.

In response, Mr. C. Harsha Raj, learned Additional Government Pleader, acknowledges notice on behalf of the respondents. He refers to the show cause notice, emphasizing the allegation within that ITC was fraudulently claimed and availed with the intent to evade payment of output tax. Based on this assertion, he defends the invocation of Section 74 and the actions taken by the authorities.

In this case, Section 74 was appropriately invoked, as argued by the respondent. The petitioner, however, contends that the assessment order, dated 31st May 2023, renders the writ petition susceptible to dismissal due to unreasonable delay (laches). The petitioner claims ignorance of the intimation, show cause notice, and assessment order until notified by the HDFC Bank manager via phone call. Notably, the petitioner was not afforded an opportunity to be heard prior to the issuance of the assessment order, despite being served notice. The assessment order indicates that the reversal of Input Tax Credit (ITC) stemmed from the non-existence of the goods supplier. The statutory requirement mandates registered individuals availing of ITC to substantiate transaction authenticity with relevant documents like tax invoices, e-way bills, payment proofs to suppliers, among others. The petitioner seeks an opportunity to address the issues raised.

The summary revolves around a legal matter concerning the genuineness of a transaction and the subsequent claim for Input Tax Credit (ITC). The impugned order, issued on 31.05.2023, questioned the authenticity of the transaction, leading to a dispute over the ITC claim. However, it is noted that the requirements of Section 74, which likely validate the transaction, were apparently met. Despite this, the petitioner has approached the court at a later stage.

To ensure the interests of revenue are safeguarded, the court imposes a condition for remand, wherein the petitioner must remit 10% of the disputed tax demand. The petitioner, represented by counsel, agrees to this condition.

Consequently, the court quashes the impugned assessment order and remands the matter for reconsideration. However, this remand is subject to the condition that the petitioner remits 10% of the disputed tax demand within a maximum period of two weeks from receiving a copy of the court’s order. Additionally, the petitioner is granted a maximum period of two weeks from the date of remittance to issue a reply to the show cause notice. Upon receipt of the remittance and satisfaction that 10% of the disputed tax demand was paid, the assessing officer is directed to provide further consideration to the matter.

The court’s ruling, as summarized, mandates that the concerned party must be given a fair chance to present their case, including a personal hearing if necessary. Following this opportunity, the relevant authority must issue a new assessment order within two months. The writ petition is concluded based on these conditions, with no costs imposed on either party. As a result, any related miscellaneous petitions are also closed.

Download Pdf:
Yashwin Enterprises

For Reference Visit:
Madras High Court

Read Another Case Law:
GST Case Law