Dismissal of details by mere word ‘incomplete’ & one-line GST order: HC set-aside order

G.Anand, Proprietor of M/s. Ram Industries Vs Assistant Commissioner (ST) (Madras High Court)
In a recent judgment, the Madras High Court addressed a significant dispute between G. Anand, Proprietor of M/s Ram Industries, and the Assistant Commissioner (ST). The case revolved around allegations of discrepancies in tax filings for the financial year 2018-2019, which led to a show cause notice being issued to the petitioner. The crux of the dispute was the alleged short payment of taxes and the adequacy of the petitioner’s response to the claims made by the tax authorities.
Background of the Case
The petitioner, G. Anand, operates M/s Ram Industries, a business entity that was flagged for discrepancies in its tax filings for the 2018-2019 fiscal year. The Assistant Commissioner (ST) issued a show cause notice on December 28, 2023, citing differences between the petitioner’s GSTR-1 (outward supply) and GSTR-3B (summary of tax liabilities) filings. These discrepancies led the authorities to conclude that there was a shortfall in the payment of Goods and Services Tax (GST).
The petitioner responded to the show cause notice on March 15, 2024, submitting a detailed reply, which included reconciliations of the discrepancies along with supporting documents. Among the documents submitted were the audited balance sheet for the relevant financial year and GSTR-9, the annual return form, which detailed all the transactions for the year. Despite these submissions, the respondent, Assistant Commissioner (ST), dismissed the petitioner’s clarifications as “incomplete” and issued a one-line order on April 30, 2024, affirming the shortfall in tax payment.
Grounds of the Petition
The petitioner, dissatisfied with the response from the tax authorities, moved the Madras High Court by filing a writ petition. The petitioner argued that the Assistant Commissioner (ST) had acted arbitrarily by dismissing the reply without providing any reasoned order or detailed consideration of the documents submitted. The petitioner claimed that the one-line order passed by the Assistant Commissioner was not only abrupt but also in violation of the principles of natural justice, as it failed to account for the reconciliation and documentary evidence provided.
In particular, the petitioner contended that the reconciliation of the GSTR-1 and GSTR-3B filings had been adequately explained, and supporting documents, including credit notes, invoices, and amended returns, were submitted to clarify the discrepancies pointed out by the tax authorities. The petitioner further argued that the audited balance sheet and GSTR-9, which provided an accurate reflection of the business’s financial and tax liabilities for the year, were ignored by the Assistant Commissioner in issuing the impugned order.
Proceedings Before the High Court
The matter was brought before the Madras High Court, where the petitioner’s counsel emphasized that the response from the Assistant Commissioner (ST) was mechanical and lacked application of mind. The counsel highlighted that despite providing all necessary documents, including reconciliations of GSTR-1 and GSTR-3B, and the final reconciliation of the E-Way bill turnover with GSTR-1, the petitioner’s submissions were dismissed in a cursory manner. The impugned order failed to provide any detailed reasons for rejecting the documents as “incomplete.”
During the proceedings, the Government Advocate representing the tax department conceded that the respondent, Assistant Commissioner (ST), had not provided a detailed or reasoned order in response to the petitioner’s submissions. The Government Advocate acknowledged that the respondent ought to have issued a more comprehensive order that considered all aspects of the petitioner’s reply, including the reconciliations and supporting documentation.
Judgment by the Madras High Court
After hearing the arguments from both sides, the Madras High Court found merit in the petitioner’s case. The court observed that the respondent had indeed failed to provide a reasoned and detailed response to the petitioner’s submissions. The court noted that dismissing the petitioner’s detailed reply, which included reconciliations and audited documents, with a one-line order was arbitrary and amounted to a violation of the principles of natural justice.
The High Court held that the respondent had not applied his mind to the petitioner’s clarifications and had mechanically passed the impugned order without considering the material evidence presented. The court remarked that the order lacked any substantive discussion or analysis of the documents submitted by the petitioner, particularly the GSTR-9 reconciliation and the audited balance sheet.
Remand of the Matter
In its judgment, the Madras High Court set aside the impugned order dated April 30, 2024, and remitted the matter back to the Assistant Commissioner (ST). The court directed the respondent to reconsider the petitioner’s submissions in detail, taking into account all the reconciliations and supporting documents provided, including the reconciliation of E-Way bill turnover with GSTR-1.
The court also instructed the respondent to afford the petitioner an opportunity for a personal hearing, during which the petitioner would be allowed to present his case in full. The court emphasized that after considering all aspects of the petitioner’s reply and hearing, the respondent must issue a detailed and reasoned order that reflects due consideration of the petitioner’s submissions.
The writ petition was disposed of with these directions, and the court clarified that there would be no order as to costs. The related miscellaneous petitions filed in connection with the case were also closed by the court.
Conclusion
The Madras High Court’s decision in the case of G.Anand, Proprietor of M/s Ram Industries Vs Assistant Commissioner (ST) highlights the importance of due process and the need for tax authorities to provide reasoned orders when addressing discrepancies in tax filings. The case serves as a reminder that tax assessments and show cause notices must be handled with thorough consideration of the taxpayer’s responses and supporting documents. The court’s direction to remand the matter for fresh consideration ensures that the petitioner’s clarifications will be properly reviewed in accordance with the law.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The present Writ Petition is field for the issuance of a Writ of Certiorarified Mandamus, to call for the records of the respondent order in Ref.No.ZD33055240001353 dated 30.04.2024 for the financial year 2018-2019 and quash the same and issue a direction to the respondent to consider the reply filed in ARN: ZD330324086426E, dated 15.03.2024 and dispose them in accordance with law.
2. The learned counsel for the petitioner submits that in the year 2018-2019, the respondent noticed discrepancies with respect to GSTR 1 and GSTR 3B filed by the petitioner and issued a show cause notice in DRC-01 dated 28.12.2023. The allegation was that there is a short payment of tax. The petitioner clarified the differences through his reply in ARN: ZD330324086426E, dated 15.03.2024 with relevant set of documents such as GSTR 9 filed in ARN No.AC330319086715T, dated 10.03.2024 along with audited balance sheet, a detailed writ up dated 11.03.2024 along with the particular invoices, credit notes and amended returns. However, the respondent ignored the clarifications and GSTR 9 reconciliation along with audited balance sheet and confirmed the show cause notice allegations through the impugned order stating that the “documents are incomplete”. The respondent, without considering all these aspects, has passed a single line order and hence, the same is liable to be set aside.
3. By referring the impugned order, the learned Government Advocate (T) appearing for the respondent would fairly submit that the respondent ought to have passed a detailed order by considering all the aspects and would further submit that a suitable order may be passed.
4. In the present case, the show cause notice was issued to the petitioner on 28.12.2023, for which, the petitioner has also filed his reply dated 11.03.2024. In the reply, final reconciliation and reconciliation of E-Way bill Turnover with GSTR-1 along with seven supporting documents were filed, but, the same were not considered by the respondent and the respondent has mechanically passed the impugned order without application of mind. Hence, this Court is inclined to set aside the order passed by the respondent dated 30.04.2024 and accordingly, the same is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to consider the reply taking into consideration all the final reconciliation and reconciliation of E-Way bill Turnover with GSTR-1 along with seven documents enclosed therewith and afford them an opportunity of personal hearing and thereafter, pass a detailed speaking order.
With the above directions, this Writ Petition is disposed of. There shall be no order as to costs. Consequently, the connected Miscellaneous Petitions are closed.