Madras High Court Sets Aside GST Order for Lack of Hearing

Candour Auto Components Represented by its Partner Mr. Kasinathan Ilaiyaraja Vs Deputy Commercial Tax Officer (Madras High Court)
In the case of Candour Auto Components vs. Deputy Commercial Tax Officer, the Madras High Court addressed the issue of a GST order issued under Section 73 of the Tamil Nadu GST Act and CGST Act. The petitioner, represented by Mr. Kasinathan Ilaiyaraja, argued that the show cause notice was only uploaded on the GST portal and not physically served, leaving the petitioner unaware of the proceedings. The respondent raised a demand of ₹33,97,729 for excess input tax credit availed during FY 2017-18, but the petitioner did not file a reply as they were unaware of the notice. The court found this claim valid and ruled that the principles of natural justice were violated due to the lack of a personal hearing. The court set aside the impugned order and remanded the matter back to the authorities for reconsideration, on the condition that the petitioner deposits 10% of the disputed tax within four weeks and submits a reply within two weeks. The authorities are required to provide a personal hearing and issue a new order based on merit.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The present Writ Petition has been filed to call for the records of the respondents and quash the impugned order under Section 73 of the Tamil Nadu Goods and Service Tax Act, 2017 (“TNGST Act”)/Central Goods and Service Tax Act, 2017 [“CGST Act”] dated 12.12.2023 along with its annexure and the consequent Summary of the Order in Form GST DRC-07 dated 12.12.2023 both passed by the first respondent and both having Reference Number ZD331223074123X in GSTIN/ID: 33AAJFC2392Q1Z0 for the FY 2017-18.
2. The learned counsel for the petitioner submits that the show cause notice under Section 73 of the TNGST Act/CGST Act dated 12.12.2023 was issued raising a demand of Rs.33,97,729/- for FY 2017-2018 including interest and penalty on the ground that the petitioner has availed excess input tax credit. The sole basis for making the allegation is that petitioner has availed input tax credit in excess of input tax credit statement as reflected in Form GSTR-2A. Both the show cause notice as well as the impugned order were not served on the petitioner and only uploaded in the GST online portal and the petitioner was not able to defend the case. Hence, the petitioner has not filed a reply. Therefore, the order passed by the respondent is in violation of principles of natural justice. He further submits that the petitioner is willing to deposit 10% of the disputed tax demand and hence, the order passed by the respondent may be set aside and remanded the matter back to the respondent for reconsideration.
3. The learned Special Government Pleader appearing for the Respondent would submit that though the notice was uploaded by the respondent in the web portal, the petitioner had failed to appear before the respondent for personal hearing. However, he would fairly submit that if any order is passed by this Court, the same will be complied with by the respondent.
4. Heard the learned counsel for the petitioner and the learned Special before this Court.
5. In the present case, it appears that the notices have been uploaded in the GST portal and the same were not at all physically served to the petitioner, due to which, the petitioner was unaware about the said notice. Hence, the reasons provided by the petitioner for being unaware of the notice, which was uploaded in the web portal, are appears to be genuine.
6. Further, this Court is of the view that no order can be passed without providing sufficient opportunities to the petitioner. However, in the present case, no reply was filed by the petitioner and no opportunity of personal hearing was provided to the petitioner. Hence, the impugned order is liable to be set aside.
7. Accordingly, the impugned order dated 12.12.2023 is set aside and remanded the matter back to the respondent on condition that the petitioner shall deposit 10% of the disputed tax demand of the assessment year, within a period of four (4) weeks from the date of receipt of a copy of this order and thereafter, the petitioner is directed to file a reply within a period of two (2) weeks. After receipt of the reply, the authorities concerned shall fix a date for personal hearing by sending a physical notice to the petitioner and thereafter, pass orders on merits and in accordance with law.
8. 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.