2021 (5) TMI 453 - HC - GST

High Court Overturns Assessment Order for GST Act Violation

The High Court set aside the Assessment Order under the Telangana GST Act, 2017 for the tax period of November, 2018, due to concerns over the methodology ... Best judgment assessment under Section 62 of the Telangana GST Act, 2017 - Arbitrariness in assessment - Requirement of a reasoned order - Right to personal hearing - Validity of penalty levy - Setting aside of attachment/garnishee ordersBest judgment assessment under Section 62 of the Telangana GST Act, 2017 - Arbitrariness in assessment - Requirement of a reasoned order - Impugned best-judgment assessment which multiplied the monthly average tax by three and adopted that as the tax liability was set aside and remitted for fresh consideration. - HELD THAT: - The Court found that although the assessing authority is empowered to make a best-judgment assessment in the absence of a return, the method adopted in the impugned order-multiplying the monthly average SGST figure by three to fix turnover and tax-was prima facie arbitrary and not shown to be based on any identifiable principle. The respondents were unable to justify the methodological basis for the multiplier. In consequence, the impugned order was set aside and the matter remitted to the assessing authority for fresh consideration. The assessing authority is directed to issue notice to the petitioner indicating the method it proposes to adopt under the best-judgment assessment provision, grant a personal hearing, and thereafter pass a reasoned order on tax, interest and penalty within eight weeks from receipt of the Court's order. [Paras 5, 6]Impugned assessment set aside as prima facie arbitrary; matter remitted for fresh assessment after notice, hearing and reasoned order within eight weeks.Validity of penalty levy - Requirement of a reasoned order - Right to personal hearing - Levy of 100% penalty, in the absence of any indication of the legal provision under which it was imposed, was not sustained and was remitted for fresh consideration along with tax and interest. - HELD THAT: - The Court observed that the impugned order levied 100% penalty without specifying the statutory provision under which the penalty was imposed. The respondent could not point to the provision supporting the penalty. As the penalty was imposed without the requisite statutory basis and without adequate reasoning recorded in the order, the Court set aside that portion of the order and remitted the question of levy of penalty to the assessing authority to consider afresh after giving notice and a personal hearing and recording a reasoned decision. [Paras 4, 5, 6]Order imposing 100% penalty set aside and remitted for fresh consideration with notice, hearing and reasoned decision.Setting aside of attachment/garnishee orders - Consequential attachment/garnishee orders issued pursuant to the impugned assessment order were set aside. - HELD THAT: - Because the assessment order dated 27-12-2019 was set aside, the Court also set aside consequential attachment and garnishee orders issued by the respondents. The recipients of those orders are thereby relieved from the consequences of enforcement steps taken pursuant to the impugned order. [Paras 6]Consequential attachment/garnishee orders set aside.Final Conclusion: Writ petition allowed: the best-judgment assessment order dated 27-12-2019 is set aside as prima facie arbitrary and remitted to the assessing authority for fresh consideration; the authority must issue notice specifying the proposed method of assessment, grant a personal hearing and pass a reasoned order on tax, interest and penalty within eight weeks; consequential attachment/garnishee orders are set aside; no costs. Issues:Challenge to Assessment Order under Telangana GST Act, 2017 for tax period November, 2018 - Methodology of best judgment assessment by the 1st respondent - Validity of multiplying by 3 times the monthly SGST tax - Levying of 100% penalty without specifying the provision - Setting aside of the impugned order and remitting the matter back to the 1st respondent for fresh consideration.Analysis:1. The Writ Petition was filed to challenge the Assessment Order dated 27-12-2019 passed by the 1st respondent under the Telangana GST Act, 2017 concerning the petitioner for the tax period of November, 2018.2. The petitioner failed to file the GSTR-3B return for November, 2018, leading to a notice being issued under Section 46 of the Telangana GST Act, 2017 on 29-01-2019, warning of tax liability assessment under Section 62 if the return was not filed within 15 days, along with interest and penalty.3. Due to the petitioner's non-compliance, the 1st respondent conducted a best judgment assessment under Section 62 of the Act, determining the turnover and tax liability based on the average monthly SGST tax, which was multiplied by 3 to arrive at the assessed amounts for SGST, CGST, and IGST for the said tax period.4. The petitioner's counsel argued that while the 1st respondent had the authority to conduct a best judgment assessment in the absence of the GSTR-3B filing, the method of multiplying by 3 times the monthly SGST tax to calculate the tax liability was deemed arbitrary and lacking a principled basis. Moreover, the imposition of a 100% penalty was contested as it was not specified under which provision of the Act it was levied.5. The Assistant Government Pleader representing the respondents was unable to explain the rationale behind the 1st respondent's methodology in the best judgment assessment or identify the legal basis for imposing a 100% penalty on the petitioner, further raising concerns about the procedural fairness and compliance with the Telangana GST Act, 2017.6. Consequently, the High Court found the impugned order to be prima facie arbitrary and contrary to the provisions of the Act. As a result, the order was set aside, and the matter was remitted back to the 1st respondent for fresh consideration. The 1st respondent was directed to issue a notice to the petitioner explaining the assessment methodology, provide a personal hearing, and pass a reasoned order on tax, interest, and penalty within eight weeks from the date of receipt of the court's order.7. In addition to setting aside the impugned order, any consequential attachment or garnishee orders issued by the respondents were also annulled. The Writ Petition was allowed with no costs incurred, and any pending miscellaneous petitions were to be closed accordingly.