2024 (5) TMI 51 - HC - GST

Tax Order Invalidated: Critical Procedural Errors Expose Flaws in Input Tax Credit Assessment and Show Cause Notice

Vela Agencies Rep by its Proprietor D. Jagannathan Versus Assistant Commissioner ST FAC

The HC reviewed a tax liability order challenging discrepancies in tax filings and Input Tax Credit. Finding significant deviations between the show cause ... Scope of SCN - impugned order proceeds on a completely different basis from the SCN - Entitlement to ITC - HELD THAT:- On perusal of the intimation and show cause notice, it is evident that the petitioner was called upon to show cause with regard to a sum of Rs. 8,27,252/-, which was arrived at on the assumption that there was sales suppression. By contrast, the impugned order imposes tax liability of Rs. 14,97,072/- and an equal amount by way of penalty. It is also clear that the impugned order does not proceed on the basis of sales suppression. If the respondent intended to modify the tax proposal in light of the petitioner's reply, a fresh show cause notice should have been issued. It is also noticeable that the petitioner's electronic credit ledger was debited to the extent of Rs. 7,52,047/-. In these circumstances, the impugned order cannot be sustained. The impugned order dated 23.06.2023 is set aside by leaving it open to the respondent to initiate fresh proceedings by issuing a show cause notice to the petitioner. Petition disposed off. Issues involved:The judgment deals with the validity of an order dated 23.06.2023 issued to a petitioner regarding tax liability and penalty, based on discrepancies in tax filings and Input Tax Credit.Summary:1. The petitioner challenged the order dated 23.06.2023, arguing that it deviated from the show cause notice received earlier. The petitioner, a distributor of Aircel Limited, had ceased business due to Aircel's closure. The impugned order was issued without proper basis as per the petitioner's response to the intimation and show cause notice.2. The petitioner's counsel highlighted the disparity between the tax liability mentioned in the show cause notice and the actual amount imposed in the impugned order. A significant reversal of Input Tax Credit was also noted, indicating a need for reconsideration of the matter due to the substantial difference in amounts.3. The Government Advocate acknowledged the petitioner's response but argued that the petitioner was not entitled to Input Tax Credit, supporting the validity of the impugned order.4. Upon review of the documents, it was evident that the impugned order did not align with the initial show cause notice, both in terms of tax liability and penalty imposed. The order lacked a proper basis and deviated from the original premise, necessitating the setting aside of the order for fresh proceedings to be initiated with a new show cause notice.5. Consequently, the impugned order dated 23.06.2023 was set aside, allowing the respondent to start afresh by issuing a proper show cause notice to the petitioner.6. The writ petition was disposed of accordingly, with no costs incurred, and related motions were closed as a result of the judgment.