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Tax Challenge Upheld: Procedural Flaws Invalidate Demand Order, 10% Payment Required with Fresh Hearing Opportunity HC allowed the tax challenge, finding procedural irregularities in the tax demand order. The court set aside the original order, directing the petitioner ...
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HC allowed the tax challenge, finding procedural irregularities in the tax demand order. The court set aside the original order, directing the petitioner to pay 10% of disputed tax and allowing a fresh opportunity to contest the demand. Tax authorities must provide a fair hearing and issue a new order within three months, with bank attachment lifted and no costs imposed.
Issues: Challenge of tax demand order on the ground of denial of reasonable opportunity to contest, reversal of Input Tax Credit (ITC) without proper evidence, sufficiency of notices and personal hearing opportunities provided.
Analysis: 1. The petitioner challenged an order dated 27.09.2023, alleging a lack of opportunity to contest the tax demand. The petitioner claimed ignorance of the proceedings leading to the order until their bank account was attached in March 2024, as the notifications were uploaded on the GST portal without direct communication. This raised concerns about the fairness of the process.
2. The petitioner's counsel argued that the reversal of Input Tax Credit (ITC) in the impugned order was based on non-existent records from the supplier, despite the petitioner possessing invoices, payment proof, and other supporting documents. The petitioner expressed readiness to pay 10% of the disputed tax demand as a condition for a review, emphasizing the ability to prove eligibility for ITC if given a chance.
3. The Additional Government Pleader for the respondents contended that the impugned order followed proper procedures, including notices in Form ASMT 10, a show cause notice, and opportunities for personal hearings. This highlighted the efforts made to involve the petitioner in the process before the final decision was made.
4. Upon reviewing the order, it was found that the tax proposal related specifically to supplies from a particular distributor. The petitioner provided relevant invoices, bank statements for payments, and ledger accounts to support their position. In the interest of justice, the court decided to set aside the order, subject to the petitioner remitting 10% of the disputed tax demand within two weeks and submitting a reply to the show cause notice. The tax authorities were directed to provide a reasonable opportunity for the petitioner to present their case and issue a fresh order within three months.
5. The judgment concluded by disposing of the case under the specified terms, with no costs imposed. The associated motions were closed, and the bank attachment resulting from the assessment order was lifted. The decision aimed to ensure fairness and due process in addressing the petitioner's concerns regarding the tax demand order.
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