Natural justice in GST assessment: conditional setting aside of demand for mismatch between GSTR-3B and GSTR-2A

An assessment confirming GST demand based on a mismatch between GSTR-3B returns and auto-populated GSTR-2A was set aside because the petitioner had not been effectively heard. The Madras HC allowed the petitioner to file a reply to the show cause notice after paying 10% of the disputed demand within two weeks, and directed the tax authority to grant a reasonable opportunity, including personal hearing, before passing a fresh assessment order. The decision turns on effective communication of notices and observance of natural justice in GST assessment proceedings.

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Issues: Whether the assessment order confirming tax demand on account of mismatch between GSTR 3B returns and auto-populated GSTR 2A, without effective communication and opportunity to respond, should be set aside and the matter remanded.

Analysis: The petitioner asserted that the show cause notice and the assessment order were uploaded on the GST portal but were not otherwise communicated, and that the tax proposal was confirmed without a meaningful opportunity to contest the demand on merits. The Court noted that the order was passed without hearing the petitioner and that the petitioner had not responded to the notice, but also considered it just and necessary to permit the petitioner to put forth a reply after being put on terms by remitting a part of the disputed demand.

Conclusion: The assessment order was set aside conditionally, the petitioner was directed to pay 10% of the disputed tax demand within two weeks, a reply to the show cause notice was permitted, and the respondent was directed to grant a reasonable opportunity including personal hearing and pass a fresh assessment order thereafter.

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