2024 (9) TMI 824 - HC - GST

Tax Assessment Order Quashed Due to Procedural Flaws in ITC Claim, Petitioner Granted Opportunity to Respond Within Two Weeks

Maasha Garments, TIrupur, Tamil Nadu Versus The Assistant Commissioner (ST), Goods and Services Tax Network, New Delhi

HC set aside tax assessment order involving improper Input Tax Credit (ITC) claim on motor vehicles. Court found procedural irregularities in notice ... Challenge to assesment order along with the summary of the order in Form DRC-07 - wrongful claiming of Input Tax Credit (ITC) on the purchase of four motor cars from M/s Ramani Cars Private Limited, which was ineligible under Section 17(5) of the CGST/TNGST Act, 2017 - petitioner was unaware of these notices due to the introduction of a new 'View Additional Notices and Orders' feature on the GST portal, which was not adequately communicated - violation of principles of natural justice - HELD THAT:- The facts remain that the petitioner had purchased four motor cars for the usage of passenger service. In the course of filing their returns, they mistakenly claimed Input Tax Credit (ITC) on these purchases, which was not permissible under the relevant provision of law, as the vehicles were intended for personal use rather than for business purposes. On realising the same, they voluntarily reversed the wrongly availed ITC in their March 2023 return, before the closing of the financial year. However, the first respondent passed the assessment order, after issuing pre-show cause notice and show cause notice. According to the petitioner, they did not aware of the said notices served through 'view additional notices and orders' portal and hence, they were unable to file their reply to the same and hence, an opportunity be provided to them to substantiate their claim. Considering the facts and circumstances of the case, this court in order to provide an opportunity to the petitioner, is inclined to set aside the order passed by the first respondent. Accordingly, the order dated 20.02.2024 is set aside and the matter is remanded to the first respondent for fresh consideration - Petition disposed off by way of remand. Issues:Challenge to assessment order under CGST/TNGST Act, 2017 for financial year 2022-23; Claim of Input Tax Credit (ITC) on ineligible purchases; Allegations of wrongful ITC claim; Lack of awareness of notices due to GST portal feature; Request for quashing assessment order.Analysis:The petitioner, a registered dealer under CGST and TNGST Acts, mistakenly claimed ITC on the purchase of four motor cars, which was ineligible under Section 17(5) of the CGST/TNGST Act, 2017. Upon realizing the error, the petitioner promptly reversed the ITC amount. Despite this, the first respondent issued scrutiny, pre-show cause, and show cause notices, leading to the impugned assessment order demanding the reversed ITC, penalties, and interest. The petitioner claimed unawareness of the notices due to a new feature on the GST portal and sought to quash the assessment order based on the expired statutory appeal period.The court noted that the petitioner erroneously claimed ITC on personal use vehicles, which was not permissible under the law. The petitioner voluntarily rectified the mistake by reversing the ITC in the subsequent return. However, the assessment order was passed without considering the petitioner's response to the notices issued. The court acknowledged the petitioner's lack of awareness of the notices and decided to set aside the order, remanding the matter to the first respondent for fresh consideration. The petitioner was directed to file a reply to the show cause notice within two weeks, and the respondent was instructed to consider the reply, conduct a personal hearing, and pass appropriate orders expeditiously.In conclusion, the court disposed of the writ petition without costs, setting aside the assessment order and providing the petitioner with an opportunity to present their case before the first respondent. The judgment emphasized the need for procedural fairness and the right to be heard in matters of tax assessments under the CGST/TNGST Act, 2017.