2024 (9) TMI 826 - HC - GST

Tax Demand Order Invalidated: Procedural Flaws Expose Need for Fair Hearing and Proper Notice Under GST Regulations

R. Mohanraj & Co., Represented by its Partner R. Mohanraj Versus The Commercial Tax Officer, Erode

HC quashed tax demand order under GST Act due to procedural irregularities. The court found that tax discrepancies were inadvertent, notices were not ... Utilization of Input Tax Credit - discrepancy in the GSTR-9 filing arose solely due to an inadvertent clerical error - HELD THAT:- The petitioner was unaware of the notices issued by the respondent, as they were only uploaded on the GST common portal and were not physically served, thereby depriving the petitioner of an effective opportunity to respond to the show cause notice or to correct the clerical mistake in the GSTR-9 filing. Considering these circumstances, this Court is of the view that allowing the impugned order to remain in force without providing the petitioner an opportunity to rectify the error and present their case would not be fair. It is therefore necessary, in the interest of justice, to set aside the impugned order and the summary order, subject to verification of the petitioner’s full payment of tax already made by the petitioner. The setting aside of the orders will take effect upon such verification. The petitioner is directed to submit their reply/objections, along with supporting documents, within two weeks from the date of receipt of a copy of this order. The writ petition is disposed of. Issues:1. Quashing of order under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017.2. Discrepancy in tax payment disclosure between GSTR-3B and GSTR-9 filings.3. Lack of physical service of notices and reminders to the petitioner.4. Denial of opportunity for a personal hearing before passing the impugned order.Analysis:1. The petitioner filed a writ petition seeking to quash the order passed under Section 73 of the GST Act, along with the summary of the order in Form GST DRC-07 for the financial year 2018-2019. The petitioner disclosed an outward supply and total output tax liability in the GSTR-3B filings, but inadvertently showed the tax payment as 'Nil' in the GSTR-9 filing. The respondent issued show cause notices and reminders, which were only uploaded on the GST portal, leading to the impugned order demanding a significant amount. The petitioner contended that the discrepancy was due to clerical errors and requested to set aside the order.2. The learned counsel for the petitioner argued that the discrepancy in tax filings was unintentional, as the entire tax liability was paid through proper channels. Despite the petitioner's good faith and timely payments, the impugned order was passed without offering a personal hearing. The petitioner was unaware of the notices as they were not physically served, depriving them of a chance to rectify the error. The Court acknowledged the petitioner's compliance with tax payments and the inadvertent mistake, emphasizing the need for fairness. Consequently, the Court set aside the impugned order and directed the petitioner to submit objections with supporting documents within two weeks. The respondent was instructed to schedule a personal hearing and pass orders promptly after considering the petitioner's reply.3. The Court disposed of the writ petition with no costs, ordering the closure of connected miscellaneous petitions. The judgment emphasized the importance of providing a fair opportunity for rectification and representation in tax matters, ensuring procedural fairness and adherence to principles of natural justice.