Tax Assessment Challenge Overturned: Procedural Errors Found, Fresh Orders Directed with Partial Payment Requirements

HC allowed petitioner's challenge to tax assessment orders for 2020-21 and 2021-22. Court set aside original assessment, directing respondent to issue fresh orders within 3 months. Petitioner required to deposit 10% of balance amount and 1% tax liability within 30 days and submit detailed reply to notice. Jurisdiction of tax officer was upheld, but procedural defects warranted order's reconsideration.

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Issues:
Challenge to assessment orders for the assessment years 2020-21 and 2021-22 based on judgment in M/s.Rasathe Garments case. Discrepancy in input tax credit availed by the petitioner and reflected in Form GSTR-2A. Jurisdiction of the respondent officer to adjudicate the show cause notice. Lack of clear reply from the petitioner leading to assessment order. Proposals for defects in the notice issued to the petitioner.

Analysis:
The petitioner challenged assessment orders for 2020-21 and 2021-22 based on the judgment in M/s.Rasathe Garments case. The petitioner, an importer of coal, claimed to have discharged entire duty liability from input tax credit (ITC) availed. The respondent relied on Form GSTR-2A to propose tax liability, not reflecting IGST paid during import initially. The petitioner argued that the department can levy 1% tax when entire liability is discharged from ITC as per Rule 86(b) of GST Rules, 2017. The petitioner was faulted for not furnishing documents despite inspections, leading to notices issued for the assessment years.

The respondent contended that the M/s.Rasathe Garments case decision does not apply, citing Circular No. 13/2022 clarifying procedures for tax payment and adjudication. The respondent claimed jurisdiction to adjudicate the show cause notice issued in DRC 01. The court considered arguments from both sides and examined the impugned order.

The court found that the respondent had jurisdiction to pass the order based on the circular and observed that the petitioner failed to provide a clear reply, leading to the assessment order. The court emphasized the importance of responding to show cause notices with proper documentation. The court noted that the bulk of the demand was due to discrepancies in input tax credit declaration and GSTR-2A, giving the petitioner an opportunity to explain with relevant documents.

To balance interests, the court set aside the impugned order and directed the respondent to pass a fresh order on merits. The petitioner was instructed to deposit 10% of the balance amount and 1% of the tax liability within 30 days. The petitioner was given 30 days to file a detailed reply to the notice. The impugned order was quashed, and the respondent was directed to issue fresh orders within three months.

In conclusion, both writ petitions were allowed without costs, and connected Miscellaneous Petitions were closed.

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