Assessment Order Overturned: Company Gets Three Weeks to Contest GST Intermediary Status u/s 75(7.

The HC set aside the impugned assessment order dated 31.08.2024, allowing the petitioner, a private limited company, three weeks to submit a reply regarding their classification as an intermediary under the GST Act. The court found a violation of Section 75(7) of the GST Act, as the petitioner was not given an opportunity to respond to the reclassification. If the petitioner fails to respond within the stipulated period, the original assessment order will be reinstated. The writ petition was disposed of, and all connected miscellaneous petitions were closed.

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Issues:
Challenge to assessment order based on violation of natural justice and GST Act provisions.

Analysis:
The petitioner, a private limited company offering non-vessel operating common carrier services, filed a writ petition contesting an assessment order dated 31.08.2024. The petitioner, registered under the GST Act, had discrepancies in their return, including under-declaration of output tax, excess claim of Input Tax, and other issues related to Input Tax Credit. A show cause notice was issued on 21.05.2024, and the tax liability was calculated at Rs. 21,77,761/-. The petitioner responded with detailed replies, but the impugned order rejected their claim as Ocean Freight Service providers, treating them as intermediaries instead. Consequently, the interest and penalty were increased to Rs. 96,83,029/-.

The petitioner argued that they were not given a chance to respond to being classified as an intermediary, leading to a significant increase in tax liability, which violated Section 75(7) of the GST Act. Section 75(7) states that the amount demanded in the order should not exceed the amount specified in the notice, and no demand should be confirmed on grounds other than those specified in the notice. The respondent, through their counsel, suggested that the petitioner treat the impugned order as a show cause notice and submit a reply within three weeks.

The court set aside the impugned order dated 31.08.2024 and allowed the petitioner three weeks to submit a reply. If the petitioner fails to respond within the stipulated period, the assessment order will be reinstated. The writ petition was disposed of, and connected miscellaneous petitions were closed.

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