2025 (7) TMI 774 - HC - GST

Tax demand order set aside for excess ITC claim due to insufficient reasoning under TNGST Act section 17(5)

Tvl. SKP READYMIX, Rep. by its Proprietor, S. Revathi Versus The Commissioner of Commercial Taxes, The State Tax Officer, The State Tax Officer, Erode

HC set aside tax demand order for excess ITC claim and blocked credit under TNGST Act section 17(5). Court found the impugned order lacked clear ... Excess claim of ITC - Tax Due Proposed on Short report of Outward supply - Blocked Credit u/s 17(5)of TNGST Act - HELD THAT:- The third respondent has scrupulously extracted the reply of the petitioner to the notice in DRC-01 dated 01.08.2024, the submission made during the personal hearing. However, there is no clear discussion in the impugned order. The order confirming the demand proposing a show cause that preceded it contained the reason for justifying the demand is unsustainable to that extent. Thus, there is hardly any discussion, even if there was application of mind. Even if there was an application of mind, it should be reflected in the order. Therefore, the impugned order is set aside, and the case is remitted back to the respondent to pass a fresh order as far as the defect Nos.2 and 3 are concerned. Petition disposed off. Summary:In the writ petition before the Madras High Court challenging the impugned order in Form DRC-07 dated 13.03.2025 under GST proceedings, the petitioner raised three defects: (1) Excess claim of ITC due to mismatch between GSTR 2A and 3B, (2) Tax demand proposed on short report of outward supply, and (3) Blocked credit under Section 17(5) of the TNGST Act, 2017. The petitioner admitted liability for defect (3) and paid the amount for defect (1), but contended that submitted documents for defects (2) and (3) were not considered.The impugned order confirmed the demand under Section 74 of the TNGST Act, 2017, stating the taxpayer's reply lacked supporting documents and was thus rejected. However, the Court found the order deficient for failing to provide a 'clear discussion' or a 'speaking order' reflecting application of mind on defects (2) and (3), rendering the order 'unsustainable to that extent.'Accordingly, the Court set aside the impugned order on defects (2) and (3) and remitted the matter for a fresh decision. The respondent was directed to pass a fresh order on merits within three months, ensuring the petitioner is heard and allowed to produce evidence. The Court emphasized that failure to substantiate the defense may lead to confirmation of demand based on the 'doctrine of preponderance of probability.'The writ petition was disposed of with no costs.