Jurisdiction Overlap in Tax Dispute Leads to Remand for Fresh Order on Differential Tax and Penalty

The HC held that the impugned order was passed within jurisdiction but noted overlapping jurisdiction between Central and State authorities for the 2019-20 period. The petitioner, having not appealed earlier, was liable to pay the differential tax, penalty, and interest. However, due to jurisdictional overlap and pending Division Bench consideration, the HC set aside the impugned order and remanded the matter to the respondent to pass a fresh order after considering the petitioner's replies and payments made. The petition was disposed by remand.

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ISSUES:

Whether the impugned order confirming tax demand, interest, and penalty under Section 74(9) read with Sections 39, 50(1), and 122(2)(b) of the CGST Act, 2017, and relevant provisions of the TNGST Act, 2017, was validly passed.Whether the petitioner was afforded a proper opportunity of personal hearing before passing the impugned order.Whether there exists an overlap in jurisdiction between the Central and State authorities concerning the tax period 2019-20, affecting the validity of the demand.Whether the impugned order should be set aside and remitted for fresh consideration in light of payments made by the petitioner and pending jurisdictional issues.

RULINGS / HOLDINGS:

The impugned order confirming tax demand, interest, and penalty was passed within the jurisdiction of the respondent but without affording the petitioner an opportunity of personal hearing, which is a procedural lapse.The Court found a prima facie overlap in jurisdiction between Central and State authorities for the tax period 2019-20, raising questions on the validity of the demand.The impugned order is set aside and remitted to the respondent to pass a fresh order considering the payments made by the petitioner pursuant to the procedure dated 22.08.2024, treating the impugned order as corrigendum to the show cause notice.The respondent is directed to complete the fresh adjudication within two months from receipt of the order, ensuring the petitioner is heard before final orders are passed.

RATIONALE:

The Court applied the statutory provisions of the CGST Act, 2017, particularly Sections 39, 50(1), 59, 74(9), and 122(2)(b), alongside relevant provisions of the TNGST Act, 2017, governing tax demand, interest, and penalty.The principle of natural justice requiring an opportunity of personal hearing before passing adverse orders was emphasized as a mandatory procedural safeguard.The Court noted the ongoing jurisdictional dispute between Central and State authorities, which is pending before a Division Bench, and thus avoided adjudicating on the merits of the tax demand for the overlapping period.The decision reflects a procedural safeguard ensuring that payments already made are duly considered and that fresh orders are passed in accordance with law and on merits after hearing the assessee.

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