GST composition assessment based on CMP-08 mismatch, purchases and presumptive gross profit; demand set aside for no DRC-01 SCN

The dominant issue was breach of natural justice in a GST composition assessment, as the demand was confirmed without issuance of a proper SCN in Form GST DRC-01, despite the authority computing suppressed turnover by comparing nominal CMP-08 turnover with substantial purchases and adding a presumptive gross profit to levy tax at 18%. Holding that the appellate limitation under s.107 had expired but that such defect warranted interference, the HC set aside the impugned order and remitted the matter for a fresh order, conditional upon the assessee depositing 10% of the disputed tax in cash from the electronic cash ledger within 30 days.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the impugned tax demand order should be interfered with in writ jurisdiction and the matter remitted for fresh adjudication, particularly when the statutory appeal limitation had expired.

(ii) What equitable conditions should govern remand, including the requirement of pre-deposit and the treatment of the impugned order vis-à-vis the show cause notice and reply opportunity.

(iii) Whether, and on what conditions, the bank account attachment should be lifted pending fresh adjudication.

2. ISSUE-WISE DETAILED ANALYSIS

(i) Interference with the impugned order and remand despite expiry of appeal period

Legal framework: The Court noted the statutory appellate remedy and limitation under Section 107 of the respective GST enactments, and recorded that the limitation to file an appeal had already expired.

Interpretation and reasoning: The Court examined the impugned order and found that it proceeded on the basis that the taxpayer had opted for composition under Section 10, had short-paid tax, and that a detailed show cause notice had been issued. The Court also took note of the demand methodology reflected in the operative portion of the impugned order: reported turnover was minimal in CMP-08, while purchases were substantially higher; the authority added 20% gross profit to purchases and demanded tax at 18%. In similar situations, the Court noted that orders had been quashed and matters remitted with conditional deposits, and found no reason to take a different view.

Conclusion: The Court set aside the finality of the impugned order by remitting the matter to the tax authority for a fresh order, notwithstanding the expiry of appellate limitation, subject to conditions protecting revenue and ensuring adjudication on merits.

(ii) Conditions governing remand: pre-deposit and reply; treatment of impugned order as addendum

Legal framework: The Court referred to the composition levy rate context under Section 10(1)(c) (as discussed in the judgment) and fashioned conditional relief to balance interests of assessee and revenue.

Interpretation and reasoning: To balance both sides, the Court required the taxpayer to deposit 10% of the disputed tax in cash from the electronic cash ledger within 30 days. The Court further directed that the taxpayer must file a reply to the show cause notice in GST DRC-01 dated 24.11.2024 with supporting documents, and expressly directed that the impugned order dated 09.04.2025 be treated as an addendum to that show cause notice to enable meaningful response and fresh adjudication.

Conclusion: Remand was granted conditionally: upon timely 10% deposit and filing of reply with documents, the authority must pass a final order on merits and in accordance with law, preferably within three months from such reply/pre-deposit; non-compliance would permit recovery proceedings as if the writ petition had been dismissed.

(iii) Vacation of bank attachment pending fresh adjudication

Interpretation and reasoning: The Court linked interim protection to compliance with the pre-deposit condition, directing that the bank attachment would stand automatically vacated only upon the taxpayer depositing 10% of the disputed tax, and additionally clarified that lifting of attachment was contingent on there being no other arrears except the amount demanded under the impugned order.

Conclusion: The bank attachment was ordered to be lifted conditionally upon the 10% deposit and absence of other arrears; failing compliance, the authority could proceed with recovery in accordance with law, after giving due notice.

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