GST demand rectification for 2018-19 GSTR-3B reversal claim remitted for fresh decision, subject to full cash pre-deposit.

In a writ challenging rectification of a GST demand where the taxpayer claimed to have reversed part of the liability through a GSTR-3B return for 2018-2019, the HC held that, consistent with its earlier approach in similar cases, the matter required reconsideration on merits by the tax authority. The HC remitted the demand for a fresh order, subject to the taxpayer depositing 100% of the admitted tax demand in cash (as confirmed in the impugned order) along with applicable interest and penalty, and additionally depositing 100% of the disputed tax amount, within 30 days; any prior debit in the electronic cash ledger was directed to be adjusted as pre-deposit, subject to verification.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the impugned rectification order issued under Section 161 of the GST enactments, read with the underlying demand order, should be interfered with in writ jurisdiction when the petitioner asserts partial reversal/payment and confines challenge to a quantified disputed portion, but the revenue cannot confirm the factual position without detailed verification.

(ii) Whether, in the above circumstances, the matter should be remitted for a fresh decision on merits subject to conditions of 100% deposit of admitted and disputed amounts, filing of reply with documents, and consequential relief regarding bank account attachment upon compliance.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Interference with the rectification order and confirmed demand in writ jurisdiction where facts require verification

Legal framework (as discussed in the judgment): The Court noted that the impugned order was passed under Section 161 of the respective GST enactments as a rectification to the earlier order, making minor corrections regarding "place of supply of goods" (Karnataka instead of Tamil Nadu). The Court also treated the impugned order, for purposes of further proceedings, as an addendum to the show cause notice referenced in the judgment.

Interpretation and reasoning: The petitioner claimed that out of the total confirmed tax liability, a substantial amount had been reversed in returns and that the challenge was confined to the balance disputed amount. The revenue was unable to confirm the petitioner's assertion at the hearing, and the Court held that such confirmation would require "detailed consideration." In view of this need for factual verification and consistent approach in similar circumstances, the Court declined to finally adjudicate the disputed factual aspects within the writ proceedings and instead opted for remand for a merits determination by the statutory authority.

Conclusion: The Court did not set aside the demand on merits at this stage; rather, it held that the dispute required a fresh merits consideration by the respondent authority after verification, making remand appropriate.

Issue (ii): Conditions for remand-mandatory deposits, treatment of earlier debit, filing reply, timeline, and bank attachment

Legal framework (as discussed in the judgment): The Court imposed conditions while remitting the matter, requiring deposit from the petitioner's Electronic Cash Register and directing the petitioner to file a reply to the show cause notice with supporting documents, while treating the impugned rectification order as an addendum to that notice.

Interpretation and reasoning: To balance the petitioner's request for reconsideration with protection of revenue, the Court made remand conditional upon deposit of (a) 100% of the admitted tax demand confirmed in the earlier order along with interest and penalty, and (b) 100% of the quantified disputed tax liability, within 30 days. The Court further directed that any purported debit earlier made for a specified amount would be adjusted towards the required pre-deposit, but only "subject to verification." The petitioner was mandated to submit a reply with documents within the same compliance period, enabling adjudication on merits. Upon compliance and absence of other arrears (apart from the impugned demand), the Court directed that the bank account attachment shall stand lifted. Conversely, non-compliance would entitle the respondent to proceed with recovery as if the writ petition had been dismissed at admission, subject to due notice before any such order/action.

Conclusion: The Court remitted the matter for a fresh final order on merits, subject to strict time-bound deposits and filing of reply with documents; it ordered expeditious adjudication (preferably within three months from compliance), provided conditional lifting of bank attachment upon compliance, and preserved the respondent's recovery powers in case of default, with a requirement of due notice.

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