Opportunity to be given when all details were submitted at the time of enquiry however SCN was not responded

Case Title: Tvl. KCP Infra Ltd. v. State Tax Officer

Court: High Court of Madras

Petition No.: W.P. No. 7088 of 2024, W.M.P. Nos. 7925 & 7927 of 2024

Date of Judgment: March 18, 2024

Relevant Sections: Section 67 of Tamil Nadu GST Act, 2017; CGST Rule 37 (Input Tax Credit reversal); Circular No. 12/2022 dated 26.09.2022

Category of Dispute: Input Tax Credit, Natural Justice, Assessment Order

Facts of the Case [¶1–3, 5–6]:

1. The petitioner, Tvl. KCP Infra Ltd., challenged the assessment order dated 27.12.2023 alleging breach of natural justice. [¶1]
2. An inspection was conducted under Section 67 of the TNGST Act in January–February 2023, during which 15 discrepancies were recorded. A sworn statement was taken from the Accounts Executive. [¶2]
3. The petitioner submitted replies addressing all discrepancies, including discrepancy 11 (ITC reversal for non-payment within 180 days) and discrepancy 7 (turnover exclusion for other states). [¶3]
4. Despite submitting a reply and seeking extension of time, a show cause notice was issued without grant of extension, and the final assessment order was passed. [¶2]
5. The petitioner offered to deposit Rs. 15,00,000/- (10% of disputed demand under 7 heads) as a precondition. [¶4]

Questions in Consideration [¶1–3]:

1. Whether the assessment order passed without granting sufficient opportunity and disregarding earlier replies violated principles of natural justice?
2. Whether ITC reversal for non-payment within 180 days and inclusion of out-of-state turnover were properly contested and ignored by the department?

Observation of Court [¶6]:

1. The Court acknowledged that the petitioner had indeed replied to each of the 15 discrepancies during inspection, particularly regarding ITC reversal and revenue from other states. [¶6]
2. Although the petitioner did not formally reply to the show cause notice or attend personal hearings, the Court observed that procedural fairness required consideration of the prior response. [¶6]
3. The Court held that in such circumstances, the assessment order deserved to be interfered with, but subject to the petitioner fulfilling conditions. [¶6–7]

Judgment of the Court [¶7–8]:

1. The assessment order dated 27.12.2023 was quashed, conditional upon the petitioner remitting Rs. 15,00,000/- within two weeks. [¶7]
2. The petitioner was allowed to submit a fresh reply to the show cause notice. [¶7]
3. Upon receipt of the reply and confirmation of the amount paid, the assessing officer was directed to give a personal hearing and issue a fresh assessment order within two months. [¶7]
4. The entire reassessment must comply with Circular No. 12/2022 dated 26.09.2022. [¶7]

Between Fine Lines:

• The Court quashed an assessment order for failure to consider earlier replies and for violating natural justice.
• It allowed the petitioner to deposit part of the tax and file a fresh reply.
• The department must now re-do the assessment with a personal hearing.
• Prior procedural missteps by the department were deemed fatal.
• A proper reply at inspection stage cannot be wholly ignored by revenue authorities.

Summary of Referred Cases:

Takeaway:

“Ignoring replies at inspection stage violates natural justice.”