Indofil Industries Ltd. V/s Commercial Tax Officer (State Tax) {HIGH COURT OF MADRAS}

Indofil Industries Ltd. V/s Commercial Tax Officer (State Tax) {HIGH COURT OF MADRAS}:

Date of Order : 25-03-2024

In the case of Indofil Industries Ltd. v. Commercial Tax Officer (State Tax), the Madras High Court addressed the legality of an order passed by GST authorities confirming a tax demand without duly considering the responses provided by the assessee to a show cause notice. Here’s a simplified explanation:

1. Background: Indofil Industries Ltd., the petitioner, is a registered entity under GST laws operating nationally. Following an audit and the issuance of an audit report in September 2023, the GST authorities issued a show cause notice to the petitioner on 29th September 2023. The notice highlighted several discrepancies, including a mismatch between Input Tax Credit (ITC) reported in GSTR 9 and GSTR 3B returns.
2. Assessee’s Response: The petitioner responded to the show cause notice on 27th October 2023, explaining that the disparity in ITC was due to transitional credit availed and duly reflected in the GSTR 9 annual return. The petitioner also addressed other issues raised in the notice, such as non-payment of tax on Director’s remuneration under the reverse charge mechanism and blocked credits under section 17(5) of the GST Act.
3. Impugned Order: Despite the petitioner’s detailed explanations in their reply, the GST authorities issued an order on 31st December 2023 confirming the tax demand without taking into account the petitioner’s responses adequately.
4. Court’s Decision: The Madras High Court ruled that the order passed by the GST authorities was unsustainable because it disregarded the explanations provided by the petitioner in response to the show cause notice. The court emphasized that under the principles of natural justice, authorities must consider all relevant submissions before making any adverse decision against the assessee.
5. Remand and Directions: Accordingly, the court quashed the impugned order and remanded the matter back to the GST authorities for reconsideration. The court directed the authorities to allow the petitioner to submit any additional documents within fifteen days and provide a reasonable opportunity for a personal hearing. A fresh order was instructed to be issued within two months from the date of receipt of the petitioner’s reply.
6. Conclusion: The judgment reaffirms the importance of adherence to procedural fairness and the duty of authorities to consider all relevant information provided by the assessee before making any determinative decisions related to tax liabilities.

This case underscores the significance of procedural due process and the obligation of tax authorities to conduct thorough assessments based on complete and accurate information provided by taxpayers during the adjudication process.