Top Stories GST DRC-01 issued for Wrong Assessment Year: Madras HC quashes Assessment Order [Read Order] The Court directed the petitioner to file a consolidated reply within 30 days, after which the respondent must pass a fresh order on merits within three months By Navasree A.M – On October 20, 2024 11:58 am – 2 mins read Recently,  the Madras High Court quashed an assessment order passed under the Tamil Nadu Goods and Services Tax ( TNGST ) Act, 2017, as GST DRC – 01 notice was issued for the wrong assessment year.

The petitioner, Tvl.Suresh Sethu had challenged the order dated March 2, 2023, which imposed tax liability, penalty, and interest based on an erroneous assessment year. According to the petitioner’s counsel, the petitioner had voluntarily surrendered their GST registration, which was cancelled on October 4, 2021. At the time of cancellation, the petitioner had stock on which Input Tax Credit (ITC) had been availed and was required to reverse the credit. However, the show cause notice issued to the petitioner under DRC-01 on June 21, 2022, pertained to the assessment year 2018-19, even though the issue at hand related to the closure of the business in the 2021-22 assessment year. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

This discrepancy led the department to invoke Section 74 of the TNGST Act, which deals with penalties for tax evasion involving fraud or willful misstatement. The petitioner argued that this section should not have been applied, as the dispute arose from the closure of the business in 2021-22 and not from the 2018-19 period. The petitioner further contended that the assessment order was passed mechanically, without proper consideration of the correct assessment year.

Despite participating in the proceedings and responding to the show cause notices, the petitioner only realised later that the impugned order had been passed and the tax amount of Rs 94,256 had already been recovered by June 2023. The petitioner’s counsel also cited a previous ruling by the Court in a similar case, Sakthi Steel Trading vs. Assistant Commissioner (ST), to support their argument. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here Justice C. Saravanan noted the procedural lapses and agreed that the petitioner should be given an opportunity to respond, as the demand appeared to pertain to the assessment year 2021-22, not 2018-19. The Court quashed the impugned order dated March 2, 2023, and remitted the case back to the tax authorities for reassessment.

The Court directed the petitioner to file a consolidated reply within 30 days, after which the respondent must pass a fresh order on merits within three months. It was also clarified that if the petitioner fails to submit a reply within the stipulated time, the authorities are free to proceed with the case as if the writ petition had been dismissed. The matter was appeared by Mr. N.Sudalai Muthu for the petitioner and Mr.R. Suresh Kumar Additional Government Pleader for the respondents.