Top Stories GST Liability Imposed due to Reply filed without Proper Annexed Documents, Reverses ITC Worth Rs. 1.04 Cr: Madras HC sets aside order on Rs.5L Pre-deposit Condition [Read Order] The court granted the petitioner an opportunity to contest the tax demand, contingent on a deposit, given their readiness and documentation By Navasree A.M – On April 17, 2024 2:58 pm – 2 mins read The Madras High Court has nullified an order requiring a pre-deposit of Rs. 5 lakhs. The bench noted that the imposition of Goods and Services Tax ( GST ) liability arises from the reply lacking appropriate documentation. The petitioner contended that their business operates on a narrow profit margin, wherein the entire tax liability is absorbed by available Input Tax Credit ( ITC ).

Following the receipt of a show cause notice on September 29, 2023, the petitioner responded on October 27, 2023, highlighting that their outward supplies do not generate tax liability after offsetting the ITC. However, due to Cyclone Michaung, they couldn’t attend the hearing scheduled for December 13, 2023, resulting in the issuance of the contested order. The Counsel for the petitioner referenced the uploaded reply on the portal and assured the submission of all pertinent documents to demonstrate genuine ITC claims.

Despite the petitioner’s willingness to comply, the entire ITC was reversed, and a tax liability was imposed. Consequently, the petitioner agreed to remit Rs. 5,00,000/- for reconsideration. Mrs.K.Vasanthamala, the Government Advocate acknowledged the petitioner’s thin margin but justified the tax imposition due to nil tax payment on outward supplies. She highlighted the offered personal hearing on December 13, 2023, as a reasonable opportunity.

Upon review, the court stated that it was evident that the tax liability arises from the petitioner’s response lacking documents. Considering the petitioner’s assertion of available documentation and willingness to contest the tax demand, the court deemed it fair to provide an opportunity to contest the tax demand, subject to the condition of deposit.

Accordingly, a bench of Justice Senthilkumar Ramamoorthy set aside the impugned order dated December 29, 2023, on the condition of remitting Rs. 5,00,000/- within three weeks, alongside the submission of additional supporting documents. Upon receipt and verification of the deposit, the respondent was directed to provide a fair opportunity, including a personal hearing, and issue a fresh order within two months. The petition was disposed of under the aforementioned terms, with no costs incurred, and the related interim applications were closed.