Order Denying ITC Without Providing the Assessee an Opportunity to Explain Discrepancies to Be Set Aside

Case Details: Muzamil N vs. Deputy State Tax Officer - I - [2024] 169 taxmann.com 451 (Madras)

Judiciary and Counsel Details

• Mohammed Shaffiq, J.
• B. Manoharna for the Petitioner.
• T.N.C. Kavshik, Addl. Govt. Pleader, for the Respondent.

Facts of the Case

The petitioner, a registered dealer engaged in the scrap business, was assessed for the financial year 2018-19. During an inspection under Section 67 of the CGST Act, it was alleged that the petitioner fraudulently availed ineligible input tax credit based on invoices issued by a non-existent supplier. A notice in Form DRC-01A was issued on 16.12.2022 via the GST portal, followed by a formal show cause notice on 07.03.2023. The petitioner failed to respond or participate in the adjudication process, claiming they were unable to access the portal. Subsequently, an assessment order dated 04.01.2024 was issued confirming the liability.

High Court Held

The High Court noted that the petitioner was not provided a fair opportunity to explain the alleged discrepancies. The principles of natural justice were violated as the notices and orders were not effectively communicated. The petitioner expressed readiness and willingness to pay 25% of the disputed tax and requested one final opportunity before the adjudicating authority to present their objections to the proposal.

Therefore, the Court set aside the assessment order and directed the respondent to ensure that fresh orders are passed in accordance with the law after affording the petitioner a reasonable opportunity of being heard.

List of Cases Reviewed

• M/s. K. Balakrishnan Balu Cables v. Assistant Commissioner of GST & Central Excise [W.P.(MD) No.11924 of 2024 dated 10.06.2024] [Para 4] followed.