Procedural Fairness in GST Assessments

Introduction

In a recent judicial decision, the Madras High Court intervened in a significant GST dispute involving Perfect Assayers Private Limited and the State Tax Officer, Coimbatore. The case underscores the importance of procedural fairness in tax assessments under the Goods and Services Tax (GST) regime.

Facts of the Case

Show Cause Notice and Responses

On April 27, 2023, a show cause notice was issued to Perfect Assayers Private Limited citing discrepancies between their GSTR 3B and GSTR 1 filings, as well as discrepancies between GSTR 3B and GSTR 2A.

On May 26, 2023, Perfect Assayers responded, explaining that the discrepancies were due to credit notes amounting to ₹68,91,320/- that were not reflected in their filings. They also pointed out missing invoices from suppliers which led to differences between GSTR 2A and GSTR 3B.

Issuance of Impugned Order

Despite the detailed response and submission of relevant documents, on September 28, 2023, the tax authority issued an order confirming a tax proposal without duly considering Perfect Assayers’ explanations and supporting documents.

Issue

The central issue before the Madras High Court was whether the tax authority properly considered Perfect Assayers’ detailed reply and documents before issuing the impugned order.

Court’s Judgment

The Madras High Court ruled decisively in favor of Perfect Assayers Private Limited. The court set aside the order dated September 28, 2023, emphasizing that procedural fairness requires tax authorities to consider taxpayer submissions thoroughly. The court noted that the failure to review the petitioner’s detailed reply and documents amounted to a violation of principles of natural justice.

The case was remanded to the tax authority with instructions to provide Perfect Assayers a reasonable opportunity for a hearing and to issue a fresh order within three months, taking into account all relevant submissions.

Conclusion

This ruling by the Madras High Court serves as a reminder of the importance of procedural fairness and thorough consideration of taxpayer submissions in GST assessments. It highlights the judiciary’s role in ensuring that tax authorities adhere to principles of natural justice, thereby protecting the rights of taxpayers.