09 Apr High Court of Madras sets aside GST penalty, emphasizes fair hearing and pre-assessment payments in tax disputes.
Introduction
The High Court of Madras recently ruled on a case involving a works contractor for government departments, addressing penalties imposed under the Tamil Nadu Goods and Services Tax Act, 2017. The court emphasized the importance of fair hearings and pre-assessment payments in tax disputes.
Facts of the Case
- The petitioner, a works contractor, received an assessment order on April 19, 2023, due to discrepancies in their GSTR 1 and GSTR 3B returns.
- A show cause notice was issued in February 2023.
- On April 12, 2023, before the assessment order was issued, the petitioner paid Rs. 3,00,000/- towards their tax liability, citing delayed payments from government departments as the reason for the discrepancies and delayed payment.
- The petitioner contested the imposition of a 100% penalty on the dues under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017.
Issue
The core issue revolves around the justification of imposing a 100% penalty on the petitioner, considering the pre-order payment and the circumstances leading to the discrepancies.
Petitioner’s Argument
- The petitioner argued that the payment made before the assessment order was not taken into account.
- Contesting the 100% penalty imposition, the petitioner expressed willingness to remit an additional Rs. 3,00,000/- for a remand.
Held
The court set aside the impugned order and directed the respondent to remit an additional Rs. 3,00,000/-. Moreover:
- The respondent was directed to provide a fair opportunity, including a personal hearing, before issuing a fresh order.
- The lack of a hearing for the petitioner before the initial order was recognized by the court.
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