Madras High Court Orders Fresh Consideration After 25% Pre-Deposit from GST Cash Ledger

The Madras High Court in the case of ignorance of the Goods and services tax (GST) recovery notices along with the hearing notices ordered the pre-deposit of 25% from the Electronic Cash Ledger (ECL) for fresh consideration.

The applicant, Sornam Medicals asked for relief from the order on 31.12.2023 furnished via the second respondent, following the alleged failures to answer legal notices of GST recovery and indeed the inability to claim the personal hearing opportunity.

The recovery notices in question were DRC-01A, dated 23.09.2023, and DRC-01, dated 29.09.2023. Also, the applicant did not attend a personal hearing notice issued on 09.11.2023.

The counsel of the applicant Mr B.Rooban claimed that the impugned order was passed excluding granting the applicant the needed three opportunities to show a defence, as obligated u/s 75(5) of the GST Act.

Also, the counsel furnished that the applicant has furnished regular GST returns up to November 2017 the applicant has chosen the composite scheme under Section 10 of the GST Act, which waived them from claiming the ITC.

However, the department arrived at a turnover discrepancy based on the GSTR-2A data, by not acknowledging that the applicant was no longer claiming the ITC post the switch to the composite scheme.

Read Also: An ECL Can Be Used to Make a Pre-deposit for an Appeal Under the GST Act, Not an Electronic Credit Ledger

The petitioner argued that the raised demand was unfair due to these inconsistencies and requested a new chance to present their case. The petitioner indicated a readiness to adhere to any fair conditions that would protect the government’s revenue interests, confident that success was probable if allowed an opportunity to clarify their position.

Mr R. Suresh Kumar, the counsel of the department countered the petition claiming that it was restricted to time. The counsel mentioned that the writ petition must be dismissed for delay quoting the ruling of the Supreme Court in Assistant Commissioner (CT) LTU, Kakinada & Ors. vs. GlaxoSmithKline Consumer HealthCare Limited.

The counsel stated that the applicant has been unable to claim the appellate remedy in the restricted duration under section 107 of the GST Act, referencing the decision of the Supreme Court in Singh Enterprises vs. Commissioner of Central Excise.

It was carried by a bench of Justice C. Saravanan that the applicant must be allowed a chance to ventilate their grievance. But the same relief was conditional. The applicant has issued an order from the court to deposit 25% of the disputed tax amount from their electronic cash ledger within 30 days.

The impugned order has been quashed by the court and remitted the matter back to the second respondent for fresh consideration on the merits. It was asked to consider the former order as an addendum to the show cause notices (DRC-01A and DRC-01), and the applicant was asked to file a consolidated answer within 30 days.

It was cited from the court that the failure to deposit the amount or furnish the answer shall result in the respondent preceding as if the writ petition has been dismissed. A personal hearing was been ensured from the applicant’s side before the issuance of the final order.