Madras HC Orders Re-Adjudication in GST ITC Mismatch Case, Directs Assessee to Pay 10% of Disputed Tax

The Madras High Court in a judgment for the mismatch in the ITC claim under Form GSTR-3B and auto-populated GSTR-2A asked the applicant to file the 10% of the disputed tax amount while passing an order for re-adjudication by the tax authorities based on new material.

The Nilgiri Dairy Farm P.Limited, (Nilgiri) submitted a Writ Petition and two Writ Miscellaneous Petitions before the Madras High Court impugning Orders passed by the Respondent. The applicant submitted their returns and paid appropriate taxes for the pertinent period under consideration, but was within audit following authorization by the joint commissioner as per Section 65 of the Goods and Service Tax Act, 2017.

The Audit indicated multiple discrepancies including a mismatch between GSTR-3B and GSTR-2A; GSTR 1 and GSTR 3B; non-payment of Tax under the Reverse Charge Mechanism (RCM); non-reconciliation of payment in Form GSTR-9C among other allied issues.

A notice in DRC 01 was provided to the applicant and furnished a chance for the personal hearing, following which the defects of mismatch between GSTR 1 and GSTR 3B, the other income considered as consideration obtained, and reversal of ITC on the purchases returns were validated against the applicant.

R. Kumar, appearing for Nilgiri aspired that the case be remanded back to the adjudicatory authority mentioning the decision of the Madras High Court in Sree Manoj International Vs. Deputy State Tax Officer (2024), while pursuing a final opportunity before the adjudicating authority to introduce their objections to the proposal in the impugned order.

G.Nanmaran, Special Government Pleader appearing for the Respondent does not raise any objections against the proposal put forth by the applicant.

The impugned order and the consequential demand order have been set aside by the Madras HC presided over by Justice Mohammed Shaffiq while asking the applicant to deposit 10% of the disputed taxes including additional compliance measures, the fulfilment of which will provide the applicant with another chance to provide their objections for the respondent who will pass a fresh order based on any related documents or material that shall be mandated to be produced by the applicant.