Madras HC: First Consider Relevant Elevants Before Passing a GST Order U/S 73

In the case of Global Calcium (P.) Ltd. v. Assistant Commissioner (ST) [Writ Petition No. 170 of 2024 dated February 01, 2024], the Hon’ble Madras High Court ruled that the Assessing Officer should acknowledge the pertinent elements before passing any order. Thus, the case was remanded back to the Assessing Officer.

Facts About Global Calcium (P.) Ltd.

Global Calcium (P.) Ltd. (“the Petitioner”) has the business of supplying Bulk Drugs and Pharmaceutical Intermediaries. Periodically the applicant furnished the returns. On the Petitioner’s records an audit was conducted certain differences were noticed and shared by issuing notices. The applicant answered such notices, including the show cause notice under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (“the TNGST Act”).

The three separate Assessment Orders (“the Impugned Orders”) were issued via the Assessing Officer (“the Respondent”) associating to FY 2017-2018, 2018-2019, and 2019-2020 in which the three defects were dealt with:

• Suppression of purchases through not claiming the available Input Tax Credit (ITC),
• The payment of performance-linked incentives to two persons who held office as whole-time directors of the company.
• Differences connecting to GST E-way bills.

The Petitioner dissatisfied by the Impugned Orders files the present writ petition.

Assessing Officer Issue

Whether an Assessing Officer passes an order without regarding applicants’ aspects?

Madras High Court Decision

The Hon’ble Madras High Court in Writ Petition No. 170 of 2024, ruled under:

The Respondent did not take into regard the subsequent facts before passing the Impugned Order:

• Concerning the first defect, the ITC was not availed for ineligibility. By directing to differences between the distinct returns, the proposed obligation was partly established and partly dropped.
• Concerning the second defect, the Respondent challenged the balance sheet, Form-16, and Form 26AS. The cost made through the applicant for remuneration and performance-based incentives shall have been shown in the profit and loss account of the applicant for the pertinent fiscal years. The tax deduction under Section 192 of the Income Tax Act, 1961 was a material fact but is not conclusive. The test is whether the same remuneration was paid for the furnished services as an employee of the company or whether services were furnished under a contract for service for fees or other considerations.

• Circular No. 140/10/2020-GST on June 10, 2020, explained that the Director’s remuneration part that is declared as ‘Salaries’ in the books of a company and subject to TDS under Section 192 of the IT Act is not subjected to tax being consideration for services through the employee to the employer in the course of or concerning his employment in terms of Schedule II of the Central Goods and Services Tax Act, 2017 (“the CGST Act”)
• It ruled that there is a chance that the applicant does not place on record all pertinent documents. In such cases, the Impugned Orders were not sustainable and are hereby quashed. Further, the matter was remanded back to the applicant. Therefore, the writ petition was disposed of.