Madras HC Directs Party to Pay 10% Pre-deposit for Failing to Appear at Hearing on GSTR 4 and 2A Difference

The GST (Goods and Services Tax) proposal order has been set aside by the Madras HC on the condition of a 10% pre-deposit after the applicant was unable to take part in the personal hearing for the disparity between GSTR 2A and GSTR 4 returns.

The applicant, Neelan Pharmacy and General runs a retail trading business in medical, surgical, and pharmaceutical products. The business had claimed the composition scheme under GST. An order has been contested by the applicant that was issued by the Deputy State Tax Officer because they were not given a reasonable chance to challenge the tax demand on merits.

On the investigation of the return, an SCN was issued directing the applicant to elaborate on the disparity between the purchase value as per the GSTR 2A return and the reported turnover in the applicant’s GSTR 4/CMP-08 return. On 07.02.2024 and 09.02.2024 the applicant provides the reply.

The order in question was issued as a result. S. Ramanan, who represented the petitioner, argued that the disparity was due to the failure to consider the closing and opening stock. He also mentioned that the petitioner couldn’t attend the personal hearing because the shop was closed due to metro rail work being carried out nearby. The petitioner agreed to pay 10% of the disputed tax demand as a condition for appeal.

T.N.C Koushik, representing the respondent, argued that due process was followed, which included issuing a show cause notice and sending multiple reminders. The respondent pointed out that the response of the applicant was regarded. However, the court noted that although the petitioner’s response was referred to, it was ultimately rejected as unacceptable. This rejection occurred because the petitioner did not include the profit and loss account and stock details for verification.

The bench of Justice Senthilkumar Ramamoorthy found that “the petitioner could not participate in the personal hearing on account of the shop being closed due to metro rail work. As a result, it appears that the petitioner was unable to produce relevant documents at the personal hearing. These documents could, however, have been enclosed with the petitioner’s reply. Therefore, it becomes necessary to put the petitioner on terms.”

The impugned order was set aside by the court on 1st April 2024 and remanded the case for reconsideration, conditional upon the applicant paying 10% of the disputed tax demand within 2 weeks from the date of obtaining an order copy. The applicant is permitted to propose other documents supporting their reply within this course.

Read Also: Missing Reply to SCN Can’t Remove the Chances of Personal Hearing U/S 75(4)

It was asked the respondent to furnish a reasonable chance for a personal hearing and issue a fresh order within 3 months from the date of receipt of the documents of the applicant.