Dept's Failure To Consider Certificate Obtained From Supplier; Madras High Court Quashes ITC Mismatch Demand

The Madras High Court has quashed the demand in respect of the input tax credit (ITC) mismatch as the department has failed to consider certificates obtained by buyers.

The bench of Justice Senthilkumar Ramamoorthy has observed that important records, such as the supplier's and the chartered accountant's certificates, were disregarded in the issuance of the demand order. Interference with the order is warranted due to this crucial evidence being overlooked.

The petitioner or assessee received a show cause notice. The show cause notice was replied to by stating that the reason for the discrepancy between the GSTR 3B return of the petitioner and the auto-populated GSTR 2A was the belated filing of GSTR 1 by the supplier in respect of one invoice. The petitioner stated that he was unable to upload the reply on the portal. The demand order was issued.

The department contended that the petitioner was provided a reasonable opportunity to contest the tax demand and failed to submit a reply through the GST portal.

The petitioner contended that it has placed on record a certificate from Fivestar Impex India Private Limited stating that the supply was made under an invoice dated November 1, 2017. A certificate from Prabhakaran & Associates, Chartered Accountant, was also placed on record. The certificate provides the details of the invoice dated November 1, 2017 for a total value of Rs. 18,82,000. The documents were not taken into account while issuing the order.

The court set aside the demand order and remanded the matter back to the respondent department for reconsideration. The petitioner was permitted to submit a reply to the show cause notice within 15 days from the date of receipt of a copy of this order by enclosing all relevant documents. Upon receipt, the respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue a fresh order within two months from the date of receipt of the petitioner's reply.

Counsel For Appellant: B.Sivaraman

Counsel For Respondent: T.N.C.Kaushik

Case Title: AP Studio Enterprises Versus The Assistant Commissioner (ST)(FAC)

Citation: 2024 LiveLaw (Mad) 174

Case No.: W.P.No.9701 of 2024 and W.M.P.Nos.10724 & 10726 of 2024

Click Here To Read The Order