Failure To Issue ASMT 10 In Respect Of Aspects Forming Subject Matter Of Proceedings Vitiates Entire Proceedings: Madras High Court

The Madras High Court has held that ASMT 10 is mandatory before proceeding to issue GST DRC-01. Failure to issue ASMT 10 in respect of the discrepancies forming the subject matter in GST DRC-01 culminating in GST DRC-07 would vitiate the entire proceedings.

The single bench of Justice Mohammed Shaffiq has observed that any proceeding in GST DRC-01A/1 culminating in an Order in GST DRC-07, if pursuant to scrutiny under Section 61 of the TNGST Act, ought to be preceded by the issuance of Form ASMT 10.

The notice required by section 61 of the CGST Act of 2017 read with Rule 99 of the CGST Rules of 2017 is known as Form GST ASMT-10, and it asks the taxpayer to provide an explanation for any discrepancies in the GST returns they have filed.

The Form GST DRC-01A is an intimation sent out prior to a Show Cause notice, whereas the Form GST DRC-01 is a summary of a Show Cause notice. The taxpayer may pay the department's liability in accordance with the notification if he accepts the department's argument.

DRC-07 is the summary of all orders. For every order which ultimately ends up in demand creation, liability is created through DRC-07. By submitting DRC-07 to GSTN, liability against the taxpayer will be created in part B (other than return-related liability) of the Liability Ledger.

The petitioner/assessee is in the business of manufacturing and supplying pyrotechnic products (fireworks) and is registered under the TNGST Act. The petitioner had filed the GST returns under the TNGST Act, periodically discharging appropriate taxes while availing the Input Tax Credit in terms of Section 16 of the TNGST Act.

The respondent/department had undertaken scrutiny of the GST returns in terms of Section 61 of the TNGST Act. A notice in Form ASMT 10 dated 22.12.2021 was issued pointing out certain discrepancies between GSTR3B, GSTR1 and GSTR2A return filed by the petitioner, calling upon the petitioner to pay taxes along with interest. In response, the petitioner paid the interest and provided GST-DRC 03 while submitting his explanation in Form ASMT 11 with the necessary details.

The department called the petitioner after more than six months to inquire whether they had paid the taxes, interest, and penalties demanded. The petitioner logged in to the GST portal and found that the Notice and Order had been uploaded. The petitioner downloaded GST DRC-01 and GST DRC-07.

The petitioner contended that the defects were different from the defects/discrepancies which were pointed out in Form ASMT 10. The entire proceedings have been conducted behind their backs. They were completely unaware of either the summary of the Notice in GST DRC-01 or the Order in GST DRC-07 until being informed by the respondent. The entire proceedings stand vitiated for violation of principles of natural justice as neither the show cause notice nor the orders under GST DRC-07 passed under Section 74 were served on the petitioner.

The court set aside the order and remitted the matter back to the Assessing Officer for redoing the assessment.

The court noted that though ASMT 10 was issued pointing out certain discrepancies, the GST DRC-01 and the order in GST DRC-07 were made on the basis of issues that were completely different from what was set out in Form ASMT 10.

"It is open to the Respondent to issue appropriate Form (Form ASMT 10) and after affording a reasonable opportunity to the petitioner in the manner contemplated under the Act proceed further in accordance with the law. The petitioner shall also cooperate in the proceedings," the court ordered.

Case Title: M/s.Vadivel Pyrotech Private Limited Versus The Assistant Commissioner (ST)

Citation: 2022 LiveLaw (Mad) 438

Case No: W.P.(MD)No.22642 of 2022 and W.M.P.(MD)Nos.16803 and 16804 of 2022

Date: 27.09.2022

Counsel For Appellant: Advocate N.Viswanathan

Counsel For Respondent: Additional Government Pleader M.Prakash

Click Here To Read Order