Determination Of Input Tax Credit Should Have Been Included In Show Cause Notice To Provide Assessee Opportunity To Respond: Madras HC

Finding that the Assessing Officer had determined the amount to be reversed based on a comparison of the Input Tax Credit (ITC) claimed under GSTR 3B and GSTR 2B, the Madras High Court set aside an assessment order passed under the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act).

At the same time, the Single Judge Bench of Justice Anita Sumanth clarified that the determination of reversal of ITC should have been included in the show cause notice itself, giving Hatsun Agro Product (petitioner) sufficient opportunity to respond and provide necessary details in support of the claim of ITC.

Advocate S. Muthu Venkatraman appeared for the Petitioner, whereas Advocate V. Prashanth Kiran appeared for the Respondent.

The present case involved the reversal of ITC claimed by the petitioner. Whereas the AO deemed the ITC to be ineligible and not rightfully claimed by the petitioner.

After considering the submission, the Bench noted that a communication dated Sep 09, 2022, had outlined the specific way the respondent sought information and supporting particulars, including invoices, from the petitioner.

However, the Bench found that it is not clear whether the petitioner had provided the requested particulars in the specified manner and whether all the supporting documents had been submitted to the AO.

The Bench remarked that before the order of assessment, what was exchanged was only general notices calling for particulars to which the petitioner is seen to have responded, albeit, insufficiently.

Accordingly, the High Court set aside the order of assessment and instructed that the order should be treated as a show cause notice.

The High Court also directed the petitioner to appear along with all the required details and supporting documents related to the reversal under the order.

At the same time, the Bench clarified that if the petitioner does not appear on that day along with the supporting materials, the benefit granted under this order shall stand withdrawn without further reference to the petitioner.

Cause Title: Hatsun Agro Product Ltd v. The Deputy Commissioner (ST) – II Office of the Joint Commissioner (ST) Large Taxpayers Unit and Ors.

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