Platinum Stones Private Limited vs. The State Tax Officer
Original PDF →Facts
Platinum Stones Private Limited (Petitioner) filed a writ petition challenging an order dated 26.01.2024 passed by the State Tax Officer (Respondent). The order pertained to the Financial Year 2022-23. During an inspection on 15.12.2022 and 16.12.2022, two defects were noted: failure to maintain proper accounts and inability to reconcile stock differences. The Petitioner paid Rs. 4,52,746/- (Rs. 2,26,373/- CGST + Rs. 2,26,373/- SGST) on 19.12.2022 for the stock difference, explicitly stating in Form GST DRC-03 that it was paid under protest. The impugned order confirmed the demand for stock differences but dropped the penalty, treating the payment as an acceptance of liability. The Petitioner argued this order suffered from non-application of mind.
Held
The Court held that the impugned order dated 26.01.2024 suffered from non-application of mind and was arbitrary. The reasoning was that the Respondent failed to consider the Petitioner's clear assertion in Form GST DRC-03 that the payment of Rs. 4,52,746/- was made under protest for the stock difference. By treating this payment as an unqualified acceptance of liability without duly considering the Petitioner's objections and replies, the Respondent acted illegally. The Court found that the principles of natural justice were violated. The ratio decidendi is that tax authorities must consider all submissions and evidence, including payments made under protest, before passing an order, and cannot presume acceptance of liability solely based on such payments. The Court quashed the impugned order and remitted the case back to the Respondent to pass a fresh order after considering the Petitioner's consolidated reply within 30 days, with the Respondent to pass final orders preferably within two months.
Key Issues
1. Whether the impugned order dated 26.01.2024, which confirmed the demand for stock differences and treated the payment made under protest as an acceptance of liability, is illegal and violative of the principles of natural justice, particularly in light of the Petitioner's submissions and the provisions of Section 73/74 of the CGST Act, 2017? Petitioner's arguments: The Petitioner contended that the impugned order was passed without considering their replies/objections dated 24.07.2023 and 22.10.2023. They argued that the payment of Rs. 4,52,746/- was made under protest for the stock difference identified during a surprise inspection, as clearly indicated in Form GST DRC-03. Therefore, the Respondent's assumption that the Petitioner accepted the liability without considering this crucial detail rendered the order arbitrary and suffering from non-application of mind. Respondent's arguments: The judgment does not record any specific arguments made by the Respondent.
Sections Cited
Section 73, Section 74
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORDER The petitioner is before this Court against the impugned order dated 26.01.2024 passed by the respondent for the Assessment Year 2022-2023. 2. By the impugned order, the respondent has confirmed the demand proposed as far as Defect No.2 on account of stock differences and dropped the penalty, as the petitioner has paid the amount on 19.12.2022. 3. The facts on record indicate that the petitioner's place of business was inspected on 15.12.2022 and 16.12.2022 and that two defects were pointed out, one for failure to maintain proper accounts and other for on account of the petitioner's inability to reconcile the stock difference. As far as the second defect on account of stock difference is concerned, the petitioner has paid a sum of Rs.4,52,746/- [Rs.2,26,373 [CGST] + Rs.2,26,373 [SGST]] on 19.12.2022. _____________ Page No. 2 of 5 https://www.mhc.tn.gov.in/judis
In Form GST DRC – 03 at Column No.8, the petitioner has clearly stated that the above said amount was paid under protest for tax liability arrived in surprise inspection for stock difference noticed. Thus, the impugned order, which has been passed as if the petitioner has accepted the liability without considering the reply of the petitioner suffers from non-application of mind and is therefore, arbitrary. It is therefore liable to be quashed and the case be remitted back to the respondent to pass a fresh order after duly considering the petitioner's replies / objections, dated 24.07.2023 and 22.10.2023. 5. In view of the above, the impugned order dated 26.01.2024 stands quashed and the case is remitted back to the respondent to pass a fresh order. The impugned order which stands quashed in this order shall be treated as Addendum to the show cause notices already issued to the petitioner. The petitioner shall file a consolidated reply within a period of 30 days from today. The respondent shall thereafter proceed to pass final orders on merits, preferably, within a period of two months.
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This Writ Petition stands disposed of the with the above directions. No costs. Consequently, connected Miscellaneous Petitions are closed. Index : Yes/ No 30.07.2024 Neutral Citation: Yes / No Speaking Order / Non-Speaking Order smn2 To The State Tax Officer, Office of Joint Commissioner (State Tax) Intelligence Survey Unit, Investigation, Madurai Intelligence, Ground Floor, Commercial Taxes Building, Dr.Thangaraj Salai, K.K.Nagar, Madurai – 625 020. _____________ Page No. 4 of 5 https://www.mhc.tn.gov.in/judis C.SARAVANAN
, J.
smn2
2024 _____________ Page No. 5 of 5 https://www.mhc.tn.gov.in/judis
Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.