Tvl.Kalyan Enterprises vs. The Deputy State Tax Officer - 1

Facts

The petitioner, Tvl. Kalyan Enterprises, filed a writ petition before the Madurai Bench of the Madras High Court challenging an assessment order dated July 10, 2023, passed by the respondent, The Deputy State Tax Officer-1, for the year 2018-19. The petitioner had paid the disputed tax of Rs. 2,46,875/- towards CGST and TNGST on January 30, 2022, and subsequently paid interest of Rs. 1,60,584/-. A balance of Rs. 243/- remained. Notices in DRC 01A and DRC 01 were issued on February 3, 2023, and April 3, 2023, respectively. The petitioner sought to quash the assessment order and requested a fresh assessment.

Held

The Court held that there appeared to be a prima facie error in imposing a penalty equivalent to the tax belatedly paid by the petitioner on November 30, 2022, and the interest paid on February 28, 2023. The Court found that this aspect ought to have been considered by the respondent before passing the impugned order. Consequently, the Writ Petition was allowed. The impugned order was set aside, and the case was remitted back to the respondent for a fresh assessment. The respondent was directed to pass a fresh order on merits and in accordance with law within three months, without being influenced by any observations on the merits of the case. The quashed order was to be treated as an addendum to the notice in DRC 01A dated April 10, 2023, and the petitioner was expected to file a reply within 30 days. The petitioner would also be heard before a fresh order is passed.

Key Issues

1. Whether the respondent was justified in imposing a 100% penalty equivalent to the tax due, both towards CGST and TNGST, when the petitioner had belatedly paid the disputed tax and interest. This issue turns on the interpretation and application of Section 74 of the respective GST Act. The petitioner argued that while the respondent was justified in invoking Section 74, imposing a 100% penalty was not warranted given the subsequent payment of tax and interest. The respondent's arguments were not recorded in the judgment.