Introduction
In a significant ruling, Mandarina Apartment Owners Welfare Association v. Commercial Tax Officer/State Tax Officer[i], the Madras High Court examined the procedural requirements under the Central Goods and Services Tax Act, 2017 (‘CGST Act’). The High Court addressed the issue of compliance with Form ASMT-10 during GST adjudications under s. 73 of the CGST Act. The key question before the Court was whether the failure to issue the ASMT-10 notice vitiates subsequent proceedings, particularly in situations where the taxpayer was not adequately informed. The ruling emphasised the importance of procedural safeguards designed to protect taxpayers’ rights.
Brief Facts
For W.P. No. 15307 of 2024, a show cause notice (‘SCN’) dated 28.12.2023 was uploaded on the GST portal. The Petitioner claimed that the SCN was not communicated through any other mode, resulting in the Petitioner being unaware of the proceedings and consequently unable to communicate.
Consequently, the Petitioner did not participate in the proceedings, and the impugned order dated 11.04.2024 was passed without the Petitioner’s participation.
For W.P. No. 15330 of 2024, the Petitioner received an SCN on 05.09.2023, alleging a discrepancy between the sales and purchase turnover.
After two reminders, the Petitioner responded on 06.11.2023, explaining that the sales turnover was reported in the following month.
Despite this explanation, the impugned order dated 23.12.2023 was passed.
Both cases involved adjudications under s. 73 of the CGST Act. The primary challenge was based on the non-issuance of a notice in Form ASMT-10, which is mandated under r. 99 of the Central Goods and Services Tax Rules, 2017 (CGST Rules).
Held
The High Court disposed of the writ petitions and set aside both the impugned orders. It remanded the matters back to the GST authorities for fresh adjudication, ensuring compliance with the mandatory procedural requirements.
For W.P. No.15307 of 2024, the High Court held that since the Petitioner was unaware of the proceedings due to lack of proper notice, an opportunity should be provided to the Petitioner to present their case.
For W.P. No.15330 of 2024, the High Court noted that the ASMT-10 notice was not issued despite scrutiny being mentioned, which vitiated the proceedings.
The High Court noted that s. 61 of the CGST Act allows the proper officer to scrutinise returns and inform the taxpayer of any discrepancies. Further r. 99 of the CGST Rules mandates that discrepancies found during scrutiny must be communicated to the taxpayer via Form ASMT-10.
The High Court observed that issuing ASMT-10 is mandatory when discrepancies are found after selecting returns for scrutiny. Non-compliance with this requirement vitiates the scrutiny process, rendering the findings and any subsequent adjudication under s. 73 or 74 of the CGST Act is legally untenable.
The High Court held that failure to issue the ASMT-10 notice prevents the tax authority from relying on the scrutiny findings for adjudication purposes. However, the Court noted that if a taxpayer fails to respond or participate after an SCN is issued, the adjudication may proceed, provided the taxpayer had an opportunity to respond.
Our Analysis
The Madras High Court’s ruling emphasises the critical importance of following procedural safeguards in tax adjudications under the CGST Act. The decision reaffirms the mandatory nature of issuing Form ASMT-10 when discrepancies are found during scrutiny under s. 61 of the CGST Act. This ruling serves as a reminder to tax authorities that procedural lapses, particularly in issuing notices, can have significant legal consequences, potentially nullifying subsequent adjudications.
The Court’s decision will likely impact the manner in which GST officers approach scrutiny and adjudication, ensuring that taxpayers are afforded due process and that any discrepancies are adequately communicated. This ruling could also lead to increased challenges to GST adjudications where procedural requirements are not strictly followed, reinforcing the need for compliance with the statutory framework.
In conclusion, this judgment underscores the balance between tax administration and taxpayers’ rights, highlighting the judiciary’s role in safeguarding procedural fairness within the GST regime. The Court’s insistence on the mandatory issuance of ASMT-10 ensures that taxpayers are not subjected to arbitrary or uninformed tax demands, reinforcing the principles of natural justice within the GST framework.
End Note
[i] 2024 164 taxman.com 803 (Madras) [16.07.2024].
Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.