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Synopsis

The Madras High Court recently addressed procedural errors in the cancellation of GST registration and the assessment of tax liability for a store in Mettur, Tamil Nadu. Court found that show cause notices were improperly served to the store via a temporary ID, which did not meet the requirements of Section 169 of the Central Goods and Services Tax Act, 2017 (the CGST Act) as the store did not have access to this ID.

The bench of Justice Senthilkumar Ramamoorthy observed that proper service of notice as outlined in Section 169, which includes methods like physical delivery, registered mail, or email, was not followed and the tax liability was calculated using auto-populated data from GSTR-2A without giving the store an opportunity to present their case or consider their objections.

In this case, the petitioner, Annalakshmi Stores' GST registration was retroactively canceled effective August 31, 2017, due to their failure to file returns for six consecutive months. The GST department issued show cause notices in Form GST ASMT-14, but these were uploaded to a temporary ID that the petitioner claimed they could not access.

The petitioner argued that they were unaware of the notices, which prevented them from filing returns or statutory appeals against the tax demands.

The counsel for the petitioner contended that issuance of show cause notice in Form GST ASMT-14 was mandatory if proceedings were initiated under Section 63 and that the uploading of such notice on the temporary ID did not constitute service of notice as per section 169 of applicable GST enactment.

She contended that the show cause notices were improperly served as they were sent to a temporary ID they could not access.

The GST department argued that the temporary ID was accessible to the petitioner, with the relevant password sent to the registered email and mobile number linked to their original GST registration. Despite this, the court found that the petitioner was not given a fair chance to participate in the assessment process.

Court noted that by using the total purchase value as the basis, the taxable value was arrived at and freight and miscellaneous charges and gross profit were added thereon and this exercise was carried out without hearing the petitioner in person.

Therefore, court set aside the assessment orders passed under Section 63 and show cause notices due to non-compliance with procedural requirements and principles of natural justice, remanding the case back to the GST department for proper reconsideration, ensuring proper service of notice and allowing the petitioner an opportunity to be heard.

Case Title: Annalakshmi Stores v. Deputy State Tax Office and Another