Tax Liability cannot be imposed merely because the financial statement did not provide State-wise turnover

editor — Thu, 04 Apr 2024 10:14:35 +0000

The imposition of tax liability solely based on the absence of state-wise turnover information in financial statements has been contested in the legal realm. This matter was addressed by the Hon’ble Madras High Court in a recent case involving Tvl. Future General India Insurance Co. Ltd. versus Assistant Commissioner (State Tax) [WP No. 3534 OF 2024, dated February 16, 2024].

Facts:

Tvl. Future General India Insurance Co. Ltd. (“the Petitioner”) operated as a private general insurance firm, specializing in insurance services. On August 16, 2021, the Petitioner was served with an audit notice by the Assistant Commissioner (State Tax) (FAC) (“the Respondent”). In response, the Petitioner diligently furnished the necessary documents and addressed the discrepancies highlighted in the audit reports. Subsequently, after issuing both an intimation and a show cause notice (“the SCN”), the Competent Authority issued the assessment order on December 30, 2023 (“the Impugned Order”).

Within the Impugned Order, the issue of defect No. 10 arose, relating to variations in turnover between the Profit & Loss account and balance sheet, as opposed to the figures in GSTR-9. The Petitioner explained that these disparities stemmed from the inclusion of Pan-India operations in the financial statements, whereas GSTR-9 solely focused on turnover within Tamil Nadu. The Petitioner even provided a certificate from a Chartered Accountant, specifically outlining the turnover within Tamil Nadu, amounting to Rs. 80,89,05,068/-. However, despite this clarification and despite the Petitioner having already paid taxes on the stated turnover, the Respondent imposed State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) at 18% each (36% combined) on the aforementioned turnover.

Dissatisfied with the assessment order, the Petitioner sought recourse by filing a writ petition before the Hon’ble High Court of Madras.

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Issue:

The central question revolves around whether tax liability can be established solely due to the absence of state-wise turnover information in financial statements.

Held:

In its ruling on Writ Petition No. 3534 OF 2024, the Hon’ble Madras High Court made the following determinations:

The Court acknowledged the variation in turnover for entities operating across multiple states, emphasizing the importance of distinguishing total turnover from state-wise turnover.
It criticized the Competent Authority's decision to impose GST at a higher rate of 36% instead of the appropriate 18%, despite the Petitioner having already paid tax on the turnover in question.
The Impugned Order was deemed invalid and the case was remanded to the Respondent for reconsideration.
Furthermore, the Court directed the Respondent to afford the Petitioner a fair opportunity, including a personal hearing, and instructed issuance of a fresh assessment order within a maximum period of two months, in compliance with legal provisions.

Consolidation of Adjournment in GST Proceedings

editor — Wed, 27 Mar 2024 08:49:50 +0000

In the legal matter of Pioneer Co-Operative Car Parking Servicing and Constructions Society Ltd. against Senior Joint Commissioner [WPA No. 3092 of 2024 dated March 1, 2024] at the Calcutta High Court, the petition was resolved, establishing that an adjournment granted for Show Cause Notice (SCN) proceedings under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) cannot be merged with an adjournment granted for other proceedings under GST.

Facts of the case:

Pioneer Co-Operative Car Parking Servicing and Constructions Society Ltd. (“the Petitioner”) is a cooperative society registered under the West Bengal Cooperative Societies Act, 1973. It operates in collecting parking fees. The Petitioner received an SCN on September 12, 2023, from the Revenue Department (“the Respondent”) under Section 73(1) of the CGST Act. The Petitioner responded to the notice. Subsequently, a Final Order dated November 6, 2023 (“the Impugned Order”) was issued, determining the tax liability under Section 73(9) of the CGST Act.

The Petitioner, dissatisfied with the Impugned Order, filed a writ petition alleging inadequate opportunity for a hearing.

Issue:

Whether adjournment granted for Show Cause Notice proceedings under Section 73 of the CGST Act can be clubbed together with adjournment granted for other proceedings under GST?

Held:

The Calcutta High Court, in the case of WPA No. 3092 of 2024, made the following determinations:

It was observed that under sub-section (5) of Section 75 of the CGST Act, the proper officer may grant adjournment upon sufficient cause shown, with written reasons. However, such adjournments should not exceed three times during the proceedings.
It was reasoned that adjournments granted to the Petitioner concerning proceedings under Section 61 of the CGST Act should not be combined with SCN proceedings. Thus, the Petitioner had adequate opportunities to respond to the SCN issued under Section 73(1) of the CGST Act.
The communication dated February 15, 2024, regarding tax recovery was deemed unsustainable and subject to annulment.
It was directed that the Petitioner must submit a response to the SCN, and the Respondent should schedule a personal hearing accordingly.

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Tax Liability cannot be imposed merely because the financial statement did not provide State-wise turnover

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Consolidation of Adjournment in GST Proceedings

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