The Madras High Court has ruled that the issuance of a second corrigendum to a Goods and Services Tax (GST) show cause notice (SCN) enhancing the input tax credit (ITC) and demand order, without providing an opportunity for hearing, is not in accordance with the principles of natural justice.
In this case, the petitioner received a GST SCN proposing to reject the ITC claimed by them and also proposing a demand of tax, interest, and penalty. The petitioner replied to the SCN, and subsequently, a personal hearing was granted. After the hearing, an order was passed rejecting the ITC and confirming the demand. However, a corrigendum was issued enhancing the demand, which was followed by a second corrigendum further enhancing the demand and ITC.
The petitioner challenged the second corrigendum before the High Court, contending that it was issued without providing an opportunity for hearing. The Court held that the issuance of the second corrigendum without providing an opportunity for hearing was in violation of the principles of natural justice. The Court relied on the decision of the Supreme Court in the case of Gkn Driveshafts (India) Ltd. vs. Income Tax Officer, which held that a corrigendum which substantially alters the basis of the assessment, cannot be issued without providing an opportunity for hearing to the assessee.
The Court observed that the second corrigendum had enhanced the demand and ITC, which was a substantial alteration of the basis of the assessment. The Court also noted that the petitioner had not been provided an opportunity to respond to the enhanced demand and ITC. The Court, therefore, quashed the second corrigendum and remanded the matter back to the authority to provide an opportunity for hearing to the petitioner.
The judgment highlights the importance of providing an opportunity for hearing to taxpayers before passing any order that affects their rights. It also emphasizes that the issuance of a corrigendum which substantially alters the basis of the assessment cannot be done without providing an opportunity for hearing. The judgment will have implications for GST authorities and taxpayers, as it emphasizes the need for transparency and fairness in the assessment process.
In conclusion, the Madras High Court’s ruling emphasizes the importance of principles of natural justice in taxation, particularly in cases where a corrigendum is issued enhancing the demand and ITC. It is essential for tax authorities to provide an opportunity for hearing to taxpayers before passing any order that affects their rights. The judgment will have significant implications for GST authorities and taxpayers, and will ensure that the assessment process is fair and transparent.