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IN THE HIGH COURT OF JUDICATURE AT MADRAS
G.R.SWAMINATHAN, J
Neeyamo Enterprise Solutions Private Limited – Appellant
Versus
The Commercial Tax Officer – Respondent
W.P(MD)Nos.30453 to 30458 of 2024
Certainly. Based on the provided legal document, the key points are as follows:
Show cause notices issued under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017, must explicitly allege fraud, wilful misstatement, or suppression of facts to invoke the extended limitation period. The absence of such specific allegations renders the orders invalid (!) (!) .
The proper officer is required to specify the jurisdictional facts, i.e., the presence of fraud, wilful misstatement, or suppression of facts, in the show cause notice. Merely indicating non-payment or short payment of tax without these elements is insufficient to activate the extended period (!) (!) .
The extended limitation period can only be invoked if the show cause notice clearly discloses the allegations of fraud, wilful misstatement, or suppression of facts. Orders lacking these specific allegations are liable to be quashed (!) .
The language used in the show cause notice is crucial; the notice must specify the sum payable and the reasons for the alleged misconduct. Using vague or predetermined terms like "determined" instead of "specified" indicates pre-determination and is not acceptable (!) .
Orders or proceedings initiated without recording the existence of jurisdictional facts—such as fraud or suppression—are invalid and must be quashed. When jurisdictional facts are absent, the court cannot remand but must directly set aside the orders (!) (!) .
The principles of natural justice require that the allegations against the assessee be specific, and the notice must inform the assessee of the exact conduct constituting fraud, misstatement, or suppression. Orders based on vague or non-specific allegations violate these principles (!) (!) .
Orders passed without proper issuance of show cause notices, or where the notices do not contain the necessary allegations, are procedurally flawed and must be invalidated (!) .
When an order is found to be bad in law due to lack of jurisdictional facts or procedural irregularities, the court must quash it without remanding for re-issuance, especially when fundamental elements such as fraud or suppression are not established (!) (!) .
The circular issued by the authority emphasizes that the invocation of the extended period under Section 74 requires concrete evidence of fraud, wilful misstatement, or suppression of facts, and such evidence must be explicitly included in the show cause notice (!) (!) .
The court underscores that mere non-payment or short payment of tax, without proof of the specific elements outlined in Section 74, cannot justify invocation of the extended limitation period. The absence of these elements leads to the quashing of the proceedings (!) .
In summary, the legal principle established is that proceedings under Section 74 require clear, specific allegations of fraud, wilful misstatement, or suppression of facts in the show cause notice. Orders lacking these allegations are invalid, and the court must quash such proceedings to uphold principles of natural justice and procedural correctness.
| Table of Content |
|---|
| 1. challenging show cause notices for tax liability. (Para 2 , 12 , 18) |
| 2. response to show cause notices and procedural adherence. (Para 3 , 4) |
| 3. criteria for invoking extended limitation. (Para 5 , 6 , 7) |
| 4. importance of explicit allegations in taxation law. (Para 9) |
| 5. judicial precedents requiring specific allegations. (Para 14) |
COMMON ORDER
Heard both sides.
2.The cases on hand pertain to the financial years 2018-2019 to 2022-2023 and the period from April 2023 to August 2023. The first respondent issued show cause notices dated 10.05.2024 calling upon the assessee to show cause as to why he should not pay the tax, interest and penalty determined in the show cause notices. The show cause notices were a fall out of the surprise inspection conducted in the petitioner's business premises on various dates in September 2023 under Section 67 of the TNGST Act, 2017. As many as 9 defects were noticed and they had been catalogued in the notices also. The petitioner failed to respond to the show cause notices. Thereafter, the impugned orders came to be passed on 11.06.2024 and 18.06.2024 calling upon the petitioner to pay the petition mentioned sums towards tax, penalty and interest. Challenging the same, these writ petitions have been filed.
3.The respondent has filed counter-affidavit and the learned Additional Government Pleader took me through its contents. He pointed out that the assessee ought to have filed appeals within time and having missed the bus cannot agitate the matter in writ proceedings.
4.Admittedly, the impugned orders were passed only under Section 74 of the TNGST Act, 2017. Chapter XII of TNGST Act, 2017 deals with assessment. Chapter XIII deals with audit. Chapter XIV deals with inspection, search, seizure and arrest. Section 73 enables the proper officer to proceed against the assessee for recovery of any tax that has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised. Action under this provision has to be taken within three years from the due date for furnishing of annual return for the relevant financial year. Section 74 provides for an extended period of limitation. The non-payment or short payment of tax or erroneous refund or wrong availing or utilization of input tax credit must have been by reason of fraud, any wilful misstatement or suppression of facts to evade tax.
5.Sub-section (1) and sub-section (10) of Section 74 of the Act are relevant and they read as follows :
“(1) Where it appears to the proper officer that any tax has not been paid short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.
.....
(10) The proper officer shall issue the order under subsection (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.”
The above provision provides for passing a re-assessment order within five years provided the assessee can be attributed with fraud, or any wilful-
misstatement or suppression of facts.
6.In almost all statutes providing for levy of tax, there are provisions providing for reopening the assessment when there is non-payment or short payment. But it has to be done within a prescribed period. An extended period is provided when the assessee can be charged with conduct such as fr
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