No, the Honorable Madras High Court in the case of M/s. Ralco Synergy Pvt. Ltd. v. Joint Commissioner of State Tax and Ors. [W.P. No. 5554 of 2024 dated March 5, 2024] set aside the impugned Order passed by the Revenue Department, thereby holding the GST demand cannot be raised based on figures in the Profit and Loss account.
The Honorable Madras Hight Court noted that the Respondent Assessing Officer relied upon the total expenditure and revenue of the corporate entity on all India bases and the profit and loss account of the Petitioner was the basis for issuance of the impugned Order. The Honorable Court opined that the impugned Order has been issued without any application of mind and held that the Impugned Order is quashed and the matter is remitted back for reconsideration after depositing 5 percent of the disputed tax demand.
Author’s Comments
There is an urgent need to understand that linear comparison of figures is meaningless in GST. Yes, it may raise suspicion but no adverse inference can be made regarding non-payment, short-payment or evasion of taxes. In this particular case, Output tax is demanded citing data differences without stating (i) the nature of supply (ii) the taxability of the same (iii) the HSN code (iv) the time of supply, and (v) the place of supply. Without these taxing ingredients, any demand for output tax is arbitrary and illegal.
This principle has been laid by the Honorable Apex Court in the case of Govind Saran Ganga Saran v. CST & Ors. AIR 1985 SC 1041, where it was held that ‘four ingredients’ are required to be present in any proceedings to demand tax.
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