No, the Honorable Madras High Court, in the case of Tvl Future General India Insurance Co. Ltd v. Assistant Commissioner (State Tax) [WP No. 3534 of 2024 dated 16.02.2024] held that an assessment order passed by the Assessing Officer has accepted the explanation of the assessee with regard to certain defects that had imposed GST at the rate of 18% on the ground that the financial statements submitted by the assessee did not reflect state-wise turnover.
The Honorable Madras High Court observed that the turnover for an entity operating in multiple states in India as reflected in the financial statements and the turnover attributable to its operations in a particular state (in this case-Tamil Nadu) would vary and the bifurcation of total and state-wise turnover is the only relevant factor, and the Competent Authority erred in imposing GST at rate of 36% instead of the applicable rate of 18%, despite the Petitioner having already paid tax on the turnover of Rs. 80,59,05,068/-
The impugned assessment order was to be set aside, and the matter was to be remanded to the Competent Authority for reconsideration.
Author’s Comments
There is an urgent need to understand that the linear comparison of two different data sets in meaningless in GST. Yes, it may raise suspension 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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