Whether the assessment order is valid when turnover is disclosed incorrectly in GSTR-1 but reported correctly in GSTR-3B

No, the Honorable Madras High Court in the case of Southern Engineering Services v. Deputy State Tax Officer -1[WP No. 6523 of 2024 dated 14.03.2024] allowed the writ petition and set aside the Assessment Order and opined that the assessment order is liable to be quashed in case where Assessee incorrectly reported turnover in GSTR-1 as taxable supply but correctly reported in GSTR-3B.

The Honorable Madras High Court noted that the as per the invoice placed on the record by the Petitioner, the supply was made to the SEZ unit and therefore, the supply would fall within the purview of zero-rated supply and the error in GSTR-1 return was at the time of introduction of GST. The Honourable Court opined that the Petitioner is entitled to an opportunity for hearing as per the facts and circumstances of the case and held that the impugned order is quashed and the matter remitted back for reconsideration.

Author’s Comments:

There is an urgent need to understand that linear comparison of two 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 difference 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.