Two different authorities cannot pass two orders confirming and canceling the demand

Asir Automobiles Private Limited v. Assistant Commissioner (ST) (Madras High Court)

Resume: In case Asir Automobiles Private Limited v. Assistant Commissioner (ST)The Madras High Court considered the legal implications of conflicting orders passed by various authorities on tax claims. The petitioner, Asir Automobiles, challenged two assessment orders relating to Goods and Services Tax (GST). The first order, dated August 16, 2023, upheld the tax claim despite the fact that the plaintiff had canceled the credits for the returned supplies, which were supported by the credit notes from the suppliers. A second order, issued on November 7, 2023, denied the request to correct the errors identified in the first order. The petitioner argued that he did not avail tax credit on non-eligible inputs, stressing that the Assistant Commissioner had missed key facts during the assessment process. The crux of the issue was whether two different authorities could simultaneously issue conflicting orders — one confirming a claim and the other rejecting it. The court found such an approach unfounded, which led to the decision to cancel the contested orders. The case was remanded to the Assistant Commissioner for reconsideration, stressing the need for a fresh order considering all relevant materials and evidence. The court ordered that the process be completed within three months and required that the applicant be given a fair hearing during the detention proceedings.

introduction: High Court of Madras in the case Asir Automobiles (P.) Ltd. vs. Assistant Commissioner (ST), Tuticorin (MD Nos. 3785 to 3789 of 2024 dated 24 July 2024) held that when the Assessee canceled the credit by availing the supplies which were returned for which the supplier had issued a credit note but not taking into account the same, the Authority confirmed the claim and further, two orders were passed by two different authorities, one to confirm the demand and one to cancel the demand. Thus, the assessment order was set aside and the case was remanded.

Facts:

M/s Asir Automobiles (P.) Ltd (“Applicant”) appealed the assessment order dated August 16, 2023 (“Disputed order-1”) and the resulting Order of November 7, 2023 (“Disputed order-2”) adopted in accordance with Article 161 Law on Central Goods and Services, 2017 (“CGST Act”) rejecting the Petitioner’s request to correct the alleged errors made regarding the Contested Order-1.

The claimant canceled the credit accrued on the returned goods for which the supplier issued a credit note. Assistant Commissioner (“defendant”) not considering the same, issued the impugned order demand-1 and 2.

The claimant never used the tax credit (“ITC”) on inappropriate inputs as blocked credits. During the consideration of the court petition, the defendant issued a new decision dated March 31, 2024, on the rejection of the claim.

Thus, aggrieved by the impugned orders, the petitioner filed a writ petition before the Madras High Court.

Output:

Can two different authorities pass two orders confirming the demand and stopping the demand?

Held:

Madras High Court in the case Writ Miscellaneous Petition (MD) #3785-3789 for 2024 conducted as follows:

• Held that two different orders were passed by two different authorities, one to confirm the claim and the other to set aside the claim, which is unreasonable. The impugned orders were, therefore, set aside and the matters remanded to the Respondent for a fresh order within three months.

Our comments:

Section 161 of the CGST Act regulates “Correction of errors evident in the record“. It states that, without prejudice to the provisions of section 160 and notwithstanding any other provision of this Act, any authority which has passed or issued any decision, order, notification, certificate or any other document may correct any mistake which is prima facie apparent in such judgment, order, notice, certificate or any other document, or of his own accord, or if such mistake is brought to his notice by any officer appointed hereunder Act, or by an official appointed under the State Goods and Services Tax Act or an official appointed under the Union Territory Goods and Services Tax Act, or by an aggrieved person within three months from the date of issuance of such decision, order, notice, certificate or any other document, as the case may be:

However, such correction shall not be made after a period of six months from the date of issue of such decision, order, notice, certificate or any other document:

In addition, the said period of six months does not apply in the following cases where the correction is purely in the nature of correcting a technical or arithmetical error arising from any accidental error or omission:

Provided also that if any person is adversely affected by such rectification, the authority making such rectification shall follow the principles of natural justice.

FULL TEXT OF JUDGMENT/ORDER OF MADRAS HIGH COURT

Pursuant to this general order, all these writ petitions are disposed of.

2. In these writ petitions, the petitioner challenged the relevant assessment orders dated 16.08.2023 and the subsequent order passed under section 161 of the TNGST Act, 2017 on 07.11.2023 rejecting the petitioner’s request for rectification of the alleged errors. made in the relevant Assessment Orders dated August 16, 2023.

3. The claimant’s case is that the claimant has canceled the credit used on the returned notices for which the Supplier has issued a credit note. However, notwithstanding this, the respondent has confirmed the claim against the impugned orders for the relevant assessment years.

4. It is further contended that the petitioner has never availed input tax credit on non-eligible inputs as blocked credits. However, the defendant ignored this despite the plaintiff uploading the information containing the details. It is submitted that post facto, during the pendency of the present Writ Petitions, the Assistant Commissioner (ST) (IU) issued fresh orders dated 31.03.2024 removing most of the issues.

5. In view of the above, the learned counsel for the petitioner submits that the impugned orders in these writ petitions may be set aside and the matters remanded to the respondent for passing a fresh order in terms of subsequent orders for the relevant Assessment years.

Sl. there is no	Assessment year	Date
1.	2017-2018 years	31.03.2024
2.	2018-2019 years	04/04/2024
3.	2019-2020 years	04/05/2024
4.	2020-2021 years	04/06/2024
5.	2021-2022 years	04/08/2024

6. The plaintiff’s arguments appear to be valid as there are two orders, one confirming the claim and the other quashing the claim from two different authorities. In these circumstances, the impugned orders are set aside and the matters remanded to the respondent for a fresh order in the light of the above orders passed by the Assistant Commissioner (ST) (IU). This exercise may be performed by the defendant as soon as possible, preferably within three months from the date of receipt of a copy of this order. It goes without saying that the claimant must also be heard before final orders are made in the remand proceedings.

7. These writ petitions remain admissible under the above direction. No costs. Consequently, the related various petitions are closed.

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