The Madras High Court in the case of M/S. ELLA TEA INDUSTRY, REP. BY ITS PROPRIETOR, NALINI PEARLINE THILAK VERSUS THE DEPUTY STATE TAX OFFICER-I, NILGIRIS vide Order No. W. P. No. 19671 of 2024 And W. M. P. Nos. 21534 & 21535 of 2024 dated 08.08.2024, had quashed the respondent's order, emphasizing the need for adherence to the principles of natural justice, particularly when reopening cases that had been previously resolved. The case was remanded for reconsideration with specific instructions to address the petitioner's arguments thoroughly. This judgment underscores the importance of providing clear reasons and addressing all grounds raised in legal replies, especially in tax-related matters where reopening closed cases must be justified with new or specific reasons.

Facts of the Case:  The petitioner faced scrutiny under Section 61 of the Act for the financial year 2018-2019. The respondent initially issued a show cause notice (SCN) on 25.11.2021, alleging discrepancies in the petitioner's tax returns, specifically concerning the claim of excess Input Tax Credit (ITC). After the petitioner responded with supporting documents on 19.12.2022, the respondent was satisfied and dropped the proceedings on 03.01.2023.

Despite the matter being resolved, the respondent issued another SCN on 28.12.2023 for the same assessment year, again alleging excess ITC claims. The petitioner submitted a detailed reply, but the respondent dismissed it without adequate consideration and passed a demand order under Section 73(9) of the TNGST/CGST Acts, 2017.

The petitioner challenged this order, arguing that reopening the case without new reasons violated the principles of natural justice, as the respondent failed to address the grounds raised in their reply.

Held:  The court noted that the respondent had already dropped the proceedings for the assessment year 2018-2019 after considering the petitioner's earlier reply. Reopening the case and issuing a new SCN for the same year without providing specific reasons or addressing the petitioner's detailed reply was improper. The respondent's action of rejecting the petitioner's reply by merely stating “not satisfied” without giving adequate or specific reasons was found to be contrary to law and in violation of the principles of natural justice.

The court set aside the impugned order dated 29.04.2024, directing the respondent to pass a fresh and detailed order on the merits, specifically addressing each ground raised by the petitioner in their reply. The respondent was given eight weeks to complete this exercise from the date of receipt of the court's order. 

To read the complete judgment 2024 Taxo.online 1789