Bombay High Court Sends Back Transitional Credit Rectification Order for Reconsideration
Background of the Dispute
In Taiyo Nippon Sanso India Pvt. Ltd. Vs Union of India & Ors. (Bombay High Court), the Bombay High Court examined the legality of a rectification order passed under Section 161 of the Central Goods and Services Tax Act, 2017 / Maharashtra Goods and Services Tax Act, 2017 concerning transitional credit and related GST demand.
The assessee, a subsidiary of a foreign multinational, is engaged in the manufacture and sale of industrial and medical specialty gases, in liquid as well as gaseous form, and is duly registered under the GST regime. The dispute arose out of an order passed under Section 73(9) of the CGST Act / MGST Act, followed by a rectification order that was subsequently challenged before the High Court.
The core grievance was twofold:
- The rectification order dated 20.10.2022 was passed without granting the assessee an opportunity of personal hearing.
- The assessee’s contention regarding duplication of proceedings—on account of a parallel Central GST audit already initiated for the same period—was not considered.
The High Court ultimately quashed the rectification order and remanded the matter to the State GST authority for fresh consideration.
Chronology of Events
GST Registration and Nature of Business
- The assessee is a company engaged in manufacture and sale of industrial and medical specialty gases, operating either in liquid or gaseous form.
- It holds valid registration under the GST law and had also availed transitional credit under the GST regime.
Initiation of Central GST Audit
- On 12.07.2021, the assessee received an email from Respondent No. 4 (State GST authority) seeking tax clarifications and explanations for the financial year 2017-18.
- Subsequently, on 29.09.2021, Respondent No. 3 (Central GST authority) issued an audit notice in
Form GST ADT-01. - The assessee complied with the said audit notice issued by the Central GST authority.
- The Central GST audit was eventually closed on 15.11.2022 by issuance of
Form GST ADT-02.
State GST Proceedings and Assessment Order
Parallel to the above:
- On 20.10.2021, Respondent No. 4 issued a notice pointing out discrepancies in
Form GST ASMT-10. - Thereafter, further notices dated 29.11.2021 and 22.12.2021 were also issued by Respondent No. 4.
- The assessee responded to these notices, mainly seeking time to provide the necessary records and documents.
- Despite this, Respondent No. 4 proceeded to pass an assessment order dated 21.04.2022 under
Section 73(9)of the CGST Act / MGST Act, raising a demand against the assessee.
The demand, inter alia, involved issues around transitional credit and other alleged discrepancies.
Objection on the Ground of Duplication of Proceedings
On 14.07.2022, the assessee wrote an email to Respondent No. 4 informing that:
- The Central GST authority (Respondent No. 3) had already initiated audit proceedings for the same disputed period.
- Given this, the State GST assessment proceedings for the same period ought not to continue, as there would be duplication of proceedings.
- Consequently, the assessee requested that the assessment order dated 21.04.2022 passed by Respondent No. 4 be set aside on the ground of lack of jurisdiction and overlapping proceedings.