Bombay High Court Rejects Taxpayer's Apprehension Of Recovery Based On Communication Of Audit Findings

The Bombay High Court has held that a taxpayer's apprehension that GST authorities would effect recovery on the basis of audit findings communicated to it was misconceived.

“The apprehension of the petitioner that the recovery will be effected on the basis of such information is misconceived,” a Division Bench of Justice M.S. Karnik and Justice Sandesh D. Patil observed.

The court added that the GST Department would have to take further action in accordance with the CGST Act.

The ruling came on a petition by SVS Aqua Technologies LLP. The taxpayer contended that although an audit had been conducted under Section 65 of the Central Goods and Services Tax Act, 2017, there had been no adjudication proceedings under Sections 73 or 74 before the authority proceeded to effect recovery.

It argued that proceeding directly to recovery without such adjudication was impermissible.

The Department's counsel submitted that the communication was an administrative step that would ultimately culminate in a show cause notice for adjudication. The court found substance in the submission.

The court noted that the communication was issued under Rule 101(5) of the CGST Rules. The rule requires the proper officer, after completing an audit, to inform the registered person of the audit findings in Form GST ADT-02.

The court found that the proper officer had informed the taxpayer of the audit findings in accordance with Section 65(6), in Form GST ADT-02. The taxpayer's apprehension that recovery would be effected on the basis of that communication was misconceived. The GST Department would have to take further action in accordance with the CGST Act.