Decided 5 March 2024. The Madras High Court has quashed a GST assessment in which the Tamil Nadu officer taxed the difference between the company's all-India turnover and its declared state turnover, and also levied reverse charge on its all-India expenditure. The Court held this reflected non-application of mind, but since the company had not replied to the notice, it remanded the matter on deposit of 5% of the disputed tax.
Case at a glance
| Case | M/s Ralco Synergy Pvt. Ltd. v. Joint Commissioner of State Tax, Intelligence-I & Anr. |
| Forum | Madras High Court (Justice Senthilkumar Ramamoorthy) |
| Case No. | W.P. No. 5554 of 2024 |
| Date of order | 5 March 2024 |
| Impugned order | Assessment order dated 23.12.2023 for FY 2017-18 |
| Result | Order quashed; fresh assessment on 5% deposit and reply |
Facts of the case
After an inspection in November 2022, a DRC-01A intimation was issued in January 2023, followed by a show cause notice and an assessment order. The petitioner did not reply or participate.
The petitioner showed that its Tamil Nadu turnover was only about Rs 2.7 crore, but the officer taxed the gap between all-India and declared turnover, used all-India closing creditors, and levied reverse charge on all-India expenditure from the profit and loss account.
Issue before the High Court
Can a state GST assessment tax the all-India turnover and expenditure of a company?
What the High Court held
- Taking all-India creditors, revenue and expenditure from the company's financial statements as the basis for GST in Tamil Nadu clearly reflects non-application of mind.
- At the same time, the petitioner was negligent in not replying to the show cause notice; there was a gap of about two months before the order.
- The petitioner said 10% would be excessive because the demand included all-India turnover. The Court accepted 5% of the disputed tax as the condition for remand.
- The order was quashed subject to deposit of 5% and a reply within two weeks. The officer must give a personal hearing and pass a fresh order within two months.
Practical takeaways for taxpayers
- Each GSTIN is a distinct person for its own state; demands based on consolidated financial statements can be challenged.
- Always reply to DRC-01A and show cause notices; non-participation leads to conditions like pre-deposit even when the order is flawed.
- Prepare a state-wise reconciliation of turnover and expenses from the books to answer such notices.
Frequently asked questions
Can GST be demanded on all-India turnover in one state's assessment?
The Madras High Court held that doing so shows non-application of mind.
Why did the taxpayer still have to pay 5%?
Because it had not replied to the notice; the deposit was a condition for remand.
Facing a similar GST dispute?
GST Folio prepares replies to show cause notices, appeals before the Appellate Authority and GSTAT, refund claims and ITC reconciliations for businesses across India. Call or WhatsApp +91 80513 31315 or email gstfolio@zohomail.in.
This summary is based on the order of the Madras High Court in W.P. No. 5554 of 2024. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.