Punjab and Haryana HC quashed GST audit notices under Section 74 after department failed to consider assessee's reply before finalizing audit report.
Failure to Consider Assessee's Reply Vitiates GST Audit Process
The Punjab and Haryana High Court has set aside GST audit notices issued under Section 74 of the CGST Act after the department finalized audit findings without considering the assessee’s reply. The Court held that failure to afford a hearing or examine submissions rendered the audit proceedings fundamentally flawed and contrary to principles of natural justice.
Emphasizing procedural fairness, the Court observed that Rule 102 of the CGST Rules mandates that the proper officer must consider any response filed by the taxpayer before finalizing the audit report.
"The statutory obligation to consider the assessee’s reply cannot be treated as a mere formality,"the Court stated. In the absence of such compliance, the issuance of notices under Section 74 was deemed invalid.
The ruling reinforces procedural safeguards in GST audits. Practitioners must ensure that clients respond promptly to audit communications and may challenge adverse actions where the department skips mandatory steps. The decision also sets a precedent for quashing enforcement actions based on procedural non-compliance in the absence of prejudice to the department’s substantive rights.
Citations
- CGST Act, Section 74
- CGST Rules, Rule 102
