GST Update No 331 on Final audit report to be issued after considering assessee’ s reply

Time and again the departmental authorities undertake audit of the businesses of the assessees which thereby results into unnecessary harassment of the taxpayer. Sometimes parallel proceedings are also invoked on the same subject matter which further increases the miseries of the taxpayer manifolds. However, it is often noticed that the revenue authorities fail to consider the submissions of the assessee which ultimately results into violation of principles of natural justice. Recently, one such case was reported before Orissa High Court in the case of M/S SIMON INDIA LTD V/S CT AND GST OFFICER. The decision imparted in this case is subject matter of discussion of our present update.
The petitioner challenged the draft audit report dated 30.06.2022 as well as the final audit report passed on the same date. The Counsel of petitioner referred to Rule 101 of CGST Rules, 2017 wherein it is prescribed that the proper officer shall finalise the findings of audit only after reply of the petitioner is considered. In the present case, no opportunity of being heard was offered to the assessee since draft audit report and final audit report was issued on the same day. Moreover, as per Section 65 of CGST Act, 2017 the audit is to be concluded within a period of 3 months from the date of commencement of audit. In the present case the audit commenced on 08.10.2021 and period of 3 months shall commence on 22.03.2022 when the documents were submitted by the petitioner. Therefore, entire proceedings should have been concluded on or before 22.06.2022. The draft audit report as well as final audit report concluded on the same day on 30.06.2022. It is further prescribed that as per procedural requirement, certain time is to be given to the petitioner to file reply of draft audit report which was not followed in the present case. Therefore, the final audit report dated 30.06.2022 was set aside.
Therefore, the present case was reverted at the stage of draft audit report dated 30.06.2022. However, even if the petitioner was offered an opportunity of being heard to file reply to draft audit report, the original deadlines of period of 3 months would be crossed as on 21.12.2022. If the exercise would not be completed, the entire proceedings would be rendered futile. Therefore, it was stated that the time for completion of audit should be extended by a further period of 6 months. It was directed to petitioner to file reply to the draft audit report not later than 28.11.2022 and the department to issue final audit report upto 21st December, 2022 subject to extension of 6 months granted by the Commissioner for completion of audit. The above decision is yet another example of the fact that proper submission of the petitioner was not considered which resulted into violation of principle of natural justice and furthermore, the interim and final audit report was concluded on the same day. This demonstrates the lack of proper training on the part of departmental authorities wherein the procedure prescribed in the law is not adhered to which creates havoc in the minds of taxpayers. It is high time that judicial rulings like these should be followed as binding precedent to avoid any unnecessary litigations in future.

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GST Update No 331 on Final audit report to be issued after considering assessee’ s reply

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