Final GST Audit Report to be issued after considering Assessee’s Reply

[CA Bimal Jain]

The Hon’ble Orissa High Court (“the High Court”), in the case of M/S. SIMON INDIA LTD. VERSUS CT AND GST OFFICER, CUTTACK-II CIRCLE, CUTTACK AND ANOTHER - 2022 (11) TMI 552 - ORISSA HIGH COURT  ruled that, the final Goods and Services Tax (“GST”) Audit Report shall be issued only after considering the reply filed by the assessee, and thereby allowed the Petitioner, M/s. Simon India Ltd. to file the reply under section 65(4) of the Orissa Goods and Services Tax Act, 2017 (“the OGST Act”) after the department filed the draft and final GST audit report on the same day.

Facts:

M/s. Simon India Ltd.  (“the Petitioner”) challenged the draft Audit Report dated June 30, 2022 issued by the Head of Audit Team-1, CT & GST Circle, CU-II, Cuttack and Final Audit Report dated June 30, 2022 submitted under Section 65 (6) of the OGST Act, on the ground that the Petitioner was not granted any opportunity to file its reply in accordance with Rule 101 (4) of OGST Rules, 2017.

 The audit exercise commenced on October 8, 2021 but the three months’ period commenced on March 22, 2022 when the Petitioner was stated to have submitted the documents called for by the authorities.

The authorities released the final audit report and the draft audit report on the same day, June 30, 2022, probably aware that the 3-month deadline had already passed.

Issue:

Whether draft audit report and final audit report can be issued without seeking reply of the Petitioner?

Held:

The High Court observed that:

• According to the OGST Act, the registered person must get notification in Form GST ADT-01 at least fifteen working days before the audit is to be conducted. The registered person's audit must be finished in accordance with Section 65(4) three months after the audit's start date.
• In accordance with Explanation to Section 65(4) of the OGST Act, the 3 month period within which the audit had to be completed commenced from March 22, 2022. Therefore, the entire audit process had to be concluded with the submission of the final audit report on or before June 22, 2022.
• However, if the Petitioner is afforded an opportunity at this stage to file the reply to the above draft audit report, followed by the authorities issuing the final audit report, the original deadline of three months would be crossed on December 21, 2022. If the exercise is not completed by that date, the entire exercise would be rendered futile

Therefore, the High Court Ordered as under:

• The Petitioner would file its reply to the draft audit report accompanied by all the documents that the Petitioner wishes to rely on not later than November 28, 2022.
• After considering the reply of the Petitioner, the final audit report would be issued by the Department under Section 65 (6) of the OGST Act not later than December 21, 2022.

Relevant Provisions:

Section 65(4)

The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit:

Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months.

EXPLANATION.––

For the purposes of this sub-section, the expression “COMMENCEMENT OF AUDIT” shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of audit at the place of business, whichever is later.

Section 65(6)

On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.

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