Facts of the Case

  • The Petitioner, M/s. Prince Seafoods Exports, is a proprietary concern represented by its proprietor, S. Irudayaraj, and is engaged in commercial business with a valid GSTIN.
  • The Respondent, the State Tax Officer (Roving Squad 1), Tirunelveli, initiated proceedings against the petitioner.
  • The respondent uploaded all essential communication, including summonses, statutory notices, and orders, exclusively onto the online GST web portal.
  • The petitioner’s part-time accountant failed to monitor and track the issuance of these electronic proceedings on the web portal.
  • Consequently, the petitioner did not participate or utilize the opportunities provided during the assessment proceedings.
  • Due to the petitioner's absence, the respondent authority passed an ex-parte assessment order dated 27.02.2026 under Section 74 of the TNGST Act, 2017, for the assessment period 2019-20. Following this order, bank attachments were also executed against the petitioner.
  • Aggrieved by the ex-parte assessment order and the subsequent violation of natural justice, the petitioner filed a Writ Petition under Article 226 of the Constitution of India before the Madurai Bench of the Madras High Court seeking to quash the order.

Issues Involved

  • Whether the ex-parte assessment order passed under Section 74 of the TNGST Act, 2017, warrants judicial intervention and quashing on equitable grounds because the petitioner failed to notice the communications hosted exclusively on the GST web portal.
  • Whether the petitioner should be granted a fresh opportunity to produce documentation to reconcile the Input Tax Credit (ITC) discrepancies between Form GSTR-3B and Form GSTR-2A.
  • Whether the levy of penalty under Section 74 and interest under Section 50 is sustainable when the taxpayer asserts an absence of fraud, wilful misstatement, or suppression of facts.
  • Whether bank attachments executed pursuant to an ex-parte assessment order should be lifted upon remanding the case back to the assessing officer.

Petitioner’s Arguments

  • The petitioner argued that their inability to respond was due to a bona fide oversight by their part-time accountant, who failed to check the online web portal where the respondent had uploaded all summonses, notices, and communications.
  • It was submitted that this lack of digital tracking resulted in a total lack of awareness of the active proceedings, which directly led to the issuance of the ex-parte impugned order.
  • On the merits of the ITC mismatch, the petitioner stated that the variance between Form GSTR-3B and Form GSTR-2A was minimal, amounting to only Rs. 82,258.42.
  • The petitioner contended that the underlying purchases were entirely genuine and fully supported by proper tax invoices. They further claimed that the applicable GST had been collected in strict compliance with Section 31 of the GST Act and Rule 36 of the GST Rules.
  • The petitioner asserted that there was absolutely no fraud, wilful misstatement, or intentional suppression of facts to evade tax liability. Therefore, they argued that invoking Section 74 to levy penalties and Section 50 to impose interest was completely unjustified.

Respondent’s Arguments

  • The respondent, represented by the Government Standing Counsel, supported the validity of the impugned order dated 27.02.2026.
  • The respondent argued that the department followed standard statutory procedures by uploading all notices, summonses, and the final order to the petitioner’s registered GST web portal dashboard.
  • The department maintained that the petitioner was afforded adequate and reasonable opportunities to participate in the assessment, which they failed to utilize.
  • The respondent contended that because the dealer failed to submit an explanation or appear during the assessment process, the officer was justified in finalizing the assessment ex-parte based on the available records.

Court Order / Findings

  • The Single Bench of Hon'ble Justice D. Bharatha Chakravarthy examined the nature of the discrepancies, the explanation offered by the assessee, and the reasons given for the failure to access the web portal.
  • The Court noted that it has consistently extended opportunities to taxpayers on equitable grounds, provided appropriate safeguarding conditions are met.
  • To balance justice, the Court granted the petitioner a fresh opportunity to present their case, subject to the condition that they deposit 25% of the disputed tax amount.
  • The Writ Petition was allowed on the following explicit terms:
    1. The petitioner must deposit 25% of the disputed tax amount with the respondent within four weeks of receiving the web copy of the order, without waiting for a certified copy.
    2. Immediately upon making this deposit, the impugned assessment order dated 27.02.2026 will stand set aside, and the matter will be remanded back to the respondent assessing officer.
    3. The petitioner is directed to appear before the respondent without fail to submit a detailed reply along with all supporting documentary evidence. The respondent must then consider the matter afresh and pass a lawful order.
    4. Since the impugned ex-parte assessment order is set aside, any bank attachments made pursuant to it are ordered to be lifted.
    5. The Court ordered no costs, and the connected miscellaneous petition was closed.

Important Clarification

  • Equitable Relief vs. Portal Monitoring: The Court clarified that while taxpayers are legally obligated to monitor their GST portal dashboards, the judiciary may grant relief on equitable grounds to prevent absolute ex-parte liabilities. However, this relief is conditional upon a pre-deposit (25% in this case) to show bona fide intent.
  • Lifting of Bank Attachments: When an ex-parte assessment order is set aside and remanded for a fresh hearing, any recovery mechanisms implemented under that order—such as bank account attachments—must be lifted immediately.

Section Involved

  • Section 74 of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017 / Central Goods and Services Tax (CGST) Act, 2017 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts).
  • Section 50 of the TNGST / CGST Act, 2017 (Interest on delayed payment of tax).
  • Section 31 of the TNGST / CGST Act, 2017 (Tax Invoice).
  • Rule 36 of the TNGST / CGST Rules, 2017 (Documentary requirements and conditions for claiming Input Tax Credit).
  • Article 226 of the Constitution of India (Power of High Courts to issue certain writs).

Link to download the order - https://mytaxexpert.co.in/uploads/1783059454_316compressed.pdf

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