Facts of the Case

  • The Petitioner, M/s. Prince Seafoods Exports, is a proprietary concern engaged in the export business, represented by its proprietor S. Irudayaraj.
  • The Respondent, The State Tax Officer (Roving Squad 1), Tirunelveli, initiated proceedings against the petitioner and subsequently passed an ex-parte assessment order dated 27.02.2026 under Section 74A of the TNGST Act 2017.
  • The revenue department had uploaded all the statutory communications, summons, notices, and the final order exclusively on the official GST web portal.
  • The petitioner failed to notice these communications because their part-time accountant did not check or access the portal regularly, which prevented them from utilizing the opportunities for a personal hearing or filing replies.
  • Consequently, an ex-parte assessment order was passed, creating a tax liability along with interest under Section 50 and penalties under Section 74A. Following the order, the department attached the bank account of the petitioner to recover the dues.
  • Aggrieved by the ex-parte order and the subsequent bank attachment, the petitioner filed a Writ Petition under Article 226 of the Constitution of India before the Madurai Bench of the Madras High Court seeking a Writ of Certiorari to quash the impugned order.

Issues Involved

  1. Whether the ex-parte assessment order passed under Section 74A of the TNGST Act 2017 was sustainable when the petitioner was prevented from participating due to a lack of awareness of notices uploaded solely on the GST web portal?
  2. Whether the levy of penal interest under Section 50 and penalty under Section 74A is justified in the absence of any established fraud, willful misstatement, or suppression of facts by the assessee?
  3. Whether the High Court can exercise its equitable jurisdiction under Article 226 to grant an alternative opportunity of hearing to the assessee, and if so, what appropriate conditions should be imposed?

Petitioner’s Arguments

  • Merits of the Discrepancy (RCM on Freight Charges): The petitioner argued that regarding the alleged discrepancy of tax to be paid under the Reverse Charge Mechanism (RCM) for freight charges, the freight pertains to Goods Transport Agency (GTA) services. Under the provisions of the GST Act, tax on such GTA services is payable at the rate of 5% under RCM, and the department's application of an 18% tax rate is legally unsustainable and inapplicable.
  • Absence of Mens Rea for Penalty: The petitioner submitted that there was no fraud, willful misstatement, or intentional suppression of facts to evade tax. Therefore, the invocation of harsh provisions for the levy of interest under Section 50 and penalty under Section 74A does not arise under the specific facts and circumstances of this case.
  • Reason for Non-Compliance: The petitioner contended that they were genuinely unaware of the ongoing proceedings because the respondent chose to upload all notices, summons, and communications exclusively on the web portal. Their part-time accountant failed to monitor the portal, which resulted in an inadvertent communication gap and the subsequent ex-parte order.

Respondent’s Arguments

  • Due Process Followed: The Respondent, represented by the Government Standing Counsel, argued that the department followed the prescribed statutory procedure by duly uploading all notices, summons, and communications on the official GST portal.
  • Failure to Utilize Opportunity: The revenue contended that the petitioner was afforded adequate and reasonable opportunities to present their case and produce supporting books of accounts, but they failed to utilize the same.
  • Validity of Ex-Parte Order: Since the dealer chose not to participate in the assessment proceedings despite the notices being made available on the portal, the assessing officer was completely justified within their jurisdiction to pass an ex-parte assessment order based on the available records.

Court Order / Findings

  • Equitable Opportunity: The Hon’ble High Court, presided over by Justice D. Bharatha Chakravarthy, observed that considering the nature of the tax discrepancies, the merits of the explanations offered, and the reasons cited for the technical default, an opportunity could be granted to the assessee on equitable grounds to present their case fresh.
  • Conditional Remand: The Court allowed the writ petition and set aside the impugned assessment order dated 27.02.2026, remanding the matter back to the file of the respondent State Tax Officer. However, this relief was made conditional upon the petitioner depositing 25% of the disputed tax amount within four weeks of receiving the web copy of the order, without waiting for a certified copy.
  • De Novo Proceedings: Upon the successful deposit of the 25% amount, the petitioner must appear before the respondent assessing officer without fail to submit their formal reply along with all supporting documentary evidence. The respondent is directed to consider the matter afresh and pass a speaking order in accordance with the law.
  • Lifting of Bank Attachment: Crucially, as the main assessment order was set aside, the High Court directed that any attachment placed on the petitioner's bank accounts pursuant to the impugned order stands raised immediately. The court ordered no costs and closed the connected miscellaneous petition.

Important Clarification

  • Portal-Only Notices vs. Natural Justice: The judgment reinforces the established judicial trend where courts take a lenient, equitable view when assessees miss notices due to the department's exclusive reliance on uploading documents to the portal, provided the taxpayer demonstrates bona fide reasons (such as administrative or oversight errors by accountants).
  • Pre-Deposit for Remand: While the courts are willing to restore natural justice and quash ex-parte orders, such reliefs are increasingly tied to financial conditions (like a 25% pre-deposit of the disputed tax) to balance the revenue interests of the state with the rights of the taxpayer.
  • Consequential Relief: The quashing of an underlying assessment order automatically invalidates any consequential recovery proceedings, including bank attachments, providing immediate operational relief to businesses.

Section Involved

  • Section 74A of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017 / Central Goods and Services Tax (CGST) Act, 2017 (Assessment order passed under determination of tax).
  • Section 50 of the TNGST / CGST Act, 2017 (Levy of interest on delayed payment of tax).
  • Article 226 of the Constitution of India (Writ jurisdiction for issuance of a Writ of Certiorari).

Link to download the order - https://mytaxexpert.co.in/uploads/1783059561_317compressed.pdf

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