Facts of the Case

  • The petitioner, K. Pitchaipandi, is a registered taxpayer under the Goods and Services Tax (GST) regime.
  • The respondent revenue authority issued an assessment order in GSTIN Ref No. 33CIYPP0255J1ZS/2021-22 dated 29.12.2025 under Section 73 of the TNGST Act, 2017.
  • The discrepancies raised by the department in the impugned proceedings primarily focused on three aspects: the alleged wrong claim of ineligible Input Tax Credit (ITC) under Section 17(5), the imposition of a late fee for the belated filing of Form GSTR-01, and the sequential levy of penalty under Section 73 alongside interest under Section 50.
  • The proper officer passed an ex-parte assessment order rejecting the representation dated 27.12.2025 on the grounds that the petitioner failed to properly utilize the personal hearing and submission opportunities provided during the adjudication phase.
  • Following the ex-parte determination, the respondent department initiated recovery actions, resulting in the attachment of the petitioner's bank accounts.
  • Aggrieved by the high-handed demand and the breach 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 to quash the impugned order.

Issues Involved

  • Whether the ex-parte assessment order passed under Section 73 of the TNGST Act, 2017, is legally sustainable when all departmental notices, communications, summons, and orders were exclusively uploaded on the web portal without alternative modes of intimation, leading to a breakdown of communication?
  • Whether the Input Tax Credit (ITC) claimed on expenses incurred for the insurance and maintenance of a concrete mixer machine purchased exclusively for business operations can be categorically blocked under Section 17(5), or if it qualifies as an eligible credit under Section 16(1) as being in the course or furtherance of business?
  • Whether the revenue department can legally sustain a demand for late fees for the delayed filing of Form GSTR-01 if the taxpayer has voluntarily deposited the late fees via Form GST DRC-03 prior to the formal passing of the final assessment order?
  • Whether the attachment levied on the petitioner's operational bank accounts ought to be vacated upon the setting aside of an ex-parte assessment order?

Petitioner’s Arguments

  • Portal Communication Oversight: The petitioner contended that their part-time accountant completely failed to track or notice the issuance of the departmental proceedings because the respondent had chosen to upload all notices, summons, communications, and final orders strictly on the digital web portal. Due to this technical oversight, the petitioner could not access the portal in time, resulting in an institutional breakdown of communication and the subsequent ex-parte order.
  • Eligibility of ITC on Concrete Mixer: On the merits of Section 17(5), the petitioner argued that as per Section 16(1) of the CGST Act, a registered dealer is legally entitled to claim credit on input tax charged on any supply of goods or services used in the course or furtherance of business. Since the expenses were explicitly incurred for insuring and maintaining a commercial concrete mixer used solely for business operations, the ITC is fully eligible and cannot be classified as blocked credit.
  • Double Taxation on Late Fees: Regarding the levy of late fees for GSTR-01, the petitioner submitted that the delay occurred strictly due to the disruptions of the Covid pandemic. Furthermore, the petitioner had already cleared the late fee liabilities voluntarily through Form GST DRC-03 (ARN: AD3312250560969) on 27.12.2025, which was two days prior to the issuance of the impugned assessment order dated 29.12.2025. Hence, repeating the demand in the assessment order amounts to unfair double taxation.
  • Absence of Penalty Grounds: The petitioner argued that since there was no excess, fraudulent, or wrongful claim of ITC, the invocation of penal provisions under Section 73 of the GST Act is completely unwarranted and legally impermissible under the facts of the case.

Respondent’s Arguments

  • Failure to Avail Opportunities: The learned Government Standing Counsel appearing for the revenue argued that the department had strictly complied with the statutory procedures by affording ample and reasonable opportunities to the taxpayer to present their case and file explanations.
  • Validity of Portal Service: The respondent maintained that uploading notices on the official GST web portal constitutes valid legal service under the GST framework. The taxpayer's internal failure to monitor their dashboard through a part-time accountant does not absolve them of their statutory obligations or vitiate the assessment process.
  • Justification of Order: Since the petitioner failed to utilize the multiple opportunities or present the requisite documentary evidence within the stipulated timelines to clear the discrepancies, the assessing officer had no choice but to finalize the assessment based on the available records.

Court Order / Findings

  • Equitable Remand: The Hon’ble High Court, presided over by Mr. Justice D. Bharatha Chakravarthy, reviewed the nature of the tax discrepancies, the merits of the petitioner's explanations, and the practical difficulties faced by the taxpayer in tracking portal notifications.
  • Proportionality and Recovery Status: The Court observed that the department had already recovered 90% of the disputed tax amount toward CGST and SGST from the petitioner. Balancing equity and revenue interests, the Court held that the petitioner deserved one final opportunity to present their submissions and produce supporting documents.
  • Quashing and Remand Direction: The High Court allowed the Writ Petition, formally setting aside the impugned assessment order dated 29.12.2025 and remanding the matter back to the file of the respondent assessing officer for denovo reconsideration.
  • Mandatory Appearance: The petitioner was explicitly directed to appear before the respondent assessing officer without fail, submit a comprehensive reply, and tender all relevant documentary evidence to support their assertions. The respondent is mandated to consider the case afresh and pass orders strictly in accordance with the law.
  • Lifting of Bank Attachment: Crucially, since the underlying assessment order was set aside, the Court directed that any active attachment placed on the petitioner's bank accounts pursuant to the impugned order stands raised immediately. No costs were imposed, and connected miscellaneous petitions were closed.

Important Clarification

  • Portal Notification Pitfalls: This judgment clarifies that while portal communication is standard under GST, the Courts will intervene on equitable grounds under Article 226 if portal-only notifications cause an inadvertent ex-parte order, provided the taxpayer shows bona fide intent and a substantial portion of the disputed tax has already been secured or recovered.
  • Pre-deposit/Recovery Context: The absolute setting aside of the ex-parte order and the simultaneous lifting of bank attachments was facilitated heavily by the factual reality that 90% of the disputed tax liability had already been recovered by the revenue authorities.
  • Conclusive Adjudication on DRC-03: The assessing officers must reconcile payments made via Form GST DRC-03 prior to final orders to eliminate duplicate demands that result in double taxation.


 

Sections Involved

  • Section 73 of the TNGST / CGST Act, 2017: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts.
  • Section 16(1) of the CGST Act, 2017: Eligibility and conditions for taking Input Tax Credit (ITC) in the course or furtherance of business.
  • Section 17(5) of the TNGST / CGST Act, 2017: Blocked credits / Ineligible Input Tax Credit provisions.
  • Section 50 of the TNGST / CGST Act, 2017: Interest levied on the delayed payment of tax obligations.
  • Article 226 of the Constitution of India: Writ jurisdiction invoked by the petitioner to seek a Writ of Certiorari.

Link to download the order - https://mytaxexpert.co.in/uploads/1783060173_322compressed.pdf

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