Facts of the Case

  • The Petitioner, Tvl. Punitha Antony Store, is a small trading entity represented by its proprietor, Rajaprakash.
  • An assessment order dated 09.12.2025 was passed against the petitioner for the Assessment Year 2018-19. The initial show-cause notices and subsequent proceedings were exclusively uploaded on the digital GST portal.
  • The petitioner had entrusted all digital GST compliances and portal monitoring to a part-time accountant. Due to a lapse on the accountant's part, these communications were never brought to the petitioner's attention. Consequently, the petitioner failed to file objections or produce supporting books of accounts, leading the revenue department to pass an ex-parte assessment order.
  • The impugned order raised an additional tax demand of ₹8,44,088/- out of a total alleged excess Input Tax Credit (ITC) availment of ₹18,82,956/- (which included an IGST discrepancy of ₹16,92,684/-) based on a structural mismatch between forms GSTR-3B and GSTR-2A.
  • Crucially, the exact same underlying ITC mismatch discrepancy—quantified at ₹8,48,596/-—had already been previously adjudicated by the jurisdictional tax authority. The petitioner had duly accepted that previous finding and paid the full amount via Form GST DRC-03, an action acknowledged by the department.
  • Despite this prior closure, the Intelligence Wing (Roving Squad-2) reworked the same transaction data under different technical defect heads, initiating proceedings under Section 74 to levy tax, interest, and penalties all over again.

Issues Involved

  1. Whether an ex-parte assessment order passed due to the non-receipt of physical notices (where notifications were merely uploaded on the portal) violates the principles of natural justice for a small trader.
  2. Whether the Intelligence Wing of the Revenue Department is legally justified in creating a duplicate demand under Section 74 based on identical transactions and ITC mismatches that were already adjudicated and settled via Form GST DRC-03.
  3. Whether the department can legally invoke the extended period or harsher penalty provisions of Section 74 without proving or even explicitly alleging fraud, wilful misstatement, or intentional suppression of facts.

Petitioner’s Arguments

  • Breach of Natural Justice: The petitioner argued that because they are a small trader with limited technical knowledge of the GST framework, they relied fully on a part-time accountant who failed to check the portal. Hence, they were left entirely unaware of the proceedings and were denied a reasonable, effective opportunity to be heard.
  • Double Taxation / Duplication of Demand: The petitioner forcefully contended that the new demand of ₹8,44,088/- was fundamentally invalid as it arose from the exact same GSTR-3B vs. GSTR-2A data that had already been resolved. Paying this would amount to double taxation on the same economic transaction.
  • Absence of Fraud/Suppression: The petitioner pointed out that they had willingly paid the earlier quantified discrepancy via DRC-03. No fresh materials or independent evidence of fraud, wilful misstatement, or active suppression had been discovered by the Roving Squad to legally justify switching the mechanism over to the penal provisions of Section 74.

Respondent’s Arguments

  • Proper Service of Notice: The revenue department argued that all statutory notices and text communications were correctly and duly served through the official GST common portal as mandated by the law.
  • Failure to Utilize Opportunities: The respondents maintained that the ex-parte order was a direct result of the petitioner's own negligence, as the dealer failed to log in, monitor their dashboard, or utilize the multiple opportunities provided during the adjudication timeline.
  • Revenue Protection: The department stood by the re-assessment, indicating that the reworked figures accounted for distinct discrepancies that warranted the recovery of wrongly availed ITC along with corresponding interest and penalties.

Court Order & Findings

  • Ex-Parte Order Set Aside: The Hon’ble Madras High Court, presided by Justice D. Bharatha Chakravarthy, reviewed the explanations and set aside the impugned assessment order dated 09.12.2025.
  • Unconditional Remand: While the High Court usually imposes monetary or bank deposit conditions on equitable grounds before restoring a case, it granted an unconditional remand in this instance. The court observed that a conditional remand was unnecessary because the department had already assessed the exact same defect mismatch in earlier settled proceedings.
  • Directions for De Novo Review: The matter was remanded back to the file of the assessing officer. The petitioner was directed to appear before the respondent without fail, submit their detailed written reply, and tender supporting documentation. The respondent must consider the submissions afresh and pass an order strictly in accordance with the law.
  • Lifting of Bank Attachments: As a consequential relief, the High Court directed that any active attachment placed on the petitioner’s bank accounts pursuant to the quashed assessment order must be lifted immediately.

Important Clarification

This judgment solidifies an essential legal safeguard for taxpayers: The department cannot issue repetitive or overlapping tax demands by merely reshuffling the nomenclature of defects for transactions that have already been adjudicated and paid. Furthermore, while portal notices constitute legal service, courts will adopt an equitable approach for small traders facing severe consequences like bank attachments, provided the underlying tax liability has already been substantially addressed or paid via voluntary compliance routes like Form GST DRC-03.

Sections Involved

  • Section 73 of the TNGST 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 wilful-misstatement or suppression of facts.
  • Section 74 of the TNGST Act, 2017: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts.
  • Article 226 of the Constitution of India: Constitutional provision under which the Writ of Certiorarified Mandamus was preferred.

 Link to download the order - https://mytaxexpert.co.in/uploads/1783060919_328compressed.pdf

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