Facts of the Case

The petitioner, Tvl. SRK Tex (represented by its Proprietrix Sasirekha), is a registered dealer engaged in business operations under the GST regime. The respondent, The State Tax Officer (FAC), Karur - 3 Assessment Circle, initiated assessment proceedings for the Assessment Year (AY) 2017-18.

During the verification process, the respondent department identified an alleged discrepancy involving the excess availment of Input Tax Credit (ITC) amounting to ₹9,08,516/- (IGST). This discrepancy was calculated based on a mismatch discovered between the petitioner’s monthly returns filed in Form GSTR-3B and the auto-populated purchase details in Form GSTR-2A for the financial year 2017-18.

The respondent uploaded the show-cause notices and subsequent assessment communications solely onto the official GST portal. Because these notices were never effectively communicated to the petitioner through physical mode or direct alert, and because the petitioner had entrusted the compliance management to a part-time accountant who completely failed to monitor the portal or inform the petitioner, the entire proceeding went unnoticed. Consequently, the petitioner could not file any written objections or present supporting evidence, leading the respondent to pass an ex-parte assessment order dated 30.12.2023. The order treated the entire mismatched ITC amount as ineligible, proposing its recovery along with applicable interest and penalties under Section 73. Aggrieved by this, the petitioner moved a Writ of Certiorari before the High Court.

Issues Involved

  1. Whether the ex-parte assessment order dated 30.12.2023 passed under Section 73 of the CGST/TNGST Act was legally sustainable since the notices were hosted only on the GST portal without effective communication, thereby violating the principles of natural justice.
  2. Whether the petitioner should be granted an equitable opportunity to present evidence establishing that the alleged excess ITC mismatch had already been voluntarily reversed with interest in subsequent tax periods.

Petitioner’s Arguments

  • Violation of Natural Justice: The petitioner argued that the entire assessment proceedings were hosted exclusively on the GST portal and were never effectively served or communicated directly to the dealer. As a result, the petitioner was entirely unaware of the ongoing case and was deprived of a fair hearing.
  • Reason for Non-Appearance: The petitioner submitted that being unfamiliar with the intricate digital workflows of the GST portal, the firm had completely relied on a part-time accountant. The accountant failed to check the portal dashboard and did not alert the management regarding the notices.
  • Revenue Neutrality & Prior Reversal: On the merits of the tax liability, the petitioner contended that the excess ITC claim was an inadvertent clerical error typical of the initial transition phase of GST implementation in 2017-18. Crucially, the petitioner had already voluntarily reversed the disputed ITC during the months of May 2018 and June 2018 (Financial Year 2018-19) along with the payment of applicable interest.
  • No Loss to the Exchequer: Because the reversal entries occurred in the subsequent financial year, they did not reflect in the assessment records specifically pulled for FY 2017-18. The petitioner claimed that the issue is entirely revenue-neutral, causing zero loss to the government, making the impugned demand an double-taxation error based on the respondent’s incomplete assumptions.

Respondent’s Arguments

The respondent, represented by the Government Advocate, defended the validity of the assessment order. The revenue argued that the department had scrupulously followed the standard statutory operating procedures by uploading the notices on the official GST portal. The respondent stressed that it is the active legal responsibility of every registered taxpayer to routinely monitor their GST portal dashboard for updates, notices, or communications. Since the petitioner failed to utilize multiple opportunities extended during the assessment cycle, the department was fully justified in finalizing the assessment ex-parte based on the available data showing a stark mismatch between GSTR-3B and GSTR-2A.

Court Order / Findings

The Madurai Bench of the Madras High Court, presided by Hon'ble Justice D. Bharatha Chakravarthy, carefully evaluated the discrepancies, the subsequent explanations, and the practical reasons cited for the lack of portal monitoring.

The Court observed that in the interest of justice and fairness, the taxpayer deserved a proper opportunity to lay out their documents and demonstrate the voluntary reversal entries before the assessing officer. Highlighting that the court regularly extends such relief on equitable grounds under reasonable terms, it allowed the Writ Petition with the following conditions:

  1. Conditional Pre-deposit: The petitioner must deposit 25% of the disputed tax amount with the respondent department within four weeks of receiving the web copy of the order, without waiting for the certified hard copy.
  2. Setting Aside and Remand: Upon successful completion of the 25% deposit, the impugned ex-parte assessment order dated 30.12.2023 will stand set aside automatically, and the entire matter will stand remanded back to the assessing officer for a fresh look.
  3. Fresh Opportunity: The petitioner is directed to appear before the respondent assessing officer without fail, submit a comprehensive reply, and file all supporting documents. The respondent will then evaluate the matter afresh and pass a lawful order.
  4. Lifting of Bank Attachment: Consequent to the setting aside of the assessment order, any active bank account attachments executed by the department for recovery purposes shall stand raised/lifted immediately.
  5. No Costs: The petition was disposed of without any order as to costs, and all connected miscellaneous petitions were closed.

Important Clarification

This ruling provides an essential procedural clarification for businesses relying on external or part-time accounting professionals: The High Court reaffirms that while portal-only communication can technically result in harsh ex-parte orders if neglected, the judiciary will lean towards granting an opportunity to defend on merits if the taxpayer can present a bona fide case of revenue neutrality (such as showing the tax was already reversed with interest in later returns). However, this judicial relief is conditional, requiring the taxpayer to deposit a portion (25% in this case) of the disputed liability to test their bona fides.

Section Involved

  • Section 73 of the Central Goods and Services Tax (CGST) Act, 2017 / Tamil Nadu Goods and Services Tax (TNGST) Act, 2017.
  • Section 73(10) of the TNGST Act, 2017 (referenced regarding limitation periods in the prayer).
  • Article 226 of the Constitution of India (under which the Writ Petition for Certiorari was filed).

Link to download the order - https://mytaxexpert.co.in/uploads/1783061650_334compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.