Facts of the Case

  • The petitioner, Tvl. T. Sivakumar, is a small-scale contractor who relies entirely on a part-time accountant to manage and fulfill statutory GST compliances.
  • For the Assessment Year (AY) 2020-21, the respondent revenue authority initiated assessment proceedings under Section 73 of the TNGST Act, 2017. The foundational basis of the department's action was an alleged turnover discrepancy found during a comparison between Form GSTR-07 (TDS returns filed by Government deductors) and Form GSTR-09 (Annual Return).
  • The revenue department proceeded under the rigid assumption that the petitioner had actively filed a "Nil" turnover GSTR-09 return. Consequently, the differential turnover reflected in the GSTR-07 TDS returns was categorized as "suppressed outward supply".
  • The entirety of the notices, hearing intimations, and subsequent show-cause proceedings were exclusively uploaded on the online GST portal. No effective alternate communication or physical notice reached the petitioner.
  • Due to a lack of technical knowledge regarding portal navigation and the subsequent negligence of the part-time accountant, the petitioner remained completely oblivious to the active proceedings. As a result, no reply was filed, no personal hearing was attended, and the respondent passed a cryptic, ex-parte assessment order dated January 29, 2025, confirming a total demand of ₹8,32,130/- inclusive of interest and penalties.

Issues Involved

  1. Whether the ex-parte assessment order passed under Section 73 of the TNGST Act, 2017 deserved to be quashed on the grounds of violating the principles of natural justice, given that the notices were only uploaded on the online portal and the assessee lacked active knowledge of them?
  2. Whether the revenue authority was justified in treating the entire differential turnover between Form GSTR-07 (TDS returns) and Form GSTR-09 as suppressed outward taxable supply, without considering statutory exemptions from filing annual returns under Section 44?
  3. Whether an equitable remedy of remanding the matter back for a fresh personal hearing can be granted to an assessee who failed to utilize multiple opportunities at the initial assessment stage?

Petitioner’s Arguments

  • Violations of Natural Justice: The petitioner argued that the entire proceedings were strictly restricted to the online portal, leading to a complete absence of effective communication. Being a small contractor without expert legal infrastructure, the petitioner depended on a part-time accountant who failed to communicate the notices, rendering the ex-parte order legally unsustainable due to a lack of real opportunity.
  • Fundamental Error in Mismatch Premise: The petitioner contended that the department’s comparative logic was legally flawed. The petitioner was explicitly exempted from filing Form GSTR-09 for AY 2020-21 under the provisions of Section 44 read with applicable government notifications. Treating a non-filed GSTR-09 as a "Nil" filed return to create an artificial mismatch with GSTR-07 is fundamentally erroneous.
  • Nature of TDS Data: It was argued that GSTR-07 reflects TDS deductions made by government entities, which represents gross figures that often encompass retention money, continuous running bills, mobilization advances, and cross-period payments. Such amounts cannot be automatically or blindly characterized as the absolute taxable outward turnover of the current assessment period. The petitioner expressed full readiness to present a clean reconciliation statement matching books of accounts, GSTR-1, and GSTR-3B if given a fair opportunity.

Respondent’s Arguments

  • Due Process Followed: The revenue department, represented by the Government Advocate, counter-argued that the department did not commit any procedural error. The statutory notices and opportunities for personal hearings were duly uploaded on the official GST portal in accordance with the prescribed rules.
  • Negligence of the Assessee: The respondent submitted that the assessment turned ex-parte solely due to the petitioner's own failure and absolute negligence in monitoring their GST portal and utilizing the multiple legal windows provided to present a defense. Therefore, the demand confirmed under Section 73 was justified based on the factual data available on record.

Court Order / Findings

  • Grant of Equitable Remedy: The Hon'ble High Court, presided over by Justice D. Bharatha Chakravarthy, took note of the nature of the alleged turnover discrepancies, the explanation provided by the contractor regarding the GSTR-07/09 comparison, and the genuine reasons for the portal oversight. The Court observed that while the petitioner failed to utilize the initial opportunities, interest of justice demands an opportunity be granted on equitable grounds, subject to reasonable balancing conditions.
  • Conditional Remand: The High Court allowed the Writ Petition and set aside the impugned assessment order dated January 29, 2025, remanding the matter back to the assessing officer on the following strict terms:
    1. The petitioner must deposit 25% of the disputed tax amount with the respondent authority within four weeks of receiving the web copy of the order, without waiting for a certified copy.
    2. Upon verification of the 25% tax deposit, the impugned ex-parte order stands officially quashed, and the matter is revived on the file of the respondent assessing officer.
    3. The petitioner is directed to appear before the respondent assessing officer without fail, submit a formal detailed reply, and produce all relevant supporting reconciliation documents. The respondent must consider the case afresh and pass a speaking order in accordance with the law.
  • Lifting of Bank Attachments: As a consequential relief, the High Court directed that since the underlying assessment order was set aside, any recovery or attachment of the petitioner’s bank accounts executed pursuant to the impugned order stands raised immediately. No costs were imposed.

Important Clarification

  • TDS vs Taxable Turnover: This judgment highlights that revenue authorities cannot arbitrarily treat the gross figures shown in Government TDS returns (Form GSTR-07) as suppressed outward taxable turnover without examining actual books of accounts and reconciliation data.
  • Exemption Under Section 44: Authorities cannot construct an artificial tax evasion case by comparing GSTR-07 against a non-filed GSTR-09 in cases where the taxpayer is legally exempted from filing annual returns under Section 44.
  • Pre-deposit Trend for Remand: The Madras High Court continues to reinforce the judicial trend where ex-parte orders resulting from portal communication oversights are set aside to prevent miscarriage of justice, but such reliefs are firmly conditioned upon a pre-deposit (commonly 10% to 25%) to safeguard revenue interests.

Section Involved

  • Primary Section: Section 73 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 utilized for any reason other than fraud or any willful-misstatement or suppression of facts).
  • Allied Statutory Provisions: Section 44 of the CGST/TNGST Act, 2017 (Filing of Annual Return / GSTR-09 Exemptions); Article 226 of the Constitution of India (Writ Jurisdiction for Certiorarified Mandamus).

Link to download the order - https://mytaxexpert.co.in/uploads/1783062152_338compressed.pdf

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