Facts of the Case

The petitioner, R. Ramesh, represented by its proprietor Ramasamy Ramesh, approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India.

The petitioner challenged the impugned order in Form DRC-07 bearing Reference No. ZD3311253531120 dated 20.11.2025 for Financial Year 2021-22.

The order was passed under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 read with the Central Goods and Services Tax Act, 2017.

The petitioner sought:

  • quashing of the impugned order as arbitrary, unjust and illegal;
  • quashing on the ground of violation of principles of natural justice; and
  • a consequential direction to the respondent to reconsider the matter afresh on merits after providing an opportunity of personal hearing.

The impugned assessment was made ex parte because the petitioner did not utilise the opportunities provided during the assessment proceedings.

The specific discrepancy recorded was:

Claim of ineligible ITC under Section 17(5).

The petitioner’s explanation was that:

  • it was a civil works contractor;
  • it had used iron and steel for business purposes; and
  • therefore, according to the petitioner, the question of ineligible ITC under Section 17(5) did not arise.

The petitioner further explained that the show cause notice and impugned order had been uploaded on the GST Common Portal without its knowledge.

These matters are specifically reflected in the tabular summary on page 3 of the judgment, which separately records the discrepancy, the assessee’s merits explanation and the reason for non-participation.

Issues Involved

The principal issues involved were:

  1. Whether the ex parte Form DRC-07 assessment order dated 20.11.2025 passed under Section 73 of the TNGST Act, 2017 could be sustained.
  2. Whether ITC claimed in relation to iron and steel used by a civil works contractor was ineligible under Section 17(5).
  3. Whether the petitioner’s assertion that iron and steel were used for business purposes required examination on the basis of supporting documents.
  4. Whether the petitioner should be granted a fresh opportunity to submit its reply and records before the assessing authority.
  5. Whether uploading the show cause notice and impugned order on the GST Common Portal without the petitioner’s knowledge constituted a sufficient explanation for non-participation for the limited purpose of granting another opportunity.
  6. Whether equitable relief should be conditioned upon deposit of 25% of the disputed tax amount.
  7. Whether any bank account attachment made pursuant to the impugned assessment order should continue after the assessment order was set aside.

Petitioner’s Arguments

The petitioner’s principal argument on merits was that the disputed ITC was not ineligible under Section 17(5).

The petitioner contended that:

  • it was engaged as a civil works contractor;
  • the disputed goods comprised iron and steel;
  • the iron and steel were used for business purposes; and
  • therefore, the question of blocked or ineligible ITC under Section 17(5) did not arise.

The petitioner thus sought an opportunity to place its submissions and supporting documents before the assessing authority.

Regarding non-participation in the original proceedings, the petitioner explained that:

  • the show cause notice had been uploaded on the GST Common Portal;
  • the impugned order had also been uploaded on the GST Common Portal; and
  • the petitioner had no knowledge of those uploads.

The petitioner accordingly sought reconsideration on merits with an opportunity of personal hearing. These contentions are expressly recorded in the judgment, particularly in the table on page 3.

Respondent’s Arguments

The respondent was represented by the learned Government Standing Counsel.

The judgment records that the High Court heard:

  • learned counsel for the petitioner; and
  • learned Government Standing Counsel for the respondent.

However, the order does not separately reproduce any detailed counter-submissions by the respondent concerning:

  • the precise application of Section 17(5);
  • the nature of iron and steel purchased;
  • the actual end use of the goods;
  • whether the goods were incorporated into immovable property;
  • whether the petitioner fell within any statutory exception;
  • or the factual eligibility of the disputed ITC.

Therefore, to preserve the exact meaning of the judgment, no additional departmental argument should be attributed to the respondent beyond what is expressly recorded.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancy;
  • the explanation offered by the assessee; and
  • the reason given before the Court for not availing the earlier opportunity.

The Court held that an opportunity could be granted to the assessee to:

  • present its submissions; and
  • produce relevant supporting documents before the respondent assessing officer.

The Court observed that it had been extending such opportunities on equitable grounds, though under appropriate conditions.

Accordingly, the Court granted a fresh opportunity subject to the condition that the petitioner deposit 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  • within four weeks from receipt of a web copy of the order, the petitioner shall deposit 25% of the disputed tax amount with the respondent;
  • the petitioner need not wait for a certified copy of the order;
  • upon such deposit, the impugned order dated 20.11.2025 shall stand set aside;
  • the matter shall stand remanded back to the respondent;
  • the assessee shall appear before the respondent without fail;
  • the assessee shall submit its reply and documents in support of its claim;
  • the respondent shall consider the matter afresh and pass orders in accordance with law;
  • because the impugned assessment order is set aside, any attachment of the bank account made pursuant to that order shall stand raised;
  • no costs were awarded; and
  • the connected miscellaneous petitions were closed.

The 25% deposit condition is recorded on page 3, while the detailed operative directions are set out on page 4 of the judgment.

Important Clarification

This judgment does not finally hold that ITC on iron and steel used by every civil works contractor is automatically admissible.

The High Court did not conclusively adjudicate the merits of the Section 17(5) dispute.

The precise effect of the judgment is:

  • the petitioner asserted that it was a civil works contractor;
  • the petitioner claimed that iron and steel had been used for business purposes;
  • the petitioner therefore disputed the allegation of ineligible ITC under Section 17(5);
  • the Court considered the explanation sufficient to justify a fresh opportunity;
  • the matter was remanded for fresh consideration of the reply and supporting documents; and
  • relief was made conditional upon deposit of 25% of the disputed tax amount.

Therefore, the ruling is a conditional remand for fresh adjudication, not a final declaration of ITC eligibility.

A further important clarification is that mere use of goods for “business purposes” does not, by itself, represent a final judicial determination in this order that Section 17(5) is inapplicable. That was the petitioner’s explanation recorded by the Court. The assessing authority must reconsider the claim in accordance with law after examining the supporting documents.

Another important point is that the High Court did not expressly determine:

  • whether the iron and steel were used for construction of immovable property;
  • whether they were used in execution of works contract services;
  • whether any statutory exception applied; or
  • whether the factual conditions of Section 17(5) were satisfied.

Those issues remain open for fresh adjudication.

Sections Involved

Section 73 of the TNGST Act, 2017:
The impugned Form DRC-07 assessment order dated 20.11.2025 was expressly passed under this provision.

Section 17(5) of the GST Act – Blocked / Ineligible ITC:
The sole discrepancy identified in the judgment was the claim of ineligible ITC under Section 17(5). The petitioner disputed its application by asserting that iron and steel were used for business purposes in its activity as a civil works contractor.

Article 226 of the Constitution of India:
The writ petition was filed under this provision seeking a Writ of Certiorarified Mandamus.

Form DRC-07:
The impugned assessment/order summary carried Reference No. ZD3311253531120 dated 20.11.2025.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783059847_362compressed.pdf 

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