Facts of the Case

The petitioner, Tvl. V.N.S. Construction, represented by its proprietor K. Vetrivel, approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India.

The petitioner challenged the assessment order dated 29.01.2026 for Assessment Year 2023-24.

The writ prayer sought a Writ of Certiorarified Mandamus to:

  • call for the records relating to the impugned assessment;
  • quash the order as cryptic;
  • quash it as non-speaking;
  • quash it as illegal;
  • quash it as arbitrary;
  • quash it as wholly without jurisdiction; and
  • direct the respondent to pass an assessment order afresh after affording an opportunity of being heard.

The writ prayer and paragraph 1 of the order describe the impugned assessment as one passed under Section 74 of the TNGST Act, 2017.

The assessment was made ex parte because the petitioner had not utilised the opportunities provided.

The central allegation was suppression of turnover based on differences between:

  • figures reflected in Form GSTR-7, representing TDS deductions; and
  • figures reflected in Form GSTR-3B.

The Department treated amounts appearing in GSTR-7 as additional taxable turnover and raised a demand of:

₹19,29,512 along with interest and penalty.

The detailed three-column table on page 3 of the judgment records the discrepancy, the assessee’s merits explanation and the reasons for non-participation. Significantly, that table refers to the demand as having been raised under Section 74A of the TNGST Act, whereas the writ prayer and opening paragraph refer to Section 74. This distinction is preserved exactly as it appears in the judicial record.

Issues Involved

The principal issues involved were:

  1. Whether the ex parte assessment order dated 29.01.2026 could be sustained without considering the petitioner’s reply, contract documents and supporting records.
  2. Whether a difference between Form GSTR-7 and Form GSTR-3B could, by itself, establish suppression of taxable turnover.
  3. Whether amounts reflected in GSTR-7 as TDS deductions could automatically be treated as additional taxable turnover.
  4. Whether services rendered by the petitioner to the TWAD Board under operation and maintenance contracts relating to public water supply schemes were exempt from GST.
  5. Whether the services fell within Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).
  6. Whether the contracts constituted pure services provided to a Government authority.
  7. Whether the services were rendered in relation to functions entrusted under Articles 243G and 243W of the Constitution of India.
  8. Whether the work order and bid document, which according to the petitioner specifically recorded that GST was not applicable to the contract, required examination.
  9. Whether Form GSTR-7 was merely a TDS reporting statement incapable, by itself, of determining taxability or proving suppression.
  10. Whether the respondent had failed to examine:
  • the exemption notification;
  • the contract documents; and
  • the actual nature of services.
  1. Whether the petitioner’s explanation for non-participation justified a fresh opportunity.
  2. Whether the matter should be remanded subject to a monetary deposit condition or without any condition.
  3. Whether consequential bank account attachment should survive after setting aside the impugned assessment.

Petitioner’s Arguments

The petitioner advanced a detailed merits explanation concerning both the nature of services and the GSTR-7/GSTR-3B difference.

1. Services Rendered to TWAD Board

The petitioner explained that the services were rendered to the TWAD Board under:

  • operation contracts; and
  • maintenance contracts,

relating to public water supply schemes.

The petitioner contended that these services were exempt from GST.

2. Exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate)

The petitioner specifically relied upon:

Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

According to the petitioner, the services qualified as:

  • pure services;
  • provided to a Government authority; and
  • related to functions under Articles 243G and 243W of the Constitution.

On this basis, the petitioner contended that the services were exempt from GST.

3. Work Order and Bid Document

The petitioner further asserted that:

  • the work order; and
  • the bid document

specifically recorded that:

GST was not applicable to the contract.

The petitioner therefore contended that these documents required consideration before fastening tax liability.

4. GSTR-7 Is a TDS Reporting Statement

The petitioner argued that Form GSTR-7 is merely a TDS reporting statement.

Accordingly, it contended that GSTR-7:

  • cannot by itself determine taxability; and
  • cannot by itself establish suppression of turnover.

The petitioner’s case was that figures appearing in GSTR-7 could not automatically be converted into additional taxable turnover without examining the underlying transactions and the applicable exemption.

5. Failure to Examine Exemption and Actual Nature of Services

The petitioner specifically contended that the respondent failed to examine:

  • the exemption notification;
  • the contract documents; and
  • the actual nature of the services,

before fastening liability.

These arguments are expressly set out in the middle column of the detailed table on page 3 of the judgment.

6. Reason for Non-Participation

The petitioner explained that:

  • the entire proceedings were uploaded only on the GST portal;
  • notices and hearing intimations were also portal-based;
  • the petitioner was a small contractor with limited knowledge;
  • GST compliance work had been entrusted to a part-time accountant;
  • the petitioner was fully dependent upon the accountant for portal-related matters;
  • during the relevant period, the petitioner was undergoing treatment for cervical health complications;
  • the petitioner was unable to personally monitor the GST portal;
  • the accountant failed to inform the petitioner about the pending proceedings;
  • consequently, the petitioner lacked awareness of the notices; and
  • the petitioner could not submit objections or participate in adjudication, resulting in the ex parte order.

These reasons are expressly recorded in the right-hand column of the page 3 table.

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 six-page order does not separately reproduce any detailed independent counter-submissions by the respondent concerning:

  • the alleged GSTR-7 vs GSTR-3B difference;
  • treatment of GSTR-7 figures as additional taxable turnover;
  • the ₹19,29,512 demand;
  • applicability of Entry No. 3 of Notification No. 12/2017-Central Tax (Rate);
  • whether the services constituted pure services;
  • whether the TWAD Board qualified within the claimed exemption framework;
  • whether the services related to functions under Articles 243G or 243W;
  • the work order and bid document;
  • or the petitioner’s explanation for non-participation.

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 discrepancies;
  • the explanation provided 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 noted that such opportunities had been extended on equitable grounds.

Significant Finding: Fresh Opportunity Without Any Condition

The most important operative feature appears in paragraph 4 on page 4 of the judgment.

The Court recorded:

“But in this case, the service rendered is an exempted from GST and therefore, an opportunity is granted to the petitioner assessee without any condition.”

Accordingly, unlike several conditional-remand GST cases where a percentage of disputed tax is required to be deposited, the Court granted the petitioner a fresh opportunity without any condition.

The writ petition was allowed on the following terms:

  • the impugned order dated 29.01.2026 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;
  • the respondent shall pass orders in accordance with law;
  • because the impugned assessment order was set aside, any attachment of the bank account made pursuant to the impugned order shall stand raised;
  • no costs were awarded; and
  • the connected miscellaneous petition was closed.

These directions are expressly recorded on page 4 of the judgment.

Important Clarification

This judgment must be reported carefully because the order contains a strong observation concerning exemption, while the matter is nevertheless remanded for fresh consideration.

The Court expressly stated that:

the service rendered is exempted from GST

and on that basis granted the fresh opportunity without any condition.

At the same time, the operative directions require:

  • the assessee to submit its reply and documents;
  • the respondent to consider the matter afresh; and
  • a fresh order to be passed in accordance with law.

Therefore, the safest accurate reading is that the High Court accepted the exemption character of the service for the purpose of granting an unconditional opportunity/remand, while leaving the assessing authority to reconsider the matter afresh on the basis of the reply and documents.

The judgment should not be expanded beyond its express terms into a proposition that:

  • every TWAD Board contract is automatically exempt;
  • every operation and maintenance contract is necessarily a pure service;
  • every GSTR-7/GSTR-3B difference is legally irrelevant;
  • GSTR-7 can never be used as evidentiary material;
  • every public water supply contract falls within Entry No. 3 irrespective of its terms; or
  • all factual conditions under the exemption notification stand automatically satisfied in every case.

A second critical clarification concerns the statutory provision. The judicial record contains an internal distinction:

  • the writ prayer and paragraph 1 state that the impugned assessment was passed under Section 74 of the TNGST Act, 2017;
  • the page 3 discrepancy table states that the demand of ₹19,29,512 with interest and penalty was raised under Section 74A of the TNGST Act.

This difference should be reported exactly and should not be silently altered.

Sections / Legal Provisions Involved

Section 74 of the TNGST Act, 2017:
The writ prayer and opening paragraph of the order expressly describe the impugned assessment dated 29.01.2026 as passed under this provision.

Section 74A of the TNGST Act:
The page 3 discrepancy table states that the demand of ₹19,29,512 along with interest and penalty was raised under this provision.

Article 226 of the Constitution of India:
The petitioner invoked the writ jurisdiction of the High Court seeking a Writ of Certiorarified Mandamus.

Articles 243G and 243W of the Constitution of India:
The petitioner relied upon these constitutional provisions while asserting that the pure services related to functions covered by the constitutional local-government framework.

Entry No. 3 of Notification No. 12/2017-Central Tax (Rate):
This was the specific exemption entry relied upon by the petitioner for services rendered under operation and maintenance contracts relating to public water supply schemes.

Form GSTR-7:
The Department relied on figures reflected through TDS deductions in GSTR-7 while alleging suppression of turnover.

Form GSTR-3B:
The alleged discrepancy arose from comparison of GSTR-7 figures with GSTR-3B figures.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783062849_369compressed.pdf 

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