Facts of the Case

The petitioner, Tvl. V.N.S. Construction, challenged the assessment order dated 29.01.2026 relating to the assessment year 2024-25. The writ petition sought quashing of the impugned assessment order on the grounds that it was cryptic, non-speaking, illegal, arbitrary and without jurisdiction, with a further request for fresh adjudication after providing an opportunity of hearing. The judgment records the challenge to the impugned GST assessment order and notes that the assessment had been completed ex parte because the petitioner did not utilise the opportunities provided during the proceedings.

The principal discrepancy alleged by the respondent was suppression of turnover based on differences between figures reflected in Form GSTR-7, representing TDS deductions, and Form GSTR-3B for AY 2024-25. The amounts appearing in GSTR-7 were treated as additional taxable turnover, resulting in a demand of Rs. 31,39,032/- together with interest and penalty under Section 74A of the TNGST Act. The detailed comparative table appearing on page 3 of the judgment specifically sets out the discrepancy, the assessee’s explanation on merits, and the reasons for failure to avail the opportunity.

The petitioner’s case was that the relevant services had been rendered to the Tamil Nadu Water Supply and Drainage Board (TWAD Board) under operation and maintenance contracts concerning public water supply schemes. According to the petitioner, these were pure services exempt from GST under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) because they were provided to a Government authority in relation to functions contemplated under Articles 243G and 243W of the Constitution of India.

Issues Involved

The principal issues arising for consideration were:

  1. Whether the respondent was justified in treating the difference between Form GSTR-7 and Form GSTR-3B as suppressed or additional taxable turnover without examining the actual nature and taxability of the underlying transactions.
  2. Whether Form GSTR-7, being a TDS reporting statement, could by itself establish taxability or suppression of turnover.
  3. Whether operation and maintenance services rendered to the TWAD Board in relation to public water supply schemes were covered by the GST exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).
  4. Whether the ex parte assessment order should be interfered with where the petitioner failed to participate because notices and hearing intimations were uploaded on the GST portal and were allegedly not brought to the petitioner’s attention.
  5. Whether, considering the asserted exempt nature of the services, the petitioner was entitled to a fresh opportunity without any pre-deposit or other condition.

Petitioner’s Arguments

The petitioner contended that the services in question were rendered to the TWAD Board under operation and maintenance contracts connected with public water supply schemes. It was argued that such services constituted pure services and were exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate), being services to a Government authority in relation to constitutional functions under Articles 243G and 243W.

The petitioner further relied upon the work order and bid document, which, according to the explanation recorded in the judgment, specifically indicated that GST was not applicable to the contract. It was argued that the respondent failed to properly examine the exemption notification, contractual documents and the actual nature of the services before imposing tax liability.

A significant contention was that Form GSTR-7 is merely a TDS reporting statement and cannot, by itself, determine taxability or conclusively establish suppression of turnover. Therefore, according to the petitioner, the mere difference between GSTR-7 and GSTR-3B figures could not automatically be treated as additional taxable turnover without examining the underlying supplies and their exemption status.

Regarding non-participation in the adjudication proceedings, the petitioner explained that the proceedings, notices and hearing intimations had been uploaded only on the GST portal. The petitioner, described as a small contractor with limited knowledge, had entrusted GST compliance work to a part-time accountant and depended upon him for portal-related matters. The judgment also records the explanation that, during the relevant period, the petitioner was undergoing treatment for cervical health complications and could not personally monitor the GST portal. The accountant allegedly failed to inform the petitioner about the pending proceedings, resulting in lack of awareness and consequent non-filing of objections.

Respondent’s Arguments

The learned Government Advocate represented the Revenue. The assessment position reflected in the impugned order was that there was a discrepancy between turnover figures appearing in GSTR-7 and GSTR-3B, and the GSTR-7 amounts were consequently treated as additional taxable turnover, leading to the demand of Rs. 31,39,032/- along with interest and penalty.

The judgment further records that the assessment had been completed ex parte because the petitioner did not utilise the opportunities provided. Thus, the Revenue’s procedural position was founded on the petitioner’s failure to respond to the notices and participate in the assessment proceedings despite opportunities having been made available.

Court Order / Findings

The Madras High Court considered three material aspects together: the nature of the discrepancies, the explanation offered by the assessee on merits, and the reasons furnished for failure to avail the earlier opportunity. The Court held that an opportunity could be granted to the assessee to place its submissions and supporting documents before the respondent assessing officer.

Importantly, the Court observed that it had been extending such opportunities on equitable grounds, but in the present case, the service rendered was exempted from GST, and therefore an opportunity was granted to the petitioner-assessee without any condition. This is the central operative clarification in the judgment.

Accordingly, the High Court ordered as follows:

  • The impugned assessment order dated 29.01.2026 was set aside.
  • The matter was remanded to the respondent for fresh consideration.
  • The assessee was directed to appear before the respondent without fail and submit its reply and supporting documents.
  • The respondent was directed to reconsider the matter afresh and pass orders in accordance with law.
  • Since the assessment order was set aside, any bank account attachment made pursuant to the impugned order was ordered to stand raised.
  • No costs were awarded, and the connected miscellaneous petition was closed.

Important Clarification

This judgment is particularly significant because the Court did not merely grant a routine opportunity to contest an ex parte GST assessment. The Court specifically recorded that, in this case, the service rendered was exempted from GST, and on that basis granted the petitioner an opportunity without any condition.

The decision also highlights the importance of examining the underlying nature of the transaction before treating a GSTR-7 versus GSTR-3B mismatch as suppressed taxable turnover. The petitioner’s recorded case was that GSTR-7 merely reflected TDS reporting and could not independently determine taxability, particularly where the underlying services were claimed to be exempt pure services. However, the final adjudication on the claim was remitted to the assessing authority, which was directed to consider the petitioner’s reply and supporting documents afresh in accordance with law.

A further consequential clarification is that once the impugned assessment order was set aside, any attachment of the bank account pursuant to that order also stood raised.

Sections

Section 74A of the TNGST Act, 2017 – Provision referred to in relation to the disputed demand arising from the alleged suppression/additional taxable turnover for AY 2024-25.

Section 74 of the TNGST Act, 2017 – The body of the High Court order describes the impugned assessment order as one passed under Section 74. The judgment materials therefore contain a reference to Section 74A in the petition/discrepancy narrative and Section 74 in the Court’s description of the challenged order; this distinction should be preserved rather than artificially harmonised.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783065564_406.pdf

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