Facts of the Case

The petitioner, Tvl. V.N.S Construction, challenged an assessment order dated 29.01.2026 passed by the respondent under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) for the assessment year 2022-23.

The assessment was completed ex parte because the petitioner did not utilise the opportunities provided during the adjudication proceedings. The respondent alleged suppression of turnover on the basis of differences between turnover reflected in Form GSTR-7, representing TDS deductions, and turnover reported in Form GSTR-3B.

The amounts appearing in GSTR-7 were treated as additional taxable turnover, resulting in a demand of Rs. 5,82,304/- together with interest and penalty under Section 74 of the TNGST Act. The judgment specifically records these discrepancies, the assessee’s explanation on merits, and the reasons for non-participation in a tabular form on page 3.

The petitioner contended that the relevant receipts related to operation and maintenance contracts executed for the TWAD Board under Tender No. 2762/21/FCWSS. According to the petitioner, Clause 4.12 of the Bid Document specifically provided that GST was not applicable to the contract and the services were exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

Issues Involved

The principal issues before the Court were:

  • Whether the ex parte assessment order passed under Section 74 of the TNGST Act, 2017 could be sustained when the petitioner had not effectively participated in the proceedings.
  • Whether differences between turnover reflected in GSTR-7 and turnover reported in GSTR-3B could, by themselves, justify treating the GSTR-7 amounts as additional taxable turnover or suppressed turnover.
  • Whether the respondent was required to examine the actual nature of the operation and maintenance services rendered to the TWAD Board, the contractual terms, and the claimed exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).
  • Whether the petitioner deserved a fresh opportunity to submit its reply and supporting documents.
  • Whether such opportunity should be granted subject to any pre-deposit or other condition.

Petitioner’s Arguments

The petitioner submitted that the receipts in question arose from operation and maintenance contracts performed for the TWAD Board under Tender No. 2762/21/FCWSS.

It was argued that Clause 4.12 of the Bid Document specifically provided that GST was not applicable to the contract, and that the services were exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

The petitioner further contended that:

  • the respondent had already acknowledged possession of documents relating to AY 2022-23 in earlier proceedings but failed to consider them in the present assessment;
  • GSTR-7 merely reflects TDS deductions and cannot, by itself, establish taxable turnover or suppression of turnover;
  • the respondent failed to examine the contractual terms, exemption notification, and actual nature of the services before invoking Section 74.

Regarding failure to participate in the proceedings, the petitioner explained that the notices and hearing intimations were uploaded only on the GST portal. Being a small contractor with limited knowledge of GST procedures, the petitioner had entrusted GST compliance to a part-time accountant and depended upon him for monitoring the portal.

The petitioner also stated that, during the relevant period, the proprietor was undergoing treatment for cervical health issues and could not personally follow up the proceedings. The accountant failed to inform the petitioner about notices uploaded on the portal, resulting in non-participation and the consequential ex parte assessment.

Respondent’s Arguments

The respondent-Revenue was represented by the learned Government Advocate.

The assessment proceeded on the basis that there was a difference between the turnover reflected in GSTR-7 relating to TDS deductions and the turnover disclosed in GSTR-3B for AY 2022-23. The amounts reflected in GSTR-7 were consequently treated as additional taxable turnover, and a demand of Rs. 5,82,304/- along with interest and penalty was raised under Section 74 of the TNGST Act.

The record further shows that the assessment had been made ex parte because the petitioner did not utilise the opportunities provided in the assessment proceedings.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancies noted by the respondent;
  • the explanation offered by the assessee on merits; and
  • the reasons given for failure to avail the opportunity during the assessment proceedings.

The Court held that an opportunity could be granted to the assessee to place its submissions and relevant supporting documents before the assessing officer.

Significantly, the Court observed that while such opportunities had been extended on equitable grounds subject to appropriate conditions in other cases, in the present case the service rendered was exempt from GST and, therefore, an opportunity was granted to the petitioner-assessee without any condition.

Accordingly, the Court:

  1. Set aside the impugned assessment order dated 29.01.2026.
  2. Remanded the matter to the respondent for fresh consideration.
  3. Directed the assessee to appear before the respondent without fail and submit its reply and documents supporting its claim.
  4. Directed the respondent to consider the matter afresh and pass orders in accordance with law.
  5. Held that, since the impugned assessment order had been set aside, any attachment of the bank account made pursuant to that order would stand raised.
  6. Ordered no costs and closed the connected miscellaneous petition.

Important Clarification

The judgment is particularly significant because the Court granted a fresh opportunity without imposing any condition, expressly noting that, in this case, the service rendered was exempt from GST.

At the same time, the remand means that the assessee must appear before the assessing authority and submit the relevant reply and supporting documents. The respondent is required to reconsider the matter afresh and pass an order in accordance with law.

A further important aspect is the petitioner’s contention that GSTR-7 reflects TDS deductions and cannot, merely by itself, establish taxable turnover or suppression. The case underscores the need to examine the underlying contract, nature of services, applicable exemption notification, and supporting documents before determining tax liability on the basis of return-data differences.

The order also clarifies the consequential effect of setting aside the assessment: any bank account attachment made pursuant to the impugned assessment order stands raised.

Sections and Legal Provisions Involved

  • Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) — provision under which the impugned assessment order and demand were passed.
  • Article 226 of the Constitution of India — jurisdiction invoked for filing the writ petition.
  • Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) — exemption provision relied upon by the petitioner concerning the services rendered under the TWAD Board contract.
  • Form GSTR-7 — relevant to GST TDS deductions forming the basis of the alleged turnover discrepancy.
  • Form GSTR-3B — return with which the GSTR-7 reflected turnover was compared by the respondent.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783067036_412compressed.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.