Facts of the Case

The petitioner, Gp Cell Point, represented by its Proprietor N. Rethinagiri, challenged an assessment order passed by the respondent, the Deputy State Tax Officer-1, Kulithalai Assessment Circle. The assessment proceedings related to Assessment Year 2021-22 and were undertaken under Section 73 of the GST law.

The assessment was completed ex parte because the petitioner had not utilised the opportunities provided during the adjudication proceedings.

The principal discrepancy concerned an alleged excess claim of Input Tax Credit (ITC) of Rs. 1,44,470, comprising SGST of Rs. 72,235 and CGST of Rs. 72,235, on the ground of a mismatch between GSTR-3B and GSTR-2A for Assessment Year 2021-22. The respondent treated the alleged differential amount as ineligible ITC and levied tax, interest and penalty.

The petitioner approached the High Court seeking quashing of the impugned assessment order as cryptic, non-speaking, illegal, arbitrary and without jurisdiction, with a consequential direction for fresh assessment after affording an opportunity of hearing. The judgment’s table on page 3 specifically records the discrepancy, the assessee’s explanation on merits, and the reason for failure to avail the earlier opportunity.

Issues Involved

  1. Whether the ex parte assessment arising from the alleged mismatch between GSTR-3B and GSTR-2A could be sustained when the assessee claimed that there was no actual mismatch and that the ITC was supported by genuine purchase invoices and duly accounted transactions.
  2. Whether the petitioner should be granted a fresh opportunity to submit a detailed reply and supporting documents before the assessing authority.
  3. Whether failure to participate in the assessment proceedings, allegedly because notices were uploaded only on the GST portal and the person handling GST compliance failed to inform the petitioner, justified reopening the opportunity of adjudication.
  4. Whether equitable relief could be granted subject to an appropriate condition, namely deposit of a portion of the disputed tax amount.
  5. Whether consequential bank account attachment made pursuant to the impugned assessment should continue after the assessment order was set aside.

Petitioner’s Arguments

The petitioner contended that there was absolutely no mismatch between GSTR-3B and GSTR-2A. According to the petitioner:

  • The ITC claimed was supported by genuine purchase invoices and duly accounted transactions.
  • The petitioner possessed return summaries and records establishing the correctness of the ITC availed.
  • The demand had been raised without proper reconciliation or verification of records.
  • The alleged excess ITC of Rs. 1,44,470 had therefore been wrongly treated as ineligible ITC, resulting in levy of tax, interest and penalty.

Regarding non-participation in the proceedings, the petitioner explained that all notices and communications were uploaded only on the GST portal. The petitioner was dependent on a part-time accountant for GST compliance. The accountant was stated to have been on medical leave during the relevant period and failed to inform the petitioner about the proceedings. Consequently, the petitioner could not submit a detailed reply or effectively participate in the adjudication process.

Respondent’s Arguments

The Revenue was represented by the learned Government Advocate.

The assessment had been made ex parte because the petitioner did not utilise the opportunities provided during the proceedings. The respondent’s case, as reflected in the impugned assessment, was based on the alleged mismatch between GSTR-3B and GSTR-2A, resulting in alleged excess availment of ITC amounting to Rs. 1,44,470, consisting of equal SGST and CGST components of Rs. 72,235 each.

The alleged difference was treated as ineligible ITC, leading to the consequential levy of tax, interest and penalty.

Court Order / Findings

The High Court considered:

  • the nature of the discrepancies noted;
  • the explanation offered by the assessee on merits; and
  • the reason advanced 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.

At the same time, the Court clarified that such opportunities had been extended on equitable grounds subject to appropriate conditions. Accordingly, the petitioner was granted relief on the condition of depositing 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  1. 25% Pre-Deposit: Within four weeks of receiving the web copy of the order, the petitioner shall deposit 25% of the disputed tax amount with the respondent, without waiting for a certified copy.
  2. Assessment Order to Stand Set Aside: Upon such deposit, the impugned assessment order shall stand set aside and the matter shall stand remanded to the respondent.
  3. Fresh Adjudication: The assessee shall appear before the respondent without fail and submit its reply and documents supporting its claim.
  4. Fresh Order in Accordance with Law: The respondent shall reconsider the matter afresh and pass orders in accordance with law.
  5. Bank Attachment Raised: Since the impugned assessment order was set aside, any attachment of the bank account made pursuant to that order shall stand raised.
  6. No Costs: No order as to costs was made, and the connected miscellaneous petition was closed.

Important Clarification

A significant clarification arising from the judgment is that an assessee’s failure to participate in GST adjudication proceedings does not, in every case, permanently foreclose a fresh opportunity of hearing. Where the Court considers the nature of the discrepancy, the assessee’s substantive explanation on merits and the reason for non-participation, it may grant a fresh opportunity on equitable grounds, subject to appropriate conditions.

In the present case, the High Court did not finally adjudicate the correctness of the ITC claim or conclusively decide whether a mismatch between GSTR-3B and GSTR-2A actually existed. Instead, it enabled the petitioner to place its reply, invoices, return summaries, reconciliation and supporting documents before the assessing authority for fresh consideration.

The relief was expressly conditional upon a 25% deposit of the disputed tax amount within four weeks from receipt of the web copy of the order.

Further, the judgment contains an apparent date inconsistency that should be preserved and noticed rather than silently altered: the writ prayer and opening portion refer to the challenged assessment order as dated 18.12.2025, whereas the operative direction states that, upon deposit, the impugned order dated 24.10.2025 shall stand set aside. This is an important textual clarification arising from the judgment itself.

Sections

  • Section 73 of the CGST Act, 2017 — Determination of tax not paid, short paid, erroneously refunded, or ITC wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts.
  • Section 73 of the TNGST Act, 2017 — Corresponding State GST provision invoked in relation to the assessment proceedings.
  • Article 226 of the Constitution of India — Writ jurisdiction of the High Court.
  • Input Tax Credit provisions under the GST framework — Relevant to the alleged excess availment of ITC.
  • GSTR-3B and GSTR-2A reconciliation — Central factual basis of the disputed ITC demand.


Link to download the order -https://www.mytaxexpert.co.in/uploads/1783068578_422compressed.pdf


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