Facts of the Case

The petitioner challenged an assessment order dated 01.12.2025 passed by the respondent under Section 73 of the TNGST Act, 2017. The assessment had been completed ex parte because the petitioner did not utilise the opportunities provided during the assessment proceedings. The writ petition was filed under Article 226 of the Constitution of India, seeking quashing of the impugned order as unconstitutional.

The impugned assessment involved three principal discrepancies. First, the department alleged excess claim of Input Tax Credit on reconciliation between GSTR-9 and GSTR-2A. Second, it alleged non-apportionment/reversal of ITC relating to exempt supplies under Rules 42 and 43. Third, it alleged ineligible ITC under Section 17(5) in respect of certain commodities. The detailed discrepancy table appearing on pages 2 and 3 of the judgment records both the assessee’s explanation on merits and the reasons for non-participation in the proceedings.

Regarding the GSTR mismatch issue, the petitioner’s case was that the difference between GSTR-2A data and GSTR-3B/annual return had been mechanically treated as an automatic excess ITC claim. According to the petitioner, suppliers frequently uploaded invoices belatedly and ITC could not be denied solely on such mismatches. An amount of Rs.1,83,377 under IGST was stated to have been added under Table 8A mismatches without verification, and the petitioner asserted that the claim could be substantiated through vendor certificates and ledger statements.

On the Rules 42 and 43 issue, the petitioner contended that the computation contained patent factual errors and that a negligible turnover of Rs.14,692 classified as “exempt supplies” had been disproportionately magnified to impose reversal of common ITC for the entire year, without correctly appreciating the true nature and character of the outward supplies.

On the Section 17(5) issue, the petitioner alleged that ordinary commercial inward supplies and logistics had been misclassified as beverages and related items under HSN Codes 2202, 2206, 2207 and 2208, resulting in ITC disallowance of Rs.6,946. The petitioner maintained that the business dealt in hardware and plywood, neither dealt in such beverage items nor claimed ITC on them, and that the classification had been made without proper verification of invoices or records.

Issues Involved

The principal issues before the Court were whether an ex parte assessment order under Section 73 of the TNGST Act should continue when the assessee sought an opportunity to place explanations and supporting documents on record; whether the alleged GSTR-9/GSTR-2A ITC mismatch required factual verification rather than mechanical treatment; whether the proposed ITC reversal under Rules 42 and 43 required reconsideration in light of the petitioner’s explanation concerning the small amount of alleged exempt turnover; whether the Section 17(5) disallowance required verification of invoices, business activity and commodity classification; and whether any additional remand condition should be imposed when the entire disputed tax amount had already been recovered from the petitioner.

Petitioner’s Arguments

The petitioner argued that the GSTR-2A and GSTR-3B/annual return difference had been mechanically treated as an automatic excess ITC claim and that delayed invoice uploads by suppliers could explain such mismatches. The petitioner specifically asserted that the IGST addition of Rs.1,83,377 could be supported through vendor certificates and ledger statements.

The petitioner further contended that the computation under Rules 42 and 43 suffered from patent factual errors because a turnover of only Rs.14,692 classified as exempt supplies had allegedly been used disproportionately to reverse common ITC for the entire year.

As regards Section 17(5), the petitioner maintained that the respondent had erroneously misclassified ordinary commercial inward supplies and logistics under beverage-related HSN codes 2202, 2206, 2207 and 2208. The petitioner stated that the business was in hardware and plywood and disputed both the alleged beverage transactions and the resulting ITC disallowance of Rs.6,946.

For failure to participate earlier, the petitioner relied upon extreme financial distress, severe medical contingencies within the family, personal health issues, unavoidable business exigencies, administrative disruptions and lack of technical tracking of the GST portal. It was submitted that these circumstances resulted in failure to notice portal notifications and reminders and prevented submission of a timely reply or attendance at the personal hearings fixed on 30.08.2025, 10.10.2025 and 21.11.2025.

The petitioner’s counsel also informed the Court that the entire disputed tax amount had already been recovered from the petitioner.

Respondent’s Arguments

The respondent Revenue was represented by counsel for the Government of Tamil Nadu. The judgment records that the Court heard both the petitioner’s counsel and counsel representing the Revenue. The assessment had been made ex parte because the petitioner did not utilise the opportunities provided during the proceedings. The order, however, does not record any elaborate separate counter-arguments on merits by the respondent against each of the petitioner’s explanations concerning the ITC mismatch, Rules 42 and 43 reversal or Section 17(5) classification. Therefore, no additional Revenue contention should be attributed beyond what is expressly reflected in the judgment.

Court Order / Findings

The Court considered the nature of the discrepancies, the explanation provided by the assessee, and the reasons placed before the Court for not availing the earlier opportunities. It held that an opportunity could be granted to the assessee to present submissions and produce relevant supporting documents before the respondent assessing officer. The Court also observed that such opportunities had been extended on equitable grounds, though ordinarily under appropriate conditions.

A decisive circumstance was that the entire disputed tax amount had already been recovered from the petitioner. In view of this fact, the Court imposed no additional condition for granting relief.

Accordingly, the High Court:

  1. Set aside the impugned assessment order dated 01.12.2025 and remanded the matter to the respondent;
  2. Directed the assessee to appear before the respondent without fail and submit the reply and documents supporting the claim;
  3. Directed the respondent to consider the matter afresh and pass orders in accordance with law;
  4. Held that, since the assessment order had been set aside, any attachment of the bank account made pursuant to the impugned order would stand raised;
  5. Made no order as to costs; and
  6. Closed the connected miscellaneous petitions.

Important Clarification

The judgment should not be read as a final adjudication accepting the petitioner’s ITC claims on merits. The High Court did not finally decide that every GSTR mismatch was permissible, that no reversal could arise under Rules 42 and 43, or that the disputed ITC was conclusively outside Section 17(5). The relief granted was a procedural and equitable remand, enabling the assessee to place replies and supporting documents before the assessing officer for fresh consideration in accordance with law.

A further significant clarification is that no additional remand condition was imposed because the entire disputed tax amount had already been recovered. Also, the lifting of the bank attachment followed from the setting aside of the assessment order pursuant to which the attachment had been made.

Sections / Rules Involved

Section 73 of the TNGST Act, 2017 — Provision under which the impugned assessment order dated 01.12.2025 was passed.

Section 17(5) of the GST law — Involved in the alleged ineligible/blocked ITC claim concerning commodities stated to have been classified under HSN Codes 2202, 2206, 2207 and 2208.

Rules 42 and 43 of the GST Rules — Involved in the alleged non-apportionment and reversal of common ITC attributable to exempt supplies.

Article 226 of the Constitution of India — Constitutional jurisdiction invoked by the petitioner for issuance of a writ of certiorari to quash the impugned assessment order.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783068585_423compressed.pdf

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