Facts of the Case

The petitioner, Manoharan, challenged the assessment order dated 29.11.2025 passed by the State Tax Officer, Nagercoil-2 Assessment Circle, 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 assessment proceedings involved the following discrepancies:

  1. Mismatch/excess claim of Input Tax Credit between Forms GSTR-3B/GSTR-09 and GSTR-2A amounting to Rs. 6,789.
  2. Excess ITC reversal reported in Form GSTR-09 compared with Form GSTR-3B amounting to Rs. 2,910.
  3. Reversal/disallowance of ITC under Section 17(5) amounting to Rs. 88,926, relating to insurance, maintenance of machinery and specified electrical goods.

The petitioner explained that he could not effectively participate in the proceedings because of his advanced age of 74 years, severe health issues, unavoidable business exigencies, financial distress and administrative disruptions in the proprietary concern. Consequently, he could not properly handle digital notifications, submit a detailed formal reply or attend the personal hearings scheduled on 29.08.2025, 10.10.2025 and 21.11.2025. These explanations are specifically summarised in the comparative table appearing on page 3 of the judgment.

Issues Involved

The principal issues before the High Court were:

  1. Whether the ex parte assessment order passed under Section 73 of the TNGST Act, 2017 should be sustained when the petitioner had failed to avail earlier opportunities but subsequently furnished reasons for such non-participation.
  2. Whether the petitioner should be granted a fresh opportunity to substantiate his ITC claims with supporting documents.
  3. Whether ITC could be denied merely on account of mismatch with Form GSTR-2A, particularly in light of the petitioner’s reliance on departmental circulars, including Circular No. 183/15/2022-GST.
  4. Whether excess ITC reversal disclosed in Form GSTR-09 vis-à-vis Form GSTR-3B could legitimately result in a further tax demand.
  5. Whether ITC relating to insurance, machinery maintenance and specified electrical goods was liable to be blocked under Section 17(5) or could qualify under Section 16(1) as expenditure incurred in the course or furtherance of business.
  6. Whether the matter deserved remand without the usual condition of a 25% deposit, considering the submission that the entire tax liability had already been paid.

Petitioner’s Arguments

The petitioner contended that the mismatch of Rs. 6,789 between Forms GSTR-3B/GSTR-09 and GSTR-2A could not, by itself, justify denial of ITC. It was argued that, for the periods 2017-18 to 2021-22, departmental circulars, including Circular No. 183/15/2022-GST, contemplated appropriate verification and an opportunity to furnish supplier certificates or alternative supporting material rather than mechanical rejection solely on the basis of GSTR-2A mismatch.

Regarding the alleged excess ITC reversal of Rs. 2,910, the petitioner submitted that reversal of a higher ITC amount in the annual return than that declared in Form GSTR-3B operated to the financial advantage of the Revenue. Therefore, treating such difference as an additional tax demand was stated to be logically contradictory and capable of resulting in double taxation.

As regards the proposed reversal/disallowance of Rs. 88,926 under Section 17(5), the petitioner argued that he was engaged in the auto stores business dealing with transport equipment. Expenditure incurred towards maintenance, repair and protection of transport machinery and business assets was claimed to have been directly used in the course or furtherance of business under Section 16(1) and, therefore, should not be mechanically treated as blocked credit under Section 17(5).

The petitioner further explained that his non-participation was not deliberate and arose from advanced age, health issues, business exigencies, financial distress and administrative disruptions. It was also specifically submitted before the Court that the entire tax liability had already been paid.

Respondent’s Arguments

The Revenue was represented by the learned Government Advocate/Additional Government Pleader. The assessment order had been passed ex parte on the basis that the petitioner failed to utilise the opportunities provided during the assessment proceedings.

The Revenue’s position, as reflected from the assessment context recorded by the Court, rested on the discrepancies concerning ITC mismatch, excess ITC reversal and disallowance of specified ITC under Section 17(5). The judgment does not record any detailed independent counter-arguments by the respondent on the merits of each individual discrepancy beyond the basis of the assessment and the petitioner’s failure to avail the earlier opportunities.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancies;
  • the explanation offered by the assessee on merits;
  • the reasons for failure to avail the earlier opportunities; and
  • the submission that the entire tax liability had already been paid.

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

Significantly, the Court observed that although it usually imposes a condition of 25% deposit while remitting such matters, in the present case the petitioner’s counsel submitted that the entire tax liability had already been paid, and the Court recorded that submission.

Accordingly, the High Court ordered:

  1. Since the entire tax amount had already been paid, the impugned assessment order dated 29.11.2025 was set aside.
  2. The matter was remitted to the respondent assessing authority for fresh consideration.
  3. The petitioner was directed to appear before the respondent without fail and submit a reply along with documents supporting the claim.
  4. The respondent was directed to consider the matter afresh and pass orders in accordance with law.
  5. Since the impugned order was set aside, any attachment of the bank account made pursuant to the impugned order was directed to be raised/lifted.
  6. No costs were awarded, and the connected miscellaneous petitions were closed.

Important Clarification

The High Court did not finally adjudicate the substantive admissibility of the disputed ITC claims on merits. It did not conclusively hold that:

  • every GSTR-2A mismatch automatically entitles the taxpayer to ITC;
  • the disputed credits relating to insurance, machinery maintenance or electrical goods are necessarily admissible under Section 16(1); or
  • Section 17(5) is inapplicable to all such expenditures.

The order is fundamentally a remand order granting one more opportunity to the petitioner to file replies and supporting documents, after which the assessing authority must reconsider the matter afresh in accordance with law.

Further, the Court’s decision not to impose the usual 25% deposit condition was linked to the specific submission, recorded by the Court, that the entire tax liability had already been paid. Therefore, the ruling should not be read as laying down a universal proposition that remand in every ex parte GST assessment case must be granted without any pre-deposit condition.

Sections / Legal Provisions Involved

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

Section 16(1) of the GST law – Relied upon in support of the contention that eligible inward supplies used in the course or furtherance of business should qualify for ITC, subject to statutory conditions.

Section 17(5) of the GST law – Relevant to the disputed blocked-credit issue involving insurance, machinery maintenance and specified electrical goods.

Article 226 of the Constitution of India – Jurisdiction invoked for filing the writ petition seeking a Writ of Certiorari against the impugned assessment order.

Circular No. 183/15/2022-GST – Referred to in the petitioner’s explanation concerning verification of ITC mismatch and the opportunity to furnish supporting supplier certificates or alternative verification material.


Link to download the order -https://www.mytaxexpert.co.in/uploads/1783070238_438compressed.pdf

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