Facts of the Case

The petitioner, Tvl. Sugam Pharmacy, represented by its proprietor M. Sheik Abdulla, filed a writ petition under Article 226 of the Constitution of India challenging the order dated 05 February 2026 bearing reference No. ZD3302260430603.

The impugned order rejected the petitioner’s application for rectification filed under Section 161 of the Tamil Nadu Goods and Services Tax Act, 2017.

Upon considering the materials on record, the Madras High Court noted that a Show Cause Notice had been issued to the petitioner alleging discrepancies relating to:

  1. the claim of ineligible Input Tax Credit (ITC); and
  2. the levy of late fee in respect of belated filing of GSTR-1.

The petitioner did not avail the opportunity provided in the proceedings. Consequently, an ex parte assessment order under Section 73 of the TNGST Act, 2017 was passed on 18 September 2025.

Thereafter, the petitioner filed a rectification application under Section 161 of the TNGST Act. The rectification application was rejected by order dated 05 February 2026.

Following rejection of the rectification petition, the petitioner filed an appeal. The Appellate Authority also rejected the appeal by order dated 20 February 2026.

During the writ proceedings, the Appellate Deputy Commissioner (State Taxes) (GST Appeal), Erode was suo motu impleaded as the second respondent because the Court considered the Appellate Authority to be a necessary party to the writ proceedings.

Issues Involved

The principal issues before the Madras High Court were:

  1. Whether the petitioner should be granted one more opportunity to respond to the discrepancies concerning alleged ineligible Input Tax Credit and late fee for belated filing of GSTR-1.
  2. Whether the ex parte assessment order dated 18 September 2025 passed under Section 73 of the TNGST Act should continue when the petitioner expressed willingness to file a reply and produce supporting documents.
  3. Whether the rejection order dated 05 February 2026 passed on the rectification application under Section 161 of the TNGST Act should be interfered with.
  4. Whether the appellate order dated 20 February 2026 should also be set aside despite the original writ prayer being directed against the rectification rejection order.
  5. Whether relief could be granted subject to a condition requiring the petitioner to deposit a portion of the disputed tax amount.
  6. Whether the petitioner could be permitted, on an oral application made during the hearing, to impugn all three orders concerning the assessment, rectification and appellate proceedings.

Petitioner’s Arguments

Learned counsel appearing for the petitioner submitted that the petitioner could not avail the opportunity before the Authority for the reasons stated in the affidavit.

It was further submitted that if one more opportunity were granted, the petitioner would:

  • file a proper reply;
  • produce documents in support of the claim;
  • appear before the Authority without fail; and
  • substantiate its case concerning the alleged discrepancies.

During the proceedings, learned counsel for the petitioner also made an oral application seeking permission to impugn all three orders, namely:

  1. the assessment order dated 18 September 2025 passed under Section 73 of the TNGST Act;
  2. the rectification rejection order dated 05 February 2026 passed under Section 161 of the TNGST Act; and
  3. the appellate order dated 20 February 2026.

Respondents’ Arguments

Learned Additional Government Pleader appearing for the respondents opposed the petitioner’s case.

It was submitted that:

  1. the petitioner neither appeared before the Assessing Authority nor availed the opportunity provided;
  2. the petitioner did not file the appeal within the prescribed time;
  3. consequently, the relevant orders had attained finality;
  4. those orders had not even been specifically challenged; and
  5. only the rectification order was under challenge before the High Court.

Thus, the respondents contended that interference was not warranted in the circumstances.

Court’s Findings

The Madras High Court considered the explanation offered by the petitioner regarding the alleged discrepancies.

The Court also took into account the petitioner’s specific submission that, if granted another opportunity, it would:

  • appear before the Authority without fail;
  • submit a reply; and
  • produce supporting documents in support of its claim.

At the stage of hearing, the petitioner made an oral application seeking permission to challenge all three orders. Considering the nature of the prayer, the High Court accepted the oral request.

The Court formed the view that one more opportunity could be granted to the petitioner, but such opportunity was made conditional upon the petitioner depositing 25% of the disputed tax amount.

Accordingly, the High Court adopted a conditional restoration approach by linking the setting aside of the assessment, rectification and appellate orders to compliance with the requirement of depositing 25% of the disputed tax.

Court Order / Operative Directions

The Madras High Court disposed of the writ petition on the following terms:

1. Deposit of 25% of Disputed Tax

Within four weeks from the date of receipt of a web copy of the Court’s order, the petitioner shall deposit 25% of the disputed tax as assessed by the order dated 18 September 2025.

2. Consequence Upon Deposit

Upon such deposit, the following three orders shall stand set aside:

  • the assessment order dated 18 September 2025 passed under Section 73 of the TNGST Act, 2017;
  • the order dated 05 February 2026 passed under Section 161 of the TNGST Act, 2017; and
  • the order dated 20 February 2026 passed by the Appellate Authority.

3. Remand of Matter

Upon compliance with the deposit condition, the matter shall stand remanded back to the file of the respondent.

4. Opportunity to File Reply and Documents

The petitioner shall be at liberty to:

  • appear before the respondent;
  • file its reply;
  • submit supporting documents in support of its claim; and
  • avail the opportunities provided without fail.

5. Fresh Order by the First Respondent

Upon filing of the reply and supporting documents, the first respondent shall consider the same in the manner known to law and pass fresh orders in accordance with law.

6. Costs

The Court ordered no costs.

Consequently, the connected miscellaneous petition was closed.

Important Clarification

The judgment is significant because the High Court did not unconditionally set aside the GST proceedings merely because the assessment had been passed ex parte.

Instead, the Court balanced the petitioner’s request for one more opportunity with the procedural objections raised by the Revenue.

The petitioner had neither appeared before the Assessing Authority nor, according to the Revenue’s submission, filed the appeal within the prescribed time. The Revenue therefore argued that the orders had attained finality and that only the rectification rejection order had actually been challenged.

Despite these objections, the High Court considered:

  • the explanation offered concerning the alleged discrepancies;
  • the petitioner’s willingness to appear before the Authority;
  • the undertaking to submit a reply;
  • the willingness to produce supporting documents; and
  • the oral request to impugn all three orders.

The Court therefore permitted one more opportunity, but protected the Revenue’s interest by imposing a mandatory condition of deposit of 25% of the disputed tax amount.

A particularly important aspect of the order is that the setting aside of all three orders is expressly dependent upon the required deposit. Thus, the relief operates upon compliance with the 25% deposit condition.

Sections Involved

·         Section 73 of the TNGST Act, 2017

·         Section 161 of the TNGST Act, 2017

·         Article 226 of the Constitution of India

Link to download the order - https://mytaxexpert.co.in/uploads/1783663770_1484compressed.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.