Facts of the Case

The petitioner, Tvl. Amutha Petrol Bunk, challenged the assessment order dated 28.02.2025 passed under Section 73 of the TNGST Act, 2017, as well as the appellate order dated 13.01.2026, by which the appeal was rejected.

The assessment was completed ex parte on the ground that the petitioner did not effectively participate in the proceedings. The demand primarily arose on account of:

  • Differential Reverse Charge Mechanism (RCM) liability based on mismatch between GSTR-2A and GSTR-3B.
  • Alleged excess Input Tax Credit (ITC) claim.

The petitioner sought quashing of both orders and requested a fresh opportunity of hearing under Section 75(4) of the TNGST Act.

Issues Involved

  1. Whether an ex parte assessment under Section 73 should be sustained where the assessee failed to effectively participate in the proceedings.
  2. Whether the petitioner deserved another opportunity to produce supporting documents and explain the alleged discrepancies.
  3. Whether the assessment and appellate orders should be set aside considering the principles of natural justice.

Petitioner's Arguments

The petitioner submitted that:

  • Reverse Charge liability cannot be determined merely on the basis of mismatch between GSTR-2A and GSTR-3B.
  • Applicability of RCM depends upon the notified categories under GST law and not merely because the supplier is an unregistered person.
  • Transport services attract RCM only if the statutory conditions applicable to Goods Transport Agency (GTA) services are satisfied.
  • The department failed to verify whether the transactions actually attracted RCM.
  • The ITC claimed was based upon genuine business transactions duly recorded in the books of accounts.
  • No transaction-wise verification was conducted before confirming the demand.
  • Although a reply had been filed, adequate supporting documents could not be produced because the petitioner depended upon a part-time accountant and remained unaware of the notices.

Respondent's Arguments

The Revenue contended that:

  • The petitioner failed to utilize the opportunities provided during assessment proceedings.
  • The assessment was therefore rightly completed ex parte.
  • The appellate authority also rejected the appeal in accordance with law.

Court Order / Findings

The Madras High Court observed that:

  • The nature of the discrepancies, the explanation offered by the petitioner, and the reasons for non-participation justified granting one more opportunity.
  • Courts have consistently granted such equitable relief subject to appropriate conditions.
  • Since the petitioner had already deposited 10% of the disputed tax while filing the statutory appeal, a further deposit of 15% of the disputed tax would sufficiently safeguard the interests of the Revenue.

Accordingly, the Court ordered that:

  • The petitioner shall deposit 15% of the disputed tax within four weeks from receipt of the web copy of the order.
  • Upon such deposit, both the assessment order dated 28.02.2025 and the appellate order dated 13.01.2026 shall stand set aside.
  • The matter shall stand remanded to the assessing authority for fresh adjudication.
  • The petitioner shall appear before the assessing authority and produce all relevant replies and supporting documents.
  • The assessing authority shall reconsider the matter and pass a fresh order in accordance with law.
  • Any bank account attachment made pursuant to the impugned assessment order shall automatically stand lifted.

Important Clarification

This judgment reiterates that:

  • Ex parte GST assessments may be set aside where sufficient cause is shown for non-participation.
  • Courts may balance the interests of both the taxpayer and the Revenue by directing payment of a portion of the disputed tax while granting a fresh opportunity.
  • RCM liability cannot be confirmed merely on the basis of return mismatches without examining the statutory conditions governing reverse charge.
  • ITC disallowance requires proper verification and cannot be sustained through a mechanical approach.
  • Compliance with the principles of natural justice under Section 75(4) remains an important requirement in GST adjudication.

Sections Involved

  • Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017
  • Section 75(4) of the Tamil Nadu Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784626327_1780compressed.pdf

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