Facts of the Case

The petitioner, Tvl. Cape Infrastructure (P) Ltd., challenged the assessment order dated 09.03.2024 passed by the State Tax Officer under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017. The assessment was completed ex parte on the ground that the petitioner had not responded to the notices issued during the assessment proceedings.

The assessment was primarily based on two allegations:

  • The Revenue treated the "Revenue from Operations" reflected in the Profit & Loss Account as taxable turnover and levied GST at 18%, along with interest and penalty.
  • Additions were also made on account of GSTR-2A and GSTR-3B mismatch.

The petitioner approached the Madras High Court seeking quashing of the assessment order on the ground that it was cryptic, non-speaking, arbitrary, and passed without providing an effective opportunity of hearing.

Issues Involved

  1. Whether an ex parte assessment order passed under Section 74 of the TNGST Act, 2017 without effective opportunity deserves to be set aside.
  2. Whether receipts arising from the sale of land/immovable property, covered under Schedule III of the GST law, could be treated as taxable turnover.
  3. Whether non-service of notices through statutory modes under Section 169 of the TNGST Act justified granting another opportunity to the assessee.
  4. Whether the assessment required reconsideration in the interest of natural justice.

 

Petitioner's Arguments

The petitioner submitted that:

  • The major receipts reflected in the Profit & Loss Account related to the sale of land and immovable property, which fall under Schedule III and are outside the scope of GST.
  • Construction and works contract services were separately accounted for, GST was discharged on taxable transactions, and Input Tax Credit was availed only in accordance with Section 16(2) of the GST law.
  • The petitioner's GST registration had already been cancelled on 12.10.2022, much before the impugned proceedings, due to which effective access to the GST portal was unavailable.
  • All notices were uploaded only on the GST portal and were not served through any alternative statutory mode as contemplated under Section 169.
  • Since the petitioner depended upon a part-time accountant, it remained unaware of the notices and therefore could not participate in the assessment proceedings.

Respondent's Arguments

The Revenue submitted that:

  • The assessment order had been passed after providing opportunities through the GST portal.
  • Since the petitioner failed to utilise the opportunities made available, the assessment was rightly completed ex parte under Section 74 of the TNGST Act, 2017.

Court Order / Findings

The Madras High Court observed that:

  • The assessment had been completed ex parte because the petitioner did not participate in the proceedings.
  • The petitioner had raised substantial issues on merits, particularly that the major receipts represented sale of land/immovable property, which falls under Schedule III and is outside the ambit of GST.
  • The explanation regarding cancellation of GST registration, lack of effective portal access, and absence of service through alternative statutory modes deserved consideration.
  • Considering the nature of the disputes and the explanation offered, the petitioner should be granted one more opportunity to produce documents and substantiate its claims before the assessing authority.
  • Accordingly, the assessment order dated 09.03.2024 was set aside and the matter was remanded to the respondent for fresh adjudication in accordance with law.
  • The petitioner was directed to appear before the assessing authority and submit all relevant documents and explanations.
  • The Court further directed that any bank account attachment made pursuant to the impugned assessment order would automatically stand lifted upon setting aside the assessment.

Important Clarification

  • Sale of land and immovable property, falling under Schedule III of the GST law, is outside the scope of GST and requires proper examination before treating such receipts as taxable turnover.
  • Mere uploading of notices on the GST portal may not always be sufficient where statutory service requirements under Section 169 are disputed.
  • Courts may exercise equitable jurisdiction to restore assessment proceedings where sufficient cause is shown for non-participation.
  • Ex parte assessment orders under Section 74 can be remanded where principles of natural justice have not been effectively complied with.
  • Upon remand of an assessment, consequential recovery actions such as bank account attachment may also be withdrawn.

Sections Involved

  • Section 74 – Tamil Nadu Goods and Services Tax Act, 2017
  • Section 169 – Tamil Nadu Goods and Services Tax Act, 2017
  • Section 16(2) – Tamil Nadu Goods and Services Tax Act, 2017
  • Schedule III – Central Goods and Services Tax Act, 2017
  • Article 226 – Constitution of India

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784626965_1783compressed.pdf

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