Facts of the Case

The petitioner, Tvl. Jumbo Fireworks India Private Limited, challenged the assessment order dated 28.07.2021 passed by the Assistant Commissioner (ST) under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) for the assessment year 2018-19.

The assessment was completed ex parte on account of the petitioner's alleged failure to respond during the assessment proceedings. The primary allegation was a mismatch between GSTR-1 and GSTR-3B returns, resulting in tax demand.

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

Issues Involved

  1. Whether an ex parte assessment under Section 73 of the TNGST Act could be sustained when the dealer claimed that the GSTR-1 and GSTR-3B mismatch arose only due to timing differences.
  2. Whether failure to receive proper notice under Section 169 of the TNGST Act justified setting aside the assessment.
  3. Whether the assessee should be granted another opportunity to produce reconciliation statements and supporting records before the Assessing Officer.

Petitioner's Arguments

The petitioner submitted that:

  • The difference between GSTR-1 and GSTR-3B arose only because sales were reported in GSTR-1 at the time of dispatch, whereas the corresponding tax liability was discharged later through GSTR-3B.
  • The entire GST liability had already been discharged through subsequent GSTR-3B returns.
  • There was no suppression of turnover or tax evasion.
  • Proper reconciliation of returns would completely eliminate the disputed demand.
  • The petitioner's GST registration had been cancelled with effect from 04.01.2019, and therefore the petitioner had no occasion to regularly access the GST portal.
  • No proper notice was served in accordance with Section 169 of the TNGST Act.
  • The petitioner remained unaware of the proceedings because communication was made only through the GST portal and the matter had been handled by the accountant.
  • The assessment was therefore completed without granting an effective opportunity of personal hearing.

Respondent's Arguments

The Revenue submitted that:

  • Adequate opportunities had already been provided during the assessment proceedings.
  • Since the petitioner failed to participate, the assessment was rightly completed ex parte under the provisions of the TNGST Act.
  • The assessment order was therefore valid and enforceable.

Court Order / Findings

After examining the record, the Madras High Court observed that:

  • The dispute essentially related to reconciliation of GSTR-1 and GSTR-3B returns.
  • The petitioner had furnished a plausible explanation that the mismatch was merely due to timing differences and that the entire tax liability had subsequently been discharged.
  • The petitioner had also explained the circumstances under which it failed to participate in the assessment proceedings.
  • Considering the nature of the dispute, the assessee deserved one more opportunity to place reconciliation statements and supporting documents before the Assessing Officer.
  • The Court further noted that the respondent had already recovered ₹5,75,286, and therefore no additional condition was required while granting relief.

Accordingly, the High Court:

  • Set aside the assessment order dated 28.07.2021.
  • Remanded the matter to the Assessing Officer for fresh adjudication.
  • Directed the petitioner to appear before the authority and submit all supporting documents.
  • Directed the Assessing Officer to pass a fresh order strictly in accordance with law after granting proper opportunity.
  • Ordered that any attachment of the petitioner's bank account made pursuant to the impugned assessment shall stand lifted.
  • Closed the connected miscellaneous petitions without costs.

Important Clarification

This judgment reiterates that:

  • Mere GSTR-1 vs GSTR-3B mismatch does not automatically establish tax evasion.
  • Where reconciliation is possible and tax has already been paid, the Assessing Officer should examine the supporting records before confirming any demand.
  • Ex parte assessments should not be sustained where the assessee demonstrates sufficient cause for non-participation and seeks an opportunity to produce evidence.
  • Proper compliance with Section 169 regarding service of notices and adherence to the principles of natural justice remain essential before finalising assessments.
  • Courts may remand matters for fresh adjudication where denial of opportunity results in prejudice to the assessee.

Sections Involved

  • Section 73 – Tamil Nadu Goods and Services Tax Act, 2017
  • Section 169 – Tamil Nadu Goods and Services Tax Act, 2017
  • Article 226 – Constitution of India

Link to Download the Order-

https://mytaxexpert.co.in/uploads/1784627477_1785compressed.pdf

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