Facts of the Case

The petitioner, Tvl Sugam Pharmacy, challenged the order dated 05.02.2026 whereby the State Tax Officer rejected its rectification application filed under Section 161 of the Tamil Nadu Goods and Services Tax Act, 2017. The dispute originated from a Show Cause Notice alleging discrepancies relating to the claim of ineligible Input Tax Credit (ITC) and the levy of late fee for delayed filing of GSTR-1.

As the petitioner failed to participate in the assessment proceedings, an ex parte assessment order under Section 73 was passed on 18.09.2025. Subsequently, the rectification application was rejected, and the appeal before the Appellate Authority was also dismissed on 20.02.2026.

The petitioner approached the Madras High Court seeking quashing of the rectification order and, during the hearing, sought permission to challenge all three orders.

Issues Involved

  1. Whether the rejection of the rectification application under Section 161 was legally sustainable.
  2. Whether the High Court could interfere with an ex parte assessment order passed under Section 73 despite dismissal of the statutory appeal.
  3. Whether the petitioner deserved another opportunity to produce evidence and defend its claim.
  4. Whether the assessment, rectification, and appellate orders could be set aside subject to suitable conditions.

Petitioner's Arguments

  • The petitioner submitted that it could not participate in the assessment proceedings due to the reasons explained in the affidavit.
  • It was contended that, if another opportunity were granted, the petitioner would file a detailed reply together with all supporting documents substantiating its Input Tax Credit claim.
  • During the hearing, the petitioner also sought permission to challenge the original assessment order and the appellate order in addition to the rectification order.

Respondent's Arguments

  • The Revenue submitted that the petitioner neither appeared before the Assessing Authority nor filed the appeal within the prescribed limitation period.
  • It was argued that the assessment order and the appellate order had attained finality.
  • The respondents further contended that the writ petition initially challenged only the rectification order and not the assessment or appellate orders.

Court Order / Findings

The Madras High Court observed that, considering the explanation offered by the petitioner and its readiness to participate in fresh proceedings, one more opportunity could be granted in the interest of justice.

Accordingly, the Court:

  • Permitted the petitioner to challenge all the three orders.
  • Directed the petitioner to deposit 25% of the disputed tax within four weeks.
  • Ordered that, upon such deposit, the following orders shall stand set aside:
    • Assessment order passed under Section 73 dated 18.09.2025.
    • Rectification order passed under Section 161 dated 05.02.2026.
    • Appellate order dated 20.02.2026.
  • Remanded the matter back to the Assessing Authority.
  • Granted liberty to the petitioner to submit a detailed reply along with supporting documents.
  • Directed the Assessing Authority to consider the reply and pass a fresh order in accordance with law after providing due opportunity.

Important Clarification

  • The High Court reaffirmed that, in appropriate cases, even ex parte GST assessment orders may be set aside to ensure substantial justice.
  • Relief was granted only after imposing the condition of depositing 25% of the disputed tax, thereby balancing the interests of both the taxpayer and the Revenue.
  • The judgment reiterates that genuine taxpayers may receive an additional opportunity to substantiate their claims where sufficient cause for non-participation is shown.

Sections Involved

  • Section 73 – Determination of tax not paid or short paid or erroneously refunded or Input Tax Credit wrongly availed or utilised.
  • Section 161 – Rectification of errors apparent on the face of the record.
  • Article 226 of the Constitution of India – Writ Jurisdiction of the High Court.

Link to Download the Order  https://mytaxexpert.co.in/uploads/1784874700_1949compressed.pdf

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