Facts of the Case

Tvl. Sellasamy Murugan, a proprietary concern registered under GSTIN 33EBDPM0701G1Z9, challenged an assessment order dated 04.05.2023 passed by the Deputy State Tax Officer-2, Rajapalayam, demanding Rs.39,96,657 towards SGST, CGST and IGST (including penalty) for the tax period 2021-2022. The petitioner had been issued three notices (15.07.2022, 18.10.2022 and 28.11.2022) and had filed a reply on 12.10.2022, contending that although vehicles had been purchased during the financial year, there was no corresponding sale or service rendered during that period. The second respondent rejected this explanation as unacceptable and passed the impugned demand order without disclosing the manner in which the tax liability had been computed.

Issues Involved

  1. Whether the impugned assessment order, passed without considering the petitioner's explanation and without disclosing the basis of the tax computation, complied with the principles of natural justice under the GST Act.

Petitioner's Arguments

  • The petitioner's reply dated 12.10.2022, explaining that there was no sale or service during the financial year 2021-2022 despite the purchase of vehicles, was not properly considered by the respondents before passing the impugned order.

Respondent's Arguments

  • The Additional Government Pleader submitted that three notices had duly been issued to the petitioner, that the petitioner had filed a reply on 12.10.2022, and that the impugned order had been passed after considering that reply.

Court Order/Findings

  • The Court noted that the second respondent had simply rejected the petitioner's explanation — that there was no sale or service during the relevant financial year — as "not acceptable", without further reasoning.
  • The Court found that the impugned order did not disclose the manner in which the tax had been levied, and on that ground set aside the assessment order dated 04.05.2023.
  • The writ petition was allowed with a direction to the respondents to conduct a fresh enquiry after affording the petitioner an opportunity of hearing, and to pass a reasoned order specifically considering the petitioner's case that there was no sale or service during the relevant period.

Important Clarification

  • An assessment order under the GST Act must disclose the manner and basis on which the tax liability has been computed; a bare rejection of the assessee's explanation as "not acceptable", without reasoning, falls short of the requirements of natural justice and is liable to be quashed.

Sections Involved

  • Central Goods and Services Tax Act, 2017 and the corresponding State Goods and Services Tax Act, 2017 — governing the assessment and demand of SGST/CGST/IGST giving rise to the impugned order.
  • Article 226, Constitution of India — writ jurisdiction invoked to challenge the assessment order on natural justice grounds.

Decision – In Favour of

The writ petition was allowed in favour of the assessee. The impugned assessment order was set aside and the matter remanded for a fresh, reasoned enquiry after hearing the petitioner, with no finding recorded on the ultimate tax liability itself.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case No.: W.P.(MD)No.27806 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice B. Pugalendhi
  • Decision Date: 28.11.2023
  • Disposal Nature: Allowed - assessment order for SGST/CGST/IGST demand set aside; remanded for fresh enquiry with opportunity of hearing

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