Facts of the Case

The petitioner, Tvl.Maruthi Trading Corporation, represented by its proprietor P.Chandran, is a registered contractor engaged in maintenance of street lights for the Municipalities of Theni and Dindigul Districts. The petitioner had reported its turnover for the year 2020-2021 as Rs.62,92,708/- under GSTIN 33ANAPC4782E1ZG. However, the Commissioner, Kodaikanal Municipality (second respondent), erroneously reported the petitioner's turnover as Rs.2,62,45,600/- to the GST Department. On the basis of this mismatch, the Assistant Commissioner (CT), Theni-I Circle, passed an assessment order dated 06.06.2023 demanding Rs.77,50,180/- as tax on the alleged turnover mismatch, which the petitioner challenged by way of this writ petition under Article 226 of the Constitution.

Issues Involved

  1. Whether the assessment order based on an erroneous turnover figure furnished by the Municipality was sustainable.
  2. Whether the petitioner was entitled to a fresh assessment once the Municipality itself admitted the error and issued a corrected certificate.
  3. Whether the Assistant Commissioner ought to have verified the turnover figure with the contracting Municipality before raising a demand for turnover mismatch.

Petitioner's Arguments

  • The reported turnover of Rs.62,92,708/- was correct, and the mismatch arose solely because the Municipality's tax consultant wrongly reported an inflated figure of Rs.2,62,45,600/- to the GST authority.
  • The Municipality had already issued a fresh, corrected certificate, which the petitioner sought to place before the Assistant Commissioner for a fresh assessment.
  • The impugned demand of Rs.77,50,180/- was raised without accounting for the correction, and the petitioner sought an opportunity of hearing for redoing the assessment.

Respondent's Arguments

  • The Kodaikanal Municipality, in its counter affidavit, admitted that its taxation consultant had mistakenly reported the petitioner's turnover for 2020-2021 and 2021-2022 at inflated figures instead of the actual amounts of Rs.62,92,708/- and Rs.1,09,10,226/- respectively.
  • The Municipality accepted that this error led to the impugned assessment order and stated that the order required modification by the Assistant Commissioner based on the correct figures.
  • The Municipality's counter affidavit specified the actual deductions towards income tax, labour welfare fund and GST from the payments made to the petitioner, confirming that the correct payable amount for 2020-2021 was around Rs.56,55,210/-, consistent with the petitioner's own reported turnover rather than the inflated figure earlier communicated.

Court Order/Findings

  • In view of the Municipality's own admission of the reporting error in its counter affidavit, the Court set aside the impugned assessment order and directed the Assistant Commissioner to redo the assessment for 2020-21 based on the fresh certificates issued by the Municipality.
  • The first respondent was directed to provide the petitioner an opportunity of hearing while redoing the assessment.
  • No costs were awarded, and the connected miscellaneous petition was closed.

Important Clarification

Where a GST demand for turnover mismatch is founded on third-party data (such as figures reported by a government body or contracting authority) that is later admitted to be erroneous, the assessee is entitled to have the assessment set aside and redone on the basis of the corrected data, with a fresh opportunity of hearing, rather than being held to the erroneous figures. This is particularly relevant in GST scrutiny cases involving works contractors and service providers to government or municipal bodies, where GSTR-2A/2B or deduction data supplied by the recipient department drives the mismatch flag, and any error at the recipient's end should not be visited upon the compliant supplier.

Sections Involved

  • Article 226, Constitution of India — invoked for a writ of certiorarified mandamus quashing the assessment order.
  • Section 73/74, TNGST/CGST Act, 2017 — underlying basis for demand notices raised against reported turnover discrepancies of a registered person.
  • Section 61, CGST/TNGST Act, 2017 — scrutiny of returns provision under which turnover-mismatch discrepancies are typically flagged before assessment.

Decision – In Favour of

The decision favours the Assessee. The impugned assessment order was quashed on the strength of the Municipality's admitted error, with a direction for a fresh, corrected assessment after hearing the petitioner, rather than the Court itself adjudicating the correct turnover figure.

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.24407 of 2023
  • CNR: Not available
  • Coram: Justice B. Pugalendhi
  • Decision Date: 31 October 2023
  • Disposal Nature: Allowed; set aside and remanded

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