Facts of the Case

The petitioner, Tvl.Maruthi Trading Corporation, represented by its proprietor P. Chandran, is a registered contractor holding a maintenance contract for street lights in the Municipalities of Theni and Kodaikanal, registered under GSTIN 33ANAPC4782E1ZG. For the year 2021-22, the petitioner had reported a turnover of Rs.1,09,10,226, but the Commissioner of Kodaikanal Municipality erroneously reported the petitioner's turnover to the tax department as Rs.2,30,73,400. Acting on this incorrect figure, the Assistant Commissioner (CT), Theni-I Circle, passed an assessment order dated 6th June 2023 demanding Rs.3,62,19,700 on the ground of turnover mismatch. The petitioner approached the Madurai Bench of the Madras High Court in W.P.(MD) No.24408 of 2023, seeking to quash the assessment and secure a fresh assessment after correction of the turnover figure.

Issues Involved

  1. Whether the GST assessment order based on an erroneous turnover figure reported by the Municipality could be sustained.
  2. Whether the petitioner was entitled to a fresh assessment based on the corrected turnover certificate issued by the Municipality.

Petitioner's Arguments

  • The turnover reported by the second respondent Municipality to the tax authorities was factually incorrect and did not reflect the actual contract value received by the petitioner.
  • Upon being informed of the discrepancy, the petitioner had approached the Municipality, which issued a corrected certificate, and the petitioner sought to place this on record before the assessing authority.
  • The impugned assessment order, based on the erroneous figure, ought to be quashed and the assessment redone after affording a reasonable opportunity of hearing.

Respondent's Arguments

  • The Standing Counsel for the Kodaikanal Municipality filed a counter affidavit candidly admitting that the tax consultant engaged by the Municipality had mistakenly reported the petitioner's turnover as Rs.2,62,45,600 and Rs.2,30,73,400, instead of the correct figures.
  • The Municipality accepted that this error on the part of its assisting authority directly resulted in the impugned assessment order and stated that the order required modification by the first respondent.

Court Order/Findings

  • The Court took note of the Municipality's own counter affidavit admitting the reporting error and the consequent inflated turnover figure used for assessment.
  • The Court held that in view of the admitted mistake, the impugned assessment order dated 6th June 2023 is set aside and directed the first respondent to redo the assessment for 2021-22 using the fresh certificate issued by the Municipality.
  • The first respondent was directed to provide the petitioner an opportunity of hearing before passing the fresh assessment order.
  • The writ petition was allowed with no order as to costs, and the connected miscellaneous petition was closed.

Important Clarification

A GST assessment order founded on turnover data supplied by a third party (here, a municipal counterparty) that is later admitted to be erroneous cannot be sustained, and the assessing authority must redo the assessment using the corrected figures after granting a fresh hearing. Where a government body itself files a counter affidavit conceding that its own tax consultant misreported figures to the GST authorities, courts have generally shown readiness to set aside the resultant demand without requiring the assessee to first exhaust the ordinary appellate remedy, since the factual error is undisputed rather than contested.

Sections Involved

  • Assessment and turnover-mismatch provisions under the Tamil Nadu Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017.
  • Article 226 of the Constitution of India, under which the writ of certiorarified mandamus was sought.

Decision – In Favour of

The decision is clearly in favour of the Assessee. The turnover-mismatch demand of over Rs.3.62 crore was set aside on the strength of the Municipality's own admission of error, and the matter was remitted for a fresh, corrected assessment with a hearing opportunity for the petitioner. The order also underscores that contractors dependent on government-body certification for their GST turnover reporting remain exposed to assessment risk arising purely from clerical or consultant-level errors by the counterparty, even where the contractor's own returns were accurate.

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.24408 of 2023
  • CNR: Not available
  • Coram: Justice B. Pugalendhi
  • Decision Date: 31-10-2023
  • Disposal Nature: Writ petition allowed, GST assessment order set aside and remanded

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