Facts of the Case

The petitioner, Tvl. Janaki Transport, represented by its partner S. Chidambaram (GSTIN 33AAFFJ8430L1Z8, tax period 2018-19), challenged an order dated 17.12.2025 and consequential rectification order dated 09.02.2026 passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017. Upon inspection, the department found a total turnover of Rs.8,58,56,506/- that had not been reported, the petitioner having reported 'nil' turnover in GSTR-1 and GSTR-3B for the period. The petitioner explained the nil entry as an inadvertent error arising because the transactions fell under the reverse charge mechanism, where liability rests on the recipient, and denied any intention to suppress. The petitioner did not, however, avail the personal hearing opportunity granted during adjudication, and the impugned order was passed confirming the demand.

Issues Involved

  1. Whether reporting reverse-charge supplies as 'nil' turnover, without more, amounts to wilful suppression justifying invocation of Section 74 of the TNGST Act.
  2. Whether the petitioner, having missed the personal hearing, was still entitled to a further opportunity before the demand could stand confirmed.

Petitioner's Arguments

  • The petitioner argued there was no wilful suppression, as the nil entry was an error arising from the reverse charge mechanism, since liability for such supplies rests on the recipient and not the petitioner.
  • It was submitted that even the show cause notice contained no averment of wilful suppression or wilful short payment, so invocation of Section 74 was not justified.
  • It was further submitted that Form GSTR-9 (the reconciliation statement), filed even before inspection, reflected these transactions as turnover, showing there was no suppression.

Respondent's Arguments

  • The Additional Government Pleader submitted that even reverse-charge turnover must be reported; otherwise the whole turnover would escape assessment if the purchaser also failed to report it, causing revenue loss.
  • It was contended that the entire episode came to light only after departmental inspection, justifying invocation of Section 74, and that the petitioner ought to have availed the opportunities provided rather than approach the writ court when an alternative appellate remedy existed.

Court Order / Findings

  • The Court held that the transactions ought to have been disclosed as turnover even though the tax incidence lay on the recipient under reverse charge, and that failing to do so was an error — the real question being whether that error was wilful or bona fide.
  • The Court found force in the fact that Form GSTR-9, filed even before inspection, reflected the disputed transactions in the reconciliation statement, but also noted that the petitioner had failed to avail the personal hearing opportunity earlier granted.
  • Balancing this, the Court granted one more opportunity of hearing, and — since it was represented that there would be no actual tax incidence given the reverse charge position — dispensed with the usual condition of a 25% deposit that is otherwise imposed when granting such opportunities.
  • The impugned order dated 17.12.2025 and the rectification order dated 09.02.2026 were quashed and the matter remanded; the petitioner was directed to file an additional reply and avail personal hearing within two weeks, with the respondent to decide afresh in accordance with law.

Important Clarification

  • Reporting reverse-charge supplies as 'nil' turnover instead of correctly reflecting and then claiming reverse-charge treatment is an error, but is not automatically 'wilful suppression' attracting Section 74 — evidence such as a pre-inspection GSTR-9 reconciliation can support a bona fide-error defence.
  • Courts may waive the customary pre-deposit condition when granting a further hearing opportunity where the assessed demonstrates that no actual tax incidence arises on the disputed turnover.

Sections Involved

  • Section 74, Tamil Nadu Goods and Services Tax Act, 2017 – demand for tax not paid by reason of fraud, wilful misstatement or suppression of facts, invoked here on an alleged nil-turnover misdeclaration.
  • Reverse Charge Mechanism – shifts the liability to pay tax from supplier to recipient for specified supplies, central to the dispute over how the transactions should have been reported.

Decision – In Favour of

The decision is in favour of the Assessee — the demand order was quashed and the matter remanded for a fresh personal hearing without any pre-deposit condition, though the merits of wilful suppression were left open for reconsideration.

Case Details

Court: Madurai Bench of Madras High Court
Case No.: W.P.(MD)No.11572 of 2026 and W.M.P.(MD)No.8816 of 2026
Coram: Justice D. Bharatha Chakravarthy
Date of Order: 21.04.2026

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