Facts of the Case

Tvl. AJ Flour Mill, represented by its proprietor S. Subbiah Arun Pandian and registered under GSTIN 33DJTPA2451N1ZZ, was assessed for the tax period 2021-22 by the State Tax Officer/Commercial Tax Officer, Madurai Rural (East) Assessment Circle. Proceedings began with a show cause notice in Form GST DRC-01 dated 26.09.2025, calling upon the petitioner to file objections with supporting documents within thirty days. Three reminders followed, dated 08.11.2025, 18.11.2025 and 01.12.2025, each calling upon the petitioner to reply and appear for a personal hearing. The petitioner neither filed a reply nor appeared on any of the fixed dates, and the respondent proceeded to pass the assessment order and a consequential summary order bearing Reference No. ZD3312253764866, both dated 24.12.2025, confirming the demand. Aggrieved, the petitioner approached the Madurai Bench of the Madras High Court under Article 226 seeking to quash the order and have the assessment redone.

Issues Involved

  1. Whether an ex-parte GST assessment order, passed after a DRC-01 notice and repeated reminders went unanswered, can still be set aside on the assessee submitting to a conditional pre-deposit.
  2. Whether the failure to respond to the notice and to attend personal hearing forfeits the assessee's right to a fresh opportunity of adjudication on merits.

Petitioner's Arguments

  • The petitioner expressed readiness to pre-deposit 25% of the disputed tax as a condition for a de novo adjudication.
  • This willingness was formally recorded as a written endorsement in the court bundle: “I obliged consent to pay 25% disputed tax.”
  • The petitioner sought an opportunity to file a substantive reply to the DRC-01 notice, having missed the earlier reminders.

Respondent's Arguments

  • Counsel for the State of Tamil Nadu took notice for the respondent and did not oppose the conditional relief recorded by consent.
  • It was made clear on behalf of the department that recovery would proceed as if the writ petition were dismissed in limine if the petitioner failed to comply with the stipulated conditions.

Court Order / Findings

  • Recording the petitioner's consent endorsement, the Court quashed both the assessment order and the summary order dated 24.12.2025.
  • The matter was remitted to the respondent for a fresh order, subject to the petitioner depositing 25% of the disputed tax in cash from the electronic cash register within thirty days.
  • Within the same period, the petitioner must file a reply to the DRC-01 notice dated 26.09.2025, with the impugned order to be treated as an addendum to that notice.
  • On compliance, the respondent must pass a fresh, reasoned order on merits, preferably within three months, after hearing the petitioner; any bank attachment shall stand automatically vacated on compliance.
  • Failure to comply with any condition entitles the department to recover the tax as though the writ petition stood dismissed in limine, after due notice to the petitioner.

Important Clarification

  • This order follows a well-settled practice at the Madurai Bench for ex-parte Section 73/74 orders passed after non-response to a DRC-01 notice: rather than relegating the assessee to a statutory appeal, the Court restores the opportunity of hearing conditioned on a 25% pre-deposit, balancing revenue's interest in recovery against natural justice.
  • An assessee who fails to reply to a show cause notice is not permanently barred from de novo adjudication if willing to secure the department's interest through part-payment of the disputed demand.

Sections Involved

  • Section 73, Central Goods and Services Tax Act, 2017 – governs determination of tax not paid or short paid for reasons other than fraud.
  • Form GST DRC-01, CGST Rules, 2017 – the prescribed show cause notice format preceding an assessment order.
  • Article 226, Constitution of India – writ jurisdiction invoked to challenge the assessment.

Decision – In Favour of

Disposed of with directions; conditionally in favour of the Assessee, with the opportunity of a fresh hearing restored on the petitioner depositing 25% of the disputed tax and filing a reply within the stipulated time.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: W.P.(MD) No.18728 of 2026 and W.M.P.(MD) No.13851 of 2026
  • Coram: Justice C. Saravanan
  • Date of Order: 06.07.2026

Link to Download the Order

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