Facts of the Case

Tvl. Tuticorin Oxygen, represented by its partner, challenged an assessment order dated 10.12.2025 passed under Section 73 of the TNGST Act, 2017 for the assessment year 2021-22. The order had been passed ex parte as the petitioner did not utilise the opportunities of hearing extended to it. The grounds of assessment included: (i) denial of ITC on account of a GSTR-2A mismatch despite the petitioner's claim that the transactions were genuine and supported by invoices, payment proof and proof of receipt of goods; (ii) denial of ITC under Section 17(5), treating certain inputs as ineligible, though the petitioner claimed these related to repair and maintenance of plant and machinery used in business; and (iii) denial of ITC traceable to cancelled dealers, return defaulters and non-payers of tax, which the petitioner said it could not be held responsible for as a bona fide purchaser satisfying Section 16 conditions. The petitioner explained its non-participation as due to serious ill health and reliance on a part-time accountant, coupled with notices being uploaded only on the GST portal.

Issues Involved

  1. Whether ITC can be denied solely on the strength of a GSTR-2A mismatch when the assessee claims underlying invoices, payment and receipt of goods are genuine.
  2. Whether ITC on repair/maintenance inputs was correctly treated as ineligible under Section 17(5).
  3. Whether ITC traceable to defaulting/cancelled suppliers can be denied to a bona fide purchaser satisfying Section 16 conditions.
  4. Whether, given the reasons for non-participation, the assessee should be granted a further opportunity on deposit of part of the disputed tax.

Petitioner's Arguments

  • Excess ITC claimed cannot be denied merely on a GSTR-2A mismatch where the transactions are otherwise genuine and documented.
  • Section 17(5) was wrongly invoked as the inputs related to repair/maintenance of plant and machinery.
  • Denial of ITC for supplier default/cancellation is unsustainable against a bona fide purchaser who fulfilled Section 16 conditions.
  • Non-participation was due to serious ill health and portal-only service of notices.

Respondent's Arguments

  • The assessment was passed ex parte strictly because the petitioner failed to avail the opportunities extended to it, and the discrepancies noted required scrutiny of the petitioner's documents.

Court Order / Findings

  • Considering the nature of the discrepancies, the assessee's explanation on merits, and the reasons given for not availing the earlier opportunity, the Court held a further opportunity could be granted on equitable terms, conditioned on deposit of 25% of the disputed tax amount.
  • The writ petition was allowed: on deposit of 25% of the disputed tax within four weeks, the impugned order stands set aside and the matter remanded.
  • The assessee must appear and file its reply/documents; any bank-account attachment made pursuant to the impugned order stands raised upon such deposit.

Important Clarification

  • A GSTR-2A mismatch alone, or ITC traceable to a supplier's subsequent default/cancellation, is not by itself conclusive to deny ITC to a purchaser who produces invoices, payment proof and proof of receipt of goods; where an assessee shows a bona fide reason for missing the assessment hearing, courts may grant a fresh opportunity on reasonable pre-deposit terms rather than leaving the ex-parte order undisturbed.

Sections Involved

  • Section 73 of the TNGST Act, 2017 — determination of tax for reasons other than fraud.
  • Section 16 of the CGST Act, 2017 — eligibility and conditions for taking input tax credit.
  • Section 17(5) of the CGST Act, 2017 — blocked credits.

Decision – In Favour of

Assessee, in part — order set aside and remanded on condition of 25% pre-deposit.

Case Details

Madurai Bench of Madras High Court; W.P(MD) No. 11762 of 2026 and W.M.P(MD) No. 8944 of 2026; Coram: Hon'ble Mr. Justice D. Bharatha Chakravarthy; Date: 22.04.2026.

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.