Facts of the Case

Bathurallam and Co., represented by its proprietor Shahul Hameed, challenged an ex parte assessment order dated 24.12.2025 passed under Section 73 of the TNGST Act, 2017 for the assessment year 2021-22. The order alleged excess availment of input tax credit of Rs 1,44,470/- (SGST Rs 72,235/- and CGST Rs 72,235/-) based on a mismatch between GSTR-3B and GSTR-2A, treating the difference as ineligible ITC and levying tax, interest and penalty. The petitioner explained that all notices and communications were uploaded only on the GST portal; being a small trader dependent on a part-time accountant who was on medical leave during the relevant period, it never came to know of the proceedings and could not respond.

Issues Involved

  1. Whether a mismatch between GSTR-3B and GSTR-2A, by itself, justifies denial of ITC without examining the underlying purchase invoices and books of account.
  2. Whether an ex parte order passed solely because notices were uploaded on the portal, without further verification of participation, should be sustained.

Petitioner's Arguments

  • There was no genuine mismatch — the ITC claimed was fully supported by genuine purchase invoices, books of account and statutory returns.
  • The demand was raised on system-generated data without examining the underlying documents and transactions.
  • The petitioner could not respond because its part-time accountant, the only person handling GST compliance, was on medical leave and failed to inform the petitioner of the proceedings.

Respondent's Arguments

  • Represented by the Government Standing Counsel; the order and the discrepancy table were placed on record without independent opposition to the petitioner's request for a fresh opportunity.

Court Order / Findings

  • Considering the nature of the discrepancy, the explanation offered on merits, and the reason for non-participation, the Court found it appropriate to grant the petitioner an opportunity to place its case, as it has consistently done on equitable grounds subject to a deposit condition.
  • The writ petition was allowed on condition that the petitioner deposit 25% of the disputed tax amount within four weeks, without waiting for a certified copy of the order.
  • Upon such deposit, the impugned order stands set aside and the matter is remanded to the respondent for fresh consideration after the petitioner submits its reply and supporting documents.
  • Since the assessment order is set aside, any consequential bank account attachment was directed to be lifted.

Important Clarification

  • Courts continue to grant a fresh opportunity in GSTR-3B/2A mismatch cases where the assessee shows a credible reconciliation explanation and a bona fide reason for non-participation, typically conditioned on a percentage pre-deposit.
  • A demand raised purely on system-generated mismatch data, without examining the underlying invoices and accounts, is treated as a weak foundation warranting reconsideration.

Sections Involved

  • Section 73, TNGST/CGST Act, 2017 — determination of tax not involving fraud or suppression.
  • GSTR-3B and GSTR-2A — self-assessed summary return and auto-populated ITC statement, whose mismatch formed the basis of the demand.

Decision – In Favour of

Disposed of in favour of the Assessee — the assessment order is set aside on a 25% pre-deposit condition and the matter remanded for a fresh hearing on merits.

Case Details

Madurai Bench of Madras High Court; W.P(MD) No. 15587 of 2026 and W.M.P(MD) No. 11686 of 2026; Coram: Hon'ble Mr. Justice D. Bharatha Chakravarthy; Order dated 10.06.2026.

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