Facts of the Case

The petitioner, Tvl. Multi Point System, challenged an assessment order dated 21.02.2025 passed for the tax period 2020-21 (GSTIN 33AERPH9625R2ZL). The order was preceded by a notice in DRC-01 dated 26.11.2024. On 21.02.2025 itself, the petitioner had requested the respondent to grant two weeks' time to file a reply to the DRC-01 notice; however, the impugned assessment order was passed the very same day. After the order was passed, the entire tax demand was recovered by the respondent from the petitioner's electronic credit ledger.

Issues Involved

  1. Whether passing the assessment order on the same day the petitioner sought two weeks' time to reply to the show cause notice violated the principles of natural justice.
  2. Whether the amount already recovered from the petitioner's electronic credit ledger should be treated as final or made subject to the outcome of fresh proceedings.

Petitioner's Arguments

  • The petitioner had specifically requested two weeks' time on 21.02.2025 to file a reply to the DRC-01 notice dated 26.11.2024, but the impugned order was passed on the very same day without waiting for the reply.
  • The entire tax demand had already been recovered from the petitioner's electronic credit ledger pursuant to the impugned order.

Respondent's Arguments

  • No specific defence was recorded resisting the petitioner's factual assertion regarding the timing of the request for time and the passing of the order.

Court Order / Findings

  • The Court noted that the request for time to file a reply was made on the same date the impugned order was passed, indicating that the petitioner was not given a real opportunity to respond to the DRC-01 notice.
  • The impugned order dated 21.02.2025 was set aside and quashed, and the matter was remitted to the respondent to pass a fresh order.
  • The refund of the amount appropriated from the electronic credit ledger was made subject to the outcome of the fresh proceedings.
  • The petitioner was directed to file a reply within 30 days to the show cause notice in DRC-01 dated 26.11.2024, with the quashed order to be treated as an addendum to that notice; the respondent was directed to pass a fresh order, preferably within 6 months thereafter.

Important Clarification

  • Passing an adverse assessment order on the very date an assessee has sought additional time to reply amounts to a denial of a genuine opportunity to be heard, and is liable to be set aside irrespective of the merits of the underlying tax demand.
  • Where amounts have already been recovered pursuant to a quashed order (including by debiting the electronic credit ledger), courts commonly keep the refund/adjustment of such amounts open, subject to the outcome of the remanded proceedings, rather than ordering an immediate refund.

Sections Involved

  • Form GST DRC-01, GST Rules, 2017 – intimation of tax ascertained as payable, requiring a reasonable opportunity to reply before adjudication.
  • Principles of Natural Justice under the GST Act, 2017 – underpin the requirement of a genuine opportunity to be heard before an adverse order is passed.

Decision – In Favour of

The petition is allowed in favour of the Assessee. The impugned assessment order is quashed and treated as an addendum to the show cause notice, with fresh adjudication to follow after the petitioner files its reply.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case No.: W.P(MD) No.19287 of 2025 with W.M.P(MD) No.14804 of 2025
  • Coram: Hon'ble Mr. Justice C. Saravanan
  • Date of Order: 17.07.2025

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