Facts of the Case

The petitioner, M/s.Velammal, holding GSTIN 33AGUPV7062K1ZK, challenged an ex-parte assessment order dated 19.08.2025 passed under Section 74 of the TNGST Act, 2017 for the period 2022-23. The order was based on a turnover mismatch between GSTR-7 and GSTR-3B returns and imposed penalty under Section 74 along with interest under Section 50. The petitioner did not participate in the assessment proceedings as its part-time accountant failed to notice the notices, summons and orders uploaded solely on the GST web portal.

Issues Involved

  1. Whether the ex-parte assessment order deserves to be set aside to enable the petitioner to explain the turnover mismatch and contest invocation of Section 74.
  2. Whether the ingredients of fraud, wilful misstatement or suppression necessary to invoke Section 74 were made out.

Petitioner's Arguments

  • The turnover mismatch between GSTR-7 and GSTR-3B arose because government departments typically report works-contract transactions in Form GSTR-7 only upon release of funds, which explains the alleged variation.
  • Invocation of Section 74 required fraud, wilful misstatement or suppression of facts with intent to evade tax to be established, relying on the Supreme Court's stay of Section 74 proceedings in GR Infra Projects Ltd., Ratlam vs State of Madhya Pradesh (SLP No. 33594 of 2025).
  • The petitioner's part-time accountant failed to notice the web-portal communications, resulting in the ex-parte order.

Respondent's Arguments

  • The impugned order recorded the discrepancies found and the reasons the assessee did not respond, and was passed strictly on the basis of proposals in the show cause notice, since the petitioner did not utilise the opportunities provided.

Court Order / Findings

  • Justice D. Bharatha Chakravarthy, considering the nature of the discrepancies, the assessee's explanation and the reasons for non-participation, held that an opportunity could be granted to the petitioner on equitable grounds, subject to appropriate conditions.
  • The impugned assessment order was set aside and the matter remitted, on condition that the petitioner deposit 25% of the disputed tax amount within four weeks.
  • The petitioner was directed to appear before the respondent, file its reply and produce supporting documents, and the respondent was directed to pass fresh orders on merits after hearing the petitioner.
  • Since the assessment order was set aside, the attachment of the petitioner's bank account made pursuant to it was directed to be raised.

Important Clarification

  • The Madras High Court continues to extend the equitable remedy of setting aside ex-parte GST assessment orders, conditional on 25% pre-deposit of the disputed tax, where notices were served only through the GST portal and not actually noticed by the assessee.
  • Bank account attachments consequent to an assessment order automatically fall away once that order is set aside.

Sections Involved

  • Section 74, Tamil Nadu Goods and Services Tax Act, 2017 — determination of tax involving fraud, wilful misstatement or suppression of facts.
  • Section 50, TNGST Act, 2017 — interest on delayed payment of tax.

Decision – In Favour of

Disposed of with conditional directions, in part in favour of the Assessee — assessment order set aside subject to 25% pre-deposit, and bank attachment lifted.

Case Details

Court: Madurai Bench of Madras High Court
Case No.: W.P(MD)No.9738 of 2026 and W.M.P(MD)No.7731 of 2026
Coram: Hon'ble Mr. Justice D. Bharatha Chakravarthy
Date of Order: 08.04.2026

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