Madras HC Remands GST Demand Orders Due to Alleged Non-Consideration of Taxpayer Replies

SRK Traders Vs State Tax Officer Adjudication/Legal Office of the Joint commissioner (ST) (Madras High Court)

The Madras High Court disposed of writ petitions challenging orders passed under Section 74A of the GST Act on 18.11.2025 for the tax period 2025-26. The petitioners contended that their replies to the DRC-01 show cause notices had not been considered in the impugned orders, resulting in a violation of the principles of natural justice. They also argued that the tax demands confirmed in the final orders exceeded the amounts proposed in the show cause notices, contrary to Section 75(7) of the GST Act.

The Court noted that the petitioners had submitted replies to the show cause notices on 17.10.2025 and that further inspections were conducted on 10.11.2025 before the orders were passed on 18.11.2025. The allegations against the petitioners were that they had failed to produce documents substantiating the inward movement of goods to justify the availment and passing on of Input Tax Credit, leading to proceedings under Sections 122(1)(ii) and 122(1)(vii) of the GST enactment.

The Court also recorded that the petitioners’ GST registrations had been cancelled, subsequently revoked upon application, and that fresh notices proposing cancellation had again been issued.

During the hearing, the petitioners undertook to deposit 10% of the disputed tax demand. Recording this undertaking, the Court remitted the matters to the respondent for fresh adjudication on merits, subject to the petitioners depositing 10% of the disputed tax within thirty days.

The Court directed the petitioners to file replies supported by documents evidencing inward movement of goods or the passing on of Input Tax Credit. Upon compliance, the respondent was directed to pass fresh orders on merits, preferably within three months. Bank attachments, if any, were ordered to stand vacated upon fulfillment of the stipulated conditions. Failure to comply would entitle the respondent to proceed with tax recovery in accordance with law after giving due notice and an opportunity of hearing.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Mr T.N.C. Kaushik, learned Additional Government Pleader takes notice for the Respondent.

2. These Writ Petitions are being disposed of at the stage of admission itself with the consent of the learned counsel for the Petitioner and the learned Additional Government Pleader for the Respondent.

3. These cases were listed on several days and were adjourned at the request of the learned counsel for the Petitioner as well as the learned counsel for the Respondent.

4. In these Writ Petitions, these Petitioners have challenged the respective impugned orders passed under Section 74A on 18.11.2025 for the tax period 2025-26. The impugned orders in the case of respective Petitioners had preceded Notice in DRC-01 has detailed below:

5. It is noticed that the Petitioners replied to the respective Show Cause Notices and after reply were filed on 17.10.2025 by the respective Petitioners, further inspection was carried out on 10.11.2025 before the impugned Order was passed on 18.11.2025.

6. The case of the Petitioners appears to be that the reply of the respective Petitioners has not been considered and discussed in the impugned order and therefore, there is a manifest violation of Principles of Natural Justice.

7. That apart, it is submitted that the amount proposed in the respective Show Cause Notices to the respective Petitioners as detailed above was exceeded in the impugned order, and therefore on this ground also impugned orders are liable to be interfered in terms of Section 75(7) of the respective GST Act, 2017.

8. It is noticed that the allegations against the respective Petitioners is that they had not produced any document to substantiate inward movement of the goods for them to validly avail Input Tax Credit to pass on the same and therefore the machinery under Section 122(1)(ii) and 122(1)(vii) of the respective GST Enactment has been pressed against the Petitioner.

9. It is also noticed that the Petitioner’s respective GST registrations have also been cancelled on the days mentioned below:

10. After the registration was cancelled, applications were moved for revocation of the cancellation of the GST Registration and the orders were passed on 11.12.2025 as detailed above. Thereafter, fresh notice has been issued on 10.03.2026 in FORM GST REG 17, once again to cancel the GST Registration of the Petitioner.

11. At this juncture, the learned counsel for the Petitioner submits that the petitioner is willing to deposit 10% of the disputed tax as a pre condition for denova adjudication and has also made an endorsement to that effect in all the Court bundles, which is extracted hereunder:-

In WP.No.11017 of 2026

“ Petitioner undertakes to pay 10% of the tax demand”

In WP.No.11022 of 2026

“ Petitioner undertakes to pay 10% of the tax demand”

In WP.No.11025 of 2026

“ Petitioner undertakes to pay 10% of the tax remand”

12. Recording the above consent, the Writ Petitions are remitted back to the Respondent to pass fresh order on merits subject to the Petitioner depositing 10% of the disputed tax in cash or from the Petitioner’s Electronic Cash Register within a period of thirty (30) days from the date of receipt of a copy of this order, in lieu of the impugned orders all dated 18.11.2025 and simultaneous separate orders in so far as the proposed cancellation of the GST Registration.

13. Within such time, the Petitioners shall also file a reply to the Show Cause Notices issued in GST DRC-01 by substantiating the inward movement of the goods into the registered premises of the Petitioner or that they have passed on the Input Tax Credit to the customer together with requisite documents by treating the impugned Order dated 18.11.2025 as an addendum to the respective Show Cause Notices.

14. In case the Petitioners comply with the above stipulations, the Respondent shall proceed to pass a final order on merits and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such reply/pre-deposit. Subject to the Petitioner complying with the above stipulations, the attachment of the bank account of the Petitioner if any, shall also stand automatically vacated.

15. It is made clear that bank attachment shall be lifted subject to the Petitioner depositing 10% of the disputed tax as ordered above and the Petitioner not being in arrears of any other amount for any other tax period barring the amount demanded under the impugned Order.

16. In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the tax in accordance with law as if this Writ Petition was dismissed in limine today.

17. Needless to state, before passing any such order, the Respondent shall give due notice to the Petitioner and he shall be heard the final report.

18. This Writ Petition stands disposed of with the above observations. No costs. Connected Writ Miscellaneous Petitions are closed.