GST Assessment Remanded Subject to Full Disputed Tax Deposit Due to Delayed Challenge: Madras HC

Tvl. R.M.K. Enterprises Vs State Tax Officer (Madras High Court)

The Madras High Court considered a writ petition challenging an assessment order dated 26.12.2023 for the tax period 2017-18. The assessment order was preceded by an intimation in Form GST DRC-01A dated 30.08.2023, to which the petitioner submitted a reply on 13.09.2023. The petitioner contended that the subsequent Show Cause Notice in Form GST DRC-01 dated 23.09.2023 was issued without jurisdiction because there were no facts available to confirm the proposed demand. The petitioner also stated that it failed to respond to the DRC-01 notice since it was uploaded on the GST portal and claimed that it became aware of the assessment order only after recovery proceedings were initiated through Form GST DRC-13 dated 17.09.2025 seeking attachment of its bank account.

The respondents opposed the writ petition, arguing that it was liable to be dismissed on the ground of delay and laches. They further submitted that the petitioner’s purported reply dated 13.09.2023 to the DRC-01A intimation did not bear any acknowledgement in Form DRC-06.

The Court observed that the DRC-01A intimation related to a mismatch between the input tax credit (ITC) claimed in Form GSTR-3B and the ITC reflected in Form GSTR-2A. According to the notice, the petitioner had availed total ITC of ₹1,33,06,140 in GSTR-3B, whereas the auto-populated credit available in GSTR-2A was only ₹1,11,17,362, resulting in excess ITC being claimed. The petitioner was therefore called upon to reverse the excess ITC.

The Court noted that the petitioner’s reply to the DRC-01A intimation did not address the merits of the ITC mismatch and merely referred to Circular No. 183/15/2022-GST dated 27.12.2022. Thereafter, a DRC-01 show cause notice was issued on 23.09.2023, but the petitioner failed to submit any response, following which the assessment order was passed.

Under the assessment order, the petitioner was held liable for the difference between GSTR-3B and GSTR-2A amounting to ₹21,88,778 each under CGST and SGST, interest of ₹22,35,432 each under CGST and SGST, and a penalty of ₹10,000 each under CGST and SGST. The total demand worked out to ₹44,34,210 each under CGST and SGST.

The Court observed that the writ petition mainly alleged violation of the principles of natural justice on the ground that the petitioner’s reply dated 13.09.2023 had not been considered. It also noted that the affidavit contained a general statement regarding difficulties faced by small traders and alleged that details relating to non-existent suppliers had not been furnished before determining tax liability. Although the petitioner referred to assessment orders for 2018-19 and 2019-20 in the affidavit, copies of those orders had not been produced before the Court.

Balancing the interests of both parties, the Court observed that in similar cases it had remitted matters for fresh adjudication subject to the assessee depositing the entire disputed tax. Considering the delay in approaching the Court and the absence of extenuating circumstances, the Court held that no different view could be taken. It also referred to the decisions of the Supreme Court in Singh Enterprises v. Commissioner of Central Excise, Commissioner of Customs and Central Excise v. Hongo India Private Limited, and Assistant Commissioner (CT) LTU v. Glaxo Smith Kline Consumer Health Care Limited.

Accordingly, the writ petition was disposed of by remitting the matter to the second respondent for passing a fresh order, subject to the petitioner depositing the entire disputed tax in cash through the Electronic Cash Register within thirty days from receipt of the order. Upon such compliance, the respondent was directed to pass a fresh order on merits and in accordance with law, preferably within three months. If the petitioner failed to comply with the stipulated condition, the respondent would be at liberty to recover the tax in accordance with law as if the writ petition had been dismissed in limine. The Court also directed that the petitioner be afforded an opportunity of hearing before any fresh order is passed.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Ms.Amirtha Poonkodi Dinakaran, learned Government Advocate, takes notice for the respondents.

2. With the consent of the learned counsel for the Petitioner and learned Government Advocate for the respondents, this Writ Petition is being disposed of at the time of admission.

3. In this writ petition, the petitioner has challenged the impugned assessment order dated 26.12.2023 passed for the tax period 2017-18. The impugned order has preceded by an intimation in DRC-01A dated 30.08.2023 (Wrongly mentioned as 09.09.2023 in the reference column of the impugned order)

4. The petitioner has also replied to the said intimation by a reply dated 13.09.2023.

5. It is the specific case of the petitioner that the petitioner has explained the position in the reply dated 13.09.2023 in response to the intimation in DRC-01A dated 30.08.2023. The Show Cause Notice that was issued in DRC-01 dated 23.09.2023 was without jurisdiction as there were no facts available for confirming the demand that was proposed in DRC-01.

6. The learned counsel for the petitioner however submits that the petitioner failed to respond to the notice in DRC-01 dated 23.09.2023 as it was posted in the web portal and the petitioner became aware of the impugned order dated 26.12.2023 only after the Department initiated recovery proceedings by issuing Form GST DRC-13 on 17.09.2025 seeking to attach the petitioner’s bank account maintained with ICICI Bank.

7. The learned Government Advocate for the respondents, on the other hand, submits that there is no merit in the present writ petition and that the writ petition is liable to be dismissed on the ground of laches.

8. That apart, the learned Government Advocate for the respondents submits that the so called reply dated 13.09.2023 to the intimation in DRC-01A dated 30.08.2023 does not bear any acknowledgement in DRC-06. Therefore, the writ petition is liable to be dismissed.

9. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Government Advocate for the respondents.

10. The intimation under DRC-01A dated 30.08.2023 is on account of the ITC claimed in GSTR-3B and the difference reflected in GSTR-2A. The table attached to the notice in DRC-01A indicates that the petitioner has availed total input tax credit of Rs.1,33,06,140/-, whereas in GSTR-2A, auto-populated credit was only Rs. 1,11,17,362/-. Thus, excess input tax credit was availed by the petitioner in Form GSTR-3B.

11. It is in this background that the petitioner was called upon to reverse the excess input tax credit availed by the petitioner in Form GSTR-3B. The reply of the petitioner to the intimation in DRC-01A dated 30.08.2023 has not dealt with the issue on merits. Instead, the petitioner has merely drawn attention to Circular No. 183/15/2022-GST dated 27.12.2022.

12. After the above intimation in DRC-01A dated 30.08.2023 was issued, to which the petitioner has purportedly replied on 13.09.2023, a notice was issued in DRC-01 dated 23.09.2023. The petitioner failed to respond to the same, and thus, the impugned order has been passed. Thus, the petitioner has been confronted with the following liability:

13. In the present writ petition, the petitioner has merely challenged the impugned order on the ground that it violates the principles of natural justice and that the petitioner’s reply dated 13.09.2023 was not considered by the respondents. That apart, a generic statement has been made in Paragraph 3 of the affidavit filed in support of the present writ petition. Relevant portion from the affidavit filed by the petitioner is reproduced below:

“3……. Most of the small traders lost their lives and struggled for their daily bread. Hence, most of the traders had lost their businesses and vacated their premises for their survival. Therefore, the petitioner requested to furnish the details of the inspection for the allegation of non-existent suppliers, but the 2^nd respondent, without providing said materials, proceeded to pass the order and finally determined the tax liability by order dated 03.02.2021.”

14. Although in paragraph No. 5, a reference is made to the orders dated 30.04.2024 and 31.08.2024 passed for the assessment years 2018-19 and 2019­20, no copies of the said orders have been filed along with this writ petition.

15. Balancing the interest of parties, this Court has remitted the case back to the respondent to pass fresh orders, subject to the assessee depositing the entire disputed tax, after considering the length of delay in approaching this Court since there are no extenuating circumstances, a different view cannot be taken.

16. As per the decision of the Hon’ble Supreme Court of India in Singh Enterprises Commissioner of Central Excise, Jamshedpur and others, (2008) 3 SCC 70 and in Commissioner of Customs and Central Excise Vs. Hongo India Private Limited and another, (2009) 5 SCC 791 and Assistant Commissioner (CT) LTU, Kakinada and others Vs. Glaxo Smith Kline Consumer Health Care Limited, 2020 SCC Online SC 440, the present writ petition is liable to be dismissed.

17. Following the same, this writ petition is disposed of, by remitting the case back to the 2^nd respondent to pass a fresh order, subject to the Petitioner depositing entire disputed tax in cash 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.

18. In case the Petitioner complies with the above stipulations, the 2nd 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 deposit.

19. In case the Petitioner fails to comply with any of the stipulations, the 2nd 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

20. Needless to state, before passing any such order, the the petitioner shall be heard.

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