Madras HC Quashes GST Assessment, Orders Fresh Adjudication on 50% Pre-Deposit

Tvl. Palepu Pharma Private Limited Vs State Tax Officer (Madras High Court)

Madras High Court Quashes GST Assessment, Orders Fresh Adjudication on 50% Pre-Deposit; Grants Relief Where Duplicate ITC Demand Already Dropped

In the case before the Madras High Court, the petitioner challenged an assessment order dated 23.08.2024 for the assessment year 2019–2020, which confirmed a total demand of ₹42,32,944 comprising tax, interest, and penalty. A portion of this demand, amounting to ₹3,97,983, related to an alleged excess claim of Input Tax Credit (ITC).

The petitioner submitted that the same ITC-related issue had already been addressed in collateral proceedings through a separate assessment order dated 19.12.2024. In those proceedings, the demand relating to the disputed ITC was initially confirmed but was subsequently challenged before the Appellate Authority. By order dated 16.12.2025, the Appellate Authority allowed the appeal and dropped the demand, holding that the disputed ITC was admissible as it was within the permissible limit and supported by required certificates.

It was also noted that the impugned order dated 23.08.2024 had been passed without considering any reply from the petitioner to the show cause notice issued in Form GST DRC-01 dated 20.05.2024.

During the hearing, the petitioner expressed willingness to deposit 50% of the disputed tax (after adjusting the amount already addressed in the appellate order) for the purpose of fresh adjudication. The Court observed that in similar cases, orders had been quashed and matters remitted for reconsideration subject to partial pre-deposit, depending on the circumstances.

Following this approach, the Court quashed the impugned order and remitted the matter back to the assessing authority for fresh adjudication on merits. This was made conditional upon the petitioner depositing 50% of the disputed tax within 30 days and filing a reply to the show cause notice along with supporting documents.

The Court further directed that, upon compliance, a fresh order should be passed preferably within three months. It also ordered that any bank account attachment would be lifted upon such compliance, provided there were no other outstanding dues. Failure to comply would allow the authorities to proceed with recovery in accordance with law.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The Petitioner is before this Court against the Impugned Order dated 23.08.2024 for Assessment year 2019-2020 whereby the following demand has been confirmed against the Petitioner:

Tax Demand

2. The learned counsel for the Petitioner submitted that a portion of the demand pertains to the excess claim of ITC amounting to a total sum of Rs.3,97,983/- out of the above demand confirmed vide Impugned Order.

3. It is further submitted that in collateral proceedings initiated for the same Tax period vide Assessment order dated 19.12.2024, the aforesaid demand of Rs.3,97,983/- was also confirmed under Defect No.I as detailed below:

“It was therefore they were requested to pay the above amount tune of Rs.344516/- IGST, Rs.26,734/-as CGST, Rs.26734/- as SGST along with Penalty and interest and interest under Section 50(1) of the TNGST/CGST Act 2017.”

4. It is also submitted that the Petitioner had successfully challenged the aforesaid Assessment order dated 19.12.2024 before the Appellate Authority and by order dated 16.12.2025, the demand insofar as the above defect was dropped. Relevant portion of the aforesaid order dated 16.12.2025 relating to the dropping of the aforesaid demand reads as under:

“6) As per the circular no.193/15/2023 dated 17.07.2023, the disputed ITC under IGST, CGST & SGST, was below 10% of the eligible claim of ITC reflected in GSTR -2A at Rs.1,00,24,653/- under IGST, and Rs.17,92,32,179/- each under SGST & CGST covered by the requisite certificates. Hence the appellant was eligible to claim the disputed ITC of Rs.3,44,516/- under IGST and Rs.26,734/- each under CGST & SGST, as per the circular no.193/15/2023 dated 17.07.2023 as rightly argued by the authorised representative, since the disputed ITC were covered by the required certificates obtained from the concerned suppliers and the same was found to be admissible and consequently the appeal was allowed.”

5. It is noticed that the Impugned Order dated 23.08.2024 has been passed in the absence of the reply to the Show Cause Notice in Form GST DRC 01 dated 20.05.2024.

6. At this stage, the learned counsel for the Petitioner submits that the Petitioner is however willing to pre-deposit 50% of the disputed tax for denovo adjudication and has also made a following endorsement to that effect in the Court bundle which has been extracted hereunder:-

“The petitioner undertakes to deposit 50% of the tax demand less the amount adjudicated in Appellate order dated 16.12.2025, against assessment order dated 19.12.2024.”

7. Under similar circumstances, Orders have been quashed and cases have been remitted back to the Respondent to pass a fresh order on terms subject to such Assessee depositing 25% to 100% of the disputed tax depending upon the length of delay in approaching the Court. I do not find any reason to take a different view in this case.

8. Considering the above facts and circumstances and following the consistent view taken by this Court under similar circumstances, the impugned order is quashed and the case is remitted back to the first respondent to pass a fresh order on merits subject to the Petitioner depositing 50% 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, less the amount which is covered by the order of the Appellate Authority dated 16.12.2025 wherein the demand confirmed on account of identical defect by the Assessment order dated amount on 19.12.2024 has been dropped.

9. Within such time, the Petitioner shall also file a reply to the Show Cause Notice in GST DRC-01 dated 20.05.2024 together with requisite documents to substantiate the case by treating the impugned Order dated 23.08.2024 as an addendum to the Show Cause Notice dated 20.05.2024.

10. In case the Petitioner complies with the above stipulations, the first 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.

11. It is made clear that bank attachment shall be lifted subject to the Petitioner depositing 50% 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.

12. In case the Petitioner fails to comply with any of the stipulations, the first 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

13. Needless to state, before passing any such order, the first Respondent shall give due notice to the Petitioner.

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