Case Law Details
Tvl.P.Rengasamy Vs Deputy State Tax Officer-2 (Madras High Court)
In Tvl.P.Rengasamy Vs Deputy State Tax Officer-2, the Madras High Court set aside an assessment order passed under Section 74 of the TNGST Act, 2017, and remanded the matter for fresh adjudication. The assessment order dated 18.07.2025 had been passed ex parte due to the petitioner’s failure to respond to proceedings.
The dispute related to an output tax mismatch between Form GSTR-1 and GSTR-3B returns vis-à-vis Form GSTR-7. The assessee explained that in government contract works, transactions are often reported by Government departments in Form GSTR-7 only upon release of funds and deduction of TDS at 2%, resulting in variations. The assessee also contended that Section 74 could not be invoked without establishing fraud, wilful misstatement, or suppression of facts with intent to evade tax.
For non-participation in the proceedings, the petitioner stated that the part-time accountant failed to notice the notices, there were issues accessing the web portal, and replies were not filed due to work pressure, resulting in the ex parte order.
The Court held that the assessee should be given an opportunity to submit explanations and supporting documents. Since 23% of the disputed CGST and SGST demand had already been recovered, the Court waived the usual condition of depositing 25% of the disputed tax. The matter was remanded for fresh consideration, and bank account attachments pursuant to the assessment order were directed to be lifted.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition challenges the impugned order dated 18.07.2025 which is an assessment order passed under Section 74 of the TNGST Act 2017.
2. I have heard the learned counsel for the petitioner and the learned Additional Government Pleader representing the revenue.
3. By the impugned order, the assessment was made ex parte because the petitioner did not utilise the opportunities provided. The discrepancies and grounds on which the assessment order was issued, the dealer’s explanation on merits, and the reasons for not participating in the assessment proceedings are summarised briefly and presented in a table below:
| Discrepancies found/Grounds on which the order is passed | Explanation offered by the Assessee on merits | Explanation for not availing the opportunity |
| i) Output mismatch between form GSTR 1 and GSTR 3B return to that of Form GSTR-7 return. | As far as the allegation of difference between the TDS tax reported in Form GSTR 07 to that of GSTR 1 and GSTR 38 return, whatever work he had executed was properly reported and tax paid. Normally, the work executed to Government departments would be reported in those years, but the Government departments in most of the case only on release of their fund report the transactions in their form GSTR 07 and pay the TDS tax @ 2%. That is the reason for the alleged variation. | The part time accountant failed to notice the fact of issuing of the proceedings.
The petitioner was not able to access the web portal. Further even though the show cause notice was issued through RPAD, the part time accountant due to pressure of work had failed to consult and file a reply which resulted in the issuance of ex parte impugned order.
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| ii) Penalty under Section 74 and interest under Section 50 of the GST Act. | For invocation of Section 74 of the GST Act, fraud, wilful misstatement or suppression of facts with an intent to evade tax, should be established. |
4. Considering the nature of the discrepancies noted, the explanation provided by the assessee and the reason given before this Court for not availing the opportunity, I believe that an opportunity can be granted to the assessee to present their submissions and produce the relevant supporting documents before the respondent assessing officer. This Court has been extending such opportunities on equitable grounds; however, under appropriate conditions.
5. Normally, this Court grants an opportunity by imposing a condition to deposit 25% of the disputed tax. In view of the fact that already 23% of the disputed tax amount has already been recovered, no additional condition is imposed.
6. In view of this, the writ petition is allowed on the following terms:-
i. Since 23% towards demand of CGST and SGST amount has already been recovered, the impugned order dated 18.07.2025 shall stand set aside, and the matter shall stand remanded back to the file of the respondent.
ii. The assessee shall appear before the respondent within a period of four weeks of receiving the web copy of the order without fail and submit their reply and documents in support of their claim, and it is for the respondent to consider the matter afresh and pass orders in accordance with law.
iii. Since the impugned order of assessment is set aside, any attachment of the bank account made pursuant to the impugned order shall stand raised.
No costs. Consequently, connected Miscellaneous Petition is closed.
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