Facts of the Case

The petitioner, Tvl. Super Rubber Products, challenged the assessment order dated 17.02.2025 passed by the State Tax Officer under Section 73 of the TNGST Act for the tax period April 2020 to March 2021. The assessment was completed ex parte through GST DRC-07, disallowing Input Tax Credit (ITC) claimed on items such as cement, iron and steel, tiles, electrical goods, plywood and paint, along with consequential interest and penalty.

The petitioner contended that the impugned order was passed without providing an effective opportunity of personal hearing and in violation of the principles of natural justice.

Issues Involved

  1. Whether the assessment order passed under Section 73 of the TNGST Act without effective participation of the assessee violated the principles of natural justice.
  2. Whether ITC claimed on cement, iron and steel, tiles, electrical goods, plywood and paint was wrongly treated as ineligible.
  3. Whether the assessment order deserved to be set aside and remanded for fresh adjudication after granting an opportunity of hearing.
  4. Whether the petitioner should be directed to make an additional deposit before grant of such relief.

Petitioner's Arguments

  • The inward supplies relating to cement, iron and steel, tiles, electrical goods, plywood and paint were used exclusively in the course of business and were not covered under blocked credits.
  • The Proper Officer wrongly presumed that the goods were not used for business purposes and consequently denied the Input Tax Credit.
  • Since the tax demand itself was unsustainable, the consequential levy of interest and penalty was also liable to be quashed.
  • No physical notice was served, and the notices were uploaded only on the GST common portal. Due to lack of knowledge regarding the notices, the petitioner could not submit a reply or participate in the assessment proceedings.

Respondent's Arguments

  • The assessment proceedings were conducted after providing statutory opportunities.
  • Since the petitioner failed to utilise the opportunities available, the assessment was rightly completed ex parte under Section 73 of the TNGST Act.
  • The demand, interest and penalty were accordingly confirmed.

Court Order / Findings

The Madras High Court observed that, considering:

  • the nature of the discrepancies,
  • the explanation offered by the assessee,
  • and the reasons furnished for non-participation,

one more opportunity deserved to be granted to the assessee to establish its claim by producing relevant records before the Assessing Officer.

The Court noted that it has consistently granted such equitable relief subject to reasonable conditions. Since the petitioner had already deposited 12.5% under CGST and 22% under SGST of the disputed tax, the Court directed the petitioner to deposit the remaining 12.5% under CGST and 3% under SGST of the disputed tax amount.

Upon such deposit:

  • the assessment order dated 17.02.2025 shall stand set aside;
  • the matter shall stand remanded to the respondent for fresh adjudication;
  • the petitioner shall appear before the Assessing Officer and submit all replies and supporting documents;
  • the respondent shall pass a fresh order in accordance with law after considering the materials;
  • any attachment of the petitioner's bank account made pursuant to the impugned assessment shall stand lifted.

Accordingly, the writ petition was allowed subject to the above conditions.

Important Clarification

  • Mere non-participation in assessment proceedings does not automatically disentitle an assessee from relief where sufficient reasons are shown.
  • The High Court may invoke its writ jurisdiction to restore an opportunity of hearing where principles of natural justice have not been effectively complied with.
  • Remand relief can be granted subject to deposit of a portion of the disputed tax.
  • ITC disputes involving business-use materials should be examined on the basis of evidence rather than presumptions.
  • Bank attachments arising from an assessment order are liable to be lifted once the assessment itself is set aside and remanded.

Sections Involved

  • Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act)
  • Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act)
  • Article 226 of the Constitution of India
  • GST DRC-07 Proceedings
  • Principles of Natural Justice

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784628846_1792compressed.pdf

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