₹50 Lakh GST Demand Order Issued Without Stating Reasons: Madras HC Intervenes in Favour of Taxpayer, Quashes Order [Read Order]

The Madurai Bench of the Madras High Court quashed a ₹50.48 lakh GST ( Goods and Services Tax ) demand order issued by the State Tax Officer on grounds of non-application of mind and absence of proper reasoning.

The petitioner, Tvl. One Plus Technology, challenged the order dated December 4, 2024, which was passed under the Tamil Nadu Goods and Services Tax (TNGST) Act for the assessment period from April 2023 to March 2024.

The demand arose from discrepancies between GSTR-3B returns and e-way bills. Although the petitioner had responded to the show cause notices in Form GST DRC-01A and DRC-01, the impugned order summarily dismissed the reply as “not convincing” and unsupported by “valid documentary evidence” without assigning any clear rationale.

The total demand included ₹41.87 lakh in tax (SGST, CGST, and IGST), ₹1.02 lakh in penalty under Section 73(9), ₹50,000 in general penalty under Section 125 for alleged non-maintenance of records, and ₹5.01 lakh as interest under Section 50(1) totaling ₹50.48 lakh.

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Justice C. Saravanan observed that the order lacked proper application of mind and failed to reflect due consideration of the taxpayer's reply. The Court also noted that no personal hearing had been granted prior to passing the order, thereby violating principles of natural justice.

Though the petitioner had filed a belated appeal before the Deputy Commissioner (Appeals), which was dismissed, the Court took a liberal view considering that the petitioner had already deposited 10% of the disputed tax and more than 25% of the total demand had been recovered over time.

Accordingly, the High Court quashed the order and remitted the matter back to the assessing authority for fresh adjudication. It directed that a new speaking order be passed after granting the petitioner an opportunity for a personal hearing. The petitioner has been granted 30 days to file a detailed reply, treating the earlier impugned order as an addendum to the show cause notice.

Accordingly, the petition was disposed of.

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