Madras HC Quashes Ex Parte GST Assessment, Holds Auditor Responsible for Non-Compliance

The Madras High Court has cancelled a tax assessment order under the Goods and Services Tax (GST) law. This decision was made because the taxpayer didn’t submit a response, but the court found that the error in following the rules was actually the auditor’s fault, not the taxpayer’s.

The applicant, M/s Siva Cotton, represented by its proprietor Shivashanmugam, contested the order of the State Tax Officer, dated 03.02.2025, claiming that the order was passed without properly considering its request for time to file a response.

As per the applicant, a formal response on 03.01.2025 has been submitted, asking for 15 days to file the documents. The assessing authority went ahead and validated the proposals in the show cause notice, culminating in an adverse order.

The applicant’s counsel cited that non-submission of a response was because the auditor managing the GST compliance failed to file the reply within the said time, rather than due to any negligence of the taxpayer. This lapse directed to the ex parte order and the dismissal of the regulatory appeal as time-barred, post delay of 36 days.

Applicant knows about the order on the attachment of their bank account, whereafter they made a 10% regulatory pre-deposit and submitted a response.

Conversely, the State defended the assessment order by arguing that the petitioner had been given multiple opportunities for a personal hearing through notices dated 02.12.2024 and 08.01.2025. Even after being granted an extension until 24.01.2025 to file a reply, the petitioner neither appeared nor submitted the required documents, leaving the assessing officer with no choice but to finalise the assessment.

As per Justice Krishnan Ramasamy, the respondent has furnished the chances, the situations specified that the lapse is because of the failure of the auditor to comply with the regulatory provisions.

The Court cited that “Therefore, this Court is of the view that the fault is neither on the side of the petitioner nor on the part of the respondent and actually, the fault lies only on the part of the Auditor, whom the petitioner has engaged for GST compliances, who had led the situation more worse for the petitioner, for having engaged him. Therefore, under these circumstances, even if the petitioner is permitted to avail the Appellate remedy by relegating them to the Appellate Authority, in the absence of any reply filed by the petitioner, this Court don’t think that the petitioner would be able to defend their case before the Appellate Authority.”

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The impugned assessment order has been set aside by the bench, and the case has been sent back to the State Tax Officer for fresh consideration. However, there was a condition on this relief. The applicant was asked to deposit an additional 15% of the disputed tax within 2 weeks, besides the 10% already paid.