Tvl. Mahalakshmi Traders vs. The Joint Commissioner - (St)(Intelligence)

Heard Mr.B.Rooban, learned counsel appearing for the petitioner and Mr.R.Parthiban, learned Government Standing Counsel, who takes notice on behalf of the respondents.

In the present case, this Court had earlier passed a detailed order in Tvl.Mahalakshmi Traders vs. The State Tax Officer – 2 (Inspection), Office of the Joint Commissioner (ST) Intelligence, Virudhunagar – 626 001 and another, reported in W.P.(MD) No.28041 of 2025, etc., batch, dated 09.10.2025. This Court remanded the matter for reconsideration, subject to the condition that the petitioner shall deposit a total sum of Rs.1,00,00,000/-. It was also made clear that, if an adverse order was passed, the said sum could be adjusted towards the amount found due. Considering the special circumstances of the case, the petitioner was also granted liberty to approach this Court directly once again for appropriate relief, if adverse orders were passed.

Under the above circumstances, even though the writ petitioner 4 https://www.mhc.tn.gov.in/judis challenges the assessment order passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017, these writ petitions are entertained.

The crux of the submissions made by the learned counsel appearing for the petitioner is that, even in the present matters, although the taxpayer had filed a detailed reply with reference to the computation of tax, interest, and penalty, particularly concerning the quantum of process loss, the same was rejected solely on the ground that, during the earlier inspection, when notice was issued, the taxpayer had voluntarily accepted the liability and paid the tax due through GSTR-3B.

The learned counsel for the petitioner placed reliance on the judgment of this Court in M/s. ARS Steels & Alloy International Pvt. Ltd. (W.P. No.2885 of 2020, etc.), wherein this Court had considered the very same issue.

This Court considered Sections 17(1) to 17(4) of the Act and held that the expression "loss" occurring therein cannot be construed to include loss occasioned by consumption during the manufacturing 5 https://www.mhc.tn.gov.in/judis process, as such loss is inherent in the process of manufacture itself.

This Court further held that the dictum laid down by the earlier Division Bench in Rupa & Co. Ltd. v. CESTAT, Chennai (2015 (324) ELT 295), relating to availment of CENVAT credit, would equally apply to proceedings under the present Act. Consequently, it was held that the finding of the Assessing Officer was misconceived and that such losses are not covered under Section 17(5)(h) of the Act.

When the above judgment was specifically brought to the notice of the respondent authority, the authority failed to consider or deal with the same and brushed aside the petitioner's contention solely on the ground that the tax component had already been paid voluntarily.

The learned counsel for the petitioner also relied upon certain factual aspects relating to e-way bills, which had already been cancelled.

The learned counsel further submitted that, with regard to 6 https://www.mhc.tn.gov.in/judis freight charges, the allegations contained in the proposal were revenue- neutral. Even after recording that there was no revenue loss and that the tax had merely been paid under the reverse charge mechanism by mistake, the authority nevertheless proceeded to determine the liability.

Per contra, the learned Government Standing Counsel appearing for the respondent submitted that the impugned orders had been passed strictly in accordance with the directions issued by this Court in the earlier round of litigation. It was further contended that, although this Court had observed that the petitioner could directly approach this Court in the event of an adverse order, the assessment order involves intricate questions of fact and law, and therefore the petitioner ought to be relegated to the statutory appellate remedy. It was also submitted that the findings of the Assessing Officer cannot be assailed as erroneous in writ proceedings, as the Assessing Officer had considered the issues on merits and passed a reasoned order.

I have considered the rival submissions made by the learned counsel on either side and perused the materials available on record.

Firstly, with regard to the issue relating to process loss, I am of 7 https://www.mhc.tn.gov.in/judis the view that the finding has been rendered solely on the basis that the tax had been paid through Form GST DRC-03. When the scheme of the Act contemplates an assessment under Sections 73, 74, or 74A, as the case may be, and when a show cause notice is issued pointing out the alleged defects, the assessee is entitled to place on record both legal and factual defences.

Merely because the tax amount has been paid, it cannot be construed that the assessee has waived or abandoned all the legal and factual defences available to it.

In view of the above, I am of the considered opinion that the plea raised by the petitioner requires consideration on merits. Since this Court is inclined to accept the petitioner's contention with regard to one of the issues, the matter is remanded to the file of the respondent. The other issues are also remanded for fresh consideration, as several additional pleas have been raised by the petitioner before this Court, which also require adjudication by the respondent authority.

In view thereof, these writ petitions are ordered on the 8 https://www.mhc.tn.gov.in/judis following terms:- i.Impugned orders dated 16.02.2026, 19.02.2026, 23.03.2026, 24.03.2026, 10.04.2026 & 20.04.2026 shall stand quashed. ii.The matters are remanded to the file of the respondent for fresh consideration. The respondent shall reconsider the issues in the light of the observations made supra, particularly with reference to the entry relating to process loss, and shall also consider all the legal and factual contentions raised by the petitioners in respect of all the defects alleged against them. Thereafter, the respondent shall pass fresh orders in accordance with law. iii.Needless to state that the sum of Rs.1,00,00,000/- already deposited will be ultimately subject to the fresh orders that will be passed and in the same manner it can be adjusted as directed earlier, if only any adverse order is passed. 9 https://www.mhc.tn.gov.in/judis iv.No costs. Consequently, connected miscellaneous petitions are closed. 24.06.2026 (1/2) NCC:Yes/No rgm To 1. The Joint Commissioner – (ST) (Intelligence), Commercial Taxes Building, Madurai Road, Virudhunagar - 626 001. 2. The State Tax Officer - 2 (Inspection), Office of the Joint Commissioner (ST) (INT), Commercial Taxes Building, Madurai Road, Virudhunagar - 626 001. 10 https://www.mhc.tn.gov.in/judis D.BHARATHA CHAKRAVARTHY

Accordingly, the W.P.(MD)No.17350 of 2026 shall stand corrected as W.P.(MD)No.17530 of 2026 wherever it appears in the order dated 24.06.2026. 4. The registry is directed to carry out the aforesaid corrections in the order dated 24.06.2026 and issue fresh order copies to the parties. 02-09-2026 NHS 12 https://www.mhc.tn.gov.in/judis D.BHARATHA CHAKRAVARTHY, J. NHS WP (MD)Nos.17525, 17526, 17527, 17528, 17529 & 17530 of 2026 and W.M.P.(MD)Nos.12972, 13024, 12985 and 13023 of 2026 02-09-2026 13 https://www.mhc.tn.gov.in/judis