Sri Iyyappan Stores vs. The Deputy State Tax Officer - 1

Facts

The petitioner, Sri Iyyappan Stores, challenged an assessment order dated 28.11.2025, passed by the Deputy State Tax Officer – 1, Aranthangi Assessment Circle, under Section 73 of the TNGST Act 2017. The assessment was made ex parte, alleging excess availment of Input Tax Credit (ITC) of Rs.1,06,714/- for the assessment year 2021-22, primarily on account of alleged ineligible credit for insurance and pension services, and ITC on granite purchases. The petitioner contended that the insurance expenditure was for commercial vehicles used for business, and they had never purchased granite or availed ITC on such transactions. The petitioner also claimed they were unaware of the proceedings as notices were only uploaded on the GST portal, and their part-time accountant failed to inform them. They argued that no effective service of notice was made as per Section 169 of the TNGST Act, depriving them of an opportunity to be heard.

Held

The Court held that an opportunity should be granted to the assessee to present their submissions and produce supporting documents before the respondent assessing officer, considering the nature of the discrepancies, the explanation provided by the assessee, and the reasons for not availing the opportunity. The Court decided to grant this opportunity on equitable grounds, subject to certain conditions. The impugned order dated 28.11.2025 was set aside, and the matter was remanded back to the respondent. The petitioner was directed to deposit 25% of the disputed tax amount within four weeks. Upon deposit, the assessee must appear before the respondent, submit their reply and documents, and the respondent is to consider the matter afresh and pass orders in accordance with the law. Any attachment of the bank account made pursuant to the impugned order was also ordered to be raised. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the assessment order dated 28.11.2025, passed under Section 73 of the TNGST Act 2017, is liable to be quashed as cryptic, nonspeaking, illegal, arbitrary, and without jurisdiction, based on the petitioner's contentions regarding the merits of the ITC disallowance and the procedural deficiency in serving notices? (Mixed question of law and fact). Petitioner's Arguments: - The respondent mechanically treated insurance and pension services as blocked credits without examining their business nexus. The insurance expenditure was for commercial vehicles used for transportation, thus having a direct business nexus. - The allegation regarding granite purchases was erroneous, as no such purchases were made, and no supporting documents were provided by the respondent. - The petitioner was unaware of the proceedings as notices were only uploaded on the GST portal, and their accountant failed to inform them. - No effective service of notice was made under Section 169 of the TNGST Act, violating their right to be heard. Revenue's Arguments: The judgment records that the assessment was made ex parte because the petitioner did not utilize the opportunities provided. No specific arguments were recorded for the revenue regarding the merits of the ITC disallowance or the service of notice.