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

The crux of the submissions made by the learned counsel appearing for the petitioner is that, although the taxpayer filed a reply explaining its position and the adjudicating officer considered and accepted the same, the proposal was nevertheless confirmed solely on the ground that, when the earlier notices were issued, the taxpayer had accepted the defect and voluntarily paid the amount through DRC-03. 4. The learned counsel would submit that, when an inspection is conducted or goods are intercepted and a demand is raised, taxpayers, considering the urgency of the situation and without prejudice to their rights, often pay the tax amount. However, such payment does not preclude them from lawfully contesting the matter, particularly when a show cause notice has been issued and a detailed reply has been filed.

Per contra, the learned Government Standing Counsel appearing for the respondents would submit that the petitioner cannot approbate and reprobate. Having voluntarily paid the tax amount through DRC-03 when the defect was pointed out at the relevant point 3 https://www.mhc.tn.gov.in/judis of time, the petitioner cannot now be permitted to turn around and contest the matter.

I have considered the submissions made on either side and perused the materials available on record.

Insofar as the tax liability is concerned, the same has to be determined and assessed in accordance with the procedure prescribed under Sections 73, 74, or 74A of the Act, as the case may be.

In that view of the matter, once a show cause notice containing the proposal is issued, the petitioner, being the taxpayer, is entitled to raise all legal and factual contentions in the reply and contend before the assessing authority that the proposed assessment is erroneous in law. Merely because the tax amount was paid through DRC-03 upon issuance of DRC-01A, it cannot, by itself, be presumed that the taxpayer has waived or abandoned all legal and factual pleas that are otherwise available. Therefore, I am unable to accept the said finding of the assessing officer, as the impugned order has been passed solely on the 4 https://www.mhc.tn.gov.in/judis basis of the said finding.

I am of the view that the matter has to be remanded back to the file of the respondent for fresh consideration. Relevant portion of the adjudication officer's final findings is extracted hereunder for ready reference:- “The tax payer's reply was carefully examined and found that the inspection officer had inadvertently made a mistake in the calculation of stock difference. By accepting the defect, the tax payer had also paid the tax due along with penalty levied u/s 74A(5) (ii) of the TNGST Act 2017 through DRC-03 on 04.07.2024 and 28.03.2026. Hence this defect is hereby dropped. ARN NO./ Date Tax Penalty CGST SGST CGST SGST AD330724006133M/04/07/2024 81525 81525 AD330326095994L/28.03.2026 64713 64713 83,199 83,199 Accordingly, an intimation in DRC-01A was issued in the reference Ist cited. The tax payer had accepted the defect and paid the amount tax voluntary through DRC 03. I therefore confirm the liability arose for the year 2024-25 due to surprise inspection as below:- 5 https://www.mhc.tn.gov.in/judis SUMMARY OF DUES DETERMINED Defect No. Nature of Defects TAX PENALTY IGST CGST SGST IGST CGST SGST 2 Name Board 0 0 0 0 10000 10000 3 Stock Difference 0 146238 146238 0 73,119 73,119 Total due 0 146238 146238 0 83119 83119 Paid 0 146238 146238 0 83119 83119 Balance 0 0 0 0 0 0 Since the tax payer had paid the entire amount in accordance with the provisions of TNGST Act 2017 at the time of inspection and on intimation, the proceedings initiated through DRC 01A are hereby ordered to be conducted.”

In view of the same, this writ petition is ordered on the following terms:- i. The impugned order dated 07.04.2026 shall stand set aside and the matter shall stand remanded back to the file of the respondent and the respondent shall proceed from the stage of personal hearing. 6 https://www.mhc.tn.gov.in/judis ii. The assessee shall appear before the respondent without fail and submit their reply and documents in support of their claim, and it is for the respondent to consider the matter afresh and pass orders in accordance with law. iii. Since the impugned order of assessment is set aside, any attachment of the bank account made pursuant to the impugned order shall stand raised. iv. Needless to mention that both factual and legal grounds can be raised before the respondents. v. No costs. Consequently the connected miscellaneous petition is closed. 24.06.2026 (2/2) NCC:Yes/No rgm 7 https://www.mhc.tn.gov.in/judis D.BHARATHA CHAKRAVARTHY