M/S.Sri Vaira Balaji Fireworks vs. The Commissioner Of Commercial Tax

Facts

The petitioner, M/s. Sri Vaira Balaji Fireworks, challenged an order dated 22.04.2026 passed by the Assistant Commissioner (ST), Sivakasi III Circle, in Form DRC-07 for the tax period 2021-2022. The impugned order was passed under Section 74A(9) of the GST enactments due to the petitioner's failure to reply to a Show Cause Notice. The Department alleged that the petitioner diverted receipts to the personal accounts of its partners, thereby suppressing turnover in its GSTR-3B returns. The Court noted that two partners obtained GST registrations after the tax period in question. The petitioner also had significant transactions in its business current account but failed to submit a proper reply to the Show Cause Notice or produce relevant documents and appear for a personal hearing.

Held

The Court held that the impugned order passed under Section 74A(9) of the respective GST Enactments was liable to be quashed and the matter remitted back to the third respondent for a fresh order. The Court found that while the petitioner had failed to provide a proper reply to the Show Cause Notice and appear for a personal hearing, the circumstances warranted a reconsideration. The reasoning was based on the petitioner's failure to adequately respond to the Department's allegations regarding the diversion of receipts to partners' personal accounts and the suppression of turnover. However, considering the procedural lapses and the potential for a more thorough examination of the facts, the Court decided to allow the petitioner an opportunity to present their case. The ratio decidendi is that procedural fairness and an opportunity to be heard are crucial, even when a party has been remiss in responding to notices, provided there is a willingness to comply with certain conditions. The operative direction was to quash the impugned order and remit the matter to the third respondent, subject to the petitioner depositing 10% of the disputed tax confirmed by the impugned order, as would be required for filing an appeal under Section 107 of the GST Enactments. The petitioner was also directed to cooperate with the third respondent and file an additional reply if necessary.

Key Issues

1. Whether the impugned order passed under Section 74A(9) of the respective GST Enactments is liable to be quashed for alleged illegality, injustice, unfairness, excess of jurisdiction, and violation of principles of natural justice? Petitioner's contention: The petitioner sought to quash the order on grounds of illegality, injustice, unfairness, excess of jurisdiction, and violation of natural justice, requesting a re-consideration of the case by clubbing amounts from individual accounts based on submitted documents and existing records, following High Court orders and government instructions after affording a personal hearing. Revenue's contention: The judgment does not record any specific arguments made by the respondents. However, the context implies the revenue supported the impugned order, which was passed due to the petitioner's failure to respond to the Show Cause Notice and alleged diversion of funds to partners' personal accounts, suppressing turnover.