Case Title: P. G. Metal v. The Assistant Commissioner (ST), Kuzhithurai Assessment Circle & Anr.
Court: Madurai Bench of Madras High Court
Petition No.: W.P.(MD) No. 22015 of 2025
Date of Judgment: 12.08.2025
Category: Assessment Order – Input Tax Credit & Penalty
Relevant Sections: Section 73, Section 74, and Section 122(1)(vii) of the CGST/SGST Acts, 2017
Facts (Para 2–4)
The petitioner, P. G. Metal, challenged the assessment order dated 26.02.2025 passed by the second respondent under GSTIN 33BYXPG2899B1Z2 for FY 2023–24. The assessment followed issuance of DRC-01A (16.12.2024) and DRC-01 (24.12.2024) along with multiple personal hearing notices. The Department alleged that the taxpayer issued fake invoices without movement of goods, passing on ineligible Input Tax Credit (ITC) and availed bogus ITC himself. It was also recorded that the petitioner had allegedly admitted these offences during enquiry. Subsequently, penalty under Section 122(1)(vii) was levied at ₹2,00,736/- each under CGST and SGST Acts.
Questions / Issues (Para 5)
Whether the assessment order and consequential penalty were sustainable when the petitioner was not given an effective opportunity to respond to the Show Cause Notice (DRC-01) before finalization of assessment.
Observations (Para 5–9)
The Court noted that though a personal hearing took place, there was no written reply by the petitioner to DRC-01. The impugned order lacked evidence that the petitioner’s alleged admission was in writing. Justice C. Saravanan observed that consistent judicial view requires providing an opportunity to file a reply before proceeding with assessment. The Court, therefore, considered it appropriate to grant a conditional relief to balance interests of justice.
Judgment (Para 6–11)
The impugned assessment order dated 26.02.2025 and the penalty order dated 06.03.2025 under Section 122 were quashed, subject to the condition that the petitioner deposits 25% of the disputed tax in cash within 30 days. The petitioner was directed to file a detailed reply to DRC-01 (24.12.2024), treating the quashed order as an addendum to the show cause notice. The Assessing Officer was directed to pass a fresh speaking order on merits within three months after hearing the petitioner. Failure to comply with deposit conditions would allow the Department to proceed as if the writ were dismissed.
Summary of Cases Referred
| S. No. | Case Name | Court | Issue | Verdict |
|---|---|---|---|---|
| 1 | Various Madras HC precedents (not individually named) | Madras High Court | Opportunity of hearing before finalization of assessment | Consistent judicial view: Orders passed without reasonable opportunity are to be quashed and remanded |
Between Fine Lines
This judgment reiterates that principles of natural justice cannot be bypassed even in cases of alleged fake invoicing. Taxpayers must be given a fair opportunity to submit replies before any penal action. Simultaneously, courts may impose deposit conditions to safeguard revenue interests during reassessment.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
