The Madras High Court has set aside GST demand orders and the consequential recovery proceedings while directing the firm to deposit 25% of the disputed tax demand as a condition for remand.
The bench of Justice Senthilkumar Ramamoorthy quashed the attachment initiated pursuant to the recovery notice and directed the tax authorities to reconsider the matter after granting a fresh opportunity of hearing.
The petitioner/assessee challenged two assessment orders dated 18 February 2025 and 20 February 2025, whereby GST demands were confirmed under Section 73 of the CGST/TNGST Act. The LLP contended that it had ceased business operations and had already filed its final GST return after cancellation of its registration.
According to the petitioner, since the business had been discontinued, the common GST portal was no longer accessed. Consequently, the show cause notices remained unanswered, resulting in ex parte confirmation of the tax proposals without the petitioner’s response being considered.
During the hearing, counsel appeared for the petitioner, on instructions from two partners of the LLP—S.A. Radhakrishnan and N. Selvaraj—submitted that the partners were willing to deposit 25% of the tax demand in each impugned order as a condition for remanding the matter back to the assessing authority.
The Court recorded this undertaking and accepted it while balancing the interests of revenue and ensuring procedural fairness.
Since the LLP’s GST registration had already been cancelled, the Court permitted the partners to make the payment through demand drafts in favour of the tax department instead of using the GST portal.
The Court directed that the deposit of 25% of the tax demand shall be made within 30 days from receipt of the order. Any recoveries already effected by the department shall be adjusted towards the required 25% payment. Upon realization of the deposit, the impugned assessment orders shall stand set aside and the matter shall be remanded for fresh adjudication.
An important aspect of the judgment is that the Court also set aside the consequential attachment initiated pursuant to the recovery notice dated 21 May 2026.
This effectively restores the petitioner’s position pending fresh adjudication and prevents coercive recovery measures during the remand proceedings.
The High Court directed the jurisdictional GST authority to provide the petitioner with a reasonable opportunity of hearing before passing fresh assessment orders.
The Court further mandated that the fresh adjudication must be completed within three months from the realization of the 25% deposit.
The Court also clarified that if the petitioner ultimately succeeds during the remand proceedings, it would be entitled to seek a refund in accordance with law, thereby preserving the taxpayer’s statutory remedies.
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