The Madras High Court has set aside a GST assessment order passed under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017, after observing that the order was issued without hearing the taxpayer and the alleged contravention appeared, prima facie, to be a minor breach.

The bench of Justice Senthilkumar Ramamoorthy remanded the matter for fresh consideration, subject to the taxpayer paying the entire tax demand within 30 days of receiving the court’s order. The Court also directed that any bank attachment arising from the impugned assessment must be lifted upon fulfilment of this condition.

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The petitioner/assessee approached the High Court seeking quashing of the assessment order and a direction to the tax authority to reconsider the matter after granting a fair opportunity of hearing and permitting it to submit supporting documents.

The taxpayer challenged the order primarily on two grounds: violation of the principles of natural justice and the allegedly minor nature of the default attributed to it.

Referring to Section 126(1) of the applicable GST enactments, counsel for the petitioner argued that the alleged contravention fell squarely within the category of a minor breach.

Section 126 prescribes general disciplines relating to the imposition of penalties under GST law. It provides safeguards against imposing penalties for minor breaches of tax regulations or easily rectifiable procedural requirements, subject to the statutory conditions.

The petitioner further contended that a disproportionate penalty was being imposed for the alleged minor default merely because Section 73(9) prescribed a minimum penalty.

Without prejudice to its legal contentions, the taxpayer offered to pay the entire tax demand under the challenged order as a condition for remand. An endorsement recording this undertaking was made on the case bundle.

Court Notes Difference Between Sections 73(9) and 74(1)

The High Court drew attention to the statutory distinction between Sections 73(9) and 74(1).

The Court observed that, on a comparison of the two provisions, no minimum sum was prescribed under Section 74(1), whereas Section 73(9) fixed a minimum penalty of ₹10,000.

The Court said that this difference could provide the basis for a constitutional challenge to the provisions. It nevertheless declined to interfere on that ground because the petitioner had not raised any such constitutional challenge in the proceedings before it.

At the same time, the Court clarified that the taxpayer would remain at liberty to challenge the relevant statutory provisions separately in accordance with law.

Absence of Hearing and Minor Nature of Breach Considered

Although the Court did not grant relief on the unraised constitutional issue, it found two circumstances significant.

First, the impugned assessment order had been issued without hearing the petitioner. Second, the alleged breach appeared prima facie to be minor.

Considering these factors, the High Court set aside the assessment order dated December 12, 2025, subject to the petitioner remitting the tax demand within 30 days from the date of receiving a copy of the judgment.

Fresh Order to Be Passed Within Five Months

The matter was remanded to the Deputy State Tax Officer for reconsideration so that the taxpayer could contest the tax proposals on merits.

The respondent was directed to provide a reasonable opportunity to the petitioner and issue a fresh order within five months from the date on which the stipulated tax payment is made.

The Court also directed that, upon fulfilment of the payment condition, any bank attachment connected with the impugned assessment order must be lifted.

The High Court clarified that the remand would not prevent the petitioner from challenging the relevant penalty provisions through appropriate proceedings.

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