Madras High Court Holds Tax Assessment Order Invalid for Failure to Consider Reply Filed Before Order Date

In a significant ruling, the Madras High Court addressed the procedural fairness required in tax assessment proceedings under the TNGST Act. The petitioner challenged an assessment order dated 11.11.2025, contending that although a notice for personal hearing was served for 03.11.2025, a reply was uploaded on the web portal on 10.11.2025—one day before the impugned order was passed. The petitioner argued that this reply was not considered by the assessing authority.

The respondent, represented by the Additional Government Pleader, maintained that the petitioner failed to appear or file a reply on the scheduled date and that the assessment was made based on available records. The respondent further asserted that the petitioner, engaged in passenger transportation services, failed to produce required tax invoices or tickets as mandated by Rule 54(4) of the CGST/TNGST Rules, 2017. Only profit and loss statements were submitted, without supporting documents such as passenger tickets, trip sheets, booking registers, or vehicle movement records, leading to the rejection of the petitioner’s claim.

In response, the petitioner’s counsel submitted that the petitioner operated both stage carriage and goods vehicles, with the latter transporting agricultural goods exempt from tax. It was argued that most of the required documents were available and could be produced if an opportunity was granted.

The Court, after considering the submissions and the record, observed that while the petitioner did not initially avail the opportunity to respond, a reply was in fact uploaded before the assessment order was passed. The Court held that the petitioner was sufficiently vigilant and that the assessment order was issued without considering the reply and supporting documents.

The Court emphasized the importance of granting a fair opportunity to the assessee, particularly where claims of exemption and stage carriage operations are involved, and where the assessment was primarily based on non-production of documents. The Court found that the entire liability was fastened on the petitioner without adequate consideration of the reply and supporting evidence.

Accordingly, the High Court set aside the impugned assessment order and remanded the matter to the assessing authority for fresh consideration. The petitioner was directed to appear before the authority within two weeks, file an additional reply, and produce all necessary documents. The authority was instructed to afford a personal hearing and pass a fresh order in accordance with law.

The judgment underscores the necessity for tax authorities to consider all submissions and documents filed before passing assessment orders, reaffirming the principles of natural justice and procedural fairness in tax adjudication.