GST Order Under Section 74 Held in Abeyance Due to Pending Second Appeal and Portal Glitch — Madras High Court

Case Overview

Case Name: Abarna Match Industries Vs State Tax Officer
Court: Madras High Court
Impugned Order Date: 26.12.2025
Provision Under Challenge: Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017

Background and Facts of the Case

The Madras High Court recently adjudicated a significant writ petition involving the interplay between appellate proceedings, portal-related technical failures, and the validity of demand orders passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act).

The assessee, Abarna Match Industries, had originally availed input tax credit (ITC) and on that basis sought and received a refund amounting to ₹4,75,859/-. The refund had been duly sanctioned by the competent authority. However, the Revenue filed an appeal before the Appellate Authority challenging the grant of the refund. The Appellate Authority decided the matter in favour of the Revenue, resulting in the reversal of the refund previously sanctioned to the assessee.

Following this adverse appellate order, the assessee resolved to contest the decision further and initiated the process of filing a second appeal before the appropriate authority. In preparation, the assessee had already deposited the mandatory 10% pre-deposit as required under the applicable provisions. However, when attempting to upload the appeal on the GST portal, the assessee encountered persistent technical glitches that prevented the appeal from being formally registered or taken on file by the system.

Taking advantage of this interim period — during which the second appeal remained in limbo solely due to portal-related issues — the Revenue proceeded to pass the impugned order dated 26.12.2025 under Section 74 of the TNGST Act, 2017, demanding recovery of the refund amount along with interest and penalty.

Contentions Raised by the Assessee

The assessee raised the following principal arguments before the Madras High Court:

  • Applicability of Circular dated 18.11.2019: The assessee relied heavily on Clause 22 of the Circular dated 18.11.2019, contending that in the facts and circumstances of the present case, the Revenue was not entitled to initiate proceedings under Section 73 or Section 74 of the Act.

  • Improper Invocation of Section 74: The assessee argued that even assuming some form of demand proceedings were permissible, resorting to Section 74 — which contemplates cases involving fraud, wilful misstatement, or suppression of facts — was inappropriate and unwarranted in the present situation.

  • Portal Glitch Causing Prejudice: The assessee highlighted that the failure to register the second appeal was entirely attributable to a technical malfunction in the GST portal and not to any default or inaction on the part of the assessee. Using this technical gap to pass a demand order caused undue prejudice.

Revenue's Stand

The learned Additional Government Pleader, appearing for the State Tax Officer, countered the assessee's submissions on the following grounds:

  • Once a refund has been sanctioned and actually availed by the assessee, and the same is subsequently reversed by the Appellate Authority, it becomes incumbent upon the Revenue to initiate appropriate recovery proceedings.

  • The proper mechanism for recovering such liability — including interest and penalty where applicable — is through an order passed under Section 73 or Section 74 of the Act, as the case may be.