Madras High Court restores right to statutory GST appeal with conditions on additional deposit
Background of the dispute
The matter in Kavithalaya Steels Vs Appellate Authority came before the Madras High Court as a writ petition seeking to challenge:
- An Assessment Order dated 27.04.2024 issued in Form GST DRC-07 for the financial year 2018-2019, and
- A subsequent Rectification Order dated 23.12.2024, whereby the rectification application filed on 26.07.2024 was rejected.
The assessment originated from a Show Cause Notice in Form GST DRC-01 dated 29.12.2023. As the assessee did not file any reply to this notice, the proceedings culminated in an ex parte assessment order confirming the following demand:
- Disputed tax: ₹19,40,368
- Penalty: ₹1,94,036
- Total demand: ₹21,34,404
The assessee approached the High Court after the rectification route failed, seeking permission to pursue the statutory appellate remedy against the original assessment order.
Challenge before the High Court
Relief sought by the assessee
The assessee’s principal contention before the Madras High Court was procedural rather than substantive. Since the rectification application had been rejected by the authorities through the Rectification Order dated 23.12.2024, the assessee requested:
- Liberty to file a statutory appeal against the Assessment Order dated 27.04.2024 before the Appellate Authority; and
- Protection against coercive recovery and bank attachment, subject to reasonable conditions on pre-deposit.
The assessee also disclosed that a sum of ₹5,75,646 had already been remitted towards the disputed tax liability of ₹19,40,368. This fact was stated specifically in paragraph 7 of the affidavit filed in support of the writ petition.
Stand of the revenue
The learned Government Advocate representing the tax department indicated that, based on the materials available at that time, the department was unable to verify or confirm the alleged payment of ₹5,75,646.
Thus, while the revenue did not dispute the assessee’s right to avail the appellate remedy per se, it expressed reservations on the factual assertion regarding partial payment already made.
Judicial approach and reasoning
Disposal at admission stage
The Madras High Court, with consent of both sides, decided to dispose of the writ petition at the admission stage itself, avoiding prolonged litigation at the writ level and instead steering the dispute back into the normal statutory appellate framework.
The Court reaffirmed its consistent practice in similar GST matters:
- Encourage the assessee to avail the remedy of statutory appeal, and
- Impose reasonable conditions of pre-deposit to protect the revenue interests while safeguarding the assessee’s right to be heard on merits.
Key conditions imposed for availing appellate remedy
The Court did not set aside the Assessment Order or the Rectification Order. Instead, it granted liberty to the assessee to file an appeal before the Appellate Authority (1st respondent), subject to fulfilment of specific financial and procedural conditions.
The conditions laid down were as follows: