Madras High Court Sets Aside Ex Parte GST Assessment Under Section 74 — GSTR-3B vs GSTR-2A Mismatch Case Remanded

Case Overview

Case: Tvl. VARS Enterprises Vs State Tax Officer
Court: Madras High Court
Provision Invoked: Section 74 of the CGST Act, 2017
Assessment Order Date: 14.11.2025

In a significant ruling favouring the principles of natural justice, the Madras High Court intervened to set aside an ex parte assessment order that had been passed against the assessee under Section 74 of the CGST Act, 2017. The Court granted the assessee a fresh opportunity to place its submissions and documentary evidence on record before the assessing officer, subject to a pre-deposit condition of 25% of the disputed tax demand.

Background of the Dispute

Nature of the Assessment

The assessing authority completed the assessment on an ex parte basis after concluding that the assessee had failed to avail itself of the opportunities extended during the assessment proceedings. The discrepancy forming the foundation of the assessment was a mismatch between GSTR-3B and GSTR-2A — a recurring issue in GST litigation that has been the subject of considerable administrative clarification over the years.

The assessment order dated 14.11.2025 was passed under Section 74 of the CGST Act, 2017, which deals with determination of tax not paid or short paid or erroneously refunded by reason of fraud or wilful misstatement or suppression of facts.

The Assessee's Position

The assessee, Tvl. VARS Enterprises, approached the Madras High Court by way of a writ petition challenging the legality of the impugned order. Before the Court, the assessee advanced two distinct lines of argument:

1. Explanation on Merits:

The assessee contended that the discrepancy between GSTR-3B and GSTR-2A had already been addressed and settled through Circular No. 183/15/2022-GST dated 27.12.2022 issued by the Central Board of Indirect Taxes and Customs. The assessee expressed full willingness to file a detailed reply accompanied by all connected records and supporting documents in line with the guidance provided under the said circular.

2. Explanation for Non-Participation:

On the question of why the assessee did not respond to the show cause notice or participate in the proceedings, the assessee submitted that:

  • The notice as well as the impugned assessment order were uploaded solely on the GST portal
  • The assessee was not otherwise intimated through any alternate mode of communication
  • The accountant responsible for managing the GST-related compliance had not informed the assessee about the portal notifications within the stipulated time
  • As a direct consequence of this communication failure, the matter proceeded to an ex parte order under Section 74 of the CGST Act, 2017