Madras High Court Sets Aside GST Order Passed Without Hearing, Cites Minor Breach and Natural Justice Violation

Background and Overview

The Madras High Court recently intervened in a GST dispute where an order dated 12.12.2025 had been issued under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act, 2017) without affording the assessee an opportunity of hearing. The Court set aside the impugned order and remanded the matter for fresh consideration, subject to the assessee depositing the full tax demand within the stipulated timeframe.

The case, Sakthi Ganapathy Tex Vs Deputy State Tax Officer-1, brought into focus two critical issues that frequently arise in GST proceedings: adherence to the principles of natural justice, and the question of whether a minor technical breach warrants the imposition of the minimum statutory penalty under Section 73(9) of the applicable GST enactments.

Facts of the Case

The assessee — Sakthi Ganapathy Tex — challenged an order dated 12.12.2025 passed by the Deputy State Tax Officer-1 on two distinct grounds:

  1. Breach of Principles of Natural Justice — The impugned order was issued without granting any hearing to the assessee, thereby violating a fundamental procedural safeguard recognized across tax adjudication proceedings.

  2. Minor Nature of the Alleged Breach — The assessee contended that the infraction alleged against it was minor in character and fell within the category of minor breaches as contemplated under Section 126(1) of the applicable GST enactments.

Counsel appearing for Sakthi Ganapathy Tex argued that the imposition of a disproportionate penalty for such a minor breach was unjustified, and that the only reason a substantial penalty was being levied was because Section 73(9) of the GST law prescribes a minimum penalty threshold, leaving no room for the adjudicating authority to exercise discretion below that floor.

Without prejudice to these contentions, the assessee's counsel placed on record an endorsement indicating that Sakthi Ganapathy Tex was willing to remit the entire tax demand under the impugned order as a precondition for the matter being remanded.

Section 73 of the TNGST Act, 2017

Section 73 deals with the determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilized — in cases not involving fraud, willful misstatement, or suppression of facts.

Section 73(9) prescribes that the penalty imposed under this provision shall not be less than Rs. 10,000/-, which effectively establishes a mandatory minimum penalty floor that adjudicating authorities cannot go below.