Madras High Court Remands Matter Due to Computational Errors and Disregard of Proposal to Drop Demand

Issue

Computational Errors: Whether an adjudication order passed under Section 74 of the GST Act is sustainable when it contains computational errors in the figures adopted for confirming the demand.
Contradictory Order: Whether the order is valid if it confirms a demand despite a prior proposal (in the defect notice/SCN stage) to “drop the demand” (referred to as “drop me demand” in the query, likely a typo for “drop the demand” or “drop proceedings”).
Writ Maintainability: Whether a writ petition can be entertained against such an order when the petitioner failed to file a statutory appeal within the limitation period.

Facts

Period: Financial Year 2019-20.
Proceedings: The Department issued a Show Cause Notice (SCN) in Form GST DRC-01.
Petitioner’s Action: The petitioner filed a reply and subsequently furnished a further reply to the notice.
The Error: The petitioner pointed out that:
- There were computational errors in the figures adopted by the authority while confirming the demand.
- A proposal to “drop the demand” (drop proceedings) was made in the defect notice/proposal stage, but the final order erroneously confirmed the demand instead of dropping it.
Challenge: The petitioner did not file a statutory appeal under Section 107 within the time limit and approached the High Court directly, challenging the order on grounds of non-application of mind and calculation errors.

Decision

The Madras High Court ruled in favour of the assessee (regarding the opportunity) and remanded the matter back to the adjudicating authority.
Interference Justified: Despite the existence of an alternative remedy (appeal), the Court was inclined to interfere because the order suffered from patent errors (computational mistakes and disregarding the proposal to drop demand), which indicated a lack of proper adjudication.
Conditional Remand: Considering that the petitioner had not approached the Appellate Authority or the Court earlier (laches), the Court imposed a condition to balance the Revenue’s interest.
Directions:
1. The impugned order was set aside.
2. The matter was remitted back to the authority for fresh consideration.
3. Condition: The petitioner was directed to remit 10% of the disputed tax amount within a specified period (usually 4-6 weeks).
4. Upon such deposit, the authority was directed to afford a personal hearing and pass a fresh, reasoned order correcting the errors.

Key Takeaways

Correction of “Apparent” Errors: High Courts often exercise writ jurisdiction to correct orders that suffer from obvious calculation errors or contradict their own proposals (e.g., proposing to drop but then confirming), as these are errors on the face of the record.
Cost of By-passing Appeal: While the Court granted relief, it imposed a 10% pre-deposit condition. This mirrors the pre-deposit required for a statutory appeal, ensuring the petitioner does not gain a financial advantage by skipping the appellate route.
Opportunity to Explain: The remand ensures the taxpayer can demonstrate the actual figures and enforce the original proposal to drop the demand if the facts support it.

HIGH COURT OF MADRAS

Hind Aluminium Company

State Tax Officer^*

C.Saravanan, J.

W.P. No. 38894 of 2025
W.M.P. Nos. 43530, 43531 and 43533 of 2025

OCTOBER 24, 2025

P.Rajkumar for the Petitioner. C.Harsha Raj, Special Govt. Pleader for the Respondent.

ORDER

1. This Writ Petition is disposed of at the time of admission with the consent of the learned counsel for the Petitioner and the learned Special Government Pleader, who takes notice on behalf of the Respondents.

2. Heard the learned counsel appearing for the petitioner and learned Special Government Pleader appearing for the respondents.

3. In this Writ Petition, the Petitioner has challenged the impugned order dated 19.02.2025, insofar as it confirms the demand relating to Defect No.3, which pertains to E-way bill verification when compared to GSTR-1. The petitioner has made out a prima facie on merits, indicating that there are computational errors in the figures adopted for confirming the demand with respect to Defect No.3, and also a drop in the demand that was proposed for Defect No.4.

4. The petitioner had submitted a reply to the Show Cause Notice in Form DRC-01 dated 19.08.2024, through a reply dated 01.10.2024. However, the petitioner was not afforded an opportunity to explain the case in person. Though the petitioner had given a further reply, he failed to appear in person to explain the case. Consequently, the impugned order has been passed with respect to Defect No.3.

5. The relevant observation of the respondent reads as follows:-

“Proper Officer Observation:-

The Tax payer has submitted reply, the filed by the taxable person has been examined carefully as per provision of the TN GST Act-2017. The taxable person has not produce documentary evidence for difference between E-way bill and GSTR-1 details as above. The Tax due @ 18% along with Interest and Penalty under Section 74 will be levied. The reply given is not accepted and the above defect.

Therefore the tax due, interest under Section 50 and penalty under Section 74 of Tamil Nadu GST Act-2017 determined below.

Year	Tax due		Interest Delay days -1786		Penalty		Total
2019-20	CGST	SGST	CGST	SGST	CGST	SGST
Total	1268683	1268683	1346403	1346403	1268683	1268683	7767538

6. The petitioner has made out aprima facie case insofar as Defect No.3 is concerned. However, considering the fact that the petitioner had not filed an appeal or approached this Court earlier, this Court is inclined to remit the case back with respect to Defect No.3, subject to the condition that the petitioner shall deposit 10% of the disputed tax within a period of four weeks from the date of receipt of a copy of this order.

7. The respondent shall thereafter fix a date for personal hearing, and the petitioner shall appear and explain the case afresh.

8. If the petitioner so desires, they may supplement the oral hearing with written submissions on the aforesaid issue.

9. In case the Petitioner complies with the above stipulations, the Respondent shall proceed to pass a final order on merits and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such reply/pre-deposit.

10. In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the tax in accordance with law as if this Writ Petition was dismissed in limine today.

11. Needless to state, before passing any such order, the Respondent shall give due notice to the Petitioner.

12. It is made clear that recovery of 10% of the disputed tax ordered above pertains only to the impugned Order dated 19.02.2025 with respect to Defect No.3.

13. This Writ Petition stands disposed of with the above observations.

14. No costs. Connected Writ Miscellaneous Petitions are closed.