Tax Demand at 12% Due to Typo Error? Madras HC Steps In, Orders Fresh GST Assessment

The current writ petition [W.P.(MD) No.21282 of 2025] is being filed by a company named Tvl. Asian Enterprises (petitioner) in the Madras High Court before the bench comprising Honourable Justice Mr. C.Saravanan, against the Deputy State Tax Officer-1 (respondent) under Article 226 of the Constitution of India. The company requested the court to quash the GST assessment order dated 10.02.2025, passed by the GST officer for the financial year 2020-2021. Also requested the court to order a fresh assessment for that financial year.

Previously, the company was issued a show cause notice (Form DRC-01) dated 22.11.2024, by the GST officer. The company filed a reply to it on 30.01.2025 and also attended a personal hearing. After considering the response of the company, the GST officer issued the final order on 10.02.2025, which raised a tax demand at 12% on the company’s total outward supply.

The company argued that it is registered under the Composition Scheme under Section 10 of the GST Act, which means it should pay only 1% tax on total sales, not 12%. It made a total suppl of Rs. 25,94,000 in the financial year 2020-21, which is under the limit set under the Composition Scheme. The company admitted that in the reply to the SCN it made a grammatical mistake; it wrote “We are collected taxes on our outward supply” instead of “We have not collected taxes on our outward supply.” Due to this mistake, the tax department assumed that the company is trying to say that they have collected taxes from customers and are therefore now not eligible for the Composition Scheme and now required to pay 12% tax instead of 1%. The company also tried correcting their mistake, but the same was not noticed and issued the final order.

Considering the same, the court quashed the GST assessment order dated 10.02.2025, and remanded the case to the GST department (respondent) for fresh consideration. Said the initial order will now be treated as an add-on to the earlier SCN dated 22.11.2024. The company must then submit a fresh reply to the SCN within 30 days from receiving this Court order, additionally pay the admitted tax of 1% under the Composition Scheme within such time. Directs the GST officer that if the company comply with the above conditions, then they must pass a fresh assessment order, considering all facts and documents within 3 months. The officer must also give a chance of personal hearing to the company before issuing the new final order. If the company fails to reply or pay the tax timely, the case will be treated as dismissed, and then GST department is allowed to take further actions against the company as allowed under the law. The company was directed to fully cooperate with the tax department and provide all relevant documents proving that the total value of supply for the financial year 2020-21 was only Rs. 25,94,000.