Introduction
The Madras High Court in P.N. Traders vs. Deputy State Tax Officer (W.P.(MD) No.21356 of 2025, decided on 12 August 2025) examined the validity of service of notice under the GST regime when a business has already ceased operations. The petitioner challenged an assessment order demanding tax on credit notes on the ground that the notice was served only through the GST portal after the closure of business. The Court quashed the impugned order, holding that such service was ineffective, as it denied the petitioner a fair opportunity to contest the demand, thereby violating the principles of natural justice.
Case Title & Details
- Case Title: P.N. Traders vs. Deputy State Tax Officer (Madras High Court)
- Writ Petition Number: W.P.(MD) No. 21356 of 2025
- Bench (Presiding Judge): Hon’ble Mr. Justice C. Saravanan
- Date of Judgment: 12 August 2025 (as mentioned in your query)
Summary
This case involves P.N. Traders, who challenged an assessment order passed by the Deputy State Tax Officer. The main issue was that the notice, demanding GST on credit notes, was served only through the GST portal—after the business had already closed. The Madras High Court quashed the impugned order, holding that such mode of service violated both Section 169 of the Tamil Nadu GST Act and the principles of natural justice. The court emphasized that if a business is closed, serving notice solely via the portal is unreasonable, as the taxpayer may not monitor it.
Facts of the Case
- The petitioner was engaged in business under GST law but had closed its business operations before the date of the impugned proceedings.
- The department issued a notice and order demanding GST on credit notes, but the notice was served only through the GST portal.
- Since the business was already closed, the petitioner did not access the portal and thus remained unaware of the proceedings.
- The department passed an adverse order creating tax liability.
- The petitioner challenged the order before the Madras High Court.
Legal Issue
Whether a tax demand/order served only through the GST portal after closure of business can be considered a valid service of notice under GST law?
Arguments
- Petitioner:
- Business was already closed; hence portal-based service is not a valid or reasonable mode of communication.
- Denial of natural justice as no opportunity was provided to contest the demand.
- Credit notes do not give rise to taxable supply and thus cannot attract tax demand.
- Respondent/Department:
- Notice was duly served through GST portal as prescribed under law.
- The petitioner cannot escape liability merely on the ground of closure of business.
Court’s Observations
- When the business itself was closed, reliance solely on portal-based service is not reasonable since the taxpayer would not be expected to monitor the GST portal.
- Valid service of notice must ensure that the affected party has a real opportunity to defend.
- Imposing tax demand on credit notes without effective service of notice amounts to violation of principles of natural justice.
Decision
- The Madras High Court quashed the impugned order.
- Directed the department to reconsider the matter after issuing proper notice to the petitioner in a manner ensuring actual communication.
Key Takeaways
- Portal service alone is insufficient when the business is closed; authorities must adopt alternative modes of communication.
- Credit notes do not by themselves trigger tax liability.
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Natural justice prevails over procedural compliance under GST.