The Madras High Court has set aside a penalty order issued under Section 74 of the Tamil Nadu GST Act, 2017

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The Madras High Court has set aside a penalty order issued under Section 74 of the Tamil Nadu GST Act, 2017, on the grounds that the taxpayer was not granted a reasonable opportunity to be heard. 

In this case the impugned order, dated 26 September 2024, was passed without providing a personal hearing to the petitioner, in violation of the principles of natural justice and statutory mandate under the Act. In a similar case involving a construction firm, Justice Vivek Kumar Singh emphasised that ignoring requests for adjournment and proceeding ex parte undermines the fairness of proceedings. The Court accordingly remitted the matter for fresh adjudication, directing that a hearing be conducted and a reasoned order issued thereafter.

By quashing the VAT penalty and mandating rehearing, the High Court reinforced that penalty proceedings under Section 74 are subject to the robust safeguards of natural justice. Procedural compliance, particularly the right to a personal hearing and to submit a reply, is indispensable before imposing financial sanctions for alleged tax fraud, misstatement, or suppression of facts. This ruling underscores the judiciary’s growing insistence that tax authorities adhere strictly to fair hearing norms, especially when imposing penalties under the GST framework.

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