Namaste DOST!

Every taxpayer knows the anxiety of receiving a notice, filing a detailed reply, and still finding that the final order seems to have skipped over everything they said.

So, where does the mistake lie — in the tax, or in the procedure?

The Madurai Bench of the Madras High Court, in M/s Shri Amman Steel and Allied Industries Pvt. Ltd. v. State Tax Officer – V (Roving Squad) (judgment dated 06 October 2025), reminded everyone that a lawful tax order must also be a fairly made one.

As the Court put it plainly, the Judge was not deciding the tax itself — he was judging the process.

Summary

M/s Shri Amman Steel and Allied Industries Pvt. Ltd. challenged a GST order passed by the State Tax Officer (V), Trichy Division, which levied GST at 1 % of the corporate-guarantee amount under Rule 28(2) of the CGST Rules 2017.

The company argued that it had not received any consideration for giving the guarantee and that the officer had ignored the contentions raised in its written reply.

The High Court agreed that the reply had not been considered at all.

On that limited procedural ground, the Court set aside the order and directed the officer to pass a fresh one after considering all the contentions and in accordance with law.

Importantly, the Judge stated, “I have not gone into the merits of the matter.”

Facts of the Case

• The petitioner, Shri Amman Steel and Allied Industries Pvt. Ltd., had furnished a corporate guarantee in favour of a related company.

• The petitioner stated that no consideration was received for giving this guarantee.

• The State Tax Officer (V) treated the act as a supply of service between related persons and levied tax at 1 % of the guarantee amount per annum under Rule 28(2).

• A show-cause notice was issued, and the petitioner filed a reply, referring to two CBIC circulars and asserting that the transaction carried no taxable value.

• The officer passed the order dated 29 April 2025 without referring to or discussing any of the contentions raised.

Aggrieved by that omission, the company filed a writ petition before the High Court, claiming that the order violated principles of natural justice because its defence was not considered.

Legal Issue

Whether an order passed under GST is valid when the assessee’s reply and contentions have not been considered by the adjudicating officer.

Arguments (As Recorded in the Order)

The judgment records that the petitioner had placed reliance on two CBIC circulars and on Rule 28 while contending that the value of the transaction should be treated as zero.

The officer, however, did not deal with those submissions while issuing the order, which led to the procedural challenge before the Court.

⚖️ High Court’s Ruling

Justice G.R. Swaminathan held that the order could not stand because the officer had failed to examine the defence raised by the assessee.

The Court observed:

“When a defence raised by the noticee is not considered in the final order, the order is vulnerable on that ground.”

Consequently,

“On the ground of non-consideration of the contentions raised by the assessee, the impugned order is set aside. The respondent is directed to consider all the contentions raised by the assessee in the reply and pass order afresh on merits and in accordance with law. I have not gone into the merits of the matter.”

The Court thus allowed the writ petition on that limited procedural ground and remanded the case for fresh consideration.

Legal Reasoning and Analysis

1. Administrative Fairness as the Foundation of GST Adjudication

The Court treated the GST adjudication process as an exercise in administrative law — where every decision must reflect fairness, legality, and reasoned consideration of the assessee’s defence.

A decision that ignores the reply is procedurally defective even if the tax computation is correct.

2. Duty to Apply Mind to the Reply

Issuing a notice and receiving a reply are not enough. The officer must read, analyse, and respond to the points made in that reply. A reasoned order is a hallmark of natural justice.

3. Merits vs Procedure

The Judge drew a sharp line between tax merits and procedure.

He expressly stated that he had not entered into the merits of the levy, because the procedural defect itself was sufficient to invalidate the order.

Important Takeaways for Taxpayers and Officers

1️⃣ A reply must be considered, not ignored.

If the officer does not address the assessee’s contentions, the order is procedurally unsustainable.

2️⃣ A reasoned order is mandatory.

The final order should explain why each argument was accepted or rejected.

3️⃣ Courts protect fair process.

Even when tax liability exists, an order passed without due process will not be upheld.

4️⃣ Officers must treat procedure as law, not as formality.

The Shri Amman Steel case is a reminder that administrative discipline is part of good governance.

Why This Matters

This decision reaffirms that in the GST framework, administrative law principles govern every assessment.

An order must show that the officer heard the assessee and applied his mind to the facts and law.

Failure to do so is not a technical error — it is a violation of due process.

The case thus serves as a gentle reminder to officers that power to decide comes with the responsibility to reason.

Conclusion

What began as a routine corporate-guarantee valuation dispute ended as a lesson on procedural fairness.

The High Court did not examine the tax calculation at all — it focused only on the process.

By doing so, it re-established a simple truth that resonates beyond this case:

“A tax order is valid only when the procedure is fair.

In GST administration, procedure is not a formality; it is a shield that protects both the taxpayer and the system from arbitrariness.

“📞 Need help responding to a GST notice or ensuring that your reply is properly heard? Contact GST DOST for expert guidance on lawful and reasoned compliance.

FAQ

Q1. What was the dispute in this case?

A: The State Tax Officer treated a corporate guarantee given to a related party as a taxable supply and levied GST at 1 % of its value.

Q2. Why was the order set aside?

A: Because the officer failed to consider the assessee’s reply and contentions; the Court found the order procedurally vulnerable.

Q3. Did the Court decide whether GST applies on the guarantee?

A: No. The Court explicitly stated that it had not gone into the merits of the matter.

Q4. What direction did the Court give to the department?

A: The officer was directed to consider all the contentions raised in the assessee’s reply and pass a fresh order on merits and in accordance with law.

Q5. What is the key lesson from this case?

A: That a GST order must demonstrate fair hearing and application of mind — otherwise, it cannot stand in law.

References

• Case: M/s Shri Amman Steel and Allied Industries Pvt. Ltd. v. State Tax Officer – V (Roving Squad), Madurai Bench of the Madras High Court, Judgment dated 06 October 2025, W.P.(MD) No. 20128 of 2025

• Legal Provisions:

  • Rule 28(2), CGST Rules 2017 — Valuation of supply between related persons.

  • Principles of Natural Justice — Duty to consider the assessee’s defence and give a reasoned decision.