“Consultant-Negligence” as a Recognised Ground for Setting-Aside GST Assessment Orders – Madras High Court’s Decision in Chandrasekaran v. Assistant Commissioner (ST)

1. Introduction

Chandrasekaran, proprietor of Subha Earth Movers, challenged an order dated 21 Aug 2024 whereby his Goods and Services Tax (GST) registration for FY 2019-20 was subjected to an adverse assessment and his bank account was frozen. The writ petition before the Madras High Court sought (a) certiorarified mandamus quashing the assessment and (b) consequential de-freezing of the bank account. Central to the dispute was that the GST reply had been drafted and uploaded by an unqualified consultant and was completely irrelevant to the show-cause notice (SCN).

Key issues framed by the Court:

• Whether an assessment order passed on the basis of an irrelevant or wrong reply—filed due to consultant’s negligence—violates principles of natural justice.
• Whether such negligence can constitute a sufficient cause to remit the matter for de novo consideration.
• What interim equity must be balanced between the tax-payer and revenue (deposit, de-freezing, timelines).
• Whether the tax department must issue a circular cautioning assessees to engage qualified consultants.

2. Summary of the Judgment

Justice Krishnan Ramasamy set aside the impugned assessment order and laid down the following operative directions:

1. The matter is remanded to the Assessing Officer (AO) for fresh consideration subject to payment of 25 % of the disputed tax within four weeks.
2. The petitioner may file a comprehensive reply within three weeks of such payment; AO must grant 14 days’ clear notice of personal hearing and pass a reasoned order.
3. The attachment on the petitioner’s bank account is directed to be lifted immediately once a copy of the order is produced before the bank.
4. The State Tax Department must issue a note/circular advising assessees to engage qualified consultants to avoid recurrence of such situations.

3. Analysis

3.1 Precedents Cited or Relied Upon

While the judgment itself does not list case citations, the Bench’s reasoning resonates with, and is buttressed by, a consistent line of decisions:

• Tvl. Suguna Cutpiece Centre v. Appellate Deputy Commissioner (ST), (Mad HC 2021) – quashed GST orders for violation of natural justice where documents on portal were not effectively communicated.
• A.S. International v. Assistant Commissioner (ST), (Mad HC 2023) – remand granted because reply filed by an accountant contained factual mistakes; Court held that “mistake by engaged professional” is a curable defect.
• Kishan Lal Oil Mills v. Union of India, (P&H HC 2021) – emphasised that attachment of bank accounts must be proportionate and only after meaningful opportunity.
• Canon India Pvt. Ltd. v. CCE, (SC 2021) – reiterated that jurisdictional defects render orders void; though a customs case, courts extend the principle that an order based on a fundamentally defective process cannot stand.

These authorities underscore two themes the present judge adopts: (1) inflexible adherence to audi alteram partem in tax adjudication, and (2) willingness to employ Article 226 to correct procedural injustices swiftly.

3.2 Legal Reasoning

1. Natural Justice & Effective Hearing. The Court held that the petitioner’s “irrelevant reply” deprived the AO of an informed decision and the assessee of effective participation. A hearing on a wrong foundation equals no hearing at all.
2. Attribution of Fault. Recognising that the error emanated from an unqualified consultant, the Court distinguished wilful default from professional lapse. It balanced equities by imposing a 25 % deposit—protecting revenue yet preventing undue hardship.
3. Broader Regulatory Concern. Noting frequent recurrence of consultant-induced defects, the Bench exercised supervisory jurisdiction to direct the State Tax Department to circulate guidance on engaging qualified professionals. Although not a statutory amendment, such judicial directions under Article 226 are binding until modified by superior courts or legislation.
4. Proportional Interim Measures. Because the underlying assessment was set aside, the ancillary bank attachment could not survive; thus, immediate de-freezing was ordered. This reflects the proportionality doctrine: coercive recovery measures stand or fall with the validity of the assessment.

3.3 Likely Impact

• Creation of a “Consultant-Negligence” Defence. Future assessees may cite this judgment to seek remand where replies filed by unqualified or erring professionals have prejudiced them.
• Administrative Overhaul. The mandated circular will compel GST authorities to lay down minimum qualification criteria for “GST practitioners,” plugging a regulatory gap left by Rule 83 of the CGST Rules (which already prescribes eligibility but is seldom enforced).
• Rise in Conditional Remand Orders. Courts may increasingly insist on partial deposit as a fair middle path—deterring frivolous remand petitions while safeguarding genuine litigants.
• Bank Attachment Jurisprudence. The decision reiterates that attachments are ancillary and cannot subsist once the underlying order is vitiated, strengthening debtor remedies against disproportionate action.

4. Complex Concepts Simplified

Certiorarified Mandamus

A hybrid writ combining (i) certiorari—to quash an unlawful order—and (ii) mandamus—to command performance of a public duty, here the duty to hear the assessee afresh.

GSTIN

Goods and Services Tax Identification Number, a unique registration number allotted to every taxpayer under GST law.

Show-Cause Notice (SCN)

The document through which the tax authority informs the assessee of proposed action and invites explanation.

Freezing/Attachment of Bank Account

Section 83 of the CGST Act allows provisional attachment of property—including bank accounts—to protect government revenue during pendency of proceedings.

Qualified Consultant vs. Unqualified Consultant

Under Rule 83 CGST Rules, a GST practitioner must hold specified degrees or pass a notified examination; however, many assessees engage unlicensed individuals, leading to procedural mishaps.

5. Conclusion

Chandrasekaran v. Assistant Commissioner (ST) carves a significant niche in GST jurisprudence by explicitly recognising professional negligence of an unqualified consultant as a valid ground to nullify an assessment order. The Court not only restores procedural fairness for the individual assessee but also addresses a systemic concern—unregulated tax consultancy—by mandating departmental action. Going forward, the ruling is likely to:

• Provide a safety-valve for honest assessees trapped by errant advisers,
• Encourage stricter enforcement of eligibility norms for GST practitioners, and
• Influence courts to balance revenue interests with taxpayer rights through conditional remands.

In the broader legal landscape, the decision reaffirms that the right to a meaningful hearing includes the right to competent assistance, and any denial thereof strikes at the heart of natural justice.