Madras HC Upholds Inquiry Into Tax Officer’s Alleged ₹266-Crore GST Demand Cut Through Section 161 Rectification

The appellant, an Assistant Commissioner (State Tax), issued rectification orders under Section 161 of the Tamil Nadu Goods and Services Tax Act, 2017, concerning assessments of Tvl. Appaswamy Real Estates Limited for 2017–18 to 2021–22.

The charge memo alleged, among other things, that she exceeded the limits of the rectification power, assumed appellate authority, and reduced confirmed tax demands by approximately Rs. 266.46 crore.

She sought to quash the charge memo, contending that her actions were taken in good faith while exercising quasi-judicial powers and that the Department had not appealed against her orders.

The Single Judge declined to quash the memo and directed her to participate in the enquiry, to be completed within four months.

She appealed.

Section 161 of the TNGST Act permits rectification of errors apparent on the face of the record, subject to the statutory limits set out in that section.

Under Union of India v. K.K. Dhawan, disciplinary action may be taken for conduct in the exercise of quasi-judicial powers where, among other circumstances, there is prima facie material of recklessness, misconduct, negligence, lack of good faith, or an attempt to confer undue favour; a merely wrong order or technical violation, without more, does not warrant disciplinary action.

Amresh Shrivastava v. State of Madhya Pradesh was considered as a fact-specific decision in which the impugned order was found to be a wrongful order without indication of extraneous influence or dishonesty.

The charge memo invoked Rule 17(b) of the Tamil Nadu Civil Services (Disciplinary and Appeal) Rules and alleged violation of Rule 20(1) of the Tamil Nadu Government Servants’ Conduct Rules, 1973.

The Court considered the charge memo’s specific allegations that the appellant had used a limited rectification power to reopen concluded assessments, undertake fresh factual and legal examination, and substantially reduce confirmed demands.

These allegations, if established, went beyond a mere challenge to the correctness of her orders and raised questions about the manner in which she exercised her statutory authority.

The Court held that her assertion of good faith and the Department’s failure to appeal did not, by themselves, bar disciplinary proceedings, because the enquiry concerned her conduct rather than the appellate correctness of the orders.

Whether the allegations were made out was for the disciplinary enquiry to determine; the appellant could present her defences there.

It found no error in the Single Judge’s order permitting the enquiry to proceed and directing its expeditious completion.

The writ appeal was dismissed, with no order as to costs; the connected miscellaneous petition was closed.