Facts of the Case

  • The Petitioner, Tvl. Preethivarshini Agencies, is a proprietary concern represented by its proprietor, Nagarajan, operating from Dindigul District, Tamil Nadu.
  • The Petitioner is engaged in the outward supply of Coconut and Coconut Husk under HSN Code 5305. These commodities are completely exempted from Goods and Services Tax (GST) as per Entry 132 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017.
  • Accordingly, the Petitioner regularly filed its monthly returns on the GSTN Common Portal, claiming the absolute statutory exemption available on these items.
  • The Respondent, the State Tax Officer of Palani-I Circle, initiated proceedings against the Petitioner on the grounds of non-submission of supporting documents regarding their exemption claim.
  • Due to a communication breakdown where the Petitioner’s accountant failed to inform them about the pending portal notices, the Petitioner remained completely unaware of the ongoing proceedings.
  • Consequently, the Respondent passed an ex-parte assessment order under Section 73 of the GST Act 2017, dated 13.12.2025, alongside an Annexure to Form GST DRC-07 for the Financial Year 2021-22, demanding tax liabilities and subsequently attaching the Petitioner’s bank account.

Issues Involved

  • Whether the ex-parte assessment order passed under Section 73 of the GST Act 2017 violates the Principles of Natural Justice when the assessee was unaware of the portal notices due to an oversight by their accountant.
  • Whether an assessee trading in entirely tax-exempt goods (Coconut and Coconut Husk under HSN Code 5305) should be penalized with an ex-parte tax liability without a proper verification of physical supporting documents.
  • Whether the High Court can exercise its equitable jurisdiction under Article 226 to waive the traditional mandatory pre-deposit condition (typically 25%) while remanding an assessment back to the proper officer under special and peculiar circumstances.

Petitioner’s Arguments

  • The Petitioner contended that the impugned assessment order dated 13.12.2025 was illegal, lacking jurisdiction, and passed in gross violation of the Principles of Natural Justice as no physical opportunity for a personal hearing was properly effectively utilized.
  • On merits, the Petitioner argued that their outward supplies consist entirely of Coconut and Coconut Husk, which are fully exempted from tax under HSN Code 5305 pursuant to Entry 132 of Notification No. 2/2017-Central Tax (Rate).
  • The Petitioner submitted that they had accurately filed all monthly returns through the GSTN portal reflecting this exemption.
  • The Petitioner further clarified that the non-participation in the initial assessment proceedings was entirely unintentional, as their accountant failed to monitor the GST portal and neglected to inform them about the notices. They requested a fresh opportunity to produce all supporting evidentiary documents before the assessing officer.

Respondent’s Arguments

  • The Respondent, represented by the learned Government Advocate, defended the impugned assessment order by stating that it was passed strictly in accordance with the statutory framework of Section 73 of the GST Act.
  • The Revenue argued that the assessment had to be completed ex-parte solely because the Petitioner failed to utilize multiple opportunities provided via the online portal to submit their supporting documents.
  • The Respondent implied that the onus of proving claims of exemption rests entirely on the dealer, and in the absence of portal compliance or responses to notices, the officer had no option but to finalize the assessment based on the available records.

Court Order / Findings

  • The Hon'ble Judge D. Bharatha Chakravarthy observed that the High Court has consistently extended opportunities to assessees on equitable grounds where structural or communicative failures prevent them from presenting their case.
  • The Court noted that while it normally directs a pre-deposit of 25% of the disputed tax before granting a remand, this case presented special and peculiar circumstances.
  • Specifically, the Court highlighted that the goods in question are entirely exempted from tax, and the Petitioner is well within the statutory time limitation period to prefer an appeal. Hence, the Court explicitly waived the pre-deposit condition.
  • The High Court allowed the Writ Petition, set aside the impugned order dated 13.12.2025, and remanded the matter back to the file of the Respondent State Tax Officer.
  • The Court directed the Petitioner to appear before the Respondent without fail, submit a formal reply, and present all supporting documents to enable a fresh, lawful assessment.
  • Consequent to the setting aside of the assessment order, the Court ordered that any bank attachments made pursuant to the impugned order stand immediately raised.

Important Clarification

  • Waiver of Pre-Deposit: This judgment serves as a vital precedent clarifying that the High Court, under Article 226, can completely waive the customary 25% pre-deposit condition during a remand if the underlying goods are entirely tax-exempt and the petition is filed within the limitation period.
  • Portal Ignorance vs. Natural Justice: Accountant oversight or ignorance of portal notifications can be mitigated on equitable grounds if the taxpayer is dealing in fully exempt commodities, ensuring substantive justice triumphs over technical defaults.

Section Involved

  • Section 73 of the Central Goods and Services Tax (CGST) Act / Tamil Nadu Goods and Services Tax (TNGST) Act, 2017.
  • Article 226 of the Constitution of India (Writ Jurisdiction for Certiorarified Mandamus).
  • Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 (Entry 132 dealing with HSN Code 5305).

Link to download the order -https://mytaxexpert.co.in/uploads/1783061544_333compressed.pdf

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