Facts of the Case

The petitioner, Tvl. Thangam Store, represented by its proprietor P. Ramachandran, challenged an assessment order passed by the Deputy State Tax Officer-1, Nanguneri Assessment Circle, under Section 73 of the TNGST Act, 2017 for the assessment year 2021-22.

The principal dispute concerned the disallowance of exemption claimed on outward supply of rice. The assessing authority treated the entire reported exempt turnover as taxable and completed the assessment ex parte, since the petitioner had not utilised the opportunities provided during the assessment proceedings.

The petitioner’s case was that the turnover related to rice, described as a primary agricultural produce exempt under Notification No. 2/2017-CTR, and therefore no GST was leviable. The petitioner further stated that the denial of exemption was based merely on assumption without verification of invoices, stock records, or the actual nature of the goods.

As regards non-participation in the proceedings, the petitioner explained that it had relied upon a part-time accountant, who failed to inform it about the notices and hearing opportunities. Because of this bona fide lapse, no reply was filed and no appearance was made, resulting in the ex parte assessment order. These details are expressly summarised in the table appearing on page 3 of the judgment.

Issues Involved

The principal issues before the High Court were:

  1. Whether the ex parte assessment order passed under Section 73 of the TNGST Act, 2017, disallowing exemption on outward supply of rice and treating the reported exempt turnover as taxable, should be sustained when the assessee had not effectively presented its explanation and supporting documents.
  2. Whether the petitioner should be granted a fresh opportunity to establish that the disputed turnover related to rice exempt from GST under Notification No. 2/2017-CTR.
  3. Whether the petitioner’s explanation that non-participation occurred because a part-time accountant failed to communicate notices and hearing details justified restoration of an opportunity of hearing.
  4. Whether such fresh opportunity should be granted subject to any pre-deposit or other condition.
  5. Whether attachment of the petitioner’s bank account pursuant to the impugned assessment should continue after the assessment order was set aside.

Petitioner’s Arguments

The petitioner contended that the disputed turnover pertained to rice, which was claimed to be exempt from GST under Notification No. 2/2017-CTR, and consequently no tax was leviable on such turnover.

It was argued that the assessing authority had disallowed the exemption and treated the entire exempt turnover as taxable on mere assumption, without properly verifying:

  • invoices relating to the outward supplies;
  • stock records;
  • the actual nature of the goods; and
  • relevant supporting documents establishing the exemption claim.

The petitioner further submitted that failure to respond to the notices or attend the hearing was not deliberate. The petitioner had relied upon a part-time accountant, who failed to communicate the notices and hearing information. This bona fide lapse resulted in the assessment being completed ex parte.

Accordingly, the petitioner sought setting aside of the assessment and a fresh opportunity to submit its reply and supporting documents before the assessing authority.

Respondent’s Arguments

The respondent Revenue was represented before the High Court by the learned Government Advocate.

The assessment had been completed ex parte on the ground that the petitioner did not utilise the opportunities provided during the assessment proceedings. The impugned assessment proceeded on the discrepancy concerning the disallowance of exemption claimed on outward supply of rice, with the reported exempt turnover being treated as taxable.

The Court heard the Revenue’s representation while examining the nature of the discrepancy, the assessee’s explanation on merits, and the reasons advanced for failure to participate in the original assessment proceedings.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancy recorded by the assessing authority;
  • the assessee’s explanation on the merits of the exemption claim; and
  • the explanation for not availing the earlier opportunities.

The Court held that an opportunity could be granted to the assessee to present its submissions and produce relevant supporting documents before the assessing officer.

A particularly important finding was that, although the Court had been extending such opportunities on equitable grounds subject to appropriate conditions, in the present case the Court observed that the commodity was exempted from GST. Therefore, the petitioner was granted a fresh opportunity without any condition.

Accordingly, the writ petition was allowed with the following directions:

  • The impugned assessment order was set aside.
  • The matter was remanded to the respondent assessing authority.
  • The assessee was directed to appear before the respondent without fail and submit its reply and supporting documents.
  • The respondent was directed to consider the matter afresh and pass orders in accordance with law.
  • Since the assessment order was set aside, any attachment of the bank account made pursuant to the impugned order was directed to stand raised.
  • No costs were awarded.
  • The connected miscellaneous petition was closed.

Important Clarification

An important aspect of the judgment is that the High Court did not finally adjudicate the exemption claim on merits by itself. Instead, it restored the matter to the assessing authority so that the assessee could submit its reply and supporting documents and the matter could be reconsidered afresh in accordance with law.

The decision is particularly significant because the Court expressly distinguished the present case from situations where restoration of an ex parte assessment may be made subject to conditions. Here, the Court observed that the commodity was exempted from GST and therefore granted the opportunity without imposing any condition.

Another important consequence was that the setting aside of the assessment order automatically resulted in the lifting of bank account attachment made pursuant to that assessment order.

Drafting Note: The judgment records the challenged assessment order as dated 17.12.2025 in the prayer and opening portion, while paragraph 5(i) refers to the impugned order dated 12.12.2025. This internal date variation should be kept in mind while reporting or citing the order.

Sections

Section 73 of the TNGST Act, 2017 – Assessment proceedings concerning determination of tax in cases other than fraud, wilful misstatement, or suppression of facts.

Article 226 of the Constitution of India – Writ jurisdiction invoked for issuance of a writ of certiorarified mandamus to quash the impugned assessment order and seek fresh adjudication after an opportunity of hearing.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783067095_416compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.