Facts of the Case

The petitioner, Shaiek Dawood, is engaged in the business of selling vegetable seeds and organic manure, which are claimed to be fully exempt from GST. The respondent passed an assessment order in Form GST DRC-07 dated 03.12.2025 under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) on the ground that the petitioner had failed to upload documents substantiating the claim of exemption.

The petitioner contended that due to personal and business-related circumstances, he could not submit a reply to the show cause notice or upload the necessary supporting documents, resulting in an ex parte assessment order. Aggrieved by the assessment order, the petitioner approached the Madras High Court seeking its quashing.

Issues Involved

  1. Whether an assessment order passed under Section 73 of the TNGST Act, 2017 without considering supporting documents for exemption is sustainable.
  2. Whether an assessee dealing exclusively in exempt goods should be granted another opportunity to establish exemption before the tax authorities.
  3. Whether the assessment order deserved to be set aside and remanded for fresh consideration.

Petitioner’s Arguments

  • The petitioner submitted that the business consisted exclusively of selling vegetable seeds and organic manure, which are exempt from GST.
  • The assessment order was passed solely because documentary evidence supporting the exemption claim was not uploaded.
  • The failure to respond to the show cause notice was not deliberate but occurred due to unavoidable personal and business circumstances.
  • Since there was no actual outward tax liability, the petitioner requested that the assessment order be set aside and an opportunity be granted to produce the necessary records.

Respondent’s Arguments

  • The respondent relied upon the assessment proceedings initiated under Section 73 of the TNGST Act, 2017, stating that the petitioner had failed to submit the required reply and documentary evidence during the assessment proceedings.
  • Consequently, the assessment order was passed based on the available records.

Court Order / Findings

The Madras High Court observed that the petitioner claimed to be dealing exclusively in GST-exempt goods, namely vegetable seeds and organic manure. Considering the nature of the business and the claim that there was no outward tax liability, the Court found that the petitioner deserved one more opportunity to establish the exemption.

Accordingly, the Court passed the following directions:

  • The petitioner shall deposit 25% of the disputed tax amount within four weeks from receipt of the web copy of the order.
  • Upon such deposit, the impugned assessment order dated 03.12.2025 shall stand set aside.
  • The matter shall stand remanded to the respondent for fresh adjudication.
  • The petitioner shall appear before the assessing authority and submit all replies and supporting documents regarding the exemption claim.
  • The respondent shall reconsider the matter independently and pass fresh orders in accordance with law.
  • Any attachment of the petitioner's bank account made pursuant to the impugned assessment order shall automatically stand lifted.
  • The writ petition was disposed of without costs, and the connected miscellaneous petitions were closed.

Important Clarification

This judgment reiterates that where an assessee claims to be engaged exclusively in the supply of GST-exempt goods, courts may grant an opportunity to produce documentary evidence if the assessment was completed ex parte. The decision emphasizes that the principles of natural justice require a fair opportunity to substantiate exemption claims before final determination of tax liability. At the same time, the Court balanced the equities by directing the petitioner to deposit 25% of the disputed tax amount before the assessment order would stand set aside and the matter remanded for fresh consideration.

Sections Involved

  • Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Form GST DRC-07

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784627650_1786compressed.pdf

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