Exemption on Agricultural Produce allegedly denied without Verification: Madras HC Allows Reconsideration on 25% Deposit [Read Order]

With regards to the claim on agricultural produce exemption allegedly denied without proper verification, the Madurai Bench of the Madras High Court has set aside an ex-parte assessment order and remanded the matter for fresh adjudication, subject to the condition that the taxpayer deposits 25% of the disputed GST ( Goods and Services Tax) demand.

The state tax authorities passed an assessment order under Section 73 of the Tamil Nadu Goods and Services Tax (TNGST) Act, classifying the taxpayer's entire reported exempt turnover as fully taxable.

The taxpayer, Jeyam Agency, a commercial trader, had claimed tax exemption primarily on the supply of coconuts, which legally qualifies as a primary agricultural produce under the relevant GST notifications.

The trader asserted that applicable taxes had already been duly discharged on other taxable commodities, such as oil cake, and maintained that there was absolutely no attempt to suppress turnover or misclassify the sales.

Despite the legitimacy of the agricultural exemption, the assessing authority entirely disallowed the claim.

According to the taxpayer, this disallowance was executed purely on assumptions, without the authorities bothering to verify actual invoices, stock registers, or the physical nature of the goods being traded. The proceedings were also concluded ex-parte, meaning the taxpayer was entirely unrepresented.

The trader explained to the High Court that this lapse was unintentional and occurred because they had relied on a part-time accountant. The accountant completely failed to communicate the receipt of the department's notices or the scheduled hearing dates. The taxpayer was completely until an adverse order was passed.

Justice D. Bharatha Chakravarthy noted that the tax department's denial of the agricultural exemption and accountant’s failure to inform the proceedings which attributed to the non-appearance for the hearing, it decided to grant the trader one final opportunity to present their case and produce the supporting documentation.

Thus, the Court ordered the petitioner to deposit 25% of the disputed tax amount within a period of four weeks. After making a deposit the contested assessment order will be set aside, and the assessing authority is mandated to reconsider the case from afresh.

The Court instructed the taxpayer to actively participate and submit all relevant evidence mandatorily and without any delay. Also, the bench also ordered the immediate lifting of any bank account attachments that had been initiated pursuant to the impugned assessment order.

Accordingly, the writ petition was disposed of.

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