The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad, has set aside an appellate order concerning a tax and penalty demand of approximately ₹50.47 lakh after finding that the authorities failed to consider documents submitted by a taxpayer claiming exemption for transportation of hatching eggs by rail.
The Bench of Sushil Kumar Sharma (Judicial Member) and Duvvuri Krishna Srinivas (Technical Member) held that the impugned order was non-speaking and had been passed without considering the taxpayer’s explanations and supporting evidence.
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The bench remitted the matter to the original adjudicating authority for fresh consideration and directed that a fresh order be passed within eight weeks from receipt of a copy of its order.
While examining the exemption claim, the Tribunal observed that the benefit appeared to be available for transportation of qualifying eggs by rail. However, it left the taxpayer’s eligibility to be examined afresh rather than finally allowing the exemption.
The appellant, a registered railway leaseholder, was engaged in collecting goods from customers and arranging their transportation through railway parcel services.
The dispute related to the financial year 2017–18. The department examined the taxpayer’s annual return in Form GSTR-9 alongside TRAN-I, GSTR-1, GSTR-2A, GSTR-3B, e-way bills and other available records.
Following this exercise, the department alleged underdeclaration of net tax liability and an excess claim of input tax credit.
A show cause notice dated November 17, 2021, proposed a demand on outward supplies and recovery of excess ITC claimed in GSTR-3B compared with the credit reflected in GSTR-9.
The original adjudicating authority confirmed the proposals through an order dated December 28, 2022, stating that the taxpayer had not furnished documentary evidence supporting its explanations.
The first appellate authority subsequently granted partial relief on the ITC issue after verification of the available records. However, it rejected the exemption claim concerning transportation of hatchery eggs, maintaining that the taxpayer had produced no supporting evidence apart from a copy of Notification No. 12/2017-Central Tax (Rate).
The demand disputed before the Tribunal comprised ₹45,88,678 in tax and ₹4,58,868 in penalty, aggregating to ₹50,47,546.
The taxpayer contended that its transportation of hatching eggs by rail qualified for exemption under Notification No. 12/2017-Central Tax (Rate), dated June 28, 2017.
According to the appellant, receipts from these services were incorrectly reported as taxable turnover in its returns because of a data-entry error. It argued that an incorrect declaration could not, by itself, defeat an otherwise available exemption.
The appellant maintained that it had furnished documents supporting its claim, including railway parcel waybills, luggage tickets, turnover statements, returns and material concerning the treatment of eggs as agricultural produce.
It also relied on the Supreme Court’s decision in Share Medical Care v. Union of India, reported in 2007 (209) ELT 321 (SC), to argue that failure to claim an exemption at the initial stage did not prevent an eligible taxpayer from claiming it subsequently.
The taxpayer further pointed out that the GST authorities had allowed the exemption for transportation of hatchery eggs by rail for FY 2021–22, through an order dated November 29, 2025.
The department argued that the adjudication and appellate orders had been passed in accordance with the GST law.
It maintained that the taxpayer had not produced documents establishing that the goods transported qualified for exemption under Notification No. 12/2017.
The department also defended the rejection of the taxpayer’s rectification application under Section 161, stating that fresh documentary evidence could not be introduced through rectification proceedings.
On examining the appeal records, the Tribunal found that the taxpayer had submitted several sets of documents to the first appellate authority and had retained acknowledgements establishing their receipt.
These included written submissions dated February 15, 2024, acknowledged on February 19, 2024, enclosing an advance ruling concerning transportation of eggs by rail, an earlier reply and turnover statements.
Another submission dated February 28, 2024, acknowledged on February 29, 2024, enclosed the exemption notification, Railway Board Freight Marketing Circular No. 3 of 2019, details of taxable and exempt goods transported by rail, and other supporting records.
The Tribunal also noted an acknowledged letter dated July 11, 2024, enclosing GSTR-1, GSTR-3B and GSTR-9 returns, together with month-wise taxable and exempt turnover details for July 2017 to March 2018.
Against this documentary record, the Tribunal rejected the department’s assertion that no supporting evidence had been produced.
It held that passing an order without discussing the evidence was unfair and contrary to the basic requirements of the judicial process.
The Tribunal reiterated that administrative authorities exercising judicial or quasi-judicial functions must ordinarily record reasons for their decisions.
It relied on the Supreme Court’s Constitution Bench judgment in S.N. Mukherjee v. Union of India, reported in (1990) 4 SCC 594, concerning the obligation to provide reasons.
The Bench also referred to judicial decisions setting aside orders that failed to consider taxpayers’ replies or disclose an application of mind.
Applying these principles, the Tribunal held that the findings in the impugned order had been reached without considering the evidence produced by the appellant and therefore required reconsideration.
Turning to the underlying exemption claim, the Tribunal noted that the sample railway parcel waybills and luggage tickets described the goods as “hatching eggs”.
It referred to Railway Board Freight Marketing Circular No. 3 of 2019, which clarified that fresh eggs in shell, on which no further processing had been undertaken, fell within the definition of agricultural produce.
The Tribunal examined Entry 20 of Notification No. 12/2017-Central Tax (Rate), which provides a nil rate for transportation of specified goods, including agricultural produce, by rail or vessel from one place in India to another.
On this basis, the Bench observed that the exemption appeared to be available for transportation of qualifying eggs by rail. It also took note of the exemption granted to the appellant for the subsequent financial year.
The Tribunal consequently held that the taxpayer deserved an opportunity to claim the exemption, if otherwise eligible.
The Tribunal directed the original adjudicating authority to reconsider the taxpayer’s explanations and supporting documents and pass a fresh order within eight weeks of receiving the Tribunal’s order.
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