Case Law Details
Dharmaraj Vs Union of India (Madras High Court)
In this writ petition before the Madras High Court, the petitioner challenged Show Cause Notice No. 12/2025-GST-AC dated 29.09.2025, which proposed to levy GST on seigniorage/royalty fee payable to the Government of Tamil Nadu. The petitioner relied on earlier decisions of the High Court rendered in similar circumstances, particularly a Division Bench judgment in which directions were issued in cases where levy of GST on royalty was under challenge, noting that the issue is presently pending before a Nine Judge Constitution Bench of the Hon’ble Supreme Court.
In the cited decision, the Division Bench directed that writ petitioners challenging show cause notices should submit their objections within four weeks, and the concerned authority should adjudicate the matter on merits after affording reasonable opportunity of hearing. However, the adjudication orders were to be kept in abeyance until the Supreme Court decides the issue regarding the nature of royalty. It was further clarified that there shall be no recovery of GST on royalty until the Constitution Bench renders its decision, and all contentions of the parties were kept open.
Following the same reasoning, the Court disposed of the present writ petition on similar terms. The petitioner was permitted to submit a reply to the Show Cause Notice within four weeks from receipt of the order. The respondent authority was directed to proceed with adjudication but keep the implementation of any assessment order in abeyance pending the Supreme Court’s decision.
The Court also noted that in other cases involving challenge to assessment orders, petitioners had been directed to deposit 10% of the disputed tax. However, in the present matter, in light of the Division Bench decision currently under challenge before the Supreme Court, no such direction was imposed. The writ petition was disposed of accordingly, without costs, and connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this writ petition, the petitioner has challenged the impugned Show Cause Notice No. 12/2025-GST-AC dated 29.09.2025. The impugned Show Cause Notice proposes to levy tax on the seigniorage / Royalty fee payable to the Government of Tamil Nadu.
2. The learned counsel for the petitioner has drawn the attention of this Court to the view taken by this Court in decisions rendered under similar circumstances in light of the fact that the aforesaid issue is now pending before the Hon’ble Supreme Court. Reliance is placed on the decision of the Hon’ble Division Bench in A. Venkatachalam v. Assistant Commissioner (ST), Palladam in W.P. No. 30974 of 2022, wherein it was ordered as under:-
“9. In these circumstances, we deem it fit and appropriate to issue the following directions:-
(i) In the cases, where the challenge is made to the show cause notices, the writ petitioners shall submit their objections/representations within a period of four weeks from the date of receipt of a copy of this order.
(ii) Upon receipt of the objections/representations from the writ petitioners, the authority concerned shall proceed with the adjudication, on merits and in accordance with law, after affording reasonable opportunity of being heard to the petitioners. However, the orders of adjudication shall be kept in abeyance until the Nine Judge Constitution Bench decides the issue as to the nature of royalty.
(iii) It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision.
(iv) Needless to state that on the matters being decided, the writ petitioners if still aggrieved, shall redress their grievance(s), if any, before the appropriate forum, including by filing appeal(s)
(v) Insofar as the challenge to the notification as well as the circular, it is open to the writ petitioners to act upon, after the outcome of the case pending before the Nine Judge Constitution Bench.
(vi) It is also made clear that all the contentions are left open for the writ petitioners to raise in appropriate proceedings, after the outcome of the decision of the Nine Judge Constitution Bench.”
3. In view of the aforesaid judgment, this writ petition is liable to be disposed of on the same terms. Consequently, the petitioner is permitted to submit a reply to the Show Cause Notice within a maximum period of four weeks from the date of receipt of a copy of this order.
4. This Court has heard several cases, wherein either the Show Cause Notices or Assessment orders were under challenge. In cases, where the assessments orders were under challenge, the petitioners were directed to deposit 10% of the disputed tax. However, in the present case, the petitioner resisted the same in the light of the above decision of the Hon’ble Division Bench of this Court, which is now the subject matter of challenge before the Hon’ble Supreme Court in SLP (C) No. 37326 of 2017 batch, etc.
5. In view of the above decision of the Hon’ble Division Bench, the respondent is directed to adjudicate the Show Cause proceedings and keep the implementation of the impugned assessment order to be passed in abeyance, awaiting the decision of the Hon’ble Supreme Court.
6. This writ petition is disposed of with the above observations. No costs. Consequently, the connected W.M.Ps. are closed.
Author Bio
