Case Law Details
Neeyamo Enterprise Solutions Private Limited Vs Commercial Tax Officer (Madras High Court)
The Madras High Court disposed of a batch of interconnected writ petitions challenging assessment orders passed under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act).
The petitioner, an SEZ Unit incorporated in 2009 and approved by the Development Commissioner in 2014, with subsequent renewal and extension up to 26.04.2025, contended that the Special Economic Zones Act, 2005 grants various exemptions and benefits to SEZ developers and entrepreneurs holding a valid Letter of Approval. In support of its claim, the petitioner relied upon Sections 7, 26(e) and 51 of the SEZ Act, 2005, along with Rules 19, 22, 25 and 30 of the SEZ Rules, 2006.
The petitioner further submitted that, after the introduction of the GST regime from 01.07.2017, service tax was subsumed into GST. It argued that supplies to and by an SEZ enjoy a special status under the statutory framework and are intended to be tax neutral under the Integrated Goods and Services Tax Act, 2017 (IGST Act).
Referring to Section 7(5)(b) of the IGST Act, the petitioner contended that supplies of goods or services to or by an SEZ developer or SEZ unit are treated as inter-State supplies. It also relied upon Section 16 of the IGST Act, which classifies supplies for authorised operations to an SEZ developer or SEZ unit as zero-rated supplies. According to the petitioner, the professional and consultancy services received by it formed part of authorised operations, as reflected in the communication dated 02.01.2018 issued by the Department of Commerce, Ministry of Commerce and Industry.
The petitioner further argued that although reverse charge is defined under Section 2(98) of the CGST Act and Notifications No. 13/2017-Central Tax and 10/2017-Integrated Tax specify categories liable to Reverse Charge Mechanism (RCM), no provision requires an SEZ unit to pay tax under RCM where the supplies qualify as zero-rated under Section 16 of the IGST Act. It therefore challenged the assessment orders levying tax on professional fees under RCM.
The respondent submitted that an SEZ unit is not outside the GST framework and that it must establish its entitlement to statutory benefits by producing the necessary documents before the adjudicating authority. According to the respondent, the petitioner had failed to furnish the Letter of Undertaking (LUT) and the SEZ Certificate for verification, resulting in the impugned assessment orders.
After considering the submissions, the High Court observed that the assessment orders had primarily been passed because the petitioner had not produced the LUT and SEZ Certificate before the adjudicating authority. The Court also noted that the SEZ Certificate had been produced during the hearing and that the petitioner undertook to produce the LUT before the authorities.
Without expressing any opinion on the merits of the factual or legal issues, the Court held that the dispute could be effectively resolved by granting the petitioner another opportunity to submit the relevant documents. Accordingly, it set aside the assessment orders dated 23.02.2026, 24.02.2026, 24.02.2026 and 27.02.2026.
The Court directed the petitioner to file an additional reply and produce the LUT and SEZ Certificate within three weeks. The adjudicating authority was directed to examine the petitioner’s claim, particularly in the light of Section 16 of the IGST Act, and thereafter pass fresh orders on merits and in accordance with law after providing an opportunity of hearing. The writ petitions were disposed of without costs.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
These writ petitions are interconnected and are, therefore, taken up together and disposed of by this common order.
2. The writ petitions challenge the respective assessment orders passed under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 [hereinafter referred to as “the TNGST Act”].
3. Upon considering the oral and written submissions made on behalf of the petitioner and perusing the materials available on record, the case of the petitioner is that it is a Special Economic Zone (SEZ) Unit incorporated on 10.02.2009 and granted approval by the Development Commissioner on 16.10.2014 for establishing its unit at Madurai. The approval was subsequently renewed on 13.04.2020 and thereafter extended up to 26.04.2025. According to the petitioner, the Special Economic Zones Act, 2005 grants various exemptions and benefits to every developer and entrepreneur holding a Letter of Approval from the Development Commissioner for carrying out authorised operations.
4. In support of the said contention, the learned counsel for the petitioner relies upon Sections 7, 26(e) and 51 of the Special Economic Zones Act, 2005 and Rules 19, 22, 25 and 30 of the Special Economic Zones Rules, 2006.
5. The learned counsel further submits that with the introduction of the Goods and Services Tax regime with effect from 01.07.2017 pursuant to the Constitution (One Hundred and First Amendment) Act, 2016, service tax levied under the Finance Act, 1994 stood subsumed into the GST framework. Various notifications prescribing rates, exemptions and procedural requirements were also issued in that regard.
6. It is the further contention of the petitioner that the unit is administered under the control of the Development Commissioner and that supplies to and by an SEZ are accorded a special status under the statutory framework. According to the petitioner, such transactions are intended to be tax neutral and are governed by the provisions of the Integrated Goods and Services Tax Act, 2017 (for short, “the IGST Act”).
7. The learned counsel submits that Section 7(5)(b) of the IGST Act treats the supply of goods or services or both to or by an SEZ developer or an SEZ unit as an inter-State supply. Reliance is also placed upon Section 16 of the IGST Act, which defines “zero-rated supply”. It is contended that Section 16(1)(b) specifically provides that the supply of goods or services or both for authorised operations to an SEZ developer or an SEZ unit constitutes a zero-rated supply. According to the petitioner, the services in question fall within the category of authorised operations.
8. In this regard, reliance is placed upon the communication dated 02.01.2018 issued by the Department of Commerce, SEZ Section, Ministry of Commerce and Industry, Government of India, wherein the authorised services are enumerated. The petitioner contends that the services availed by it, including professional and consultancy services, fall within the entries specified therein and are consequently covered by the expression “authorised operations”.
9. The learned counsel further submits that the concept of reverse charge is defined under Section 2(98) of the CGST Act. While Notification No.13/2017- Central Tax dated 28.06.2017 and Notification No.10/2017-Integrated Tax dated 28.06.2017 prescribe categories of supplies liable to tax under the Reverse Charge Mechanism, no specific provision has been made therein requiring an SEZ unit to discharge tax on supplies which otherwise qualify as zero-rated supplies under Section 16 of the IGST Act. Therefore, according to the petitioner, the conclusion reached by the respondent that the professional fees paid by the petitioner are liable to tax under the Reverse Charge Mechanism is erroneous. It is accordingly contended that the impugned orders have been passed without properly appreciating the effect of Section 16 of the IGST Act and the status of the petitioner as an SEZ unit.
10. Per contra, the learned Standing Counsel appearing for the respondent, relying upon the counter affidavit, submits that the petitioner is not outside the GST framework altogether merely because it is an SEZ unit. According to the respondent, it is for the assessee to establish its entitlement to the benefits available under the statutory scheme by producing the necessary documents before the adjudicating authority. In particular, the learned Standing Counsel places reliance upon paragraphs 10 and 11 of the counter affidavit, which are
“10. It is humbly submitted that as per Section 16 of the IGST Act 2017 the supply of goods service or both to a SEZ is a zero rated supply. Hence the supplier shall pay the tax on sales and get refund the same or effect sales without payment of tax under a valid letter of undertaking (LUT) or sand, whereas in the situation in which supplier are not liable to pay the tax the recipient/SEZ has to pay tax under RCM or effect interval supply without payment of tax under LUT as they are being a supplier.
11. It is further submitted that in this case in hand the tax payer/the petitioner herein had not furnished the LUT and SEZ certificates to the adjudicating authority for verification and hence the impugned order had been passed in accordance with laws and it needs no interference.”
11. I have considered the rival submissions made on either side and perused the materials available on record.
12. From the submissions made on behalf of the respondent and from paragraphs 10 and 11 of the counter affidavit extracted above, it appears that the impugned orders came to be passed primarily on account of the petitioner’s failure to produce the Letter of Undertaking (LUT) and the SEZ Certificate before the adjudicating authority for verification.
13. Even during the course of hearing, the SEZ Certificate has been produced before this Court. The learned counsel for the petitioner submits that the Letter of Undertaking would also be produced before the authorities.
14. In the above circumstances, this Court is of the view that the controversy can be effectively resolved by affording one further opportunity to the petitioner to place the relevant documents before the adjudicating authority. Accordingly, without expressing any opinion on the merits of the rival factual or legal contentions, the matter deserves to be remanded for fresh consideration.
15. In view thereof, these writ petitions are disposed of on the following terms:
(i) The impugned assessment orders dated 23.02.2026, 24.02.2026, 24.02.2026 and 27.02.2026 shall stand set aside.
(ii) The petitioner shall, within a period of three (3) weeks from the date of receipt of the web copy of this order, file an additional reply, if any, and produce the Letter of Undertaking (LUT) and the SEZ Certificate before the adjudicating authority.
(iii) Upon receipt of the said documents, the adjudicating authority shall consider the petitioner’s claim, particularly in the light of Section 16 of the IGST Act, and thereafter, pass fresh orders on merits and in accordance with law after affording due opportunity to the petitioner.
No costs. Consequently, the connected Miscellaneous Petitions are closed.
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