Case Law Details
S. Shivraj Reddy Constructions Vs Assistant Commissioner (ST) (Telangana High Court)
Telangana High Court Directs Taxpayer to Reply to GST Show Cause Notice; Challenge to GST on Royalty Left Open
Summary: The content is a Legal Case/Judgment/Tribunal Order. The Telangana High Court disposed of a writ petition challenging Form GST DRC-01 dated 24.01.2025 issued for the assessment year 2022-23. The petitioner, engaged in extracting minor and major minerals under a Memorandum of Understanding-cum-Agreement dated 23.10.2020 with M/s. Reya Minerals on a royalty payment basis, challenged the show cause notice issued after discrepancies were identified based on information furnished by the Senior Audit Officer, Office of the Accountant General, Hyderabad. During the hearing, the petitioner confined its challenge to the levy of GST on royalty, while the State Tax submitted that the show cause notice also contained other discrepancies and could not be stalled on a single issue. The High Court directed the petitioner to participate in the proceedings by filing objections to the impugned show cause notice. It further observed that, if aggrieved by the adjudication order, the petitioner would be at liberty to challenge both the levy of GST on royalty and the other discrepancies in appropriate proceedings. The writ petition was disposed of without any order as to costs, and pending miscellaneous applications were closed.
Introduction
In M/s. S. Shivraj Reddy Constructions v. Assistant Commissioner (ST) & Others, the Telangana High Court considered whether a writ petition could be entertained against a show cause notice proposing GST liability, particularly where one of the issues involved the levy of GST on royalty payments arising from quarry operations.
The Court reiterated the settled principle that taxpayers should ordinarily participate in adjudication proceedings and raise all available contentions before the proper officer instead of challenging the show cause notice at the threshold.
Facts of the Case
The petitioner was engaged in the business of extraction of major and minor minerals. It had entered into a Memorandum of Understanding-cum-Agreement dated 23.10.2020 with M/s. Reya Minerals for operating the quarry, including extraction, crushing, and marketing activities on a royalty payment basis.
Based on information received from the Senior Audit Officer, Office of the Accountant General, Hyderabad, the State Tax authorities issued Form GST DRC-01 dated 24.01.2025 for the assessment year 2022-23, identifying certain discrepancies and proposing tax liability along with interest. The notice also required the petitioner to either pay the tax through Form GST DRC-03 or file objections in Form GST DRC-06 within the prescribed period.
Aggrieved by the issuance of the show cause notice, the petitioner approached the High Court by way of a writ petition.
Petitioner’s Contentions
During the course of arguments, the petitioner restricted its challenge only to the issue relating to levy of GST on royalty, while indicating that the remaining issues raised in the show cause notice could proceed independently.
Revenue’s Stand
The State Tax Department argued that the show cause notice contained multiple discrepancies, and therefore the entire adjudication process could not be stalled merely because the petitioner disputed the levy of GST on royalty.
Court’s Observations
The High Court observed that since the show cause notice involved several issues, the petitioner ought to participate in the adjudication proceedings and submit objections before the proper officer.
The Court further clarified that if the petitioner remained aggrieved after adjudication, it would be free to challenge both:
- The levy of GST on royalty; and
- Any other discrepancies forming part of the adjudication order.
Thus, the Court declined to interfere at the show cause notice stage.
Final Decision
The Telangana High Court:
- Directed the petitioner to participate in the proceedings by filing objections to the show cause notice.
- Clarified that the petitioner could challenge the levy of GST on royalty and all other issues after the adjudication order, if aggrieved.
- Disposed of the writ petition without any order as to costs.
Key Takeaways
1. Courts Rarely Interfere at the Show Cause Notice Stage
The decision reiterates that writ jurisdiction is generally not exercised against a show cause notice when an effective adjudication mechanism is available.
2. GST on Royalty Can Be Raised During Adjudication
Taxpayers disputing the levy of GST on royalty are expected to raise their objections before the adjudicating authority in the first instance.
3. Multiple Issues in a Show Cause Notice Cannot Be Selectively Stalled
Where a show cause notice contains several allegations or discrepancies, courts may decline to stay the proceedings merely because one issue is under challenge.
4. Post-Adjudication Remedies Remain Available
The Court expressly preserved the petitioner’s right to challenge both the royalty issue and other findings after the adjudication order is passed.
Conclusion
In M/s. S. Shivraj Reddy Constructions v. Assistant Commissioner (ST) & Others, the Telangana High Court reaffirmed the principle that taxpayers should ordinarily participate in GST adjudication proceedings rather than seek judicial intervention against show cause notices. While leaving the question of GST liability on royalty open, the Court directed the petitioner to submit objections and pursue appropriate remedies after adjudication. The ruling highlights the judiciary’s consistent reluctance to interfere at the notice stage where statutory proceedings are still pending.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Mr. S. Suri Babu, learned counsel for the petitioner appears through video conferencing.
Mr. Swaroop Oorilla, learned Special Government Pleader appears for State Tax.
2. The petitioner is a firm engaged in the business of extracting minor and major minerals. Petitioner entered into Memorandum of Understanding-cum-Agreement with M/s. Reya Minerals on 23.10.2020 for working in the quarry and to handle all the raising, crushing and marketing operations of the quarry on royalty payment basis. Petitioner submits that on the information furnished by the Senior Audit Officer, Office of the Accountant General, Hyderabad, respondent No.1 issued Form GST DRC-01 dated 24.01.2025 in ARN No.AD360125011415L for the assessmentyear 2022-23, wherein it is stated that certain discrepancies were identified and asked the petitioner to pay the tax along with interest on the net tax payable in Form GST DRC-03. If the petitioner is not agreeing with the proposals in the said show cause notice, it may file its objections in Form GST DRC-06 within (15) days from the date of receipt of the notice. Aggrieved by the said show cause notice, the petitioner filed the instant writ petition.
3. After arguing the matter for some time, learned counsel for the petitioner restricts his prayer only to the extent of levying tax on royalty and the other issues may go on.
4. Learned Special Government Pleader for State Tax submits that the show cause notice cannot be stalled on only this particular issue since the same contains other discrepancies also.
5. Having regard to the facts and circumstances, the petitioner is directed to participate in the proceedings by filing objections to the impugned show cause notice. If the petitioner is aggrieved by the adjudication order, it is at liberty to assail both levy of GST on royalty and other discrepancies in an appropriate proceeding.
6. Accordingly, the writ petition is disposed of. No order as to costs.
Miscellaneous applications, if any pending, shall stand closed.
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