Naroda Enviro Projects Ltd. & Anr. Vs Union of India & Ors. (Gujarat High Court)
Summary: The Gujarat High Court considered a writ petition challenging the show-cause-cum-demand notice dated 05.09.2023 issued under section 74 of the Central Goods and Services Tax Act, 2017 read with the Gujarat Goods and Services Tax Act, 2017. The petitioners, Naroda Enviro Projects Ltd. and another, had obtained registration under section 12AA of the Income Tax Act, 1961, and the petitioner entity was also registered under section 25 of the Companies Act, 1956. In earlier income-tax proceedings, the Gujarat High Court, by judgment dated 29.07.2019 in Tax Appeal No.627 of 2015 and allied matters, had held that the petitioner’s activities involving pollution-control treatment and disposal of liquid and solid industrial waste constituted charitable activity by way of preservation of environment and that the entity was entitled to seek exemption under section 11 of the Act.
The connected Civil Appeal No.8839 of 2022 before the Supreme Court was disposed of on 30.01.2025 in view of low tax effect. After GST was introduced from 01.07.2017, the petitioners claimed exemption under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 and did not pay GST. They subsequently obtained GST registration, began paying output tax and stopped claiming the charitable exemption from 13.05.2022. Following a search on 23.11.2022, the Department proposed tax, interest and penalty for the period 01.07.2017 to 12.05.2022 and issued Form GST DRC-01A on 21.06.2023, followed by the impugned section 74 notice dated 05.09.2023. The petitioners relied on the earlier Gujarat High Court judgment, Notification No.12/2017 and the absence of fraud, wilful misstatement or suppression. The respondents relied on Notification No.11/2017-Central Tax (Rate), Heading 9994, under which sewage and waste collection, treatment and disposal and other environmental protection services carried a 9% rate, and contended that the petitioners had rendered taxable services without discharging GST.
