Case Law Details
Noordeen Enterprises Vs Additional Director General Directorate of GST Intelligence (Madras High Court)
The Madras High Court disposed of a batch of writ petitions in which the petitioners sought directions to the GST authorities to issue “No Objection Certificates” regarding receipt of payments from customers to whom they had supplied goods. The petitioners contended that the Directorate General of GST Intelligence (DGGI) had issued letters to their customers directing or influencing them to remit amounts due to the petitioners directly to the GST authorities. One such instance involved a customer, Sumangala Steel Private Limited, which remitted ₹15 lakh to the GST authorities after receiving a communication from the respondents.
The petitioners relied on an earlier order dated 04.03.2022 in a related writ petition, where the Court had held that such recovery could not have been effected under either Section 79 or Section 83 of the applicable GST enactments because the tax proposal had not crystallised into a tax liability at that stage. In that earlier case, the petitioner had been granted liberty to seek refund under Section 54 of the GST law.
The respondents, however, pointed out that the concerned petitioner had itself written to Sumangala Steel directing the customer to remit the amount to the Government GST account towards amounts payable to the petitioner. The respondents also submitted that despite being granted liberty by the earlier order, the petitioner had not filed any refund application under Section 54.
After examining the records, the Court noted that the communication from the DGGI Chennai Zonal Unit had been issued at a stage when only a tax proposal existed and no final tax liability had yet been determined. Referring to the earlier order dated 04.03.2022, the Court reiterated that neither Section 79(1)(c) nor Section 83 could have been invoked in such circumstances. The Court also observed that although the petitioner claimed similar letters had been issued to other customers, copies of such communications had not been placed on record, allegedly because they were unavailable to the petitioner.
The Court further recorded that, in the meantime, orders determining tax and related liabilities had been passed on 28.03.2023. Those orders were already under challenge in separate writ proceedings.
Taking into account the overall facts and circumstances, the Court held that any letters issued by the GST authorities to customers of the petitioners before the issuance of orders-in-original determining the petitioners’ tax liability were invalid and could not form the basis for any further action. At the same time, the Court clarified that this finding would not affect the authorities’ right to initiate recovery proceedings in accordance with law after determination of liability, including by resorting to Section 79(1)(c) of the applicable GST enactments pursuant to the orders-in-original.
Accordingly, the writ petitions were disposed of by declaring that pre-adjudication communications sent to customers for recovery purposes were invalid, while preserving the GST authorities’ right to undertake recovery measures after tax liability had been duly determined.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In these writ petitions, the respective petitioner has requested for a direction to the first respondent to issue a “No Objection Certificate” in relation to receipt of payments by the respective petitioner from persons to whom the such petitioner supplied goods.
2. Learned counsel for the respective petitioner contends that letters were issued by the respondents to customers of the respective petitioner, who were liable to make payment to the respective petitioner in respect of goods supplied to them by such petitioner. One such customer was Sumangala Steel Private Limited (Sumangala Steel). Upon receipt of a letter from the respondents, the said customer remitted a sum of Rs.15 lakhs to the GST authorities. This was the subject of challenge in W.P.No.20067 of 2021, wherein the petitioner therein, MNS Enterprises, represented by its proprietor, Mr. Sheik Dawood, sought refund of amounts recovered from said petitioner’s customers. Learned counsel points out that said writ petition was disposed of on 04.03.2022 by recording express findings that such recovery could not have been made either under Section 79 or 83 of the applicable GST enactments. In view thereof, he contends that the respondents are liable to withdraw such letters forthwith.
3. In response, Mr.Sai Srujan Tayi, learned counsel, relies on the counter affidavit in W.P.No.6704 of 2026 to contend that said petitioner addressed a letter to Sumangala Steel directing said customer to make payment to the Government GST account by way of discharge of amounts due and payable to said petitioner. A sum of Rs.15 lakhs was remitted by Sumangala Steel pursuant thereto. He also adds that said petitioner did not file an application under Section 54 of the applicable GST enactments seeking refund pursuant to the directions in the earlier writ petition.
4. From the counter affidavit of the respondents, it is clear that a communication was addressed by DGGI Chennai Zonal Unit to Sumangala Steel. At that time the said communication was issued, a tax proposal had been made, but the same had not crystallised into a tax liability. In those circumstances, by order dated 04.03.2022, this Court recorded findings that neither Section 79(1)(c) nor Section 83 could have been pressed into service. Therefore, the petitioner therein was granted leave to apply for refund under Section 54. For reasons difficult to discern, said petitioner did not adopt this course of action.
5. The respective petitioner asserts that letters were also addressed by the respondents to other customers. Copies of such letters have not been filed. It is submitted on behalf of the respective petitioner that such copies are not available with said petitioner.
6. Meanwhile, orders imposing tax and related liabilities have been issued on 28.03.2023. Such orders are the subject matter of separate writ petitions.
7. Considering the above facts and circumstances, these Writ Petitions are disposed of on the following terms:
i. Any letters issued by the respondents to customers of the respective petitioner, prior to the issuance of the order-in-original determining the tax liability of said petitioner, are invalid and cannot be the basis for further action;
ii. This is, however, without prejudice to the right of the respondents to initiate appropriate action for recovery, including by recourse to Section 79(1)(c) of applicable GST enactments pursuant to the orders-in-original; and
iii. There shall be no order as to costs.
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