Case Law Details
Tamilnadu Road Infrastructure Development Corporation Vs State Tax Officer (Madras High Court)
The Tamilnadu Road Infrastructure Development Corporation (TNRDC) filed a writ petition challenging the GST demand order issued by the State Tax Officer. The dispute arose as TNRDC, a wholly owned government entity, functions solely as an intermediary, receiving grants from the Tamil Nadu government to implement road construction projects and disburse funds to contractors. The corporation, registered under the category of “Tax Deductor,” argued that it should not be subjected to GST on supply transactions. However, a show cause notice was issued on September 28, 2023, followed by a demand order on December 12, 2023. Due to limited technical staff and a lack of awareness of the GST portal, TNRDC failed to respond to the notice in time. The petitioner sought relief, requesting a chance to present its objections and a personal hearing before the final decision.
The Madras High Court ruled in favor of TNRDC, setting aside the demand order. The court acknowledged that the entity’s role as a tax deductor did not make it liable for GST on supply transactions. It also recognized the petitioner’s explanation regarding its failure to respond to the notice. The court directed TNRDC to file its objections within two weeks and instructed the tax authorities to provide a personal hearing before making a final determination. Additionally, the court declined to impose a pre-deposit condition on TNRDC, given its status as a tax deductor. With this ruling, the case was remanded for reconsideration, ensuring that TNRDC is given a fair opportunity to present its case.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition has been filed by the petitioner seeking to call for the records of the respondent in Form GST DRC-01 in dated 28.09.2023 and the consequential order in GSTIN:33AACCT2732R1Z2/2017-18 along with DRC-07 in Ref No.ZD331223070129P dated 12.12.2023 and quash the same as void, arbitrary apart from being barred by limitation.
2. Mr. V. Prashanth Kiran, learned Government Advocate (Tax), takes notice on behalf of the respondent.
3. By consent of the parties, the main writ petition is taken up for disposal at the admission stage itself.
4. Learned counsel appearing for the petitioner would submit that, the petitioner company was incorporated as wholly owned by Government of Tamilnadu. The activity of the petitioner is only to obtain the grant given by the Goverment of Tamilnadu for the purpose of implementation of the construction and upgradation of roads in Tamilnadu and the same will be disbursed to the respective contractors. The petitioner is acting only as an agent of the Government of Tamilnadu and it has been registered under the category “Tax Deductor” and therefore, the petitioner ought not to have subjected to demand on the supply of goods/service under the GST Act. However, the show cause notice was issued on 28.09.2023. Since the entire functioning of the petitioner is done by the skeleton staff, which consists of only technical staff, there was no knowledge about the GST Portal, the proceedings uploaded by the respondent was not noted and therefore, they are not in a position to reply to the show cause notice. Subsequently, the impugned order came to be passed on 12.12.2023. Hence, he prayed to set aside the impugned order directing the respondent to permit the petitioner to file their reply and provide an opportunity of personal hearing so that the petitioner would be able to substantiate their case.
5. The learned Government Advocate appearing for the respondent would submit that the petitioner may be directed to deposit some amount out of the disputed tax demand in respect of the impugned assessment period.
6. Heard the learned counsel for the petitioner as well as the learned Government Advocate for the respondent and perused the materials available on record.
7. Upon perusal, it is seen that the petitioner was incorporated as wholly owned by Government of Tamilnadu. According to the petitioner, they only receive grant from the Government of Tamilnadu for the purpose of laying road and disburse the same to the contractor and therefore, they are not liable to pay any tax. Since the petitioner company is functioning with the skeleton staff, the proceedings uploaded by the respondent was not noted and therefore, they are not in a position to reply to the show cause notice.
8. In such circumstances, this Court feels that it is just and necessary to provide an opportunity to the petitioner to establish their case on merits and in accordance with law. As far as the deposit of the condtitional amount is concerned, this Court is not inclined to direct the petitioner to deposit the conditional amount since the petitioner has been registered under the category of “Tax Deductor”.
9. For the reasons stated above, this Court is inclined to set aside the impugned order dated 12.12.2023 passed by the respondent. Accordingly, this Court passes the following order:-
i. The petitioner shall file their reply/objection along with the required documents, if any, within a period of two weeks from the date of receipt of a copy of this order.
ii. On filing of such reply/objection by the petitioner, the respondent shall consider the same and issue a 14 days clear notice by fixing the date of personal hearing to the petitioner and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible.
10. With the above directions, the writ petition is disposed of. There is no order as to costs. Consequently, the connected miscellaneous petitions are closed.
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