Tvl.R .Muthukrishnan vs. The Deputy State Tax Officer -2

Facts

The petitioner, Tvl.R.Muthukrishnan, filed a Writ Petition challenging an order of assessment dated 07.02.2026, issued by the respondent, The Deputy State Tax Officer-2, Pudukkottai, for the tax period 2020-21. The dispute concerns the levy of GST on seigniorage fees, a matter pending before the Supreme Court of India. The petitioner argued that the assessment order should not have been passed while the Supreme Court's decision was awaited, citing previous High Court orders. The respondent contended that proceedings were directed to be completed, but final orders were to be kept in abeyance pending the Supreme Court's judgment. The Court noted that the petitioner had not availed the opportunity to respond to the show cause notice or submit supporting documents.

Held

The Court held that the impugned order of assessment dated 07.02.2026 was to be set aside and the matter remanded back to the respondent for fresh consideration. The Court acknowledged that the petitioner had not availed the opportunity to respond to the show cause notice. However, considering that the very incidence of tax was under dispute and pending before the Supreme Court, the Court granted the petitioner an opportunity to file their reply along with supporting documents within two weeks of receiving the order. The respondent was directed to consider the matter afresh. Crucially, the Court ordered that final orders, if any, were to be kept in abeyance until the Supreme Court pronounces its judgment. If the final order resulted in tax assessment or penalty, its enforcement and demand would also be kept in abeyance. The petitioner would be entitled to take further steps based on the Supreme Court's judgment. No costs were imposed.

Key Issues

1. Whether the respondent authority was justified in passing an order of assessment dated 07.02.2026 for the tax period 2020-21, when the very incidence of tax on seigniorage fees is pending adjudication before the Hon'ble Supreme Court of India, and in light of previous High Court orders directing authorities to await the Supreme Court's decision? Petitioner's Contentions: The petitioner argued that the assessment order was illegal, arbitrary, and against the principles of natural justice, as it was passed during the pendency of a crucial matter before the Supreme Court. They relied on prior High Court judgments that directed tax authorities to await the Supreme Court's verdict on the levy of GST on seigniorage fees. Respondent's Contentions: The respondent, through the Government Standing Counsel, submitted that while High Court orders directed proceedings to be completed, final orders were to be kept in abeyance until the Supreme Court's decision. They produced orders from this Court in similar matters (M/s.Marginal M sand vs. State Tax Officer and Tvl.Rajapalayam Cement and Chemicals Limited vs. Assistant Commissioner) which permitted completion of proceedings but prohibited the passing of final orders pending the Supreme Court's judgment.