K Palaniyappan vs. The State Tax Officer

Facts

The petitioner, K Palaniyappan, filed a writ petition challenging an assessment order dated 23.03.2026 passed by the respondent, The State Tax Officer, Virudhunagar-III Assessment Circle. The dispute concerns the levy of GST on seigniorage fees, a matter pending before the Supreme Court of India. The petitioner contended that the assessment order was passed without considering their reply and raised a question of jurisdiction under Section 22 of the Act. The respondent argued that the Court had directed proceedings to be completed, but final orders were to be kept in abeyance pending the Supreme Court's decision. Previous orders of this Court in similar matters directed authorities to complete proceedings but await the Supreme Court's judgment before passing final orders.

Held

The Court held that the impugned assessment order dated 23.03.2026 was to be set aside and remanded back to the respondent for fresh consideration. The Court acknowledged that the very incidence of tax was under dispute before the Supreme Court and that the petitioner's reply had not been considered. The Court also noted the petitioner's contention regarding jurisdiction under Section 22 of the Act. The reasoning was based on the principle that final orders should await the outcome of the Supreme Court's decision on the core issue of taxability. The operative directions included the petitioner filing an additional reply within two weeks, the respondent reconsidering the matter, and keeping final orders in abeyance until the Supreme Court pronounces its judgment. Enforcement and demand of any determined liability were also to be kept in abeyance. The Court explicitly stated that if the order resulted in assessment or penalty, it would be communicated, but enforcement would be stayed. No additional condition of deposit was imposed due to the fundamental nature of the dispute.

Key Issues

1. Whether the assessment order passed by the respondent is illegal, without jurisdiction, and in gross violation of the Principles of Natural Justice, particularly in light of the pending Supreme Court decision on the levy of GST on seigniorage fees? (Question of law and fact, turning on Section 74 of the Tamil Nadu Goods and Services Act, 2017 and principles of natural justice). Petitioner's arguments: The petitioner argued that the assessment order was passed despite the subject matter being sub-judice before the Supreme Court and that their reply was not considered. They also raised a jurisdictional issue under Section 22 of the Act. Respondent's arguments: The respondent contended that the Court had directed the completion of proceedings, but acknowledged that final orders were to be kept in abeyance pending the Supreme Court's decision. They referred to previous orders of this Court in similar cases.