K Palaniyappan vs. The State Tax Officer

Facts

The petitioner, K Palaniyappan, filed a Writ Petition challenging an order of assessment dated 23.03.2026, passed by the respondent, The State Tax Officer, Virudhunagar-III Assessment Circle, under Section 74 of the Tamil Nadu Goods and Services Act, 2017. 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 questions of jurisdiction under Section 22 of the Act. The respondent argued that proceedings were directed to be completed, but final orders were to be kept in abeyance pending the Supreme Court's decision.

Held

The Court held that the impugned order of assessment dated 23.03.2026 should be set aside and the matter remanded back to the respondent for fresh consideration. The Court acknowledged that the very incidence of tax is at large, pending a decision from the Supreme Court of India. The Court directed the petitioner to file an additional reply with supporting documents within two weeks, which the respondent must consider afresh. Crucially, the Court ordered that final orders should be kept in abeyance until the Supreme Court pronounces its judgment. If the final order is in favour of the petitioner, no further action is needed. If it results in tax or penalty, enforcement and demand will be stayed until the Supreme Court's decision. The petitioner will be entitled to take further steps based on the Supreme Court's outcome. No costs were imposed.

Key Issues

1. Whether the assessment order passed by the respondent is liable to be quashed for non-consideration of the petitioner's reply and for violation of principles of natural justice, particularly in light of the pending Supreme Court decision on the levy of GST on seigniorage fees, as contemplated under Section 74 of the Tamil Nadu Goods and Services Act, 2017? 2. Whether the respondent has jurisdiction to pass the assessment order, considering the petitioner's challenge to jurisdiction under Section 22 of the Act? Petitioner's arguments: The petitioner argued that the assessment order was passed without considering their reply and that the very incidence of tax is under challenge before the Supreme Court. They also raised a question of jurisdiction under Section 22 of the Act. The petitioner relied on previous orders of the High Court in similar matters (M/s.Marginal M sand vs. The State Tax Officer and Tvl.Rajapalayam Cement and Chemicals Limited vs. The Assistant Commissioner) which directed authorities to await the Supreme Court's decision. Respondent's arguments: The respondent contended that the High Court had directed proceedings to be completed, but acknowledged that final orders were to be kept in abeyance pending the Supreme Court's decision.