Ar A S Appliances Private Limited vs. Assistant Commissioner (St)

Facts

The petitioner, AR A S Appliances Private Limited, filed a writ petition challenging an order dated 24.12.2025 passed by the Assistant Commissioner (ST), Madurai, under Section 73 of the TNGST Act, 2017. The primary grievance of the petitioner was the imposition of tax at 18% on the entire turnover related to a corporate guarantee provided to a related person, instead of 1% of the turnover as contended by the petitioner. The respondent argued that the petitioner had an alternative remedy of appeal. The Court considered the submissions and the materials on record.

Held

The Court allowed the writ petition and set aside the impugned order dated 24.12.2025, with specific directions for fresh consideration. The Court found that the major portion of the tax liability was related to the corporate guarantee. The petitioner's submission that only 1% of the turnover should be taxed in relation to the corporate guarantee was not seriously disputed by the respondent. The Court acknowledged the petitioner's reliance on specific GST circulars and a prior judgment of the High Court. Therefore, the Court held that the matter should be remitted back to the respondent for fresh consideration, focusing solely on the issue of the corporate guarantee. The impugned order was set aside in so far as it held against the assessee, except for the issue concerning the corporate guarantee. The respondent was directed to address only the defect concerning the corporate guarantee, allowing the petitioner an opportunity to submit replies and documents. The respondent must consider the petitioner's specific submission regarding taxing only 1% of the turnover for the corporate guarantee, along with the applicability of the cited circulars and judgment, before passing fresh orders on this issue alone. The findings on other items in the impugned order were deemed valid.

Key Issues

1. Whether the impugned order dated 24.12.2025, passed by the Respondent under Section 73 of the TNGST Act, 2017, is liable to be quashed in so far as it imposes tax at 18% on the entire turnover related to the corporate guarantee provided by the petitioner. Petitioner's arguments: The petitioner contended that only 1% of the turnover related to the corporate guarantee is liable to be taxed at 18%. They relied on certain circulars (Circular No. 199/11/2023-GST dated 17.07.2023, Circular No. 204/16/2023-GST dated 27.10.2023, Circular No. 210/4/2024-GST dated 26.06.2024, and Circular No. 225/19/2024-GST dated 11.07.2024) and a judgment of this Court in M/s. Amman Try Trading Company Private Limited v. The State Tax Officer (2025 (10) TMI 1178 – Mad HC). Respondent's arguments: The respondent argued that the petitioner has an alternative remedy of filing an appeal and should have availed it before approaching the High Court.