Ariyamalai.T vs. The Commissioner / Additional Chief Secretary
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The petitioner, T. Ariyamalai, holds the right to extract minerals upon payment of seigniorage charges. The Second Respondent, State Tax Officer, issued notices on September 9, 2022, proposing to levy tax under the reverse charge mechanism (Section 9(3) of the CGST Act) on seigniorage charges and under forward charge (Section 9(1) of the CGST Act) on material disposal. The petitioner was asked to file objections within 15 days, failing which a best judgment assessment for the tax period 2020-2021 under Section 63 of the CGST Act was threatened. The petitioner challenged these notices through a writ petition, seeking to quash them as illegal and unconstitutional.
Held
The Court held that the writ petition was premature. Citing the Supreme Court's decision in Union of India -vs- Kunisetty Satyanarayana, the Court reiterated that a charge memo or show cause notice cannot ordinarily be challenged before the completion of inquiry. The reasoning was that a show cause notice does not amount to an adverse order infringing rights unless issued by a person without jurisdiction. It is possible that the authority may drop proceedings after considering the reply. The writ jurisdiction is discretionary and should not ordinarily be exercised to quash a show cause notice, except in rare cases of being wholly without jurisdiction or illegal. Since the petitioner could raise their contentions in their reply to the show cause notice, and the authority was bound to deal with them before reaching a conclusion, interference at this stage was deemed unnecessary. The Court did not express any view on the merits of the controversy.
Key Issues
1. Whether the impugned notices issued by the Second Respondent are liable to be quashed on the ground that the issue of legislative competence regarding 'service tax' on renting of immovable property or related services, as per Section 65(105)(zzzz) of the Finance Act, 1994, is pending before a Nine Judges Bench of the Supreme Court of India in Mineral Area Development Authority -vs- M/s. Steel Authority of India, and whether an interim order in M/s. Lakhwinder Singh -vs- Union of India staying GST payment for mining lease/royalty is applicable. Petitioner's contention: The petitioner argued that the validity of levying tax on such matters is sub-judice before the Supreme Court and that an interim order in a similar case provided a stay. Respondents' contention: The respondents did not explicitly record arguments but their action implies they are proceeding with the assessment. The judgment notes that the Supreme Court subsequently dismissed the writ petition in M/s. Lakhwinder Singh, vacating the interim order, and that the tagged cases in the Mineral Area Development Authority appeal have been listed for hearing with directions for compliance with the Sabka Vishwas Scheme.
Sections Cited
Section 9(3), Section 9(1), Section 63, Section 65(105)(zzzz)
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Cause title — parties, addresses and appearances
ORDER 1/9 https://www.mhc.tn.gov.in/judis Heard Mr. C.Jeganathan, Learned Counsel for the Petitioner and Mr. Na.Ga.Nataraj, Learned Government Advocate, who takes notice for the Respondents, and perused the materials placed on record, apart from the pleadings of the parties.
The Petitioner has been granted the right to use minerals including its extraction and exploration upon payment of seigniorage charges by the Government of Tamil Nadu. The Second Respondent by notices dated 09.09.2022 has called upon the Petitioner to file his objections for payment of tax under reverse charge mechanism under Section 9(3) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as 'the Act' for short), on the seigniorage charges paid and on the method of forward charges under Section 9(1) of the Act on the material disposed within 15 days from the date of its receipt, failing which assessment would be made following the prescribed procedure for best of judgment for the tax period 2020-2021 under Section 63 of the Act. 2/9 https://www.mhc.tn.gov.in/judis
The primordial attack of the Petitioner on the impugned notices is that matters relating to the question as to whether 'service tax' under Section 65(105)(zzzz) of the Finance Act, 1994, on renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce is within the legislative competence of the Union Parliament, would have to await the outcome of the reference made to a Nine Judges Bench of the Hon'ble Supreme Court of India in Mineral Area Development Authority -vs- M/s. Steel Authority of India (Order dated 30.03.2011 in Civil Appeal Nos. 4056-4064 of 1999) and that in M/s. Lakhwinder Singh -vs- Union of India (Order dated 04.10.2021 in Writ Petition (Civil) No. 1076 of 2021), payment of Goods and Services Tax for grant of mining lease/royalty for the Petitioner therein has been stayed until further orders. However, it has come to light that the Hon'ble Supreme Court of India has subsequently in M/s. Lakhwinder Singh -vs- Union of India (Order dated 04.01.2022 in Writ Petition (Civil) No. 1076 of 2021) dismissed that Writ Petition, meaning thereby that the earlier interim order granted to the Petitioner therein has been vacated. Further, the tagged cases in Civil Appeal Nos. 4056-4064 of 1999 have been listed for hearing before the Two Judges Bench of the Hon'ble Supreme Court of India on 28.11.2019, 3/9 https://www.mhc.tn.gov.in/judis
2020, 16.10.2020, 12.04.2021, 30.03.2022, 28.04.2022, 04.08.2022, 12.08.2022, 26.08.2022, 30.09.2022 and 18.11.2022 and some of the parties therein have been directed to comply with Section 127(8) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. In such circumstances, the question of restraining the Second Respondent from proceeding in furtherance to the impugned notices does not arise.
At this juncture, it must be recapitulated that it has been consistently held as reiterated by the Hon’ble Supreme Court of India in Union of India - vs- Kunisetty Satyanarayana [(2006) 12 SCC 28] that a charge memo or show cause notice cannot be challenged before the completion of enquiry and the proceedings cannot be interdicted till it reaches its logical conclusion. It would be useful here to extract the relevant passages from the said decision which read as follows:- “13. It is well settled by a series of decisions of this Court that ordinarily no writ lies against a charge sheet or show-cause notice vide Executive Engineer, Bihar State Housing Board -vs- Ramdesh Kumar Singh [JT 1995 (8) SC 331], Special Director -vs- Mohd. Ghulam Ghouse (AIR 2004 SC 1467), 4/9 https://www.mhc.tn.gov.in/judis Ulagappa -vs- Divisional Commissioner, Mysore [2001(10) SCC 639[, State of U.P. -vs- Brahm Datt Sharma (AIR 1987 SC 943) etc.
The reason why ordinarily a writ petition should not be entertained against a mere show-cause notice or charge-sheet is that at that stage the writ petition may be held to be premature. A mere charge-sheet or show-cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no juri iction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ lies when some right of any party is infringed. A mere show-cause notice or charge-sheet does not infringe the right of any one. It is only when a final order imposing some punishment or 5/9 https://www.mhc.tn.gov.in/judis otherwise adversely affecting a party is passed, that the said party can be said to have any grievance.
Writ juri iction is discretionary juri iction and hence such discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or charge sheet.
No doubt, in some very rare and exceptional cases the High Court can quash a charge-sheet or show-cause notice if it is found to be wholly without juri iction or for some other reason if it is wholly illegal. However, ordinarily the High Court should not interfere in such a matter.” Having due regard to the aforesaid legal position, as there is nothing which precludes the Petitioner from raising the contentions in this Writ Petition in the reply to be submitted to the Second Respondent, who is bound to deal with the same before coming to any ultimate conclusion, there is no necessity for the Court to interfere at this pre-mature stage of the matter. 6/9 https://www.mhc.tn.gov.in/judis
In such circumstances, without expressing any view on the merits of the controversy involved in the matter, the Writ Petition is disposed on the following terms:- (i) it shall be incumbent upon the Petitioner to submit her explanation to the show cause notices, which are impugned in the Writ Petition, if not done already, to the concerned authority by 28.02.2023; (ii) in the event of not being satisfied with the explanation submitted by the Petitioner, an enquiry shall be conducted following the prescribed procedure after affording full opportunity of personal hearing to the Petitioner to explain her position in that regard and a reasoned order shall be passed dealing with each of the contentions raised on merits and in accordance with law and the decision taken communicated under written acknowledgment; (iii) if any adverse decision is taken, the Petitioner may pursue legal remedies in accordance with law; (iv) consequently, the connected Miscellaneous Petition is closed; and (v) there shall be no order as to costs. 19.12.2022 pkn 7/9 https://www.mhc.tn.gov.in/judis Index : Yes/No Note: (i) Issue order copy by 23.01.2023. (ii) Registry is directed to return the original copy of the impugned order under written acknowledgment after retaining a copy of the same for record. To 1. The Commissioner / Additional Chief Secretary, Commercial Tax Department, Ezhilagam, Chepauk, Chennai..
State Tax Officer, O/o.The Assistant Commissioner, (ST), Theni 2. Copy to T.Ariyamalai W/o. S.Tharmaraj Pappammalpuram Thimmarasanarakkanur Village, Andipatty, Theni District. 8/9 https://www.mhc.tn.gov.in/judis P.D.AUDIKESAVALU,J. pkn
2022 9/9 https://www.mhc.tn.gov.in/judis
Reproduced from the public record of the Madras High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.