Tvl. Sri Murugan Tyres vs. The Deputy State Tax Officer-1/ The Deputy Commercial Tax Officer

Facts

The petitioner, Tvl. Sri Murugan Tyres, represented by its Proprietor Krishnan Bharathiraja, filed two writ petitions before the Madurai Bench of the Madras High Court challenging assessment orders passed by the Deputy State Tax Officer-1/Deputy Commercial Tax Officer, Aruppukottai Assessment Circle. The impugned orders, dated 03.02.2026, with reference numbers ZD330226020787G and ZD330226020284W, pertain to the tax periods 2021-22 and 2022-23 respectively. The petitioner sought to quash these orders and direct the respondent to redo the assessment proceedings. The core of the challenge was the imposition of GST on seigniorage/royalty, which the petitioner argued was done in breach of the principles of natural justice.

Held

The Court held that the impugned assessment orders were to be set aside. The primary ground for this decision was the breach of the principles of natural justice, as argued by the petitioner. The Court noted that the legal issue concerning the imposition of GST on seigniorage/royalty was pending before the Supreme Court. Consequently, any fresh assessment orders would be subject to the outcome of those Supreme Court proceedings and would not be implemented until the Supreme Court's decision was received. The Court directed the petitioner to remit 10% of the tax demanded under the impugned orders within thirty days of receiving a copy of the judgment. Upon remittance, the respondent was directed to provide a reasonable opportunity to the petitioner and issue fresh orders within three months. The bank attachment related to the impugned orders was to be raised upon fulfillment of these conditions. The Court expressly left undecided the broader legal issue of whether GST could be imposed on seigniorage, as it was pending before the Supreme Court.

Key Issues

1. Whether the assessment orders imposing GST on seigniorage/royalty for the periods 2021-22 and 2022-23 are liable to be quashed on the ground of breach of principles of natural justice? (Mixed question of law and fact, concerning principles of natural justice and assessment procedures). Petitioner's Contentions: The petitioner argued that the assessment orders were passed in breach of the principles of natural justice. They relied on a similar order of the High Court dated 18.06.2026 in W.P.Nos.21789 & 21875 of 2026, which presumably also dealt with similar issues of natural justice in GST assessments. Respondent's Contentions: The respondent, represented by the Government Advocate (Taxes), accepted notice. The judgment does not record any specific arguments made by the respondent against the petitioner's claims, other than accepting notice and proceeding based on the Court's observations and directions.