2025 (1) TMI 210 - HC - GST

Territorial jurisdiction - impugned order challenged on the premise that the impugned order levies tax on supplies outside the State of Tamil Nadu, thereby suffers from want of jurisdiction - demand in excess of the amount of taxes proposed in the SCN - Violation of mandate contained in Section 75 (7) of the Act - violation of principles of natural justice - HELD THAT - In view of the submissions/ consent of the counsel appearing on behalf of the petitioner and the Respondents, the impugned order is set aside and the petitioner shall remit a sum of Rs.1 crore within a period of two weeks from the date of receipt of a copy of this order. Subject to complying with the above condition, it is open to the petitioner to submit its reply within a period of two weeks thereafter treating the impugned order as show cause notice. If any reply/ documents are filed, the Respondent authority shall proceed to complete the assessment in accordance with law after affording the petitioner a reasonable opportunity of hearing. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core issues:

Whether the impugned order levying tax on supplies outside the State of Tamil Nadu was issued without jurisdiction.
Whether the impugned order violated Section 75(7) of the Tamil Nadu Goods and Services Tax Act, 2017, by raising a tax demand exceeding the amount proposed in the show cause notice.
Whether the principles of natural justice were violated due to the lack of opportunity for the petitioner to respond to the increased tax demand.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction Over Supplies Outside Tamil Nadu

Relevant Legal Framework and Precedents: The petitioner argued that the impugned order was issued without jurisdiction as it levied tax on transactions outside Tamil Nadu, which should not fall under the state's purview.
Court's Interpretation and Reasoning: The court acknowledged the petitioner's claim that the impugned order extended beyond the state's jurisdiction by taxing supplies made at a PAN India level.
Key Evidence and Findings: The petitioner demonstrated that the majority of the supplies were already taxed in other jurisdictions, particularly in Mumbai, where their head office is located.
Application of Law to Facts: The court considered the jurisdictional limits of the Tamil Nadu tax authorities and the potential for double taxation.
Treatment of Competing Arguments: The respondent argued that the petitioner failed to respond to the notices, but the court found merit in the jurisdictional challenge.
Conclusions: The court found the impugned order to be jurisdictionally flawed as it attempted to levy taxes on out-of-state transactions.

Issue 2: Excessive Tax Demand Beyond Show Cause Notice

Relevant Legal Framework and Precedents: Section 75(7) of the Tamil Nadu Goods and Services Tax Act, 2017, mandates that the tax demand in the final order should not exceed the amount specified in the show cause notice.
Court's Interpretation and Reasoning: The court emphasized that the show cause notice forms the foundation of any subsequent order, and any deviation without notice violates legal principles.
Key Evidence and Findings: The impugned order demanded Rs. 247.32 crores, significantly exceeding the Rs. 10.60 crores proposed in the show cause notice.
Application of Law to Facts: The court applied Section 75(7) to determine that the excessive demand was unlawful.
Treatment of Competing Arguments: The petitioner argued that they were not given a chance to respond to the increased demand, while the respondent claimed procedural compliance.
Conclusions: The court concluded that the impugned order violated Section 75(7) due to the excessive demand beyond the show cause notice.

Issue 3: Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to respond to any claims or demands.
Court's Interpretation and Reasoning: The court noted that the petitioner was not afforded a fair opportunity to address the increased demand, rendering the process unjust.
Key Evidence and Findings: The petitioner sought adjournments to collate documents, which were voluminous, indicating a lack of opportunity to respond adequately.
Application of Law to Facts: The court applied the principles of natural justice to find that the petitioner's right to a fair hearing was compromised.
Treatment of Competing Arguments: The respondent's argument of non-response was countered by the petitioner's need for more time to prepare a defense.
Conclusions: The court determined that the impugned order violated the principles of natural justice by not allowing the petitioner sufficient opportunity to respond.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The amount of tax, interest, and penalty demanded in the order shall not be in excess of the amount specified in the notice."
Core Principles Established: The judgment reinforced the necessity of adhering to jurisdictional limits, the importance of not exceeding demands specified in show cause notices, and the imperative of upholding natural justice.
Final Determinations on Each Issue: The court set aside the impugned order, directing the petitioner to remit Rs. 1 crore and allowing them to submit a reply, treating the impugned order as a show cause notice. The respondent authority was instructed to complete the assessment in accordance with the law, ensuring a fair hearing for the petitioner.

The judgment highlights the importance of jurisdictional clarity, adherence to procedural mandates, and the safeguarding of natural justice in tax assessments. The court's decision to set aside the impugned order and allow the petitioner a chance to respond underscores the judiciary's role in ensuring fair administrative practices.

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