2025 (1) TMI 584 - HC - GST

Maintainability of petition - availability of alternative remedy - liability to pay tax on the entire sale consideration for the sale of a business - sale of a Wind Electric Generator Park qualifies as a transfer of a business as a going concern or not - HELD THAT - The impugned demand is clearly contrary to the discussion and proposal in the 2nd mentioned Notice dated 21.10.2021, wherein, there is a categorical admission that a sum of Rs.9,50,00,000/- was not exigible. The impugned demand is unsustainable and is clearly arbitrary and contrary to the aforesaid Notice dated 21.10.2021. Therefore, Court is inclined to set aside the impugned order and remits the case back to the respondent to pass a fresh order on merits and in accordance with law. This exercise shall be carried out by the respondent within a period of 8 weeks from the date of receipt of a copy of this order. Needless to state, the petitioner shall be heard before final orders are passed. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the impugned assessment order demanding tax on the entire sale consideration of Rs.10,34,32,205/- is legally sustainable.
• Whether the transaction involving the sale of a Wind Electric Generator Park qualifies as a transfer of a business as a going concern, which is not exigible to tax under the TNGST Act, 2017.
• Whether the petitioner has an alternate remedy under Section 107 of the GST Act and if this affects the writ petition's maintainability.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of the Assessment Order

• Relevant legal framework and precedents: The assessment order was issued under the TNGST Act, 2019, which governs the taxation of goods and services in Tamil Nadu. The key provision under scrutiny is the applicability of tax on the sale of business assets.
• Court's interpretation and reasoning: The court noted that the impugned order was contrary to the respondent's own admission in the notice dated 21.10.2021, which acknowledged that Rs.9,50,00,000/- was not taxable. The court found the demand for the entire amount arbitrary and unsustainable.
• Key evidence and findings: The court relied on the notice dated 21.10.2021, which admitted that the sale of the business as a going concern was not taxable. This contradicted the assessment order's demand for tax on the entire sale amount.
• Application of law to facts: The court applied the legal principle that a business transferred as a going concern is not taxable, as per entry 4(c)(i) of Schedule II to the TNGST Act, 2017. The court found that the petitioner had indeed transferred the business as a going concern.
• Treatment of competing arguments: The respondent argued that the assessment order was regular and that the petitioner had an alternate remedy. However, the court prioritized the inconsistency in the respondent's notices over the availability of an alternate remedy.
• Conclusions: The court concluded that the assessment order was arbitrary and set it aside, remanding the case for a fresh order.

Issue 2: Transfer of Business as a Going Concern

• Relevant legal framework and precedents: The TNGST Act, 2017, specifically entry 4(c)(i) of Schedule II, exempts the transfer of a business as a going concern from tax.
• Court's interpretation and reasoning: The court interpreted the sale agreement and the respondent's admission as evidence that the business was transferred as a going concern, making it non-taxable.
• Key evidence and findings: The court highlighted the sale agreement and the respondent's notice, which both supported the non-taxability of the Rs.9,50,00,000/- sale consideration.
• Application of law to facts: The court applied the exemption for businesses transferred as going concerns, finding the petitioner's transaction qualified under this provision.
• Treatment of competing arguments: The respondent did not effectively counter the argument that the transaction was a going concern, leading the court to favor the petitioner.
• Conclusions: The court determined that the transaction was a non-taxable transfer of a going concern.

Issue 3: Alternate Remedy under Section 107 of the GST Act

• Relevant legal framework and precedents: Section 107 of the GST Act provides a mechanism for appeal against assessment orders.
• Court's interpretation and reasoning: The court acknowledged the existence of an alternate remedy but chose to address the substantive issue of arbitrariness in the assessment order.
• Key evidence and findings: The court focused on the inconsistency in the respondent's notices rather than the procedural aspect of alternate remedies.
• Application of law to facts: The court applied the principle that writ jurisdiction can be invoked in cases of arbitrary or illegal orders, despite alternate remedies.
• Treatment of competing arguments: The respondent's argument for dismissal based on alternate remedies was not sufficient to outweigh the substantive issues identified by the court.
• Conclusions: The court allowed the writ petition, emphasizing the need to rectify the arbitrary assessment order.

3. SIGNIFICANT HOLDINGS

• Verbatim quotes of crucial legal reasoning: "The impugned demand is unsustainable and is clearly arbitrary and contrary to the aforesaid Notice dated 21.10.2021."
• Core principles established: The transfer of a business as a going concern is not exigible to tax under the TNGST Act, 2017. Writ jurisdiction can be invoked to address arbitrary or illegal orders, even when alternate remedies exist.
• Final determinations on each issue: The assessment order was set aside, and the case was remanded for a fresh order. The court allowed the writ petition and closed the connected writ miscellaneous petition.