Facts of the Case

The petitioner, Tvl. Manickavasagam S., filed a writ petition under Article 226 of the Constitution of India challenging the impugned assessment order dated 24.02.2026 passed by the respondent, The Proper Officer/Commercial Tax Officer, Sivagangai.

The impugned assessment was passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017. The underlying dispute concerned the levy of GST on seigniorage fees, an issue stated before the High Court to be pending consideration before the Hon’ble Supreme Court of India.

The petitioner had filed a reply before the respondent. However, the High Court specifically found that the petitioner’s reply had not been considered while passing the assessment order. Since the very incidence of tax was itself at large and the substantive controversy concerning GST on seigniorage fees was pending before the Supreme Court, the petitioner sought interference with the assessment order and an opportunity for fresh consideration.

Issues Involved

The principal issues before the Court were:

  1. Whether the assessment order passed under Section 74 of the TNGST Act, 2017 could be sustained when the petitioner’s reply had not been considered by the respondent.
  2. Whether final adjudicatory consequences could be enforced when the underlying issue concerning the incidence and levy of GST on seigniorage fees was pending before the Hon’ble Supreme Court of India.
  3. Whether the matter should be remanded to the Proper Officer for fresh consideration after granting the petitioner an opportunity to file an additional reply and supporting documents.
  4. Whether the petitioner should be required to make the 25% deposit ordinarily imposed by the High Court on equitable considerations while granting another opportunity.
  5. Whether any tax or penalty determined upon fresh consideration should remain unenforced until the Supreme Court pronounces its judgment on the substantive controversy.

Petitioner’s Arguments

The learned counsel for the petitioner submitted that the subject matter of the dispute related to the levy of GST on seigniorage fees, and that the issue was presently pending before the Hon’ble Supreme Court of India.

It was argued that, pending determination of the controversy by the Supreme Court, the High Court had already taken the view that the authorities should await the orders of the Supreme Court.

The petitioner further relied upon the fact that a reply had been filed before the respondent. However, the respondent passed the assessment order without considering that reply. Therefore, the impugned order was challenged as illegal, arbitrary and contrary to the principles of natural justice.

The petitioner consequently sought setting aside of the assessment order and a fresh opportunity to place its case and supporting materials before the respondent.

Respondent’s Arguments

The learned Government counsel appearing for the respondent submitted that the High Court had been permitting the authorities to complete the proceedings, while directing that consequential orders or appellate consequences be kept in abeyance until the Hon’ble Supreme Court passed orders on the issue.

In support of this position, reliance was placed upon the orders passed by the High Court in:

  • M/s. Marginal M Sand, represented by its Proprietor S. Abraham Muller vs The State Tax Officer and Another, W.P.(MD) No. 22159 of 2025 etc.; and
  • Tvl. Rajapalayam Cement and Chemicals Limited vs The Assistant Commissioner, W.P.(MD) No. 32352 of 2025.

The respondent’s position was therefore that proceedings could continue and be completed, subject to the restrictions imposed by the Court in view of the pending Supreme Court controversy.

Court Order / Findings

The Madras High Court examined the earlier orders produced before it and found that, while the assessing authorities had been permitted to proceed with the matter, the Court had directed that final orders should not be passed and that the authorities should await the orders of the Hon’ble Supreme Court of India.

In the present case, however, an assessment order had already been passed. More importantly, the Court specifically found that although the petitioner had filed a reply, the same was not considered by the respondent.

Considering that the very incidence of tax itself was at large, the Court held that the petitioner deserved an opportunity for fresh consideration.

The Court further observed that, ordinarily, while granting such an opportunity on equitable considerations, it imposed a condition requiring a deposit of 25%. However, because the very incidence of tax was itself unresolved in the present matter, the Court expressly declined to impose any such additional condition upon the petitioner.

Accordingly, the writ petition was allowed with the following directions:

  1. The impugned assessment order dated 24.02.2026 was set aside.
  2. The matter was remanded to the respondent for fresh consideration.
  3. Within two weeks from receipt of a web copy of the High Court’s order, the petitioner was directed to file such additional reply as considered necessary, together with supporting documents.
  4. The respondent was directed to consider the matter afresh.
  5. Final orders were directed to be kept in abeyance until the Hon’ble Supreme Court of India passed its orders.
  6. If the fresh order was in favour of the petitioner, no further difficulty would arise.
  7. If the fresh order resulted in assessment of tax or imposition of penalty, the same could be communicated to the petitioner.
  8. However, enforcement and further demand of the liability so determined must remain in abeyance until the judgment of the Hon’ble Supreme Court of India.
  9. After the Supreme Court pronounces its judgment, the petitioner would be entitled to take further steps, subject to the outcome of that judgment.
  10. No costs were awarded, and the connected miscellaneous petition was closed.

Important Clarification

A significant clarification emerging from the judgment is that the High Court distinguished between fresh consideration of the proceedings and enforcement of the resulting liability.

The respondent was permitted to reconsider the matter after taking into account the petitioner’s additional reply and supporting documents. However, because the substantive issue concerning the incidence of GST on seigniorage fees was pending before the Hon’ble Supreme Court, the High Court protected the petitioner against immediate adverse consequences.

Thus, even if fresh consideration resulted in assessment of tax or imposition of penalty, such determination could be communicated to the petitioner, but its enforcement and further demand were required to remain in abeyance until the Supreme Court delivered its judgment.

The judgment also makes an important equitable departure from the Court’s usual approach. Although a 25% deposit condition is ordinarily imposed while granting another opportunity, the Court imposed no such deposit condition in this case because the very incidence of tax itself remained unresolved.

Further, the judgment reinforces that a reply filed by an assessee cannot simply be ignored while passing an assessment order under Section 74. In the present matter, the non-consideration of the petitioner’s reply was a material factor supporting the setting aside and remand of the assessment order.

Sections / Legal Provisions Involved

Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017 – The impugned assessment order was passed under this provision.

Article 226 of the Constitution of India – The petitioner invoked the writ jurisdiction of the Madras High Court seeking a Writ of Certiorari to quash the impugned assessment order.

Principles of Natural Justice – Materially involved because the petitioner’s reply, though filed, was not considered by the respondent while passing the assessment order.

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