Facts of the Case

The petitioner, M/s SPK and Co, represented by its Joint Managing Partner, approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India.

The writ petition sought quashing of the impugned order referred to in the prayer as Form GST DRC-07, Reference No. ZD330226218024Y dated 25 February 2026, passed by the respondent State Tax Officer / Commercial Tax Officer.

In the body of the judicial order, the High Court described the challenged assessment as an order passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, along with consequential notices of bank attachment and related actions issued against the petitioner.

The central controversy concerned whether the seigniorage fee paid by the petitioner amounting to ₹23,70,555 could be subjected to tax at the rate of 18%.

Both sides informed the High Court that the issue was pending consideration before the Hon’ble Supreme Court of India in Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others, SLP (Civil) No. 37326 of 2017, in which the Supreme Court had also granted an interim order.

In view of the pendency of the substantive issue before the Supreme Court, the petitioner sought protection against enforcement of the impugned assessment, consequential demand, bank attachment and related actions

Issues Involved

The principal issues arising before the Madras High Court were:

  1. Whether the seigniorage fee of ₹23,70,555 paid by the petitioner could legally be subjected to GST at the rate of 18%.
  2. Whether the assessment order passed under Section 74 of the TNGST Act and the consequential demand should remain enforceable while the same substantive issue was pending before the Supreme Court.
  3. Whether consequential bank attachment notices and related recovery actions could continue during the pendency of the Supreme Court proceedings.
  4. What should be the legal consequence if the Supreme Court ultimately decides Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others in favour of the Revenue.
  5. What should be the legal consequence if the Supreme Court decides the issue in favour of the assessee.
  6. Whether the petitioner should retain a fresh right to challenge the impugned assessment, including by way of statutory appeal, after the Supreme Court pronounces its judgment if the decision favours the Revenue.

Petitioner’s Arguments

The petitioner challenged the Section 74 assessment and consequential actions arising from the proposed levy of 18% tax on seigniorage fee of ₹23,70,555.

The petitioner’s case, as reflected from the controversy recorded by the High Court, was that the levy could not presently be enforced when the underlying legal issue concerning taxation of seigniorage fee was already pending before the Hon’ble Supreme Court.

The petitioner relied upon the pendency of:

Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others, SLP (Civil) No. 37326 of 2017

and the existence of an interim order passed by the Supreme Court in those proceedings.

The petitioner therefore sought protection against the impugned assessment, consequential demand, bank attachment and related recovery actions pending final resolution of the issue by the Supreme Court.

It is important to note that the High Court order is concise and does not separately reproduce extensive legal submissions of the petitioner beyond the controversy and the common submission regarding pendency of the issue before the Supreme Court. Accordingly, no additional argument should be attributed to the petitioner beyond what is reflected in the order.

Respondent’s Arguments

The respondent Revenue was represented by the learned Additional Government Pleader.

Significantly, the High Court recorded that learned counsel on both sides submitted that the issue was at large before the Hon’ble Supreme Court of India in Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others, SLP (Civil) No. 37326 of 2017, where an interim order had also been granted.

Thus, the Revenue did not dispute before the High Court, as recorded in the judgment, that the substantive legal issue was pending before the Supreme Court.

The judgment does not separately reproduce any detailed argument by the Revenue defending the 18% levy on merits. Therefore, no further substantive contention should be attributed to the respondent beyond what is expressly recorded in the judicial order.

Court Order / Findings

The Madras High Court took note of the common submission made by counsel for both sides that the controversy was pending before the Hon’ble Supreme Court in:

Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others, SLP (Civil) No. 37326 of 2017

and that an interim order had also been granted by the Supreme Court.

In view of the pending Supreme Court proceedings, the High Court issued the following directions:

1. Assessment order and consequential demand kept in abeyance

The impugned assessment order and the consequential demand were directed to be kept in abeyance pending the decision of the Hon’ble Supreme Court of India.

2. Consequence if Supreme Court rules in favour of Revenue

If the Supreme Court’s verdict is in favour of the Revenue, a further cause of action to challenge the impugned order shall arise.

The High Court specifically clarified that such challenge may include filing a statutory appeal.

The fresh cause of action would arise from the date of receipt of the Supreme Court’s judgment.

3. Consequence if Supreme Court rules in favour of assessee

If the Supreme Court judgment is in favour of the assessee, all further proceedings pursuant to the impugned orders shall stand dropped.

4. Writ petition disposed of

The writ petition was accordingly disposed of.

5. No costs

The Court awarded no costs, and the connected miscellaneous petition was closed.

Important Clarification

1. The High Court did not finally decide whether 18% GST is payable on seigniorage fee

The Madras High Court did not conclusively determine the substantive taxability of the seigniorage fee. The issue was left dependent upon the final decision of the Supreme Court.

2. The Section 74 assessment was not finally quashed on merits

The Court did not permanently annul the assessment after deciding the tax controversy. Instead, the impugned assessment order and consequential demand were directed to remain in abeyance pending the Supreme Court’s decision.

3. The result expressly depends on the Supreme Court verdict

The High Court created two distinct consequences:

  • Revenue succeeds before Supreme Court: the petitioner obtains a further cause of action to challenge the impugned order, including through statutory appeal, from receipt of the Supreme Court judgment.
  • Assessee succeeds before Supreme Court: all further proceedings pursuant to the impugned orders stand dropped.

4. Bank attachment and related actions formed part of the challenge

The High Court expressly recorded that the writ petition challenged not only the Section 74 assessment but also consequential notices of bank attachment and related actions issued against the petitioner. The operative protection must therefore be understood in the context of the Court’s direction keeping the impugned assessment and consequential demand in abeyance pending the Supreme Court’s decision.

5. No final factual finding was rendered on ₹23,70,555 seigniorage fee

The amount of ₹23,70,555 was the seigniorage fee involved in the controversy. The High Court did not itself decide that the amount was taxable or non-taxable at 18%.

6. The Supreme Court case is expressly mentioned in the judgment

Unlike cases where related precedents are added only for broader context, the present order expressly records Udaipur Chambers of Commerce and Industry and Others vs Union of India and Others, SLP (Civil) No. 37326 of 2017, as the pending Supreme Court matter governing the issue.

Sections / Legal Provisions Involved

·         Section 74 of the Tamil Nadu Goods and Services Tax Act / GST framework — Provision concerning determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised by reason of fraud, wilful misstatement or suppression of facts.

·         Article 226 of the Constitution of India — Constitutional writ jurisdiction of the High Court.

·         Form GST DRC-07 — Summary of an adjudication order reflecting the demand determined by the proper officer.

·         Statutory Appeal under GST Law — The High Court expressly preserved a future cause of action, including the possibility of filing a statutory appeal, if the Supreme Court ultimately decides the issue in favour of the Revenue.

Link to download the order - https://mytaxexpert.co.in/uploads/1784613128_1490compressed.pdf

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