Statutory Appeal Comes First: Telangana High Court Declines to Entertain a Writ Challenging Both an Assessment Order and the Vires of Notification No.11/2017-CT(Rate), Relegating the Assessee to the Section 107 Remedy in MPM Ventures' Case (Writ Petition No.30910 of 2023)

Facts of the Case

The petitioner, M/s MPM Ventures Private Limited (formerly MPM Hotels Private Limited), challenged an Order-in-Original dated 28.07.2023 confirming a demand of tax, interest and penalty exceeding Rs.7 crore in aggregate, arising from a show cause notice dated 09.03.2022. Beyond challenging the assessment order on merits and natural justice grounds, the petitioner also sought a declaration that paragraph 2 and Entry 3(i) of Notification No.11/2017-CT (Rate) (and the corresponding TGST notification) were ultra vires Sections 7, 9 and 15 of the CGST Act read with Entry No.5 of Schedule III, and Rules 30 and 31 of the CGST Rules, and violative of Articles 14 and 265 of the Constitution.

Issues Involved

1. Whether the High Court should entertain a writ petition challenging a GST assessment order on merits (including alleged natural justice violations), when a statutory appeal under Section 107 is available.
2. Whether the constitutional vires of the underlying rate notification should be examined by the writ court in the same proceeding, or left to be raised separately or before the statutory appellate forum.

Petitioner's Arguments

• The petitioner argued that the impugned Order-in-Original was passed without jurisdiction, was erroneous, arbitrary and in violation of principles of natural justice, and that the show cause notice itself was vague and contradictory.
• It was further contended that Entry 3(i) of Notification No.11/2017-CT (Rate) had no nexus to the subject matter sought to be taxed and was ultra vires the CGST Act and unconstitutional.

Respondent's Arguments

• The Revenue relied on the specific findings recorded in paragraph 7 of the impugned order, which stated that despite more than a year elapsing, three personal hearing opportunities (with a further extension granted on the petitioner's own request), and multiple email intimations, the petitioner neither filed a written reply to the show cause notice nor attended any personal hearing to defend its case.

Court Order / Findings

• The Court examined the impugned order's own recitals and found that ample opportunity — including an additional hearing granted at the petitioner's request — had in fact been afforded, and it could not be said that the order was passed in violation of natural justice on this record.
• On the petitioner's contention that its Managing Director's statement had not been properly appreciated, the Court held this went to the correctness of appreciation of evidence, a matter not amenable to scrutiny under Article 226 where a statutory appeal under Section 107 is available.
• Relying on the Supreme Court's ruling in State of Madhya Pradesh v. Commercial Engineers & Body Building Co. Ltd. [2022 (2) TMI 837 SC] — itself following Greatship (India) Ltd. and United Bank of India v. Satyawati Tondon — the Court held that in tax matters where a statutory appellate remedy exists, the High Court ought not to entertain a writ petition against an assessment order merely because the case is said to turn on undisputed facts.
• The writ petition was rejected solely on the ground of availability of an alternative statutory remedy, without expressing any opinion on the merits of either the assessment or the vires challenge, both of which were left open for the petitioner to pursue in appropriate proceedings, including before the appellate authority.

Important Clarification

Where a GST assessment order records that adequate opportunities of hearing were in fact granted to the assessee, a High Court will decline to entertain a writ petition challenging the order under Article 226 on the ground of an available statutory appellate remedy under Section 107, applying the Supreme Court's guidance that alternative remedies must ordinarily be exhausted in tax matters. A vires challenge to a rate notification raised in the same petition may similarly be left open rather than decided, where the primary relief sought (quashing the assessment) is itself relegated to the statutory forum.

Sections Involved

• Section 107, CGST Act, 2017 — the statutory appellate remedy the petitioner was relegated to.
• Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 — the rate notification whose Entry 3(i)/paragraph 2 was challenged as ultra vires, a question left open by the Court.
• Sections 7, 9 and 15, CGST Act, 2017 — provisions defining "supply," the levy of GST, and valuation of supply, cited as the basis of the vires challenge.
• Section 74, CGST Act, 2017 — under which the underlying demand (including penalty under Section 122(1)(xv) and Section 125) was raised.

Decision – In Favour of

The decision is in favour of the Department on the threshold question — the writ petition was rejected for non-exhaustion of the statutory appellate remedy — while the substantive questions of natural justice, merits, and the notification's vires remain open for the petitioner to pursue through appropriate proceedings.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition No.30910 of 2023
Coram: Justice P. Sam Koshy and Justice N. Tukaramji
Date of Order: 07.11.2023

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.