High Court stays Rs.7 Crore GST Demand Notice issued to TNERC

The Madras High Court has stayed the Directorate General of GST Intelligence (DGGI)’s show-cause notice to the Tamil Nadu Electricity Regulatory Commission, which sought Rs.6.9 crore in GST for the period 2017-22.

The commission filed a writ petition in the Madras High Court, challenging the demand notice issued by the DGGI’s Chennai Zonal Unit.

When the case came before Justice Sathya Narayana Prasad, senior lawyer P Wilson claimed that TNERC was a commission created by the Electricity Act to conduct a variety of functions, including judicial and legislative.

The commission operates on funding from the state government, and the fees, fines, and penalties it collects, including court fees for performing various responsibilities, are put directly into the state government’s Public Accounts, he noted.

The senior lawyer, backed by advocates Natarajan and Richardson Wilson, invoked Article 289 of the Constitution to argue that a State’s revenue cannot be taxed by the Union unless it is earned through trade or business.

Wilson contended that because TNERC’s functions cannot be classified as a business, they cannot be brought under the ambit of the GST Act, and no GST levy may be imposed, noting that schedule III of the GST Act exempts courts and tribunals from GST levying.

“The show cause notice is misconceived and without jurisdiction,” the commission stated, requesting a stay.

Following the submission, Justice Sathyanarayana Prasad stayed the show cause notice issued by the Additional Director of the DGGI Chennai Zonal Unit and rescheduled the matter for counter-filing on July 1.