HC stays Rs 7 crore GST demand on Tamil Nadu Electricity Regulatory Commission

CHENNAI: The Madras High Court stayed the show cause notice issued by the Directorate General of GST Intelligence (DGGI) to the Tamil Nadu Electricity Regulatory Commission seeking Rs 6.9 crore towards GST for the period between 2017-22.

Challenging the demand notice issued by the Chennai Zonal Unit of DGGI, the commission moved the Madras High Court with a writ petition.

When the matter came before Justice Sathya Narayana Prasad, senior counsel P Wilson argued that TNERC was a commission established under the Electricity Act to perform various functions, including judicial and legislative functions. The commission works on grants given by the State government, and the fees, fines and penalties it collects, including court fees for discharging various functions, are deposited directly into State government's Public Accounts, he added.

The senior lawyer, assisted by advocates Natarajan and Richardson Wilson, cited Article 289 of the Constitution to contend that a State's income cannot be taxed by the Union unless it is arising out of a trade or business.

As the functions of TNERC cannot be called a business, the functions cannot be brought within the purview of GST Act, and there cannot be any levy of GST, Wilson argued, and also noted that the schedule III of GST Act exempts levy of GST for courts and tribunals.

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

After the submission, Justice Sathyanarayana Prasad stayed the show cause notice issued by the Additional Director, DGGI Chennai Zonal Unit, and posted the matter to July 1 for filing counter.