Madras High Court Grants Stay on Rs. 6.9 Crore GST Demand Against TNERC

The Tamil Nadu Electricity Commission through its Secretary C. Veeramani has challenged a demand of about Rs. 6.9 crores towards GST for its statutory functions for the period between 2017-2022 before the Madras High Court in a writ petition.

The said matter came up before Justice Sathya Narayana Prasad of the Madras High Court.

P. Wilson, Senior Counsel assisted by Natarajan & Richardson Wilson Advocates appeared for the TNERC.

P. Wilson submitted that TNERC is a commission established under the Electricity Act to perform various functions including judicial and legislative functions. It has the trappings of a court, and the proceedings are judicial. He submitted that TNERC works on grants given by the TN Government, and the fees/ fines/ penalties collected, including court fees for discharging various functions, are deposited directly into TN Government’s Public Accounts. Applying Art 289 of the Constitution, the State’s income cannot be taxed by the Union unless it is arising out of a trade or business. He also submitted that to levy GST, it has to be a “supply of service” under section 7(1) of the CGST Act which definition requires the supply to be in the course of trade or business. The functions of TNERC cannot be called a business; therefore, the functions cannot be brought within the purview of GST Act, and there cannot be any levy of GST. He also submitted that the GST Act schedule III itself exempts levy of GST for courts and tribunals. The show cause notice is misconceived and is without jurisdiction, and hence, prayed for a stay.

After hearing arguments of P. Wilson, Senior Advocate Justice Sathyanarayana Prasad granted stay of the show cause notice issued by the Additional Director, DGGI Chennai Zonal Unit and posted the matter to 1.7.2024 for filing counter.