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2024 Supreme(Online)(Mad) 78537
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Mohammed Shaffiq, J
Zirconium Complex – Appellant
Versus
Assistant Commissioner – Respondent
W.P(MD)Nos.6343, 6460, 6468 to 6470 and 6477 of 2024
For the Appellants/Petitioners: J.Krishna Srinivasan, Ramasubramanian
For the Respondents: R.Suresh Kumar
In tax assessment proceedings, the Assessing Authority has a legal duty to correctly determine tax liability and consider applicable exemptions, even if the assessee failed to raise them during the assessment process, as tax proceedings are not intended to be adversarial.
Headnote:(A) Central Goods and Services Act, 2017 - Section 2(84), Section 7, Section 15, Section 25(5) - Constitution of India - Article 265 and Article 226 - Taxability of internal services - Whether processing activities between units of the same government department constitute 'supply' - Petitioner challenged assessment orders contending that Zirconium Complex and Nuclear Fuel Complex are mere extensions of the Department of Atomic Energy and thus not 'distinct persons' - Court observed that tax proceedings are not adversarial and the Assessing Authority has a duty to examine the applicability of potential exemptions even if not raised by the assessee during the initial assessment - Notification No. 9 of 2017, dated 28.06.2017, provides for exemption on services provided by one government body to another. (Paras 2, 4, 6 and 7)
Facts of the case:
The petitioner, a unit of the Nuclear Fuel Complex (NFC), processed materials for the NFC. The Revenue sought to tax these transactions as 'services' under the GST Act. The petitioner contended that as both units are part of the Department of Atomic Energy, there is no 'supply' between distinct persons that would attract tax.
Findings of Court:
The Court held that the Assessing Authority failed to consider the applicability of Notification No. 9 of 2017. The assessment orders were set aside, and the petitioner was directed to submit detailed replies treating the impugned orders as show cause notices.
Issues: Whether the activities performed by the petitioner fall under the scope of 'supply' given their status as government units and whether the exemption under Notification No. 9 of 2017 should have been applied.
Ratio Decidendi: Tax proceedings are not adversarial; it is the duty of the Assessing Authority to act correctly and consider all relevant exemptions, including those not specifically raised by the taxpayer, to determine the correct tax liability.
Result: Writ petitions disposed of; impugned assessment orders set aside with a direction for fresh assessment.
| Table of Content |
|---|
| 1. are government department extensions distinct persons for gst supply purposes? (Para 1 , 2 , 3 , 4) |
| 2. assessing authority obligation to consider all exemptions in non-adversarial tax proceedings. (Para 5 , 6 , 7) |
| 3. setting aside assessment for lack of exhaustive consideration of exemption notifications. (Para 8 , 9) |
Prayer : Writ Petition filed under Article 226 of the Constitution of India, praying this Court to issue a Writ of Certiorari, calling for the records of the impugned orderie. order under Section 74(9), dated 20.07.2023 bearing reference GSTIN No.33AAALZ0205G1ZE/2022-23 passed by the respondent Assistant Commissioner (ST), Tuticorin III and the demands of Tax, Interest, Penalty etc. made therein and quash the same as being wholly without jurisdiction, illegal, arbitrary, in violation of the principles of natural justice and pass such other and further orders as this Court.
COMMON ORDER
These writ petitions are filed challenging the impugned orders issued by the respondent in GSTIN No.33AAALZ0205G1ZE for the assesment years 2017-18; 2018-19; 2019-2020; 2020-21; 2021-22 and 2022-23, dated 20.07.2023, whereby, the petitioner admittedly a processing plant / facility of Nuclear Fuel Complex ("NFC"), Hyderabad has been subject to tax on the alleged services rendered to Nuclear Fuel Complex, Hyderabad.
2.The challenge is primarily on the premise that the activity of the petitioner would fall under Entry 3 of Schedule-II of the Central Goods and Services Act, 2017 ["CGST"] Act or in any view would be covered by Serial No.8 of Notification No.9 of 2017, dated 28.06.2017 and thus any levy of tax on the petitioner would fall foul of Article 265 of the Constitution of India.
3. Before proceeding further, it may be relevant very briefly to set out the activity undertaken by the petitioner as stated in the affidavit filed in support of the writ petition:
"6. The raw material (Zircon Sand) is received by NFC, Hyderabad from M/s.Indian Rare Earths Limited. It is then processed by NFC into frit powder by NFC and sent to the petitioner at Tuticorin, Tamil Nadu for converting into Zirconium Sponge. The Zirconium Sponge is of Nuclear Grade and undergoes several stages of production at NFC, Hyderabad before it is finally converted into Zirconium Tubes. Then, the uranium fuel pellets processed and assembled at NFC are inserted into the Zirconium tubes and converted into nuclear fuel bundles and sent to the various Nuclear Power Reactor Sites of the Nuclear Power Corporation of India Limited across the country."
4. Case of the petitioner:
4.1. The Zirconium Complex is part of the Government of India and does not have any existence independent of Government of India. Reliance was placed on the proceedings, dated 12.05.2003 to show that the 500 TPY Zirconium Oxide Plant and 250 TPY Reactor Grade Zirconium Sponge Plants at Pazhayakayal, Tamil Nadu (i.e.,) was set up by Department of Atomic Energy. The President had sanctioned the expenditure for setting up of the above complex / facility / infrastructure. The relevant portion of the proceeding is extracted hereunder:
“OFFICIAL MEMORANDUM:
.......
The undersigned is directed to refer to NFC Note No.NFC/NZOSP/2002 dated 28.09.2002 and subsequent correspondence on the above mentioned subject and to convey the santion of the President to incur an expenditure of Rs.185.12 Crore (Rupees One Hundred Eighty Five Crore and Twelve Lakh only) (including an expenditure of Rs.11.92 Crore already incurred upto March 2002 under previous approvals) with a foreigh exchange component of 4.26 Crores at first quarter 2002 prices for the project “Setting up of 500 TPY Zirconium Oxide Plant and 250 TPY Reactor Grade Zirconium Sponge Plants at Palayakayal, Tamil Nadu”. Break up of the capital cost is given in Annex.I. The project is schedule to be completed within 36 months from the date of this sanction and full protection capacity will be acheived within twelve months thereafter.
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