The Madras High Court has stayed a show cause notice issued by the Directorate General of GST Intelligence (DGGI) to the Tamil Nadu Electricity Regulatory Commission (TNERC), which demanded Rs 6.9 crore towards GST for the period between 2017 and 2022.TNERC challenged the demand notice from the Chennai Zonal Unit of DGGI by filing a writ petition in the Madras High Court. Senior counsel P Wilson, representing TNERC, argued before Justice Sathya Narayana Prasad that the commission, established under the Electricity Act, performs various functions including judicial and legislative duties. Wilson highlighted that TNERC operates on grants from the State government and deposits all collected fees, fines, and penalties directly into the State’s Public Accounts.
Citing Article 289 of the Constitution, Wilson contended that a State’s income cannot be taxed by the Union unless it arises from trade or business activities. He asserted that TNERC’s functions do not constitute a business and therefore should not be subject to GST. Additionally, Wilson pointed out that Schedule III of the GST Act exempts courts and tribunals from GST levies.
“The show cause notice is misconceived and is without jurisdiction,” the commission argued, seeking a stay on the notice.
Justice Sathya Narayana Prasad, after hearing the submissions, granted a stay on the show cause notice issued by the Additional Director of DGGI’s Chennai Zonal Unit. The matter has been scheduled for further hearing on July 1, allowing time for the filing of a counter.
