Madras High Court
The Managing Director vs R.Sivashanmugam on 29 April, 2022
W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 29.04.2022
CORAM
THE HONOURABLE MR.JUSTICE R. MAHADEVAN
AND
THE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD
W.A. Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
and
C.M.P. Nos.7772, 7773, 7774, 7777, 7782, 7786, 7790 & 7827
1. The Managing Director,
Tamil Nadu State Marketing Corporation
Limited (TASMAC),
4th Floor, CMDA Towers,
Gandhi Irwin Bridge Road,
Egmore, Chennai.
2. The Senior Regional Manager,
Tamil Nadu State Marketing Corporation
Limited (TASMAC),
Collector Office, Old Building First Floor,
Trichu - 620 001.
3. The District Manager/ Deputy Collector,
Tamil Nadu State Marketing Corporation
Limited (TASMAC), Cuddalore,
Cuddalore District. ... Appellants in all the appeals
Versus
R.Sivashanmugam ... Respondent in W.A.No.1223/2022
K.Mylvaganan ... Respondent in W.A.No.1226/2022
S.Paneerselvam ... Respondent in W.A.No.1222/2022
https://www.mhc.tn.gov.in/judis
W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
S.Jayabalan ... Respondent in W.A.No.1227/2022
Chakkarvarthi Kaliyamurthy ... Respondent in W.A.No.1224/2022
S.Velmurugan ... Respondent in W.A.No.1230/2022
K.Balamurugan ... Respondent in W.A.No.1231/2022
A.Kalonji ... Respondent in W.A.No.1238/2022
Prayer: Writ Appeals filed under Clause 15 of Letters Patent against the orders
passed by this Court in W.P. Nos.12657, 15158, 14730, 12697, 15166, 15159,
12690 and 12760 of 2020 dated 22.02.2021.
For Appellants in
all W.As. : Mr.K.Sathish Kumar
For Respondents
all W.As. : Mr.V.Prashanth Kiran
Government Advocate (Taxes)
COMMON JUDGMENT
[Judgment of the court was delivered by R.MAHADEVAN,J.]
Assailing the common order dated 22.02.2021 passed by the learned
Judge in the respective writ petition bearing Nos.12657, 15158, 14730, 12697,
15166, 15159, 12690 and 12760 of 2020, the appellants / TASMAC have come
up with these intra-court appeals.
https://www.mhc.tn.gov.in/judis
W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
2.By the order impugned herein, the learned Judge, following the earlier
order of this court in WP.(MD)No.10355 of 2020 dated 18.12.2020, allowed
the writ petitions filed by the respondents herein as against the orders of the
concerned District Manager, TASMAC, imposing penalty, interest and GST for
the remittance of the shortage value in stock.
3.It is the main contention of the learned counsel for the appellants that
the order dated 18.12.2020 made in WP(MD)No.10355 of 2020, based on
which, the learned Judge passed the order impugned herein, was subsequently
challenged by the appellants / TASMAC by filing WA(MD)No.679 of 2021
and this court, by order dated 24.03.2021, granted an order of interim stay in
respect of the findings of the learned Judge on the calculation of GST on the
penalty, alone; and hence, the order of the learned Judge is covered by the said
interim order of this court dated 24.03.2021 passed in WA(MD)No.679 of
2021. Adding further, the learned counsel submitted that the omitted section
7(1)(d) was brought into the same amendment as section 7(1)(A) and the same
was not taken into consideration by the learned Judge; and that, the findings of
the learned Judge that GST cannot be imposed in respect of the penalty levied
in the disciplinary proceedings, are against clause 5(e) of the schedule II of the
Central Goods Sales Tax Act, 2017. It is also submitted that the respondents
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W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
had already paid the amount of shortage as well as penalty with GST, without
any protest and thereafter, filed the writ petitions and asked for refund of GST,
which is a clear case of estoppel. The learned counsel further submitted that
the stock shortage was admitted and the shortage amount was also paid; in such
an event, no domestic enquiry is necessary; and therefore, the orders of the
authority imposing a lenient and minor punishment of levying penalty, without
affecting the service condition of the respondents, are perfectly justified.
However, the learned Judge erred in setting aside the same, on the ground of
violation of principles of natural justice. With these submissions, the learned
counsel sought to allow these appeals by quashing the order impugned herein.
4.Heard Mr.K.Sathish Kumar, learned counsel appearing for the
appellants and also perused the materials available on record.
5.At the outset, we are not inclined to go into the correctness of the order
passed by the learned Judge, in respect of setting aside the orders impugned in
the writ petitions and directing the appellants to proceed against the
respondents in accordance with law and the procedure as contemplated in the
Code of Prevention and Detection of Fraudulent Acts in Tamil Nadu State
Marketing Corporation, 2014, on the ground of violation of principles of
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W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
natural justice, having regard to the admitted position that no enquiry was
conducted before passing the orders imposing penalty on the respondents
herein.
6.Qua levy of GST, in the order dated 18.12.2020 passed in
WP(MD)No.10355 of 2020, based on which, the learned Judge passed the order
impugned herein, it was held that the penalty imposed, under Rule 7(b) (xiv) of
the Code in a disciplinary proceedings initiated against the employees, would
not attract the GST and the penalty referred therein would only refer to the
penalty imposed in the course of trade or commerce; and hence, the imposition
of GST on the penalty is illegal and is liable to be set aside. For better
appreciation, the relevant paragraphs of the said order are extracted below:
“32.The next question that arises for consideration is whether the
penalty imposed in a disciplinary proceedings in a service matter is liable
for GST, in terms of Section 7(1) (d) or 7(1-A) of the GST Act, 2017.
Admittedly the said Section 7(1) (d) was not in force as on the date of
passing the impugned order in the month of September 2020. The said
Section was omitted with effect from 01.02.2019. The respondent, in his
counter clearly stated that the notice of collection of GST was issued under
Section 7(1) (d) alone. Therefore, without any provision/authority, the third
respondent has issued the show cause notice to collect the GST, which is
totally illegal.
33.Secondly, even assuming that Section 7(1A) of the Act r/w Rule
5(e) of the Rules will be applicable and the show cause notice was issued
in accordance with the said provision, as contended by the learned counsel
for the respondents, nowhere either in the show cause notice or in the
impugned order or in the counter affidavit, the respondents never ever
stated about the applicability of Section 7(1A) r/w Rule 5(e). It would be
apposite to mention Section 7(1A), which reads as follows:-
'Agreeing to the obligation to refrain from an act, or to
https://www.mhc.tn.gov.in/judis tolerate an act or a situation, or to do an act'.
W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
34. By referring the above said Section, the respondents submitted
that the petitioner refrained from performing to prevent the shortage of
supply, so that they have imposed the penalty and as such it would attract
the GST. This Court is not in a position to accept the present approach of
the respondents due to the reason that the imposition of any GST will arise
only when the penalty imposed in the course of trade or commerce. During
the course of business, if any agreement was entered, where there is a
delay in supply or in payment, if any, penalty imposed as per the
agreement, such penalty comes under the purview of Section 7 (1A) for the
imposition of GST. However, in the present case, the penalty imposed was
in a disciplinary proceedings to an employee which would not attract GST.
35.In any angle, the imposition of the GST by the respondents, to
the penalty imposed, under Rule 7(b) (xiv) of the Code, in a disciplinary
proceedings initiated against the employees would not attract the GST and
the penalty referred therein would only refer the penalty imposed in the
course of trade or commerce.
36.As such in the present case the penalty was imposed in a
disciplinary proceedings which cannot be construed that the penalty
imposed in the course of trade or commerce for the imposition of GST.
37.This Court finds substance in the arguments made by
Mr.R.V.Rajkumar, learned counsel appearing for the petitioners in some of
the writ petitions in the batch and this Court recorded its appreciation for
his assistance in the present writ petition.
38.Therefore, I am of the opinion that the GST imposed by the
respondents is illegal on the face of it and the same is liable to be set
aside.”
7.As stated by the learned counsel for the appellants, the aforesaid order
passed by the learned Judge in WP(MD)No.10355 of 2020 dated 18.12.2020
was subsequently, challenged by the appellants / TASMAC by filing
W.A.(MD) No.679 of 2021, and a Co-ordinate Bench of this court, by order
dated 24.03.2021, granted an order of interim stay, insofar as the order relating
to calculation of GST on the penalty alone. The operative portion of the same
reads as under:
“3.Considering the same, there shall be an order of interim stay
insofar as the order of the learned Judge pertaining to the finding on the
calculation of GST on the penalty alone is concerned. Thus, it is made clear
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W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
that the other portion of the order of the learned Judge, in which, liberty
was given to the appellant to proceed to conduct an enquiry has not been
dealt with and therefore, it is open to the appellant/petitioner to proceed
further. Notice.”
8.However, in the opinion of this court, the order of the Co-ordinate
Bench of this court dated 24.03.2021 in WA(MD).No.679 of 2021, as referred
to above, cannot be applicable to the facts of the present cases, as the learned
Judge rendered his verdict on 22.02.2021, whereas, the appellants obtained the
order of interim stay with respect of GST on penalty, only on 24.03.2021 i.e.,
much later than the order of the learned Judge. Therefore, the order of the
learned Judge, which holds good as on 22.02.2021, does not call for any
interference. However, it is made clear that there is no bar for the appellants in
proceeding with the enquiry as against the respondents in accordance with law.
At the same time, the imposition of GST on the penalty amount alone, is subject
to the result of WA(MD)No.679 of 2021.
9.With the aforesaid observations, this writ appeals stand disposed of.
No costs. Consequently, connected miscellaneous petitions are closed.
[R.M.D., J.] [J.S.N.P., J.]
29.04.2022
msr/gba
Index:Yes/no
Internet:Yes/No
https://www.mhc.tn.gov.in/judis R.MAHADEVAN, J.
W.A.Nos.1223, 1226, 1222, 1227, 1224, 1230, 1231 & 1238 of 2022
and
J.SATHYA NARAYANA PRASAD, J.
msr/gba
To
1. The Managing Director,
Tamil Nadu State Marketing Corporation
Limited (TASMAC),
4th Floor, CMDA Towers,
Gandhi Irwin Bridge Road,
Egmore, Chennai.
2. The Senior Regional Manager,
Tamil Nadu State Marketing Corporation
Limited (TASMAC),
Collector Office, Old Building First Floor,
Trichu - 620 001.
3. The District Manager/ Deputy Collector,
Tamil Nadu State Marketing Corporation
Limited (TASMAC), Cuddalore, Cuddalore District.
W.A. Nos.1223, 1226, 1222, 1227, 1224,
1230, 1231 & 1238 of 2022
and
C.M.P. Nos.7772, 7773, 7774, 7777,
7782, 7786, 7790 & 7827
29.04.2022
https://www.mhc.tn.gov.in/judis
