Tax Demand Contradicts going Concern Exemption: Madras HC Orders Re-Assessment [Read Order]
The bench set aside a GST demand on a business sale, due to contradictions in tax notices and the applicability of the going concern exemption under the TNGST Act
![Tax Demand Contradicts going Concern Exemption: Madras HC Orders Re-Assessment [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Madras-High-Court-Re-assessment-Tax-Demand-taxscan.jpg "Tax Demand Contradicts going Concern Exemption: Madras HC Orders Re-Assessment [Read Order]")
The Madras High Court observed that the GST demand on a going concern transfer was arbitrary and unsustainable as it contradicted the tax department’s earlier notice. The petitioner, Frontline Wind Energy Private Limited, had purchased a Wind Electric Generator Park with 20 windmills from Zuri Hotels & Resorts Private Limited through a slump sale agreement dated 17.04.2015. Later,...
The Madras High Court observed that the GST demand on a going concern transfer was arbitrary and unsustainable as it contradicted the tax department’s earlier notice.
The petitioner, Frontline Wind Energy Private Limited, had purchased a Wind Electric Generator Park with 20 windmills from Zuri Hotels & Resorts Private Limited through a slump sale agreement dated 17.04.2015. Later, on 14.06.2019, the business was sold to Bilal Match Works for a total sum of ₹9,50,00,000.
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On 09.09.2021, the tax department issued a notice based on the petitioner’s 6th Annual Report for the financial year 2019-2020. In this notice, the department proposed to levy GST at 18% on a sale value of ₹10,34,32,205, which included a profit of ₹4,69,88,686. The petitioner responded to this notice, explaining their stance.
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Subsequently, on 21.10.2021, the department issued another notice, admitting that the sale consideration of ₹9,50,00,000 was not taxable. However, they proposed to tax a differential amount of ₹84,32,205 instead. The petitioner replied to this notice as well, addressing the concerns raised.
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Despite the earlier admission, the final assessment order demanded GST on the entire ₹10,34,32,205.
The petitioner, represented by counsel N. Prasad, argued that the petitioner had sold its business unit as a going concern to another entity. The tax demand on the entire sale consideration was arbitrary and had no legal basis, making it unsustainable. The counsel asserted that, as per Entry 4(c)(i) of Schedule II to the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act), no tax could be levied on the sale consideration, further reinforcing that the demand was irregular and unsustainable.
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On the other hand, Amirtha Poonkodi Dinakaran, Government Advocate for the respondent, defended the impugned order, stating that it did not suffer from any irregularities. She argued that the petitioner had an alternative remedy available under Section 107 of the GST Act before the Appellate Authority and, therefore, requested the court to dismiss the writ petition.
After considering the arguments presented by both sides, Justice C. Saravanan observed that the impugned demand was contrary to the notice dated 21.10.2021, which had explicitly stated that the sale consideration of ₹9,50,00,000 was not taxable. The notice had clarified that the business was transferred as a going concern under entry 4(c)(i) of Schedule II to the TNGST Act, 2017, making the tax demand on this amount unsustainable.
The court found the demand to be arbitrary and unsustainable. Consequently, it set aside the impugned order and directed the respondent to pass a fresh order based on the merits and under the law.
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