No GST Liability If Tax Already Remitted: Madras HC Sets Aside ₹14.63 Cr SCN Against GAIL [Read Order]
The Court held that GAIL had already discharged its GST liability through the transmission vertical, so Section 76 could not be invoked, and the ₹14.63 crore SCN was invalid.
![No GST Liability If Tax Already Remitted: Madras HC Sets Aside ₹14.63 Cr SCN Against GAIL [Read Order]](https://images.taxscan.in/h-upload/2026/04/20/2133776-no-gst-liability-if-tax-already-remittedjpg.webp "No GST Liability If Tax Already Remitted: Madras HC Sets Aside ₹14.63 Cr SCN Against GAIL [Read Order]")
In a recent ruling, the Madras High Court has quashed a ₹14.63 crore Show Cause Notice (SCN) issued to GAIL (India) Ltd. under Section 76 of the Central Goods and Services Tax Act, 2017, holding that the provision was not applicable since the GST component had already been remitted to the government by GAIL’s transmission vertical. The petition...
In a recent ruling, the Madras High Court has quashed a ₹14.63 crore Show Cause Notice (SCN) issued to GAIL (India) Ltd. under Section 76 of the Central Goods and Services Tax Act, 2017, holding that the provision was not applicable since the GST component had already been remitted to the government by GAIL’s transmission vertical.
The petition arose from a 2020 SCN alleging that GAIL collected GST from customers but failed to pay it to the exchequer. The Petitioner GAIL explained that it operates two distinct verticals - trading (sale of natural gas under State VAT) and transmission (pipeline services under GST), each with a separate GST registration. The company maintained that the trading vertical merely reimbursed the GST paid by the transmission vertical, and no tax was withheld.
Represented by Joseph Prabakar, GAIL argued that Section 76 applies only when a person collects tax and does not remit it, which was not the case here. The company pointed out that even the SCN acknowledged there was no discrepancy between the amount collected and the amount paid to the government.
They also relied on judgments, such as Magadh Sugar and Energy Ltd. vs. State of Bihar and others, and Mahindra and Mahindra Ltd. vs. The Joint Commissioner (CT) (Appeals).
On the other hand, the Revenue, represented by Additional Solicitor General A.R.L. Sundaresan, contended that the two verticals were “distinct persons” under Section 25(4) ofthe CGST Act and that the trading vertical had retained the GST component. It urged that GAIL should respond to the SCN rather than invoke writ jurisdiction.
After hearing both sides, Justice D. Bharatha Chakravarthy noted that a similar issue had already been decided by the Gujarat GST Authority in 2024, which dropped the proceedings after finding that the transmission vertical had duly paid GST and that the trading vertical’s recovery was only a reimbursement.
The court observed that the Tamil Nadu GST Department’s own inquiry confirmed the same facts. The Court stated that Section 76 of the CGST Act applies only when tax is collected but not remitted. Also, the court rejected the Revenue’s argument that separate GST registrations made the trading and transmission verticals “distinct persons.” It held that this was an internal reimbursement arrangement, not wrongful retention of tax.
The High Court observed that “Section 76 proceedings are no method to justify double taxation. By just ignoring the same, the show cause notice proceeds to quantify the amount payable and the penalty. “
Accordingly, the High Court quashed the SCN dated 17.08.2020 issued under Section 76 of the CGST Act, and the writ petition was allowed.
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