HC Upholds Section 74 Proceedings Based on Seigniorage Fee Analysis
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- Last Updated on 22 June, 2026
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Case Details: KPR Enterprises vs. State Tax Officer - [2026] 187 taxmann.com 707 (Madras)
Judiciary and Counsel Details
- C. Saravanan, J.
- Dr S. Sathyanarayanan for the Petitioner. & V. Prashanth Kiran, Govt. Adv. for the Respondent.
Facts of the Case
The petitioner was engaged in the business of the sale of rock boulders, while the extraction activity was carried out through a third-party contractor. Following an inspection, the jurisdictional officer issued Form DRC-01A intimations alleging suppression of outward supplies. It filed replies to the intimations, after which show cause notices in Form DRC-01 were issued and subsequently adjudicated through orders in Form DRC-07 by estimating escaped turnover on the basis of seigniorage fee paid using the National Standard Method. It contended that no incriminating material had been recovered during inspection, challenged the invocation of the extended period and submitted that the issue relating to taxability of seigniorage fee was already kept in abeyance owing to a pending matter before the Supreme Court. The matter was accordingly placed before the High Court.
High Court Held
The High Court held that the material on record disclosed a prima facie case justifying the invocation of the extended period of limitation under Section 74 of the CGST Act and the Tamil Nadu GST Act. It was observed that the petitioner had paid substantial seigniorage fees while reporting comparatively lower outward supplies in GSTR-1, making it highly improbable that such high extraction charges corresponded to limited extraction. The Court further held that estimation of escaped turnover through the National Standard Method constituted a reasonable basis for initiating proceedings and that sufficient foundational facts existed for issuance of notices under Section 74. Accordingly, it rejected the challenge to the extended limitation period as well as the alleged procedural irregularities and dismissed the writ petitions in favour of the revenue.
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