The Madras High Court has declined to interfere with a GST show cause notice issued to a Coimbatore-based industrial unit over alleged supply of electricity, holding that the dispute involves factual questions requiring examination by the GST authorities during adjudication. 

The bench of Justice Senthilkumar Ramamoorthy has observed that the taxpayer would have to establish through documentary evidence that the electricity generated from its rooftop solar power plant was entirely captively consumed and not supplied to TANGEDCO. 

The petitioner challenged the GST show cause notice primarily on the ground that the department had wrongly proceeded on the assumption that electricity generated from its rooftop solar power plant was supplied to the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO). 

According to the petitioner, the electricity generated through the solar power installation was not sold to TANGEDCO. Instead, the power was fed into the electricity grid and equivalent units were subsequently adjusted against the petitioner’s own electricity consumption. Therefore, the petitioner contended that the electricity was being captively consumed and did not constitute a taxable supply under the GST laws. 

The central legal issue before the Court was whether the electricity generated by the petitioner and routed through TANGEDCO’s grid amounted to a “supply” under GST law or merely constituted captive consumption.

The petitioner argued that since the electricity was generated for self-use and corresponding credit for equivalent units was received, there was no outward supply attracting GST implications. 

However, the GST authorities had initiated proceedings by issuing a show cause notice alleging taxable supply of electricity. The notice was challenged directly before the High Court without filing a detailed reply before the adjudicating authority. 

The Court noted that the petitioner’s defence was based entirely on factual assertions regarding the manner in which electricity generated from the solar power plant was utilized.

Justice Ramamoorthy observed that the success of the petitioner’s case would depend on establishing whether the entire electricity generated was captively consumed or whether any part of it was supplied to TANGEDCO. Such issues, according to the Court, require factual determination by the adjudicating authority and cannot be conclusively decided in a writ proceeding at the show cause notice stage. 

The Court therefore held that no case had been made out for interference with the show cause notice.

While refusing to quash the notice, the High Court granted liberty to the petitioner to file a comprehensive reply along with supporting documents to demonstrate that the entire power generated through the rooftop solar plant was captively consumed. 

The Court also permitted the petitioner to raise an additional legal objection that the department had allegedly clubbed multiple assessment periods in a single proceeding, if such contention was available under law. 

The Court clarified that if an adverse order is eventually passed after adjudication, the petitioner would remain free to challenge such order through appropriate legal remedies available under the GST framework. 

Consequently, the writ petition was disposed of without granting relief against the show cause notice, and the connected miscellaneous petitions were also closed.

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