Lakshmikumaran And Sridharan Attorneys Represent On Landmark Madras High Court Ruling In MRF Limited GST Matter

Lakshmikumaran and Sridharan Attorneys Represent on Landmark Madras High Court Ruling in MRF Limited GST Matter

The leading law firm in India, Lakshmikumaran and Sridharan Attorneys, represented MRF Limited in a significant GST-related litigation matter before the Hon’ble Madras High Court.

Court Order – MRF Limited v. Additional Director DGGI and Others

The Hon’ble Madras High Court, on 28 November 2025, delivered a landmark ruling in MRF Limited v. Additional Director DGGI and Others, by allowing the Writ Petitions filed by MRF Limited and quashing a GST demand of Rs. 176,24,11,541/- along with an equal penalty. The personal penalty imposed on the Vice President (Finance) of MRF Limited was also set aside. The High Court quashed the Show Cause Notice issued under Section 74 of the CGST Act by the Additional Director DGGI, Delhi Zonal Unit, Directorate General of GST.

Background of Proceedings

The proceedings were initiated on the premise that the supply of tyres, tubes, and flaps (‘TTF’) in a carry strapping form constitutes a composite supply, with the supply of tyres being the principal supply. Consequently, the Petitioner was alleged to be liable to discharge GST at the rate applicable for the supply of tyres.

Key Issues Considered by the High Court

The primary issue before the High Court was whether proceedings under Section 74 of the CGST Act can be initiated against the Petitioner when the entire tax demand with interest was paid prior to the issuance of the SCN.

Petitioner’s Submissions

• The supply of TTF in a carry strapping form does not qualify as a ‘composite supply’ as these are independent and distinct supplies not naturally bundled.
• The tax demand with interest was paid prior to issuance of the SCN; therefore, the SCN under Section 74 of the CGST Act ought not to have been issued.
• Payments made by the taxpayer are not in accordance with Section 74, hence the bar on utilization of ITC for payment of taxes imposed by Section 17(5)(i) is not applicable.
• The intimation of payment of taxes was made prior to the initiation of the investigation, hence Section 39(9) of the CGST Act is not attracted.
• The industry-wide confusion regarding the nature of supply precludes any action against the Petitioner under Section 74 of the CGST Act for alleged suppression or misstatement.

High Court Observations and Ruling

The Hon’ble Court accepted that mere acceptance by the taxpayer that the supply is a “composite supply” does not preclude the Court’s jurisdiction to decide the issue. Regarding officers’ jurisdiction to issue SCNs under Section 74 without satisfying its ingredients, the Court held that the matter can be adjudicated under Article 226 of the Constitution of India.

The Court further observed that once the taxpayer has voluntarily paid the tax dues with interest, no fraud, willful misstatement, or suppression of material facts can be attributed. Section 39(9) of the CGST Act does not apply where tax intimation preceded enforcement. Additionally, Section 74 cannot be invoked in cases of industry-wide confusion on the nature of supply. Consequently, the SCN was quashed as being without jurisdiction, and the personal penalty imposed on the Vice President (Finance) was set aside.

The Writ Petitions were argued by V Lakshmikumaran, assisted by Charulatha R, Raghav Rajeev, and Nimrah Ali of Lakshmikumaran and Sridharan Attorneys.

Conclusion

This ruling reinforces the principle that voluntary payment of tax dues prior to enforcement action can protect taxpayers from penalties under Section 74 of the CGST Act. It also provides clarity on the treatment of composite supply disputes in the industry, setting a significant precedent for future GST litigations.

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