Madras High Court Sets Aside ₹5.50 Crore GST Demand Based On Projected Revenue From Unbuilt Construction

The Madras High Court has set aside a ₹5.50 crore GST demand against Shree Velu Builders Private Limited, holding that tax cannot be levied on projected revenue from two building blocks merely because their plans had been approved. The court noted that construction had not commenced in either block.

Justice Krishnan Ramasamy remanded the matter to the State Tax Officer for fresh consideration, subject to the company depositing ₹50 lakh within four weeks.

The case arose from an order passed against M/s Shree Velu Builders Private Limited, raising a demand of ₹5,50,25,100 based on projected revenue, along with ₹2,40,19,438 towards other liabilities.

The company argued that the assessment relating to Block Nos. 12 and 13 was based solely on planning approval granted by the Salem Local Planning Authority, despite construction not having commenced. It also contended that it had not been given sufficient opportunity to file a detailed reply.

The State Tax Officer maintained that adequate opportunity had been provided. However, the Court found that construction had not commenced in the two blocks and that the company had not been afforded sufficient opportunity to present its defence.

The Court directed the company to file its objections and supporting documents within four weeks.

The bench further directed the State Tax Officer to consider the submissions, grant a personal hearing, and pass a fresh order on merits and in accordance with law.

The Court further clarified that if the tax officer failed to communicate the lifting of the attachment within the stipulated period, the company could directly approach the concerned banks with proof of payment and a copy of the order to have the accounts de-frozen.

Accordingly, the Court set aside the impugned order, subject to the company depositing ₹50 lakh within the stipulated period, and remanded the matter for fresh consideration.

For Petitioner: Advocate A.V. Arun

For Respondent: Advocate B. Sivaraman