Jharkhand High Court directs Municipal Bodies to pursue GST appeals instead of writ petitions

Background and Context

Multiple writ petitions came before the Jharkhand High Court in the matter of Jugsalai Nagar Parishad Vs Union of India, all raising a common issue: whether Municipal Corporations and Nagar Parishads could directly invoke the writ jurisdiction of the High Court under Article 226 of the Constitution to challenge orders passed by GST adjudicating authorities, despite there being a statutory appellate remedy under Section 107 of the CGST Act, 2017.

The petitioners were various local self-government institutions such as Municipal Corporations and Nagar Parishads. They questioned GST demands confirmed by adjudicating authorities, contending that the very levy of GST upon them was inherently unlawful and beyond the jurisdiction of the authorities concerned.

The Court had to decide:

  • Whether these writ petitions were maintainable in light of the statutory appeal mechanism; and
  • Whether the case fell within the limited exceptions where the existence of an alternative remedy does not bar recourse to writ jurisdiction.

Petitioners’ Core Arguments

Claim of jurisdictional error and illegality

The petitioners asserted that:

  • The GST demands raised against them were patently illegal and thus rendered the adjudication orders as “wholly without jurisdiction.”
  • As a consequence, they argued that the bar of alternative remedy should not apply.

To substantiate this, they relied on:

  • Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority and Others reported in 2023 5CC OnLine SC 95
  • Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others reported in (1998) 8 5CC 1

On the strength of these decisions, they contended that when an order is ultra vires for want of jurisdiction, the assessee is entitled to bypass the appellate mechanism and straightaway invoke the High Court’s writ jurisdiction.

Argument that Municipal Bodies are immune from GST

The petitioners advanced a broader, constitutional-level argument that:

  • Municipal Corporations, Nagar Parishads and similar local self-government authorities are not liable to GST at all on the basis of the constitutional scheme.

They placed reliance on:

  • Article 243W and Article 243X of the Constitution
  • Entry V in List II of the Seventh Schedule

According to them, these provisions collectively demonstrate that:

  • Local authorities, while discharging functions of self-government, hold a constitutional status that shields them from levy of GST on their activities.

Reliance on Madras High Court decision

The petitioners also relied on the decision of the learned Single Judge of the Madras High Court in:

  • Cuddalore Municipality v. Joint Commissioner of GST and Central Excise, Tiruchirappalli reported in (2021) 93 GSTR 287

They read this decision as laying down a broad proposition that:

  • No GST can ever be imposed on Municipal Corporations or similar local self-government bodies, irrespective of the nature of their activities.

On this foundation, they claimed that the adjudicating orders were without authority and therefore challenged them directly before the High Court.

Respondents’ Stand

Challenge to the “blanket immunity” theory

Counsel for the respondents disputed the petitioners’ sweeping contention that Municipal Corporations and Nagar Parishads enjoyed overall immunity from GST. The respondents submitted that:

  • The adjudicating authorities had already examined the factual matrix of the underlying transactions in each case.
  • They took into account the nature of the activities, whether they were core governmental functions or otherwise.

The respondents argued that: