Telangana High Court Declines Writ in GST Rate Dispute, Directs Remedy via Section 107 Appeal

Overview

The Telangana High Court in Sahasra Enterprises vs Assistant Commissioner of Central Tax & Another has once again clarified that disputes concerning GST classification, applicable rate of tax and factual nature of services or contracts are ordinarily to be adjudicated by the statutory appellate authorities created under the GST law, rather than through a writ petition under Article 226 of the Constitution of India.

In this matter, an assessee providing services as a sub-sub-contractor was subjected to additional GST liability under Section 74 on the allegation that GST had been wrongly paid at 12% instead of 18%. While the assessee argued that the applicable notification justified the 12% rate and that there was no suppression warranting proceedings under Section 74, the High Court declined to go into the factual and interpretational aspects and directed the assessee to avail the appellate remedy under Section 107 of the GST Act.

Factual Matrix

Role of the Assessee and Nature of Demand

The assessee, Sahasra Enterprises, was engaged as a sub-sub-contractor for supply of specified services. Following scrutiny, the proper officer issued an order-in-original dated 17.09.2025 under:

  • Central Goods and Services Tax Act, 2017
  • Telangana Goods and Services Tax Act, 2017
  • Integrated Goods and Services Tax Act, 2017

The order imposed a tax liability of Rs.36,81,736/- by invoking Section 74 on the premise that:

  • The assessee had discharged GST at 12%
  • The Department considered the correct GST rate to be 18%
  • The difference represented short payment of tax attributable to alleged suppression and misclassification

Basis of the Department’s Action

Proceedings were initiated under Section 74 on allegations that:

  • There was short payment of tax due to application of an incorrect rate
  • The assessee had suppressed material facts
  • GST was wrongly discharged at 12% instead of 18%
  • The case justified invocation of extended period and penal consequences under Section 74

The order-in-original upheld these allegations and confirmed the differential liability.

Assessee’s Stand

Reliance on Notification and Correct Rate Claim

The assessee maintained that its services were correctly taxed at 12% by virtue of the applicable GST notification dated 28.06.2017. According to the assessee:

  • The nature of services provided clearly fell within the concessional rate category under the said notification
  • levy at 18% was inconsistent with the scheme and wording of the notification
  • The proper officer had not properly appreciated or applied the notification while confirming the demand

Challenge to Invocation of Section 74

The assessee further disputed the basis for invoking Section 74, contending that:

  • All relevant details and transactions were disclosed in the regular course of compliance
  • The dispute was purely interpretational and classificatory, not arising from any fraud, wilful misstatement or suppression of facts
  • Resort to extended limitation and stringent provisions of Section 74 was therefore legally unwarranted

The assessee had also submitted a detailed reply before the proper officer putting forth these arguments and challenging the extended period of limitation. However, the adjudicating authority proceeded to confirm the demand without, according to the assessee, adequate consideration of these submissions.

On these grounds, the assessee invoked the writ jurisdiction of the High Court seeking quashing of the order-in-original dated 17.09.2025.

Department’s Position Before the High Court

Counsel for the Department argued that the writ petition was not maintainable in the given circumstances, primarily because: