Orissa High Court Stays GST Show-Cause Notice, Cites Unconstitutionality in Provisions

High Court questions validity of GST Act provisions; halts multi-year tax notice pending further review.

In a significant legal development, the Orissa High Court has put a hold on the operation of a contentious Goods and Services Tax (GST) show-cause notice involving M/s. ESL Steel Limited, citing potential constitutional issues with certain provisions of the GST Act. The decision was made by a division bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman.

The court's decision follows a writ petition filed by M/s. ESL Steel Limited, challenging the constitutional validity of specific GST provisions. The petitioners argued that these provisions contradict established legal principles in Indian jurisprudence. The case also involved a show-cause notice issued on September 1, 2025, which allegedly covered multiple financial years, a practice deemed impermissible by the petitioners.

The High Court, acknowledging the gravity of the constitutional challenge, has directed the relevant authorities to file affidavits in response. In the interim, it has stayed the operation of the impugned show-cause notice until January 15, 2026, when the matter will be revisited alongside a similar pending writ petition, W.P.(C) No.27979 of 2024.

This decision aligns with a previous judgment by the Karnataka High Court, which found the issuance of a single show-cause notice for multiple tax periods to be impermissible. The Orissa High Court's ruling thus reflects a growing judicial scrutiny of GST practices perceived to overstep legal bounds.

Legal representatives for the petitioners included Mr. Bharat Raichandani, Mr. Rishabh Prasad, and Mr. Onkar Sharma, while Mr. P.K. Parhi, Deputy Solicitor General of India, represented the Union of India. Other representatives for the state and central GST authorities were also present.

The judgment has been welcomed by various stakeholders as a step towards ensuring the GST framework aligns with constitutional mandates and judicial precedents.

Bottom Line:

GST Act provisions challenged on grounds of being unconstitutional and contrary to settled legal principles - High Court stays operation of show-cause notice covering multiple financial years as impermissible in law.

Statutory provision(s): Goods and Services Tax Act

M/s. ESL Steel Limited v. Union of India, (Orissa)(DB) : Law Finder Doc Id # 2821480