Facts of the Case

Dharam Pal and Co. (petitioner), a contractor, filed a writ petition before the Punjab and Haryana High Court seeking a direction to the State of Haryana and its Executive Engineer, Safidon Water Services Division, District Jind, to refund Rs.17,13,105/- along with interest @ 18% per annum, alleged to have been illegally deducted from the petitioner's running bills towards sales tax, even though GST had already been deducted from the same bills. The respondent-Department, in its written statement filed by K.S. Mahla, Executive Engineer, relied on guidelines issued by the Department of Revenue, Ministry of Finance vide F.No.S.31011/11/2018-ST-I-DoR dated 14.09.2018, under which tax deduction at source provisions under the Central Goods and Services Tax Act, 2017 took effect only from 01.10.2018, though GST itself was in force from 01.07.2017.

Issues Involved

  1. Whether the deduction of sales tax from the petitioner's running bills, despite GST already having been deducted from the same bills, was legally sustainable.
  2. Whether the petitioner was entitled to a writ directing refund of the amount so deducted, along with interest at 18% per annum.
  3. Whether the tax deducted at source under guidelines dated 14.09.2018, prior to the statutory effective date of 01.10.2018, could be justified.

Petitioner's Arguments

  • The deduction from the petitioner's running bills towards sales tax was illegal, as GST had already been deducted from the same bills, resulting in a double deduction on the same transaction.
  • The petitioner had already discharged GST liability, so a further deduction of sales tax could not be justified merely on the basis of internal departmental guidelines.
  • The petitioner sought a writ directing the respondents to refund the excess amount of Rs.17,13,105/-, together with interest at 18% per annum, for the wrongful deduction.
  • Faced with the respondents' stand and the Court's observations, the petitioner's counsel opted not to press the petition, choosing instead to pursue an alternative statutory remedy.

Respondent's Arguments

  • The sales tax deduction was rightly made in terms of the guidelines issued by the Department of Revenue, Ministry of Finance, Government of India.
  • Any GST deposited by the petitioner at his own end could not be attributed as a lapse or wrongdoing on the part of the respondent-Department.
  • Prior to 01.10.2018, tax deduction at source was governed by the said guidelines, justifying the deduction made from the petitioner's bills.

Court Order/Findings

  • The Court noted that prior to 01.10.2018, tax was being deducted at source in terms of the guidelines dated 14.09.2018, and that any GST deposited by the petitioner on his own account could not be treated as a lapse attributable to the respondent-Department.
  • The Court held that the petitioner, if so advised, may take recourse to seek the benefit of the amount deposited in excess and claim input credit wherever due before the competent forum, rather than pursue the writ remedy for refund.
  • Faced with this position, learned counsel for the petitioner did not press the petition at that stage, opting instead to avail the alternative remedy available in accordance with law.
  • The petition was disposed of as not pressed, with liberty reserved to the petitioner to pursue the alternative remedy for refund/input credit of the excess amount deposited.

Important Clarification

  • Where sales tax/TDS was deducted prior to the statutory effective date of GST TDS provisions (01.10.2018) under departmental guidelines dated 14.09.2018, such deduction, standing alone, is not automatically treated as illegal merely because GST was also separately deposited by the assessee.
  • An assessee alleging a double deduction (sales tax TDS plus self-deposited GST) is expected to pursue the remedy of claiming refund of the excess deposit or input tax credit before the competent forum/authority, rather than seek a direct writ for refund, particularly where disputed facts on deduction dates are involved.

Sections Involved

  • Section 51 of the Central Goods and Services Tax Act, 2017 - provides for tax deduction at source (TDS) by specified deductors on notified supplies, the provision invoked, via departmental guidelines, for the disputed deduction.
  • Section 54 of the Central Goods and Services Tax Act, 2017 - governs the procedure for claiming refund of tax, relevant to the petitioner's claim for refund of the excess amount deducted.
  • Section 16 of the Central Goods and Services Tax Act, 2017 - deals with eligibility and conditions for claiming input tax credit, referenced as the alternative remedy available to the petitioner.

Decision – In Favour of

The judgment does not record a finding in favour of either the assessee or the Department on the merits of the alleged illegal deduction. The Court observed that the deduction made prior to 01.10.2018 was in terms of the guidelines relied upon by the respondents, and that any GST deposited by the petitioner independently could not be treated as a departmental lapse. However, rather than deciding the writ petition on merits, the petitioner's counsel chose not to press it, and the matter was disposed of as not pressed, with liberty granted to the petitioner to pursue the alternative remedy of claiming refund of the excess deposit and/or input tax credit before the competent forum. The outcome is thus procedural/neutral rather than a substantive win for either side.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Punjab and Haryana High Court, Chandigarh
  • Case No.: CWP-22768 of 2019
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice Vinod S. Bhardwaj
  • Decision Date: 18.10.2023
  • Disposal Nature: Disposed of as not pressed, with liberty reserved

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