The Allahabad High Court has disposed of a writ petition arising out of a dispute between a supplier and Bharat Sanchar Nigam Ltd. (BSNL) over the GST component charged in the supplier's bills, directing release of the withheld amount once proof of GST payment is furnished.

Facts of the Case

Laxmi Electric And Motor Winding Works ("the petitioner") supplied goods and services to BSNL and raised bills that included the applicable GST component. According to the petitioner, out of the total value of supplies, BSNL withheld Rs. 41,98,314/-, representing the GST charged in the bills, without releasing it. The petitioner filed representations dated 22.01.2019 and 22.08.2020 seeking release of the withheld amount and a decision on its grievance, but these remained undecided. The petitioner accordingly approached the High Court seeking a mandamus directing BSNL to deposit the GST amount deducted from its bills with the GST Department, and to decide its pending representations.

Issues Involved

  1. Whether BSNL was liable to release the GST component withheld from the petitioner's bills.
  2. Whether the writ court could direct such release without the petitioner first establishing that the corresponding GST had actually been deposited.

Petitioner's Arguments

  • Out of the total bill amount for supplies made to BSNL, an amount of Rs. 41,98,314/- representing the GST charged in the bills had not been paid by the respondents.
  • The petitioner's representations dated 22.01.2019 and 22.08.2020 seeking release of this amount remained pending and undecided for a long period.

Respondent's Arguments

  • The petitioner had not produced any proof before the respondents of payment of GST corresponding to the amount charged in the bills.
  • If such proof of payment were produced, the payment would be released to the petitioner in accordance with law.

Court Order / Findings

  • The Court recorded the statement made on behalf of BSNL that the withheld amount would be released once the petitioner furnished proof of GST payment.
  • The writ petition was disposed of in terms of the respondents' statement, without an independent adjudication on merits.
  • The petitioner was directed to produce proof of payment of GST before the respondents for release of the withheld payment, if any is found due.

Important Clarification

  • Where a recipient of supply withholds the GST component of a bill citing absence of proof of tax payment or deposit by the supplier, courts may dispose of such disputes with a direction to produce proof rather than adjudicating entitlement on merits — the onus lies on the supplier to demonstrate that the underlying GST has in fact been deposited before release can be directed.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — general provisions governing the GST component of consideration payable on supplies and its deposit with the department.

Decision – In Favour of

Disposed of with directions; a qualified outcome for the Assessee/Supplier, since a mechanism for release of the withheld GST amount was directed, conditional upon the petitioner furnishing proof of deposit.

Related Case Laws

This order may be read alongside other case notes on this site concerning disputes between government/PSU recipients and suppliers over withholding or non-remittance of the GST component of contractual payments.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: WRIT TAX No. 1199 of 2021
  • Coram: Hon'ble Surya Prakash Kesarwani, J. and Hon'ble Jayant Banerji, J.
  • Order Date: 05.03.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787075549_4607compressed.pdf

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