The Chhattisgarh High Court on 28 October held that amounts recovered from UltraTech Cement Limited and Shree Cement Limited towards the tax dues of the State Mining Department must be refunded once the underlying tax demand has been quashed.
Justice Narendra Kumar Vyas allowed the petitions filed by the cement companies challenging the State Government's refusal to refund or adjust the amounts recovered towards the Mining Department's tax dues. The Bench held:
“In view of the fact that since Tax cases preferred by the Mining Department has been allowed by the Division Bench of this Court wherein demand so raised against the Mining Department has already been quashed, it is directed that if any amount has already been recovered by the Income Tax Department against the petitioners, the same shall be returned back to the petitioners on furnishing the application by the individual petitioners.”
The dispute arose after the Income Tax Department raised a demand against the Mining Department for failing to collect Tax Collected at Source (TCS) on royalty payments received from mining leaseholders.
UltraTech Cement and Shree Cement use limestone in cement manufacturing and were required to pay royalty in advance to the Mining Department for their mining operations.
As the Mining Department failed to deposit the TCS amounts, the Income Tax Department issued recovery notices to the cement companies under Section 226(3) of the Income Tax Act, 1961.
During the proceedings, the State Government informed the Court that a Division Bench had already quashed the tax demand raised against the Mining Department. The Bench, therefore, directed the Income Tax Department to refund any amounts recovered from the cement companies upon submission of applications by the respective companies.
Accordingly, the High Court disposed of the petitions and directed the refund of the recovered amounts upon submission of applications by the respective companies.
For UltraTech Cement: Senior Advocate Ashish Shrivastava, with Advocates Aman Pandey, Rahul Ambast, Shotabdi Bageli and Ishaan Singh Rathore.
For Shree Cement: Advocate Raja Sharma.
For the Union of India: Deputy Solicitor General Ramakant Mishra.
For the State: Deputy Government Advocate Anuradha Jain.
For the Income Tax Department: Advocate Ajay Kumrani, appearing on behalf of Advocate Amit Choudhari.