After 20 Years, Delhi High Court Reserves Verdict In Railways' Plea Against Sales Tax Demands On IRFC Transactions

The Delhi High Court has recently reserved judgment in a batch of writ petitions filed by the Ministry of Railways challenging sales tax demands in relation to transactions involving the Indian Railway Finance Corporation (IRFC), nearly 20 years after the petitions were instituted in 2006.

The division bench of Justices Anil Khetrapal and Shail Jain reserved judgment and asked the parties to file synopses, not exceeding five pages each, within three working days.

The writ petitions were filed in 2006, challenging assessment orders dated March 30, 2006 that raised sales tax demands.

The High Court had stayed the demand vide order dated August 30, 2006 and the interim protection was subsequently directed to continue till the final disposal of the writ petitions.

The central issue is whether the Indian Railway Finance Corporation (IRFC) was liable to pay sales tax and whether the transactions between IRFC and the Railways were liable to sales tax under Delhi Sales Tax Act, 1975. The Court noted that the issue was the subject matter of two Cabinet notes dated December 16, 1987 and July 26, 1989 relied upon by the Ministry of Railways.

Considering the potential impact of the dispute, the Court directed the Deputy Director (Finance), Ministry of Railways, Rail Bhawan, to remain personally present on the next date of hearing and observed that if the Ministry failed to furnish instructions, the writ petitions would be liable to be dismissed.

Accordingly, the Deputy Director, Finance Stores, Ministry of Railways, appeared before the Court in December 2025.

The matter was thereafter heard by a different division bench, which permitted both sides to place additional written submissions on record before the final hearing.

After hearing the parties on July 31, the High Court reserved its judgment.

For Petitioners: Additional Solicitor General Chetan Sharma with Central Government Standing Counsel Archana Gour, Advocates Rukhmini Bobde, Ridhima Gour, Vinayak Aren, Deepu Kumar, and Aishwarya Nigam

For Respondents: Senior Advocate Balbir Singh with Advocates Sumit K. Batra and Priyanka Jindal,