Delay in Tax refund: HC Restrains authorities from declaring company as defaulter under SVLDR Scheme

SEW Infrastructure Limited Vs Director General of GST Intelligence DGGI (Telangana High Court)

Conclusion: The respective authorities was restrained from declaring Company as a defaulter under the SVLDR Scheme and from from taking any coercive action against the Directors, Officials of company as the Income Tax department did not release the refund due to assessee and therefore, assessee could not pay the amount determined by the Designated Committee under the SVLDRS.

Held: Assessee-company filed an application under the Scheme for settlement of dues under the SVLDRS which was accepted by the Designated Committee of the Tax Department. The Committee reviewed assessee’s application and issued its approval vide Form No.SVLDRS-3 and assessee was asked to remit an amount of Rs.18,91,37,548/- as against the original liability of Rs.59,20,19,079/-. As per the SVLDRS, payment of the amount mentioned in Form No.SVLDRS-3 should be made as per timelines prescribed (and extended from time to time), failing which the order of the Designated Committee would be deemed to be automatically canceled. The final date for making the above payment was 30, June 2020. Assessee contended that because of the COVID-19 Pandemic situation and its own financial difficulties, the only way assessee could discharge its liability as per Form No.SVLDRS-3 was by utilizing the Income-tax refund of Rs.34,65,92,300/- which it was held entitled to. However, on account of the Garnishee Notice issued by GST authorities to C.I.T. (C.P.C.), Bengaluru and Principal C.I.T. (Central), Hyderabad to remit Rs.59,02,23,755/- towards Service tax liability of assessee, the Income Tax Department did not pay to assessee the refund due to it for the Assessment Year 2018-19. Assessee wrote letters to respondents to modify the Garnishee Notice dt.22.3.2019 and restricting it to Rs.18,91,37,548/- to enable assessee to discharge its liability as per Form SVLDRS-3, but they did not modify the Garnishee Notice. Assessee contended that it had no other source of funds except the Income tax refund to make payment of the Service Tax Dues determined by the Designated Committee, and since the Income Tax department did not release the refund due to it, assessee could not pay the amount determined by the Designated Committee under the SVLDRS by 30.06.2020. It was held that assessee should be deemed to have made payment of Rs.18,91,37,548/- determined under Form No.SVLDRS-3 before 30.06.2020; the respondents were restrained from declaring that assessee had committed a default under the SVLDRS Scheme 2019 and also restrained from taking any coercive action against the Directors, officials of assessee-company or against the assessee; the respondents were  directed to release to assessee the amount of Rs.12,01,23,118/- out of the Income Tax refund amount of Rs.30,92,60,666/- payable to it within four (4) weeks.

FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT

The petitioner is engaged in infrastructure development sector and is registered assessee with the Service Tax Department, Hyderabad under the Finance Act, 1994 and also under the Income Tax Act, 1961.

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