Ultratech Cements Limited Vs Union of India (Chhattisgarh High Court)
Tax Demand Against Mining Department Quashed: HC Directs Refund of Amounts Recovered From Cement Companies
The Chhattisgarh High Court directed the Income Tax Department to return amounts, if any, recovered from Ultratech Cement and Shree Cement towards tax dues of the State Mining Department, after the underlying demand against that department had been quashed.
Disposing of three connected writ petitions, the Court held that the amounts recovered should be returned upon submission of applications by the individual petitioners. The decision followed an earlier Division Bench judgment allowing the Mining Department’s challenge to the tax demand.
Background of the Dispute
The petitioners, Ultratech Cement Limited and Shree Cement Limited, manufacture cement and clinker. Their manufacturing operations require limestone as a raw material.
To ensure an uninterrupted supply of limestone, the companies obtained mining leases from the Government for extraction under the applicable mining framework. These leases required payment of royalty to the Mining Department.
Under the mechanism described in the order, royalty was payable in advance through an online portal against allotted pit passes, pursuant to a notification dated 30 June 2017. The Mining Department permitted mining operations on the basis of these advance royalty payments.
The dispute arose when the Income Tax Department sought recovery from the companies in connection with tax dues attributed to the Mining Department.
TCS Default Led to Recovery Notices
The High Court recorded that the Income Tax Department had passed an order dated 30 November 2018 concerning non-collection of tax collected at source (TCS) on royalty payments under Section 206C.
According to the factual account in the judgment, the Mining Department failed to deposit the TCS amount. The Income Tax Department consequently sought recovery of the outstanding demand from the mining leaseholders.
For this purpose, it issued notices to the petitioners under Section 226(3) of the Income Tax Act, demanding payment towards the Mining Department’s tax liabilities.
The recovery action therefore involved two connected relationships: the companies’ royalty obligations to the Mining Department and the Income Tax Department’s demand against that department.
Petitioners Sought Refund or Adjustment
The petitioners approached the High Court under Article 226 of the Constitution of India.
Their challenge concerned a letter dated 4 January 2021, bearing No. F6-36/2020-21, issued by the Additional Secretary, Department of Mineral Resources, Government of Chhattisgarh.
Through that communication, the State authority had rejected the company’s representation seeking refund or adjustment in respect of advance royalty, taking account of amounts paid to the Income Tax Department towards recovery of the Mining Department’s dues.
The petitions thus concerned the financial consequences of recovering the Mining Department’s tax demand from companies that were also required to make advance royalty payments for their mining operations.
Since the petitions involved common questions of law and fact, the High Court heard them together and disposed of them through a common order.
Income Tax Department’s Submissions
The Income Tax Department submitted that certain dues were recoverable from the Mining Department of the State of Chhattisgarh.
It explained that notices under Section 226(3) had therefore been issued to the petitioners, requiring payment of the amounts specified in those notices.
Its recovery action was accordingly founded on the existence of an outstanding demand against the Mining Department. The subsequent fate of that underlying demand became decisive when the writ petitions were considered.
State Relied on Earlier Division Bench Judgment
The State informed the Court that the Mining Department had challenged the Income Tax Department’s claim in Tax Case No. 189 of 2025 and connected matters.
That proceeding included the dispute between the Deputy Director of Geology and Mining and the Deputy Commissioner of Income Tax (TDS).
The State submitted that a Division Bench of the High Court had allowed those tax cases on 26 February 2026.
The Court recorded that the demand raised against the Mining Department had consequently already been quashed. This development removed the underlying demand on which the recovery from the petitioners had been based.
High Court Directs Return of Recovered Amounts
Taking note of the earlier Division Bench decision, Justice Narendra Kumar Vyas directed that any amount already recovered by the Income Tax Department from the petitioners must be returned.
The direction was subject to the individual petitioners furnishing applications for that purpose.
The Court did not quantify the refundable amounts or prescribe a specific repayment deadline. Its direction covered amounts, if any, actually recovered from the petitioners against the Mining Department’s demand.
Conclusion
The writ petitions were disposed of with refund directions. The relief rested on the prior quashing of the Mining Department’s tax demand, rather than a fresh determination of the substantive TCS dispute in these proceedings.
FULL TEXT OF THE ORDER OF CHHATTISGARH HIGH COURT
1. Since common question of law and facts are involved in bunch of these writ petitions, they are heard analogously and are being disposed of by this common order.
2. The petitioners have filed the instant writ petitions under Article 226 of the Constitution of India challenging the letter dated 4-1-2021 bearing No. F6-36/2020-21 issued by the Additional Secretary, Department of Mineral Resources, Govt. of Chhattisgarh, Raipur, ie. respondent No.4 whereby the latter has rejected the representation submitted by the petitioner company requesting refund/adjustment of the amount by the petitioner company towards the payment of advance royalty against the amount paid by the petitioner company to the Income Tax Department ie, respondent No.3 in relation to the recovery of tax dues on behalf of the Mining Department ie., respondent No.7.
3. Case of the petitioners, in brief, is that the Petitioner Company, Ultratech Cement Limited/ Shree Cement Limited, a Company incorporated under the Company’s Act 1956, is engaged in the business of manufacturing cement and clinker. Petitioner Company uses limestone which is required as raw-material in the process of manufacture of cement. In order to ensure uninterrupted supply of limestone as raw-material for continuous manufacturing activity of cement, Petitioner Company obtained a mining lease from the Government for extracting limestone as required under the provisions of Mineral Concession Rules 1960 referable to Mines & Minerals Regulations & Development Act, 1957. For extracting limestone, the petitioner Company is required to pay royalty to the respondent No.7, As per the mechanism established by the Respondent No.6 & 7, the Royalty is required to be paid in advance through online portal against allotted pit-passes, as per the notification dated. 30.06.2017. The Respondent No.7, i.e., Dy. Director (Mining & Admin), Mining Office, Raipur, in turn, allows the petitioner Company for mining operation on the basis of advance royalty payment. As per order dated 30-11-2018 passed by the Income Tax Department under Section 206C ( C) and (6) & (7) due to non collection of TCS on royalty payment. The Mining Department failed to deposit TCS amount without any reasonable cause, the Income Tax Department left with no other option to recovery the entire tax demand from their lease holders, therefore, notice under Section 226(3) was issued to the petitioners.
4. Learned counsel for respondents No.2 And 3/ Income Tax Department would submit that there are some dues which have to be recovered against the Mining Department of the State of Chhattisgarh, therefore, they have issued notice to the petitioners under Section 226 (3) of the Income Tax Act demanding amount as mentioned in the notice.
5. Learned counsel for the State would submit that the State has challenged the claim made by the Income Tax Department before this Court in a Tax Case No. 189 of 2025 (The Deputy Director (Geology and Mining) 1st Floor, Collectorate Parisar, Kutcheri Chowk, Raipur CG vs. The Deputy Commissioner of Income Tax (Tds) Raipur, CG and other connected matters) preferred by the Mining Department wherein the tax case has been allowed by the Hon’ble Division Bench of this Court on 26-2-2026.
6. 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.
7. With the aforesaid observation and direction, the bunch of these writ petitions are disposed of.
