Sew Infrastructure Limited vs. Director General Of GST Intelligence (Dggi)

Held

The Court held that it would be a "travesty of justice" to allow the respondents' plan to label the petitioner as a defaulter under the SVLDRS scheme. The Court found the actions of the respondents to be arbitrary and lacking bonafides. Regarding the first issue, the Court allowed the writ petition, deeming the petitioner to have made the SVLDRS payment of Rs. 18,91,37,548/- before the June 30, 2020 deadline. The respondents were restrained from declaring the petitioner a defaulter or taking coercive action. Concerning the second issue, the Court directed the release of Rs. 12,01,23,118/- (the excess amount appropriated) to the petitioner. The Court also addressed the third issue by directing the Income Tax Department to pay interest at 15% per annum on the total refund amount of Rs. 30,92,60,666/- from May 21, 2020, to November 24, 2020, and further interest at 12% per annum on Rs. 12,01,23,118/- from November 25, 2020, until payment. Costs of Rs. 10,000/- were also awarded.

Facts

The petitioner, an infrastructure development company, had outstanding service tax liabilities. They applied for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), and a Designated Committee determined their liability at Rs. 18,91,37,548/-. The payment deadline was June 30, 2020. The petitioner intended to use an income tax refund of Rs. 34,65,92,300/- to discharge this liability. However, a garnishee notice dated March 22, 2019, issued by the GST authorities to the Income Tax Department, prevented the release of the refund. The petitioner made several representations to modify or withdraw the garnishee notice, but these were unsuccessful. The Income Tax Department eventually appropriated Rs. 30,92,60,666/- from the refund towards service tax dues on November 24, 2020, after the SVLDRS payment deadline had passed.

Key Issues

1. Whether the actions of the respondents in not modifying or withdrawing the garnishee notice dated March 22, 2019, thereby preventing the petitioner from utilizing its income tax refund to meet the SVLDRS payment deadline of June 30, 2020, were arbitrary and violative of Articles 14 and 300A of the Constitution of India? (Petitioner's contention: Yes, the inaction was arbitrary and unreasonable, preventing them from availing the benefits of the SVLDRS scheme. Revenue's contention: Not recorded.) 2. Whether the appropriation of the income tax refund by the Income Tax Department towards service tax dues on November 24, 2020, was contrary to Section 245 of the Income Tax Act, 1961, and if the department could have facilitated the SVLDRS payment before the deadline? (Petitioner's contention: Yes, Section 245 permits set-off only against income tax dues, and the department could have transferred the required amount before June 30, 2020. Revenue's contention: Not recorded.) 3. Whether the Income Tax Department's failure to pay interest on the delayed refund from May 21, 2020, was arbitrary and illegal under Article 14 and Section 243(1)(b) of the Income Tax Act, 1961? (Petitioner's contention: Yes, the delay in refund and non-payment of interest is illegal. Revenue's contention: Not recorded.)