Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE MR. JUSTICE SYAM KUMAR V.M.
FRIDAY, THE 24TH DAY OF MAY 2024/3RD JYAISHTA, 1946 W.A.NO.143 OF 2024 AGAINST THE JUDGMENT DATED 07.12.2023 IN W.P(C).NO.10596 OF 2023 OF HIGH COURT OF KERALA APPELLANT(S)/PETITIONER IN W.P.(C):
FINS ENGINEERS AND CONTRACTORS (P) LTD., AGED 50 YEARS N P TOWERS, 1ST FLOOR POOKUNNAM ROAD, WEST FORT, THRISSUR REPRESENTED BY MANAGING DIRECTOR P N SURESH, PIN - 680004 BY ADV.SRI.V.JAYANANDAKUMAR BY ADV.SRI.U.BALAGANGADHARAN RESPONDENT(S)/RESPONDENTS IN W.P.(C):
1 SUPERINTENDENT, CENTRAL TAX & CENTRAL EXCISE, AYYANTHOLE RANGE, C R BUILDING, S T NAGAR, THRISSUR, PIN – 680001 2 DEPUTY COMMISSIONER (ADJUDICATION), STATE GST DEPARTMENT, TAX TOWERS, POOTHOLE POST,THRISSUR, PIN – 680004 3 COMMISSIONER, STATE GST DEPARTMENT, TAX COMPLEX, KILLIPPALAM, THIRUVANANTHAPURAM, PIN – 695002 4 CHIEF COMMISSIONER, CENTRAL TAX & CENTRAL EXCISE, CENTRAL REVENUE BUILDING, I S PRESS ROAD, KOCHI, PIN – 682018 5 SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI, PIN – 110001
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6 STATE OF KERALA, REPRESENTED BY SECRETARY (TAXES), GOVT SECRETARIAT, THIRUVANANTHAPURAM, PIN – 695001 7 ASSISTANT COMMISSIONER (SOUGHT TO BE IMPLEADED), CENTRAL TAX & CENTRAL EXCISE, THRISSUR DIVISION, S T NAGAR, THRISSUR, PIN - 680001 BY SRI.P.R.SREEJITH, STANDING COUNSEL BY SRI.V.K.SHAMSUDHEEN, SR. GOVERNMENT PLEADER THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 24.05.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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J U D G M E N T D r . A.K. Jayasankaran Nambiar, J.
The appellant, who was the petitioner in W.P.(C).No.10596 of 2023 has preferred this appeal impugning the judgment dated 07.12.2023 of a learned Single Judge in the writ petition.
2. The brief facts necessary for disposal of this appeal are as follows:
The appellant is a registered Private Limited Company registered as such under the Kerala Goods and Service Tax Act, 2017. It is a provider of works contract services. During the period from July, 2017 to March, 2018, the appellant had un-adjusted TDS amounts in its account. In other words, during the said period, the appellant had, while paying output tax in respect of the services provided by it, failed to adjust the TDS amounts that were lying to its credit in its accounts. Instead of claiming a refund of the output tax paid, to the extent of un-adjusted TDS that was available in the accounts, it chose to treat the un-adjusted TDS as available input tax credit in its accounts and sought to transition the same to its GST account as unutilised input tax credit, through an application in Form TRAN-1. The total amount claimed for transition as
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unutilised input tax credit was Rs.59,05,352/-. The claim for transition of unutilised input tax credit was, however, rejected by the respondents by Ext.P6 order dated 27.02.2023.
3. In the meanwhile, however, by anticipating that the claim for the transition of the input tax credit would be allowed by the authorities concerned, the appellant had proceeded to utilise Rs.37,24,463/- of the aforementioned amount of Rs.59,05,352/- while effecting payment of output tax in the State. Noticing the utilisation of ineligible input tax credit to the extent of Rs.37,24,463/-, the respondents, by order dated 28.12.2023, raised a demand of state tax amounting to Rs.37,24,463/- towards wrongly utilised input tax credit. There was also a separate imposition of penalty and levy of interest on the appellant. It is relevant to note that, in the writ petition, only Ext.P6 order was impugned. The order dated 28.12.2023 having been passed after the judgment of the learned Single Judge in the writ petition, it was produced only along with the Writ Appeal as Annexure A1.
4. The learned Single Judge, who considered the challenge to Ext.P6 order, found that the appellant had erred in taking input tax credit of un-adjusted TDS, which was essentially the tax that was deducted by the awarder of the contract while honouring the bill raised on him by the appellant . The learned Single Judge relied
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on the statutory provisions under the CGST/SGST Act to hold that un-adjusted TDS amounts could not be treated as input tax credits for the purposes of the CGST/SGST Act. The writ petition was therefore dismissed, but liberty was granted to the appellant to apply for a refund of the TDS in accordance with law.
5. We have heard Sri.Jayanandakumar V., the learned counsel for the appellant, Sri.P.R.Sreejith, the learned Standing Counsel for respondents 1, 4, 5 and 7 and also Sri.V.K.
Shamsudheen, the learned senior Government Pleader for respondents 2, 3 and 6.
6. On a consideration of the rival submissions, we are of the view that, on the point of law, the learned Single Judge is correct in his finding that un-adjusted TDS, which is essentially a component of output tax payable by the appellant, cannot be transitioned as un-utilised input tax credit. We therefore cannot find fault with the learned Single Judge for having dismissed the writ petition of the appellant, in its challenge to Ext.P6 order. However, we find that, at this distance of time, when the appellant has already utilised an amount of Rs.37,24,463/- for paying the output tax due under the CGST/SGST Act, and technically it would be entitled to claim a refund of an amount of Rs.59,05,352/-, which represented un-adjusted TDS or output tax paid in excess by it, the ends of
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justice could be served by modifying Annexure A1 order and Ext.P6 order so as to take into account the subsequent events that have come about since the filing of the writ petition. Since the State Government is obliged to refund an amount of Rs.59,05,352/- which remained in the account of the appellant as un-adjusted TDS, Annexure A1 order, to the extent it directs a reversal of Rs.37,24,463/- which has already been utilised by the appellant by treating it as input tax credit that could be adjusted towards its output tax liability in the State, together with the interest thereon, need not be sustained. We are of the view that it would be a meaningless exercise to require the appellant to reverse the amount of Rs.37,24,463/- utilised as input tax credit and pay the said amount to the respondents, when the respondents are obliged to refund the said amount to the appellant towards un-adjusted TDS. However, the penalties of Rs.3,72,446/- and Rs.25,000/- imposed in Annexure A1 order can be sustained, taking note of the irregularity occasioned by the appellant. We thus modify Annexure A1 order and direct that only the penalties imposed on the appellant under the said order shall be recoverable by the respondents. The demand of tax and interest thereunder is set aside.
7. Further, the disallowance of the transition of TDS, to the extent of Rs.21,80,889/- alone [Rs.59,05,352 – Rs.37,24,463] in
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Ext.P6 order, is upheld and Ext.P6 order modified to that extent. It will be open to the appellant to seek a refund of the said amount of Rs.21,80,889/- by way of refund from the State Government towards un-adjusted TDS. Thus, solely with a view to confer finality to this litigation by taking note of the revenue neutral situation that would result from the aforesaid arrangement, we dispose the writ appeal as above, by modifying the directions in the judgment of the learned Single Judge, Ext.P6 order that was impugned in the writ petition and Annexure A1 order that was produced in the writ appeal, as above. We make it clear that the aforesaid arrangement has been made only in the peculiar facts and circumstances of this case since we felt that upholding the order of the learning Single Judge without any modification would unfairly prejudice the appellant while not prejudicing the Revenue in any manner. The directions issued in this judgment shall not be treated as a precedent for any future case.
The Writ Appeal is disposed as above.
Sd/- DR. A.K.JAYASANKARAN NAMBIAR JUDGE Sd/- SYAM KUMAR V.M.
JUDGE
prp/24/5/24
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APPENDIX OF W.A.NO.143/2024 PETITIONER ANNEXURES:
ANNEXURE A.1 A TRUE COPY OF THE ORDER DATED 28/12/2023 OF ASST COMMISSIONER, CENTRAL TAX AND CENTRAL EXCISE, THRISSUR.
RESPONDENTS ANNEXURES: NIL.
//TRUE COPY// P.S. TO JUDGE