M/S.Premier Garments Processing vs. The Commissioner Of Central Excise And Service Tax

Facts

The petitioner, M/s. Premier Garments Processing, entered into a contract agreement with the Southern Railway (second respondent) on July 24, 2020. The petitioner was awarded a tender and was executing work for which bills amounting to Rs. 5.6 Crores were due for the period April 2022 to April 2023. However, the second respondent withheld these payments based on a communication from the Commissioner of Central Excise and Service Tax (first respondent) alleging that the petitioner had outstanding GST dues of Rs. 1,97,50,308/-. The petitioner stated that the dispute regarding these alleged GST dues was pending before the Supreme Court. The petitioner sought a writ of mandamus directing the first respondent to issue a No Claim Certificate and enabling the second respondent to release the payments after deducting the disputed amount.

Held

The Court allowed the writ petition. It directed the second respondent, Southern Railway, to pay the balance amount to the petitioner after retaining the disputed sum of Rs. 1,97,50,308/-. The Court reasoned that the Railways should not withhold the entire contractual payment when the dispute with the GST authority pertains to a specific, lesser amount. The principle established is that contractual payments should not be entirely withheld due to a disputed tax liability if a portion of the payment can be released after setting aside the disputed sum. The exercise of releasing the balance payment was to be completed within six weeks from the date of receipt of the order. No issue was expressly left undecided.

Key Issues

1. Whether the second respondent (Southern Railway) is justified in withholding the entire payment of Rs. 5.6 Crores due to the petitioner, when the disputed GST amount is Rs. 1,97,50,308/-? Petitioner's Arguments: The petitioner argued that even if they are liable for the disputed GST amount of Rs. 1,97,50,308/-, the Railways should not retain the entire Rs. 5.6 Crores. They contended that the Railways are bound to release the balance amount after deducting the specific disputed sum. Revenue/State's Arguments: The judgment does not record any specific arguments made by the first respondent (Commissioner of Central Excise and Service Tax) or the second respondent (Southern Railway) regarding their stance on withholding the entire payment. The court's decision appears to be based on the petitioner's contention and the procedural context.