Revenue illegally forced TCS collection despite Form 27C; full refund with interest ordered under relevant tax rules

The HC held that the Revenue acted illegally in compelling TCS collection despite the Petitioner submitting Form 27C confirming use of coal for power generation. The ITAT quashed the default assessment against CCL for non-collection of TCS. Instead of direct refund, the Court initially directed issuance of TCS certificates for FY 2012-13 to 2017-18, which were later issued but deemed unusable by the Petitioner due to delay. Addressing unresolved issues, the Court accepted the Revenue's proposed Option No. 2, directing Respondents 3 to 5 to refund the entire TCS amount collected from the Petitioner along with interest to Respondents 1 and 2 (CCL), who must then promptly refund the Petitioner. The refund is to be completed within a specified timeframe.

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Issues Involved:
1. Refund of Rs. 7,86,33,649 collected as TCS.
2. Payment of interest at 18% per annum on the amount collected.
3. Directions to deposit the amount along with statutory interest in the Petitioner's PAN.
4. Declaration of actions by Respondents as illegal, arbitrary, and violative of Articles 14 and 265.

Summary:

Issue 1: Refund of Rs. 7,86,33,649 Collected as TCS
The Petitioner sought a refund of Rs. 7,86,33,649 collected as Tax Collected at Source (TCS) by Respondents No. 1 and 2 for the period FY 2012-2013 to the First Quarter of FY 2017-2018. The Court noted that the relevant details required to be submitted to the Income Tax Department in Form 27 EQ were not submitted, nor was the TCS certificate issued. The Court directed the Joint Commissioner of Income Tax and the Deputy Commissioner Income Tax to appear and provide a tangible solution. Subsequently, TCS certificates were issued to the Petitioner, but the Petitioner was unable to utilize them due to the lapse in time.

Issue 2: Payment of Interest at 18% Per Annum
The Petitioner contended that interest must follow the refund of TCS collected illegally. The Court acknowledged that the Petitioner was entitled to statutory interest under Section 244A of the Income Tax Act. The Petitioner claimed that the interest component of Rs. 1,60,75,329.93 should also be restituted.

Issue 3: Directions to Deposit the Amount with Statutory Interest
Respondents No. 3 to 5 (Revenue) proposed two solutions:
1. The Petitioner approaches its jurisdictional Assessing Officer to get the refund of the principal amount and statutory interest.
2. The entire amount of Rs. 106.56 Cr be refunded by the Income Tax Department to Respondents No. 1 and 2 (CCL), who would then issue refunds to the Petitioner and others.

The Petitioner preferred the second option, and the Court directed that the entire sums of money collected as TCS, along with interest, be refunded by Respondents No. 3 to 5 (Revenue) to Respondents No. 1 and 2 (CCL), who should then refund the same to the Petitioner within a specified timeline.

Issue 4: Declaration of Actions as Illegal and Arbitrary
The Court recognized that the root cause of the dispute was the illegal collection of TCS by Respondents No. 1 and 2 (CCL) despite the Petitioner submitting Form 27C. The Court deemed the issuance of TCS certificates as an alternative effective relief but noted that the Petitioner could not utilize them due to the time lapse. The Court concluded that the actions of the Respondents were indeed illegal and arbitrary.

Conclusion:
The Court directed the refund of Rs. 7,86,33,649 along with interest to the Petitioner in a time-bound manner. The Petitioner was advised to move the competent Civil Court for any other interest claims. The writ application was disposed of accordingly.

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