TaxTMI 
TaxTMI 
2021 (5) TMI 462
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....hereby reducing the refund due to the petitioner to Rs. 34,65,92,300/-. 3. The petitioner had also filed its Service Tax return under the Finance Act,1994 with the Central Excise Department for the period October, 2013 to June, 2017. On the basis of the same, the Intelligence Wing of the Central Excise and Service Tax Department (DGCEI), now Director General of GST Intelligence (DGGI), Hyderabad (1st respondent) issued vide letter dt.22.03.2019, a Garnishee Notice under Section 73(1B) r/w Section 87(b)(i) of the Finance Act, 1994 to the Commissioner of Income Tax - C.P.C., Bengaluru for an amount of Rs. 29,71,12,901/- towards Service Tax and interest amount of Rs. 29,49,06,178/- totaling Rs. 59,20,19,079/-. This was communicated to the petitioner vide letter dt.07.05.2019 by the Dy. Commissioner of Income Tax (I/C), Central Circle - 2(2), Hyderabad. 4. In July, 2019, Parliament approved an Amnesty Scheme by name 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019' (for short, 'SVLDRS') under the Finance Act, 2019 and the Government notified the same on 21.08.2019. 5. Petitioner filed application under the Scheme on 30.10.2019 and petitioner's application for settlem....
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....them to consider petitioner's plea positively. 11. But the efforts of petitioner to have the Garnishee Notice dt.22.3.2019 issued by the 1st respondent to the Income Tax Department withdrawn or modified did not succeed and the petitioner was disabled from discharging its Service tax liabilities determined under Form No.SVLDRS-3 by 30.06.2020 from out of the refund amount due to it from the Income Tax Department. The prayer in the Writ petition 12. Petitioner therefore filed the Writ Petition in September, 2020 to : (a) direct the Principal Commissioner of Central Tax, Hyderabad Commissionerate (2nd respondent) not to declare the petitioner as defaulter under the SVLDRS scheme and not to disallow the benefits made available to it under the Scheme and grant reasonable time to it for making payment as per the scheme; (b) direct the DGGI (1st respondent) to modify the garnishee notice dt.22.03.2019 to Rs. 18,91,37,548/- based on Form No.SVLDRS-3 issued by 2nd respondent; and (c) restrain the respondent nos.1 and 2 from taking any coercive or punitive actions against petitioner-Company's officials and directors. Events after filing of the Writ Peti....
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.... and notice dt.5.11.2020 under Section 87 of the Finance Act 1994 modifying the Garnishee Notice by increasing the demand of Service Tax dues of the petitioner to Rs. 76,97,22,142/- and asking the Income Tax Department to makeover the refund due to the petitioner under the Income Tax Act,1961 for settlement of the said Service tax dues; and that the respondent nos.1 and 2 forced the Income Tax Department to give to them on 24.11.2020 an amount of Rs. 30,92,60,666/- out of Rs. 34,65,92,300/- which was payable to the petitioner towards Income tax refund . It is stated that the latter had thus adjusted the Income tax refund amount due to the petitioner towards the Service tax liability of the petitioner, and that this action of respondent nos.1 and 2 is patently illegal and untenable in law because the matter was sub judice, and respondent nos.1 and 2 had sought an adjournment in this Court. I.A.No.3 of 2020 18. Petitioner filed I.A.No.3 of 2020 for filing an Additional Affidavit and also additional material papers. I.A.No.4 of 2020 - the Application to amnd the prayer in the writ Petition 19. The petitioner also filed I.A.No.4 of 2020 seeking amendment of the prayer in th....
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....asimha Sarma, Senior Standing Counsel for respondents 1 & 2, and Sri J.V.Prasad, Standing Counsel for 3rd respondent. 28. There is no dispute that the petitioner's return of income for the assessment year 2018-19 was processed and an intimation dt.20.02.2020 was received by it under Section 143(1) of the Income Tax Act, 1961 stating that it is entitled to an Income Tax refund of Rs. 34,65,92,300/-, though the petitioner had claimed a refund of Rs. 38,32,59,500/-. 29. Petitioner itself admits that the Service Tax Dues and interest are owed by it under the provisions of the Finance Act, 1994 for the period October, 2013 to June, 2017 amounting to Rs. 59,20,19,079/-. 30. Initially, the DGGI (1st respondent) addressed a letter dt.22.03.2019 to the Principal Commissioner of Income Tax(Central), Hyderabad, informing that the petitioner is liable to pay to the GST Department the said amount of Rs. 59,02,23,755/-, and directing the Income Tax Department to credit to the GST Department the refund amount under the Income Tax Act, 1961, payable to the petitioner invoking Section 73(1B) read with Section 87 of the Finance Act, 1994 . This is the first Garnishee order. 31. The 3rd r....
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....d to make such payment in its e-mail dt.18.07.2020, the respondents 1 and 2 should have withdrawn or modified the Garnishee Notice dt.22.03.2019 by asking the Income Tax Department to withhold only Rs. 18,91,37,548/- as determined in the Form SVLDRS-3 instead of the whole amount of income tax refund of Rs. 34,65,92,300/- and that this action is not bonafide. It is also petitioner's contention that since the Garnishee Notice was issued on 22.03.2019 prior to the announcement of the SVLDRS, 2019 by the Government of India, even if it was validly issued at that time, once the Designated Committee under SVLDRS reduce the demand from Rs. 59,02,23,755/- to Rs. 18,91,37,548/-, the original Garnishee Notice dt.22.03.2019 can no longer be valid and it was the obligation of the respondents 1 and 2 to withdraw the said Garnishee Notice dt.22.03.2019 or modify it as mentioned above. There was no legal impediment to modify the Garnishee notice dt.22.3.2019 37. In para 3 of the counter affidavit initially filed in November, 2020, respondents 1 and 2 took a stand that there is no legal provision to withdraw any such Garnishee order dt.22.3.2019 issued till the amounts are recovered; and ....
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....hi High Court also held: " In the opinion of this Court, a liberal interpretation has to be given to the Scheme as its intent is to unload the baggage relating to legacy disputes under the Central Excise and Service Tax and to allow the businesses to make a fresh beginning." 42. We respectfully agree with the said view that the SVLDRS Scheme has to be given a liberal interpretation and not a narrow interpretation. 43. The stand taken by respondents 1 and 2 that the Garnishee Notice dt.22.03.2019 cannot be amended is contrary to the Circular No.996/3/2015-CX, dt.28.02.2015 issued by the Central Board of Excise and Customs. 44. The said Circular No.996/3/2015-CX, dt.28.02.2015 specifically clarified that Garnishee Notices issued under Section 87(1B) of the Finance Act, 1994 can be amended or withdrawn, when the assessee comes forward for payment of arrears after issuance of Garnishee Notice to the persons from whom money is due to the assessee and that under Section 21 of the General Clauses Act, 1897, the power to issue an order includes power to add, amend, vary or rescind the order, and that an interpretation that a Garnishee Notice cannot be amended or rescinded....
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....ned in the first Garnishee Order dt.22.03.2019 to Rs. 76,97,22,142/- in the second Garnishee Notice dt.05.11.2020. 51. The upward revision of the Service Tax dues from Rs. 59,20,19,079/- in the garnishee notice dt.22.03.2019 issued by 1^st respondent to Rs. 76,97,22,142/- mentioned in the second garnishee notice dt.05.11.2020, runs contrary to the very claim of the respondents 1 and 2 in their counter affidavit that they cannot amend or withdraw the first garnishee notice dt.22.03.2019 and is self-contradictory. 52. This second Garnishee Notice dt.05.11.2020 was admittedly issued after the Dy. Commissioner of Income Tax, Circle-3(1), Hyderabad, addressed a letter to the Additional Director General of GST Intelligence, Hyderabad Zonal Unit, Hyderabad, on 22.10.2020 offering to manually issue amount available with the said Office, if a "Garnishee Notice" is to be issued to it; and following it up by the Assistant Commissioner of Income Tax, Circle-3(1), Hyderabad, writing another letter on 03.11.2020 to the Principal Commissioner, Central Tax, Hyderabad Central Commissionerate(2nd respondent), asking the latter who issued a fresh Garnishee Notice. 53. This was done by the In....
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....ssee without the assessee being required to make any claim in that behalf. It held: "15. Section 240 of the Act provides for refund on appeal, etc. The section envisages that if an amount becomes due to the assessee by virtue of an order passed in appeal, reference, revision, rectification or amendment proceedings, the assessing officer is bound to refund the amount to the assessee without the assessee being required to make any claim in that behalf. The expression 'other proceedings under the Act' used in Section 240 of the Act, are wide enough to include any order passed in proceedings other than the appeals under the Act. 16. Section 244 of the Act provides for interest on refunds where no claim is made or required to be made by the assessee. The said section envisages that where a refund is due to the assessee in pursuance of an order passed under Section 240 of the Act, and the assessing officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee a simple interest of 15% per annum on the amount of refund due from the date immediately follow....
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....ishee notice was issued to it by the Service Tax department on 5.11.2020, the 3rd respondent paid on 24.11.2020 by Chq.No.309093 and 309094, a sum of Rs. 3,73,31,630/- towards TDS and Rs. 30,92,60,666/- to the Dy. Commissioner, Central Tax (GST), Hyderabad, i.e., Rs. 34,65,92,300/- which the petitioner was entitled to get as Income Tax refund, to the Service Tax department. 63. Thus the 3rd respondent has thus set off Rs. 30,92,60,666/- out of the income tax refund of Rs. 34,65,92,300/- due to the petitioner against the Service Tax dues of the petitioner. The action of the 3rd respondent in transferring Rs. 30,92,60,666/- payable to the petitioner to the Respondent no.s 1 and 2 for set off against the service Tax dues violates Sec.245 of the Income Tax Act,1961 64. We shall now consider whether this act of the Income Tax department is valid as per law. 65. Such power to Set Off is conferred on the Income Tax authorities by Section 245 of the Income Tax Act, 1961. It states: "245. Set off of refunds against tax remaining payable.- Where under any of the provisions of this Act a refund is found to be due to any person, the Assessing Officer, Deputy Commi....
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....Department can never be an 'assessee' as defined under Section 65(7) of the Finance Act, 1994 because it is not liable to pay service tax as it is the department of the Government of India mentioned in Clause (a) of Section 66-D of the Finance Act, 1994 ( which gives the negative list of services exempted from service tax). (c) Once the 3rd respondent is not an 'assessee' under the Finance Act, 1994, it can never be an 'assessee in default' under Clause (iii) of Sub-Section (b) of Section 87 of the Finance Act, 1994. 71. Therefore, we hold that the payment made on 24.11.2020 by the 3rd respondent of Rs. 30,92,60,666/- to the respondents 1 and 2 towards Service Tax dues of the petitioner is contrary to Section 245 of the Income Tax Act, 1961. The Letter dt.4.4.2018 given by petitioner does not operate as estoppel against petitioner 72. The Respondents 1 and 2 have taken a stand that petitioner itself through it's Managing Director had given Letter dt.4.4.2018 and an affidavit to the Commissioner of Income Tax, CPC, Bangalore that the later can pay to the Central Excise Department the Service Tax to be determined out of the refund issued for Asst. Year 2018-19 and s....
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....Income Tax Act, 1961. 78. As held in K.Lakshmanya & Co. v. CIT (2018) 11 SCC 620, the statutory obligation of the Income Tax department to refund excess tax is nondiscretionary and carries with it the right to interest and the latter is 'parasitical' i.e., the assessee has a substantive right to get interest on the income tax refund if it is delayed by the Income Tax Department. In the said decision, the Supreme Court followed it's decision in Tata Chemicals Ltd ( 5 supra). 79. There is no explanation forthcoming in the counter affidavit of the 3rd respondent or from the counsel for the 3rd respondent, why the Income Tax department had not paid till date any interest statutorily due and payable to the petitioner on account of the intimation dt.20.2.2020 issued to it under Section 143 (1) of the Act. 80. This inaction on the part of the Income Tax Department in not paying to the petitioner interest @ 15% p.a on the refund from 20.5.2020 ( the date of expiry of the 3 month period as per Section 243 (1) (b) of the Income Tax Act,1961) which it is entitled to get on account of the delay in making payment of refund, is arbitrary, illegal and violates Art.14, 300A of the Cons....
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....a decision of this Court in Mrutunjay Pani v. Narmada Bala Sasmal AIR 1961 SC 1353 wherein it was held by this Court that where an obligation is cast on a party and he commits a breach of such obligation, he cannot be permitted to take advantage of such situation. This is based on the Latin maxim commodum ex injuria sua nemo habere debet (no party can take undue advantage of his own wrong). 15. In Union of India v. Major General Madan Lal Yadav (1996) 4 SCC 127 the accused army personnel himself was responsible for delay as he escaped from detention. Then he raised an objection against initiation of proceedings on the ground that such proceedings ought to have been initiated within six months under the Army Act, 1950. Referring to the above maxim, this Court held that the accused could not take undue advantage of his own wrong. Considering the relevant provisions of the Act, the Court held that presence of the accused was an essential condition for the commencement of trial and when the accused did not make himself available, he could not be allowed to raise a contention that proceedings were time-barred. This Court (at SCC p. 142, para 28) referred to Broom's Legal Maxims....
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....d Committee by issuing Form SVLDRS-3 dt.28.01.2020 reducing the Service Tax dues to Rs. 18,91,37,548/-, and (d) either modify or withdraw the Garnishee Notice dt.22.03.2019. This would have enabled the petitioner to settle the dues before 30.6.2020 and get the benefit under the SVLDRS scheme. (iii) without any valid reason, this was scuttled by respondents 1 and 2 for reasons which do not appear to us to be bonafide and that the said inaction of respondents 1 and 2 is arbitrary and unreasonable and violative of Article 14 and 300A of the Constitution of India. (iv) The action of the Income Tax Department in soliciting from the Service Tax Department, a fresh Garnishee Notice in order to see that the petitioner does not get the income tax refund, (which was payable as per the intimation issued to the petitioner under Section 143(1) of the Act on 20.02.2020, and by continuing to retain the income tax refund amounts till November, 2020 without any valid reason), is not bonafide and indicates a prejudice against the petitioner. (v) the payment made on 24.11.2020 by the 3rd respondent of Rs. 30,92,60,666/- to the respondents 1 and 2 towards Service Tax dues of....