Electrosteel Steels Limited V. Principal Commissioner of Income Tax, Ranchi and Central Coalfields Ltd.

WPC/7643/2017

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Electrosteel Steels Limited, a company engaged in manufacturing activities such as Pig Iron, Billets, and TMT Bars, filed a writ petition against Central Coalfields Limited and the Principal Commissioner of Income Tax, Ranchi. The dispute centered on the imposition of a 1% Tax Collection at Source (TCS) on coal purchases, which the petitioner argued was unjustified as they met the conditions for exemption under Section 206C(1A) of the Income Tax Act, 1961. The court referenced its earlier decision in W.P.(C) No. 46 of 2018, which had set a precedent for similar cases, and ruled in favor of the petitioner, quashing the TCS demand.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 797832 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 20-02-2019
• Assessment Year: misc
• Other Referred Cases: W.P.(C) No. 46 of 2018
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ANOOP MEHTA; AMRITA SINHA; HAIDAR ZOYA
• Assessee Lawyers: BIREN PODDAR; DEEPAK SINHA
• Keywords: Captive Power Plant; Coal; Manufacturing Activities; Pig Iron; Self-consumption; Tax Collection at Source; TCS; TMT Bars; Bulk purchaser; Billets
• Section: 206C; 37C; 206C(1A)

Judgement Text

"-1- IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 7643 of 2017 ---- Electrosteel Steels Limited, a Company registered under the Companies Act, 1956, having its registered office at 801, Uma Shanti Apartments, Kanke Road, Ranchi, P.O. Kanke, P.S. Gonda, District Ranchi and its principal place of business at Vill-Siyaljori, P.O. Jogidih, Opp-Bangaria, P.S. Chandankiary, Bokaro, through its General Manager (F & A), Mr. Anuj Jaiswal, s/o Late Shri Rajeshwar Prasad Jaiswal, resident of Mahaveer Vatika, Flat no. 502, Dharamshala More, Main Road, Chas, Tara Nagar, Bokaro-827013, P.O. and P.S. Chas, District Bokaro … … Petitioner Versus 1. Principal Commissioner of Income Tax, Ranchi having its office at Central Revenue Building, Main Road, P.O. Ranchi 834001, P.S. Hindpiri, District Ranchi in the state of Jharkhand 2. Central Coalfields Ltd., Darbhanga House, Office of GM Finance-A, Opp. Governor House, P.O. Ranchi University, P.S. Kotwali, District Ranchi, in the state of Jharkhand … … Respondents ---- CORAM : HON’BLE THE CHIEF JUSTICE HON’BLE MR. JUSTICE SANJAY KUMAR DWIVEDI ---- For the Petitioner : Mr. Biren Poddar, Sr. Advocate Mr. Deepak Sinha, Advocate For the Respondent CCL : Mr. Anoop Kumar Mehta, Advocate For the Respondent IT : Ms. Amrita Sinha & Haidar Zoya, Advocates ---- Order No. 12 : Dated 20th February, 2019 Aniruddha Bose, C.J. The writ petitioner is bulk purchaser of coal from Central Coalfields Limited. Contention of the writ petitioner is that such coal is used for self consumption, to operate its own captive power plant in respect of their manufacturing activities of Pig Iron, Billets, TMT Bars etc. The controversy involved in this writ petition is over Tax Collection at Source (TCS) in terms of the provisions of Section 206C of the Income Tax Act, 1961. Under the aforesaid provision, the bulk seller of certain specified items which include coal, is required to realize 1% additional sum over and above the purchase price as income tax from the buyer itself, which is subsequently credited to buyer’s income tax payment. 2. Under Sub-section (1A) of Section 206C of the Act however certain -2- exceptions have been provided to such blanket collection and the conditions under which a buyer can remain out of such TCS regime has been specified in the aforesaid Sub-section read with Rule 37C of the Income Tax Rules, 1962. 3. In this writ petition, complaint of the writ petitioner is that in spite of fulfilling the conditions specified in Sub-section (1A) of Section 206C of the 1961 Act, the Central Coalfields Limited is demanding the 1% TCS. Though there are various prayers made in this writ petition, learned counsel for the writ petitioner has primarily sought quashing of a letter written by the coal company to its General Manager dated 29th November, 2017 in which the petitioner has been asked to deposit TCS. The said letter reads :- “Please refer your letter dated 15th Nov. 2017. Earlier CCL was issuing coal to consumer by not charging TCS @ 1% TCS but after collecting Form 27C where it was certified by the consumer itself that it was the actual consumer of the Coal. CCL was charging TCS only from traders and it (TCS) was being deposited into Income Tax Department. During the month of October’2017, CCL received a series of letters from Income Tax Department on this issue and in reply, CCL justified the reason of not charging TCS from consumers under section 206C of the Income Tax Act’ 1961. But ultimately CCL received a letter, no. F.No. PCIT/Ran/Tech/TCS-Misc/2017-18/1813 dated 31.10.2017, from Pr. C.I.T. Ranchi, Income Tax Department, mentioning following :- Quote “You are therefore advised, as a matter of abundant precaution, to either satisfy yourself that form 27C filed by the assessee is correct in letter and in spirit. Or, if you are not so satisfied, it is incumbent upon you to collect TCS at the rates prescribed u/s 206C of the I.T. Act, 1961” Unquote -3- Since, Form 27C is a declaration from the customer and it is not possible for CCL to get satisfied from it, as required by Income Tax department, CCL has advised to all customers to deposit TCS @ 1% of coal value.” 4. The petitioner has also questioned the legality of another circular letter issued by the coal company on 2nd November, 2017 bearing No.CCL/M&S/CSC/2017-18/TCS/13227-34. 5. This Court had the occasion to deal with this very question, which was raised by several other bulk purchasers of coal whose complaint was against such blanket collection of TCS. That issue was dealt with by this Court in W.P.(C) No. 46 of 2018, which was disposed of with the following directions:- “19. We accordingly hold, while disposing of these writ petitions:- (a) The two notices issued by the C.C.L. bearing no.CCL/M&S/CSC/2017-18/TCS/13227-34 dated 2nd November, 2017 and CCL/M&S/CSC/2017-18/15377-80 dated 14th December, 2017 would not ipso facto be applicable to all the writ petitioners in the event they comply with the provisions of Sub-section (1A) of Section 206 C of the Income Tax Act, 1961 read with Rule 37C thereof by furnishing the declaration in Form 27C. In such a situation, the buyers shall be entitled to the benefits contemplated in the provision of Section 206C (1A) of the Act. (b) In the event such forms are not furnished as per the statutory requirement, it shall be open to C.C.L. to insist on TCS as per the statutory provisions. (c) If C.C.L. has any doubt that the coal is not being used for self-consumption by any of the buyers claiming relaxation in terms of Section 206C (1A) of the Act, it would be open to C.C.L. to take up the matter with individual buyers and insist on TCS if circumstances justify such insistence. But to deny the benefits contemplated in Section 206C(1A) of the Act, so far as -4- the individual writ petitioners are concerned, it would have to be examined first if as buyers or any of them have furnished declarations or verifications under Form 27C or not. If declarations are filed and there is no material to conclude that such declaration is false, then the provisions of Section 206C (1A) would be applicable. On the other hand, if C.C.L. finds that any misdeclaration is made by any individual buyer, then it shall be open to them to take such steps as may be permissible in law. (d) So far as the sum collected in pursuance of the two notices issued by the Central Coalfields Limited as TCS is concerned, in the event it is found that in individual cases the buyers were not required to deposit such sum it shall be adjusted by the Income Tax authorities against future payment of income tax by such buyers. If tax has been deposited under the TCS scheme by a coal buyer who otherwise does not fulfil the requirement of waiver or relaxation from the TCS scheme, then the amount so deposited shall be dealt with as payment of income tax in accordance with law. In those cases, the coal company shall issue TCS certificate in terms of the provisions of Income Tax Act. Such certificates shall be issued on application made by the individual buyers within a period of eight weeks from the date of making of the application. (e) If there is finding to the effect that there has been misdeclaration by any of the writ petitioners, then it shall be open to the Income Tax authorities as also C.C.L. to take steps against them as may be permissible under the law. It shall be open to Income Tax authorities as also C.C.L. to make enquiries in respect of individual writ petitioners to ascertain if there has been any wrong or misdeclartion on their part.” By the same judgment, several other writ petitions were also disposed of on 3rd December, 2018. 6. As would be evident from the directions issued by this Court in the judgment delivered in W.P.(C) No. 46 of 2018, specific observations have been made in relation to the circular letter of the coal company dated 2nd November, 2017. The letter of the coal company dated 29th November, 2017 -5- is in the nature of a follow up action and hence would stand covered by the judgment of this Court delivered on 3rd December, 2018. No other argument has been raised on behalf of either Income Tax authorities or the coal company which could persuade us to take a contrary view. We accordingly dispose of this writ petition with the same directions as contained in the aforesaid judgment of 3rd December, 2018 and quoted earlier in this judgment. The letter of 29th November, 2017 also shall stand quashed but the course mandated in our judgment of 3rd December, 2018 in relation to the collection of TCS from bulk purchasers of coal shall prevail in the case of the writ petitioner also. To this extent, the Rule is made absolute. 7. There shall be no order as to costs. (Aniruddha Bose, C.J.) (Sanjay Kumar Dwivedi, J.) Birendra/ "