Tax concession disputes are not subject to arbitration: Supreme Court


Quick Summary
The Supreme Court has ruled that disputes concerning tax concessions are not subject to arbitration. The court overturned a High Court decision that had dismissed a company's petition regarding tax benefits. The case has been sent back to the High Court for a decision on its merits, with instructions for prompt resolution.

Court :
Supreme Court of India

Brief :
The Hon'ble Supreme Court in the matter of M/s Shree Enterprise Coal Sales Pvt Ltd v. Union of India & Anr [Civil Appeal No 6539 of 2022 dated September 12, 2022] overruled the Allahabad High Court judgment and ordered to remand the proceedings back to the High Court for consideration on merits. The Hon'ble Supreme Court also observed that the High Court was in error while dismissing the writ petition filed by the assessee.

Citation :
Civil Appeal No 6539 of 2022 dated September 12, 2022

The Hon'ble Supreme Court in the matter of M/s Shree Enterprise Coal Sales Pvt Ltd v. Union of India & Anr [Civil Appeal No 6539 of 2022 dated September 12, 2022] overruled the Allahabad High Court judgment and ordered to remand the proceedings back to the High Court for consideration on merits. The Hon'ble Supreme Court also observed that the High Court was in error while dismissing the writ petition filed by the assessee.

Facts

M/s Shree Enterprise Coal Sales Pvt Ltd ("the Appellant") is a private limited company with a Head Office in Kolkata which is involved in the trading of coal which it obtains from e-auctions conducted by the subsidiaries of Coal India Limited ("the Respondent"). Further, the Appellant purchased coal from the Respondent for which the appellant took certain consignments through the railways of which the destination was Madhya Pradesh.

The Appellant filed a writ petition (Writ Tax No. 850 of 2016) in the Allahabad High court stating that the Respondent did not issue Form E-1 and did not grant the benefit of Form C while charging tax at the rate of four percent. 

Thereafter, the High Court dismissed the petition stating that the terms of e-auction provided that any dispute is arbitrable and the Appellant is virtually seeking the enforcement of a contract through a writ petition for raising a claim for refund.

Being aggrieved by this judgment of the High Court dated March 15, 2018 ("the Impugned order"), the Appellant filed this petition before the Hon'ble Supreme Court of India.

Issue

Whether or not the dispute related to tax concessions is arbitrable?

Held

The Hon'ble Supreme Court in Civil Appeal No 6539 of 2022 dated September 12, 2022, held as under:

  • Observed that the Appellant is not asserting a contractual claim in pursuance of the e-auction and a contractual dispute would be amenable to be resolved by arbitration. However, the Hon'ble Supreme Court in the present case stated that the Impugned order of the High Court was incorrect. Therefore, the Court set aside the impugned judgment and remanded the proceedings back to the High Court for consideration on merits.
  • Stated that the High Court must expeditiously dispose of the matter preferably within a period of four months from the date of receipt of a certified copy of this order. And also ordered the Respondents to file their reply within four weeks.

FAQ :

The main issue was whether a dispute related to tax concessions, arising from an e-auction of coal, was arbitrable.

The Supreme Court decided that disputes related to tax concessions are not arbitrable, distinguishing them from general contractual disputes.

The High Court had dismissed the appellant's petition, stating that the terms of the e-auction made any dispute arbitrable and that the appellant was seeking contract enforcement through a writ petition.

The Supreme Court overruled the High Court's judgment, set aside the impugned order, and remanded the proceedings back to the High Court for consideration on merits.

The High Court is to expeditiously dispose of the matter, preferably within four months, after the respondents file their reply within four weeks.

 



Judgement posted by

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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