Tax concession disputes are not subject to arbitration: Supreme Court

[CA Bimal Jain]

The Hon’ble Supreme Court in the matter of M/S SHREE ENTERPRISE COAL SALES PVT LTD VERSUS UNION OF INDIA & ANR - 2022 (10) TMI 188 - SC ORDER 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 (M/S SHREE ENTERPRISES COAL SALES PVT. LTD. BULANDSHAHAR VERSUS UNION OF INDIA AND ANOTHER - 2018 (3) TMI 1978 - ALLAHABAD HIGH COURT) 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 M/S SHREE ENTERPRISE COAL SALES PVT LTD VERSUS UNION OF INDIA & ANR - 2022 (10) TMI 188 - SC ORDER, 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.

(Author can be reached at info@a2ztaxcorp.com)