GST Contractor Wins Right to Refund of TDS Deducted by PWD — Court Orders Quick Decision

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Case Name

Raju K. Thomas v. The State Tax Officer (WC) & Others

Case No.: W.P.(C) No. 32678 of 2019

Court Name: High Court of Kerala at Ernakulam

Decided on: 9th January, 2020

Key Takeaways

1. TDS under GST is refundable — When a deductor (like PWD) deducts TDS under Section 51 of the CGST Act, the deductee (contractor) is entitled to claim that amount as a refund if it’s not credited to their account.

2. Proper format matters — The petitioner’s initial refund application was rejected/ignored because it wasn’t in the prescribed format. He later filed it correctly under Section 51(8) read with Section 54 of the Central Goods and Services Tax Act, 2017.

3. Courts can direct tax authorities to act — Even without going into the merits, the High Court used its powers under Article 226 of the Constitution to direct the tax officer to decide the application promptly.

4. Time-bound disposal — The court set a three-week deadline for the tax authority to decide the refund application after giving the petitioner a fair hearing.

Issue

Was the petitioner (contractor) entitled to a refund of the GST-TDS amounts deducted by the PWD, and was the tax authority obligated to process his refund application?

In simpler terms: The contractor paid his GST from his own pocket even though TDS had already been deducted from his contract payments. He wanted that TDS money back, but the tax department wasn’t acting on his application. So he asked the court — “Can you make them process my refund?”

Facts

• Who is the petitioner? Raju K. Thomas, aged 63 years, a road contractor running Kalloth Road Builders, based in Thadiyoor, Thiruvalla, Pathanamthitta, Kerala. He is a registered GST assessee (Registration No. 32ABGPT4698C1ZH, issued on 17-07-2018).

• What work did he do? The 2nd respondent — the Executive Engineer, PWD Roads Division, Pathanamthitta — awarded him two separate road construction contracts.

• What was deducted? Against these contracts, the PWD deducted:
• Rs. 8,11,206/- (as evidenced by Exhibit P2)
• Rs. 2,98,848/- (as evidenced by Exhibit P2(a))
• These deductions were made under Section 51 of the CGST/SGST Act — which is the TDS provision under GST.
• What was the problem? Even though TDS was deducted, the credit for these amounts was NOT reflected in the petitioner’s GST account. So when he filed his GST returns for March 2019 (Exhibit P3) and August 2019 (Exhibit P3A), he had to pay the tax from his own pocket — essentially paying twice!

• What did he do next?
• He sent reminders but got no response.
• On 24-09-2019, he wrote to the 2nd respondent (PWD) — Exhibit P4.
• The PWD replied on 28-09-2019 — Exhibit P5.
• On 30-10-2019, he filed a formal refund application before the 1st respondent (State Tax Officer) and the 2nd respondent (PWD) — Exhibits P6 and P6A.
• The PWD issued another letter on 11-11-2019 — Exhibit P7.
• Despite all this, no refund was processed, which led him to file this Writ Petition.

Arguments

Petitioner’s Side (Raju K. Thomas):

• The petitioner’s counsel, Sri. Harisankar V. Menon, argued that:
• TDS was lawfully deducted by the PWD under Section 51 of the CGST Act.
• The credit for this TDS was never passed on to the petitioner’s GST account.
• As a result, the petitioner had to pay GST from his own funds while filing returns.
• He had initially applied for refund in a non-prescribed format, but later filed the correct application on 30-10-2019 in the prescribed form under Section 51(8) read with Section 54 of the Central Goods and Services Tax Act, 2017.
• The application was pending but no action was being taken.
• He sought a writ of mandamus directing the 1st respondent to refund the TDS amounts.

Respondents’ Side (GST Department & PWD):

• The respondents were represented by Smt. Thushara James, Government Pleader.
• The judgment does not record any specific counter-arguments from the respondents’ side, suggesting the matter was disposed of at the admission stage itself without detailed contestation.

Key Legal Precedents

The judgment in this case is relatively brief and was disposed of at the admission stage. The court did not cite any specific case law precedents in its order. However, the key statutory provisions referenced are:

Article 226 of the Constitution of India

Gives the High Court power to issue writs (like mandamus) to direct government authorities to perform their duties.

Section 51 of the Central Goods and Services Tax Act, 2017

Deals with Tax Deduction at Source (TDS) under GST. Government entities like PWD are required to deduct TDS when making payments to contractors.

Section 51(8) of the CGST Act, 2017

Specifically deals with the refund of TDS that has been deducted but not credited to the supplier’s account.

Section 54 of the Central Goods and Services Tax Act, 2017

Deals with the general refund mechanism under GST — the procedure for claiming refunds.

Judgment

Outcome: Disposed of in favour of the Petitioner (with directions)

• Justice Alexander Thomas did not go into the merits of whether the refund was actually due or not. That was left for the tax authority to decide.

• However, the court directed that:

“In case the petitioner has filed requisite application for grant of refund as above-stated before the 1st respondent and the same is pending consideration, then the said authority will take the said plea for consideration after affording a reasonable opportunity of being heard to the petitioner through his authorised representative or counsel, if any, will take a considered decision thereon in accordance with law, without much delay preferably within a period of three weeks from the date of production of the certified copy of the judgment.”

• The petitioner was directed to produce a certified copy of this judgment before the 1st respondent (State Tax Officer) for further action.

• The court made it clear that it has not expressed any opinion on the merits — the 1st respondent must take an independent decision in accordance with law.

FAQs

Q1: What is TDS under GST and why was it deducted here?

Under Section 51 of the CGST Act, certain government entities (like PWD) are required to deduct 2% TDS (1% CGST + 1% SGST) when making payments to contractors exceeding Rs. 2.5 lakhs. Here, PWD deducted TDS from the payments made to Raju K. Thomas for road construction work.

Q2: Why did the petitioner have to pay tax from his own pocket?

Normally, the TDS deducted by PWD should appear as a credit in the contractor’s GST account (GSTR-2A), which he can use to offset his tax liability. But in this case, that credit was not reflected, so when the petitioner filed his returns, he had no credit to use and had to pay from his own funds.

Q3: Did the court order the refund to be paid?

No, not directly. The court only directed the 1st respondent (State Tax Officer) to consider and decide the refund application within three weeks, after giving the petitioner a fair hearing. The actual decision on whether to grant the refund was left to the tax authority.

Q4: What is a Writ of Mandamus?

It’s a court order that directs a government authority or official to perform a duty that they are legally obligated to perform. Here, the petitioner asked for a mandamus to direct the tax officer to process his refund.

Q5: What happens if the tax authority still doesn’t act within three weeks?

The judgment doesn’t explicitly address this, but if the authority fails to comply with the court’s direction, the petitioner could approach the court again for contempt of court proceedings or file a fresh writ petition.

Q6: What is the significance of filing the application in the “prescribed format”?

Under GST law, refund applications must be filed in specific prescribed forms. The petitioner’s initial application was not in the correct format, which may have been one reason it wasn’t processed. He later filed it correctly under Section 51(8) read with Section 54 of the CGST Act, 2017 on 30-10-2019.

Q7: Is this a landmark judgment?

Not exactly — it’s a procedural/administrative direction by the court. However, it reinforces the principle that tax authorities cannot sit on pending refund applications and must process them in a time-bound manner, especially when TDS has been deducted and the taxpayer has paid tax from their own pocket.

The case projected in this Writ Petition (Civil) filed under Article

226 is as follows.

The petitioner is an assessee under the CGST/SGST Acts on the

rolls of the 1st respondent herein. The 2nd respondent has awarded two

separate works to the petitioner and as against the said contracts

Rs.8,11,206/- and Rs.2,98,848/- were deducted by the 2nd respondent

herein under Sec.51 of the Act as evidenced by Exts.P2 and P2 (a). But

the petitioner was not extended credit against the above, by the

respondents herein inspite of repeated reminders. Ultimately the

petitioner had to file the returns for the respective periods by satisfying

the tax due from out of his own resources. Therefore the petitioner has

submitted a request before the 1st respondent for refund of the tax

deducted at source. But no positive steps are being taken in the matter.

It is in the light of these averments and contentions, the petitioner

has filed instant Writ petition with the following prayers:

“(i) To direct the 1st respondent to refund the tax deducted at source

under Section51 of the CGST Act amounting to Rs.8,11,206/-

and Rs.2,98,848/- by the 2nd respondent herein, to the

petitioner forthwith by the issue of a writ of mandamus or such

other writ or order or direction.

(ii) To grant the petitioner such other incidental reliefs including

the costs of these proceedings.”

2. Heard Sri.Harisankar.V.Menon, the learned counsel appearing

for the petitioner and Smt.Thushara James, the learned Government

Pleader appearing for the respondents.

3. Sri.Harisankar.V.menon, the learned counsel appearing for the

petitioner would submit on the basis of instructions from the party that

earlier, the petitioner had made an application for grant of refund in

respect of the subject matter of his claims, which was not in the

prescribed format and later on advice, the petitioner has now already

submitted the requisite application in the prescribed form for claiming

the benefit of the refund of the amounts as provided under Sec.51 (8)

read with Sec.54 of the Central Goods and Services Tax Act, 2017 before

the 1st respondent on 30-10-2019 etc,. If that be so, it is ordered in the

interest of justice that in case the petitioner has filed requisite

application for grant of refund as abovestated before the 1st respondent

and the same is pending consideration, then the said authority will take

the said plea for consideration after affording a reasonable opportunity

of being heard to the petitioner through his authorised representative or

counsel, if any, will take a considered decision thereon in accordance

with law, without much delay preferable within a period of three weeks

from the date of production of the certified copy of the judgment.

4. The petitioner may produce the certified copy of this judgment

before the 1st respondent for the necessary information and further

action. It is made clear that this Court has not entered into the merits

of the controversy in any manner and it is for the 1st respondent to take

an independent decision in the matter and in accordance with law as

aforestated.

With these observation and directions the above Writ petition

(Civil) will stand disposed of.

Sd/-

ALEXANDER THOMAS,

JUDGE