Facts of the Case

The petitioner was the successful bidder for the weekly market at Nilakottai Selection Grade Town Panchayat, Dindigul District, for the period 15.07.2019 to 14.07.2020, and remitted a total of Rs.54,43,340/- comprising the lease amount of Rs.46,13,000/- and 18% GST of Rs.8,30,340/-. Due to the COVID-19 lockdown, the market remained closed for 17 weeks, from 22.03.2020 to 14.07.2020, during which the petitioner could not collect any entry fee. The petitioner sought a proportionate refund for this closure period along with interest. The fifth respondent, by an order dated 18.10.2021, allowed a refund for only two months in terms of G.O.(D) No.298, Municipal Administration and Water Supply (MA.IV) Department, dated 02.09.2020, and paid Rs.7,68,832/- on 12.05.2021, denying refund for the remaining period. During the pendency of this writ petition, the fifth respondent, applying a subsequent G.O.(D) No.337 dated 16.06.2023, refunded a further Rs.5,58,023/- on 08.09.2023. The petitioner's continuing grievance was that the entire 18% GST component collected from him for the 17-week closure period had not been passed on or deposited by the fifth respondent, and was being retained without authority.

Issues Involved

  1. Whether the fifth respondent was entitled to retain the proportionate GST amount collected from the petitioner for the 17-week period the weekly market remained non-operational.
  2. Whether the petitioner was entitled to a direction for refund (or deposit) of this GST amount so as to enable him to claim credit for it.

Petitioner's Arguments

  • The petitioner had remitted the entire 18% GST amount to the fifth respondent, but this amount was neither deposited with the concerned tax authority nor refunded, and was being retained by the fifth respondent.
  • The petitioner was entitled to the proportionate GST amount for the 17 weeks of closure, computed at Rs.4,52,698/-, and sought a direction for its refund.

Respondent's Arguments

  • The learned Special Government Pleader for respondents 1 to 4 submitted that there was no scope for refund of the GST amount paid by the petitioner, and that the lease amount refund due to him had already been paid to the extent he was entitled.

Court Order/Findings

  • The Court held that the GST paid by the petitioner could not be retained by the fifth respondent, since the amount did not belong to it and the fifth respondent was duty-bound to pay or deposit it with the concerned authority.
  • If the GST amount had not been deposited by the fifth respondent, it was directed to refund the sum of Rs.4,52,698/- (the GST corresponding to the 17-week closure period) to the petitioner so that he could take credit for the payment.
  • In the alternative, if the amount had already been deposited, the fifth respondent was directed to complete the necessary process (through the fourth respondent) within four weeks.
  • The writ petition was disposed of with these directions, with no order as to costs, and connected miscellaneous petitions were closed.

Important Clarification

  • A public authority that collects GST from a person as part of a lease or contract consideration cannot retain that amount once the underlying service period fails to materialise (here, due to a lockdown); it must either deposit the GST with the appropriate authority or refund it to the payer.
  • Where the amount is refunded rather than deposited, the payer is left free to independently account for and claim credit for the corresponding GST component.

Sections Involved

  • Article 226, Constitution of India — invoked by the petitioner to seek a writ of certiorarified mandamus against the impugned proceedings of the fifth respondent.
  • Goods and Services Tax (GST) at 18% — the tax component collected on the weekly market lease consideration, whose retention/refund was in dispute.

Decision – In Favour of

In favour of the Petitioner (Assessee). The Court directed the fifth respondent to either refund the proportionate GST amount to the petitioner or deposit it with the concerned authority within four weeks.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: W.P.(MD) No.20809 of 2021
  • Coram: Justice N. Anand Venkatesh
  • Decision Date: 29.11.2023
  • Disposal Nature: Disposed of with directions

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