After Mining Department’s TCS Demand Was Quashed, Chhattisgarh HC Orders Return Of Amounts Recovered From Cement Firms On Application

The petitioners, cement manufacturers holding mining leases for limestone, paid royalty in advance to the State Mining Department.

After the Income Tax Department raised a demand against the Mining Department for failure to collect and deposit tax, it issued notices under Section 226(3) of the Income Tax Act to the petitioners and recovered amounts from them.

The petitioners challenged the State’s rejection of their request for refund or adjustment of the recovered amounts.

The State submitted that the demand against the Mining Department had since been quashed by the High Court’s Division Bench in Tax Case No. 189 of 2025 and connected matters.

The petitions were brought under Article 226 of the Constitution to challenge the rejection of the petitioners’ refund or adjustment request.

The recovery notices had been issued under Section 226(3) of the Income Tax Act, following a demand concerning non-collection of tax under Section 206C(6) and (7).

The Court’s dispositive basis was the Division Bench’s decision in Tax Case No. 189 of 2025 and connected matters, which quashed the demand against the Mining Department; the Court did not set out a separate interpretation of those statutory provisions.

The Income Tax Department had recovered amounts from the petitioners in connection with tax dues attributed to the Mining Department.

Once the Division Bench quashed the underlying demand against the Mining Department, the Court held that any amounts already recovered from the petitioners should be returned.

It left the petitioners to seek repayment by submitting individual applications.

The writ petitions were disposed of in those terms.