The Supreme Court on Friday stayed the interim orders passed by the Kerala and Allahabad High Courts to defer Central and State tax recovery proceedings, including the GST, till April 6 on account of the COVID-19 outbreak.
A Bench led by Justice A.M. Khanwilkar ordered a freeze on the implementation of the High Courts’ orders on an urgent mentioning made by Solicitor General Tushar Mehta for the Centre.
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Mr. Mehta said the “broad and omnibus” directions arbitrarily passed by the High Courts would have a “catastrophic” strain on national finances, and in fact, on the nation's ongoing battle against the pandemic and its monthly commitments like payment of salaries.
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“The government is conscious of the prevailing situation and will take suitable measures to alleviate any hardship... The government is fully committed to using all its resources at its command to deal with the situation arising out of the coronavirus pandemic and it is taking pro-active precautions and measures... It has also been praised by the World Health Organisation for its response,” Mr. Mehta told the court during the mentioning.
The orders were passed by High Courts on March 19. The courts also extended limitations to conclude tax assessments, etc.
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A special leave petition filed by the Centre through advocate Zoheb Hossain said the postponement of payment of taxes would result in a “severe cash flow and liquidity crisis and cash crunch and consequently the government will find it extremely difficult to run even its basic maintenance and development activities and pay salary to its crores of employees, pensioners, wage earners including armed forces, police, and health workers”.
The Centre said such judicial orders would serve as an unwarranted impetus to those financially capable to pay taxes in time. Even they would wait till April 6 because the consequences of late payment such as late fee, penalty, interest, etc. have been deferred.
“It has been the common experience that that almost 90% of the taxes get paid only on the last date or one or two days before the last date,” the petition said.
The directions of the High Courts would severely impact the monthly revenue collections of the Government of India, which are to the tune of two lakh crore. The High Courts have encroached upon purely executive functions and policy decision-making, which should be best left to the Executive.
“Have the High Courts failed to consider that most of the taxes are made online without human to human contact and there is no legal basis or rationale behind the broad direction to defer recovery proceedings till 06.04.2020" the Centre asked in its appeal before the Supreme Court.
