SC Stays Kerala & Allahabad HC Orders Which Stopped Recovery Measures By Tax Authorities, Banks Citing COVID19 [Read Order]

The Supreme Court on Friday stayed the general orders passed by the High Courts of Allahabad and Kerala which restrained all recovery proceedings by tax authorities under State and Centre, and by Banks and other Financial Institutions until April 6.

These High Courts had passed the stay orders to cut down litigation in the wake of COVID 19 pandemic.

In SC, a bench comprising Justices A M Khanwilkar, Vineet Saran and Krishna Murari passed the stay order on the petition filed by the Central Government against the HC orders.

Solicitor General Tushar Mehta, mentioning the plea before the bench, submitted that HCs cannot pass such blanket orders. It was submitted that the restraint on recovery will put the Government to prejudice, particularly in view of the impending closure of financial year on March 31.  

These orders will have pan-India repercussions, Mehta said.

"Even people who volunteer to pay the taxes and file returns will stop doing so," Mehta argued. 

Centre also said that it will not trouble the tax payers.

The court recorded the statement of SG Tushar Mehta that "the Government is conscious of the issue of Coronavirus and Centre  is coming up mechanism to address the issue without causing hardship in the present circumstances."

The SLP filed by the Union Ministry of Finance questioned the jurisdiction of the High Court to pass such an omnibus direction. The petition also stated :

"The impugned order of the High Court will incentivize people to either delay payment of taxes or not pay any taxes at all which fall due, without facing any consequences in light of directions to defer recovery proceedings and it would lead to a devastating consequences for the country's financial system wherein even those who are able to pay and are not affected by Corona Virus"

The Centre expressed the apprehension that the the impugned directions of the High Court will "severely impact the monthly revenue collections of the Government of India which are to the tune of 2 lakh crores".

In Allahabad, a division bench comprising Justice Ramesh Sinha and Justice Ajit Kumar passed the direction on Wednesday stating :

"due to serious threat presently to the society in the country due to pandemic disease of Corona Virus(COVID-19), it has become necessary to issue directions to the State Government to issue necessary circulars/directives to the various authorities including the District Magistrates of every district of the State and other Government Agencies and authorities not to take coercive measures or any exercise against any individual or body of individuals which may force them to approach the Courts for legal remedies and also to avoid any public gathering pursuant to any such proceedings like auction etc."

On Thursday, Justice Amit Rawal of Kerala HC passed a similar direction.

"...I deem it appropriate to issue general directions to departments concerned like banks, financial institutions, Income Tax authorities, erstwhile KVAT, GST, recovery of tax on motor vehicles and building tax to defer the recovery proceedings or coercive measures till 06.04.2020", ordered Justice Amit Rawal.

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