While dismissing the SLP as barred by limitation, the Court passed strictures regarding the lethargy on the part of the Revenue Department for the delay in filing the SLP and called this case as a ‘certificate case’ filed only with the object to obtain a quietus from the Supreme Court, to complete a mere formality and to save the skin of the officers who may be at default in following the due process, or may have done it deliberately, noting that the petitioner has approached this Court without any cogent or plausible ground for condonation of delay. Referring to the decisions in the cases of
State of Madhya Pradesh vs. Bheru Lal [SLP (c) Diary No. 9217 of 2020, dated 15th October, 2020]; and State of Odisha vs. Sunanda Mahakuda [SLP (c) Diary No. 22605 of 2020, dated 11th January, 2021], the Court stated that the leeway that was given to Government / public authorities on account of innate inefficiencies was the result of certain orders of this Court which came at a time when technology had not advanced and thus, greater indulgence was shown. This position is no more prevalent and the current legal position has been elucidated by the judgment of this Court in
Office of Chief Post Master-General vs. Living Media India Ltd. [2012] 20 taxmann.com 347. The Supreme Court thus imposed costs on the petitioner(s) of Rs. 25,000 for wastage of judicial time.
2 Union of India & others vs. VKC Footsteps India Pvt. Ltd. [2021-TIOL-237-SC-GST] Date of order: 13th September, 2021
In case of Inverted Duty Structure, refund is allowed only of inputs and not with respect to input services
FACTS
Section 54(3) of the CGST Act, 2017 allows refund of unutilised input tax credit involving zero-rated supplies made without payment of tax and credit accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. Writ petitions under Article 226 of the Constitution were instituted before the High Courts of Gujarat and Madras. It was submitted that refund on account of inverted duty structure should be allowed on both input as well as input services. Restricting the credit only to inputs would be unconstitutional as it would lead to discrimination between input and input services. The Division Bench of the Gujarat High Court held that ‘Explanation (a) to Rule 89(5) which denies the refund of “unutilised input tax” paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is ultra vires the provision of Section 54(3) of the CGST Act, 2017’. The High Court therefore allowed the refund. However, the Madras High Court gave a contrary decision in the matter. The Union of India has filed the present appeal against the decision of the Gujarat High Court.
HELD
The Court noted that section 54(3) allows refund of inputs, which by no parameters can also include input services. The Court noted that with the clear language which has been adopted by the Parliament while enacting the provisions of section 54(3), the acceptance of the submission will involve a judicial re-writing of the provision which is impermissible in law. Reading the expression ‘input’ to cover input goods and input services would lead to recognising an entitlement to refund, beyond what was contemplated by Parliament. The Court stated that proviso to section 54(3) is not a condition of eligibility but a restriction provided in the law. It was also noted that a discriminatory provision under tax legislation is not invalid per se, input goods and input services are not treated as one and the same, and they are distinct species under the GST law. Therefore, the submission that goods and services must necessarily be treated at par cannot be accepted. Thus, refund is allowed only in case of inputs in case of inverted duty structure. Therefore, the Court affirmed the decision of the Madras High Court and allowed the appeal of the Revenue filed against the Gujarat High Court.
II. HIGH COURT
3 Deem Distributors (P) Ltd. vs. UOI [2021 (129) taxmann.com 134 (Tel)] Date of order: 3rd August, 2021
The provisions of the GST law do not confer any advisory jurisdiction on the respondents to issue any ‘advises’ to the taxpayers to pay tax before ascertainment of the liability as required by section 74(9) and no demands in the form of letters asking the taxpayer to pay GST along with interest and penalty can be issued or raised when the investigation is still in progress
FACTS
The petitioner is a partnership firm registered under the GST Act. They availed Input Tax Credit (ITC) based on invoices issued by certain suppliers / firms. The Department requested them to reverse the said credit on the ground that the said credit has been availed fraudulently without receiving any material as the suppliers / firms are fictitious and are issuing fake invoices with intent to pass on the ITC. Summonses were also issued in the name of the Directors of the petitioner firm; however, the investigation was not complete and the show cause notice u/s 74 was issued. The petitioner deposited certain amounts merely to avoid coercion and buy peace, but challenged the said letters before the Court on the ground that liability cannot be determined by the respondents before conducting inquiry when even the investigation is incomplete and that any advice or demand can at best be a provisional one; and the petitioner cannot be compelled coercively to pay the amounts.
HELD
Referring to the provisions of section 74 and the affidavit in reply filed by the Department, the Court held that a conclusion that the petitioner had availed ITC and raised invoices by certain fictitious suppliers without actual receipt of goods, appears to have been drawn based on an incomplete investigation. It further held that section 74(5) gives a choice to the assessee to make any payment if he so chooses, but it does not confer any power on the respondents to make a demand as if there has been a determination of the liability of the assessee and demand tax along with interest and penalty. Hence, before ascertainment of the liability, as required by section 74(9), the Department could not have issued the letters advising the petitioner to reverse the input tax allegedly availed. The Court accordingly held that no advisory jurisdiction is conferred on the respondents to issue any ‘advises’ of the nature issued to the petitioner and no demands can be issued or raised when the investigation is still in progress. The Department cannot be allowed to put the cart before the horse and collect any tax, interest or penalty before they determine it in an inquiry. Any such action is wholly arbitrary and without jurisdiction. The Court thus directed the Department to refund the amount already deposited along with interest and proceed with their inquiry strictly in accordance with the provisions of law.
4 R.M. Dairy Products LLP vs. State of UP [2021 (129) taxmann.com 37 (All)] Date of order: 15th July, 2021
Rule 86A is not a recovery provision but only a provision to secure the interest of Revenue. It only provides, in certain situations and upon certain conditions being fulfilled, the specified amount that may be held back and be not allowed to be utilised (i.e., debited to the electronic credit ledger) by the assessee towards discharge of its liabilities on the outward tax or towards refund. Hence, if as on the date of passing the order there is no balance in the electronic credit ledger, the order would be read to create a lien up to the monetary limit mentioned in the said order in respect of future credits availed and credited in the electronic credit ledger
FACTS
The petitioner filed a writ petition challenging the order passed by the Department under Rule 86A(1)(a)(i) [i.e., not allowing debit in the electronic credit ledger of the amount equivalent to the credit of input tax that has been allegedly availed on the strength of tax invoices or debit notes issued by the registered person who has been found to be non-existent or not to be conducting any business] of the State / Central Goods and Services Tax Rules, 2017 raising the objections that the Department has no jurisdiction or authority to block any ITC over and above any amount that may have been actually available on the date of the order. The Department has to record a positive ‘reason to believe’ that credit of input tax had been fraudulently availed or the petitioner was wholly ineligible to avail the same. The adjudication proceedings in respect of the very same matter are underway in accordance with section 74 and till those proceedings are concluded, no amount would become recoverable from the petitioner u/s 78.
HELD
Referring to various provisions of the Act, the Court noted that the recovery provisions are contained in section 79 and the enabling Rules fall under Chapter XVIII being Rules 142 to 161. On the other hand, Rule 86A falls under Chapter IX of the Rules regarding payment of tax. It further held that the ambit and purpose of Rule 86A are inherently different and independent of the recovery provisions. Referring to Rule 86A, the Court held that it does not contemplate any recovery of tax due from an assessee. It only provides, in certain situations and upon certain conditions being fulfilled, the specified amount that may be held back and be not allowed to be utilised by the assessee towards discharge of its liabilities on the outward tax or towards refund. It creates a lien without actual recovery being made or attempted. The Court further clarified that Rule 86A does not allow the Revenue to reverse or appropriate any part of the credit existing in the electronic credit ledger or to adjust that credit against any outstanding demand or likely demand. It is at most a provision to secure the interest of Revenue, to be exercised in the presence of the relevant ‘reasons to believe’, as recorded and in respect of the amount equivalent to credit fraudulently taken which has to be kept unutilised. To that effect, the Legislature has chosen the words ‘not allow debit’ which is different from the word ‘appropriate’. The adjustment or appropriation may arise only upon an adjudication order attaining finality or after the lapse of three months from the date of it being passed if there is no stay granted in appeal, etc., that, too, as a consequence of the recovery provisions but not under Rule 86A of the Rules.
The Court further held that the words ‘input tax available’ used in the first part of sub-rule (1) of Rule 86A cannot be read as actual input tax available on the date of the order passed under that Rule. It would always relate back in time when the assessee allegedly availed ITC either fraudulently or which he was not eligible to avail. It does not refer to and therefore does not relate to the ITC available on the date of Rule 86A being invoked. The word ‘has been’ used in Rule 86A (1) leaves no manner of doubt in that regard. The Court also explained that the ‘ineligibility’ of the credit as mentioned in the said Rule is only for the reasons mentioned in the said Rule. The Court noted that the correctness or otherwise or the sufficiency of the ‘reason to believe’ was not the subject matter of dispute before it and the ‘reason to believe’ is based on material with the competent authority indicating the non-existence of the selling dealer which is a valid reason to invoke the said Rule.
5 Satyam Shivam Papers Pvt. Ltd. vs. Assistant Commissioner of Service Tax, Hyderabad [2021 (50) GSTL 459] Date of order: 2nd June, 2021
Section 129 of the Central Goods and Services Tax Act, 2017 – Mere expiry of E-way bill cannot lead to a presumption of intention to evade tax and invoke penalty
FACTS
The petitioner had made an intra-state supply and generated an E-way bill on 4th January, 2020. The transporter started for the delivery by an auto-trolley at 4.33 pm on the same day. On the way, there was a traffic jam on account of a political rally due to which the auto trolley could not move. This continued till 8.30 p.m. by which time the shop of the buyer was closed. Therefore, the driver took the auto trolley to his residence and planned to complete the delivery on the next working day. The next day being a Sunday, the goods were intended to be delivered on 6th January, 2020. On the way to delivery, the Respondent No. 2 (i.e., Deputy State Tax Officer, Bowenpally-II, Circle, Begumpet Division) detained the goods and a Notice for Detention in Form GST MOV-07 was issued alleging that the validity of the E-way bill had expired and proposing to impose tax and penalty.
The detained goods were unloaded at the premise of a relative of Respondent No. 2 without tendering any acknowledgement receipt for the same. The petitioner made various representations against the action of Respondent No. 2; however, all of them were ignored, stating that it was a clear case of evasion of tax. Therefore, to get the goods released, the petitioner made a payment of Rs. 69,000 towards tax and penalty on 20th January, 2020. Further, the Respondent No. 2 passed an order dated 22nd January, 2020 in Form GST MOV-09, which was signed by the Respondent No. 1 (i.e., Assistant Commissioner [ST], Osmanganj, Circle, Charminar Division, Hyderabad). It was stated in the order that the petitioner admitted the liability and it had no objection to pay the proposed tax and penalty. Aggrieved by the said order of 22nd January, 2020, the petitioner preferred the present petition.
HELD
The High Court held that there had been a blatant abuse of power by unloading the goods at a relative’s premise and by issuing an order that was signed by the Respondent No. 1. Also, no material was placed on record by the Respondent No. 2 to conclude that there was evasion of tax by the petitioner. Mere expiry of time limit mentioned on the E-way bill cannot lead to a presumption of intention to evade tax. Therefore, the order dated 22nd January, 2020 was set aside and the Respondents were directed to refund the amount of Rs. 69,000 to the petitioner along with interest @ 6% p.a. from 20th January, 2020 till the date of repayment. The Respondent No. 2 was also directed to pay a cost of Rs. 10,000 to the petitioner.
6 Anuj Mahesh Gupta vs. Asstt. Commissioner of Sales Tax, Mumbai [2021 (50) GSTL 180 (Bom)] Date of order: 12th July, 2021
Section 167(2)(a)(ii) of Code of Criminal Procedure – Assessee can be granted bail on expiry of 60 days from detention even in case of cognisable and non-bailable offences
FACTS
The petitioner is sole proprietor of M/s Savvy Fabrics and partner in M/s Shubhmangal Textile Industries LLP. It was alleged that he was actively involved in receiving tax invoices or bills without any actual supplies of goods or services or both and claiming ineligible ITC on such invoices. Thus, he had committed cognisable and non-bailable offences u/s 132(1)(b)(c) of the MGST Act by receiving fake invoices of more than Rs. 277 crores and taking ITC of at least Rs. 31 crores. As per clause (i) of section 132 of the CGST Act, in cases where the amount of tax evaded or the amount of ITC wrongly availed of or utilised or the amount of refund wrongly taken exceeds Rs. 500 lakhs, then the punishment would be imprisonment for a term which may extend to five years and with fine. As per section 167 of the Code of Criminal Procedure, 1973 where investigation could not be completed within 24 hours, the accused can be detained up to a maximum period of 60 days where the investigation relates to an offence other than those which are punishable with death, imprisonment of life or imprisonment of at least ten years and on expiry of such 60 days, the accused shall be released on bail. The petitioner was arrested on 15th January, 2021 and had completed 54 days in custody; therefore, the present petition was filed to examine the prayer for bail made by the petitioner.
HELD
The High Court applied section 167(2)(a)(ii) of the Code of Criminal Procedure, 1973 and held that the petitioner should be released on bail subject to certain conditions, viz., he should furnish case surety of Rs. 5 lakhs and within two weeks of release he should furnish solvent surety of like amount, the petitioner should co-operate in the investigation, he shall not tamper with any evidence or try to intimidate any witness, and the petitioner shall deposit his passport with the authorities.
7 Kerala Communicators Cable Ltd. vs. Addl. Dir.-General DGGI, Kochi [2021 (50) GSTL 116 (Ker)] Date of order: 24th March, 2021
Section 83 of the CGST Act, 2017 – Stay was granted to furnish the bank guarantee during pendency of writ petition filed to challenge the validity of the provisional attachment of bank accounts
FACTS
A search and inspection u/s 67 of the CGST Act was conducted at the premises of the petitioner. Based on this and to protect the interest of Revenue, the respondent had passed orders to provisionally attach the bank accounts of the petitioner. The petitioner had objected to such provisional attachment of its bank accounts and preferred a writ petition. During the pendency of the said petition, the provisional attachment order was modified and the petitioner was directed to furnish a security in the form of bank guarantee equivalent to Rs. 30 crores along with a bond. Pursuant to this direction, the petitioner furnished the bank guarantee and bond under protest reserving the right to challenge the modified order. Thus, being aggrieved by the modified provisional attachment order imposing additional condition to furnish bank guarantee and bond, the present writ petition was filed.
HELD
The High Court observed that the respondent had not disclosed reasonable apprehension that necessitated the issuance of the provisional attachment order. Also, the bank guarantee of about Rs. 30 crores would certainly block a huge amount from the business of the petitioner. Therefore, the High Court granted a stay on the direction that required the petitioner to furnish the bank guarantee till the disposal of the writ petition and directed the petitioner to execute an undertaking that it shall not sell, alienate or deal with any of its fixed assets, plant, property and equipment shown in the balance sheet dated 31st March, 2020.
8 Dhirendra Singh vs. Commissioner of CGST, Commissionerate [2021 (50) GSTL 176 (Guj)] Date of order: 4th March, 2021
Input tax credit wrongly availed in respect of goods allegedly never received by assessee – Department directed to proceed further in accordance with law – Section 70 of CGST Act, 2017
FACTS
The petitioners are the Directors of M/s Manpasand Beverages Limited (‘MBL’). They were issued multiple summonses and instructed to produce all the documentary evidence essential to verify their GST liability. However, the Directors were unable to produce the requisite documents and the final GST liability could not be arrived at. Hence, the Department was of the view that MBL had contravened the provisions of section 16 of the CGST Act inasmuch as they knowingly availed ITC and used the same in payment of GST liability. This constitutes an offence under sections 132(1)(b), 132(1)(c) and 132(1)(l) of the CGST Act and they are liable for punishment of imprisonment up to five years in terms of section 132(5) of the CGST Act. Therefore, the present writ petition was filed to evade arrest by challenging the validity of the summonses issued u/s 70 of the CGST Act.
HELD
The High Court held that there was no good or legal ground to challenge the validity of the summonses issued u/s 70 of the CGST Act. As such, the writ application becomes infructuous and the Court was not inclined to extend any further protection to the petitioners. Further, if the petitioners apprehended that they would be arrested any time, it was open for them to take recourse to the steps available to them in accordance with the law to avoid arrest.
III. AUTHORITY OF ADVANCE RULING
9 Eastern Coalfields Ltd., Kolkata [2021-TIOL-221-AAR-GST] Date of order: 9th August, 2021
Since the supplier has paid tax belatedly, the assessee is denied input tax credit
FACTS
The question is whether the applicant is entitled for ITC already claimed by him on the invoices raised by one of the vendors pertaining to January, February and March, 2020 for which the supplier has actually paid the tax charged in respect of such supply to the Government in the month of November, 2020 while filing the GSTR3B in November, 2020. And whether the applicant has to reverse the said ITC already availed by him where the vendor has actually paid the tax, though belatedly.
HELD
The Authority noted that section 16 of the GST law prescribes conditions and restrictions towards entitlement of ITC. Sub-section (c) allows ITC provided the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of ITC admissible in respect of the said supply. However, it is evident that while the applicant has availed ITC in the months of January, February and March, 2020, respectively, the supplier has declared such outward supplies in his respective Form GSTR1 in the month of November, 2020 and has also paid the taxes on such supply upon furnishing of return in Form GSTR3B in the month of November, 2020. The Authority also noted that Form GSTR2B has been made effective from 1st January, 2021 but at the same time the applicant cannot deny that the provisions of sub-rule (4) of Rule 36 were already in force during the period when the applicant availed of the ITC. The applicant is therefore not entitled for ITC claimed by him pertaining to the months January, February and March, 2020 for which the supplier has furnished Form GSTR1 and Form GSTR3B in the month of November, 2020 and the applicant is, therefore, required to reverse the said ITC.
Note: The Authority in the present case has denied the entire credit even though the tax is paid by the supplier. Denial of entire credit does not appear to be justified; at the most, interest could be demanded for availment of credit prior to payment by the supplier.
IV. APPELLATE AUTHORITY FOR ADVANCE RULING
10 M/s Pioneer Bakers, Odisha [2021-TIOL-29-AAAR-GST] Date of order: 27th July, 2021
Restaurant is a place where food items are prepared and served to customers. A mere outlet where ready-to-eat items are sold across the counter cannot be considered as a restaurant
FACTS
The applicant is operating under the Brand name of ‘Go-Cool’ since the year 1997. They have established it as a brand in the field of bakery items, especially cakes. Their principal business is producing and selling of bakery products, viz., cakes, artisan cakes, pastries, pizza, patties, sandwiches, self-manufactured ice-creams, handmade chocolates, cookies, beverages, etc. They also offer a number of customisation options to customers with respect to the above products. The outlets are equipped with all the facilities to dine such as tables and chairs, air conditioner, drinking water, stylish lights for providing a nice ambience which provide an overall good experience to the customers.
The question before the Authority, whether supply of food items prepared at the premises of the applicant and supplied to the customers from the counter (with the facility to consume the same in the air-conditioned premises itself) is covered under restaurant services was answered in the affirmative. Aggrieved by the order, this appeal was filed.
HELD
The Authority noted that the meaning of restaurant is provided in the Cambridge Dictionary as a place where meals are prepared and served to the customer. The serving of the items to the customers for consuming the food in the premises is done for very few customers. Therefore, the establishment cannot be considered as a restaurant. It was stated that, in the instant case, it is a bakery outlet where ready-to-eat items are sold and a mere facility is provided to eat them in the shop itself. The applicant only prepares birthday cakes as per orders for take-out service and does not prepare birthday cakes immediately on the customer’s order. For those who want to consume it within the premises, they merely supply the readily available cakes. They do not serve food on the customer’s table and in most cases the items are sold only across the counter. Therefore, the applicant should not be considered as providing Restaurant Services.
