I. SUPREME COURT
18 Union of India vs. Bharti Airtel Ltd. and Ors. [2021-TIOL-251-SC-GST] Date of order: 28th October, 2021
Assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR3B – Matching and correction process happens on its own as per the mechanism specified in sections 37 and 38 – Once the return is submitted, any changes thereto will have a cascading effect and therefore rectification of errors and omissions have to be done as per the scheme of the law only
FACTS
The assessee alleged that there has been excess payment of taxes by way of cash due to non-operationalisation of Forms GSTR2A, GSTR2 and GSTR3 and the system related checks which could have forewarned about the mistake. Since there were no checks in the Form GSTR3B, the excess payment of tax went unnoticed; therefore, the petitioner desired to correct its returns, but is being prevented from doing so as there is no enabling statutory procedure implemented by the Government. The Delhi High Court held that the benefit of rectification cannot be denied due to the fault of the Government in not developing the relevant infrastructure. The facility of Form GSTR2A was not available prior to 2018 and as such the scheme envisaged was not implemented during the period from July to September, 2017. The Court accordingly held that the assessee has a substantive right to rectify / adjust the input tax credit (ITC) for the period to which it relates and the correction in the subsequent return when the error is noticed is against the scheme of the Act. The Revenue is in appeal against this order.
HELD
The Court primarily noted that there is no provision in law regarding refund of surplus or excess ITC in the electronic credit ledger. An assessee who has discharged liability by paying cash cannot later on ask for swapping of the entries, so as to show the corresponding output tax liability amount in the electronic cash ledger from where he can take refund on the ground of non-availability of the relevant infrastructure. Form GSTR2A is only a facilitator for taking an informed decision while doing self-assessment. Non-performance or non-operability of Form GSTR2A, or for that matter other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in Form GSTR3B manually on the electronic platform. The Court held that there is no denial of ITC and it is only postponement of availment of credit. The credit can be availed in the next return, including the return of September of the next financial year. Further rectification of a particular month’s return would not only be an illegality but in reality would simply lead to a chaotic situation and collapse of the tax administration of the Union, States and Union Territories. The appeal of the Revenue was accordingly allowed.
II. HIGH COURT
19 BMG Informatics (P) Ltd. vs. UOI [2021 130 taxmann.com 182 (Gau)] Date of order: 2nd September, 2021
Provisions of paragraph 3.2 of the Circular No. 135/05/2020-GST dated 31st March, 2020 providing that even though different tax rates may be attracted at different points of time, but the refund of the accumulated unutilised tax credit being not available is contrary to section 54(3)(ii) of the CGST Act of 2017 and should be ignored – Refund will be available once the rates are different and result in accumulation of credit
FACTS
The assessee filed a refund claim u/s 54(3)(ii) of the CGST Act under inverted duty structure which was denied by the authorities on the ground that the amount of ITC claimed for refund was accumulated out of the trading activity where the input and output were the same; although in the assessee’s case output supplies attracted different tax rates depending upon the class of buyer, it would not get covered under the provisions of section 54(3)(ii). The Department also relied upon para 3.2 of the clarificatory Circular No. 135/05/2020-GST dated 31st March, 2020. On appeal, the First Appellate Authority decided the matter in favour of the assessee on the ground that the adjudicating authority has travelled beyond the show cause notice. Hence, the Department is before the High Court. At the same time, the assessee is before the High Court challenging para 3.2 of the said Circular.
HELD
The High Court observed that the clarifications incorporated by Circular No. 135/05/2020-GST dated 31st March, 2020 were made in exercise of the powers under section 168(1) of the CGST Act of 2017. It held that issuing orders, instructions or directions to bring in uniformity in the implementation of the Act and altering the particular provision of the Act itself would be two different acts and for the latter the Central Board of Indirect Tax and Customs had not been empowered under the provisions of section 168(1) of the CGST Act of 2017. Referring to paragraph 3.2 of the Circular No. 135/05/2020-GST dated 31st March, 2020, the Court held that the paragraph provides that although the input supplies and the output supplies may attract different tax rates at different points of time, such differences in the tax rates are not covered u/s 54(3)(ii) of the CGST Act of 2017. The Court held that a conjoint reading of the said paragraph with the provisions of the Act suggests that while section 54(3)(ii) provides that refund of unutilised ITC shall be allowed in cases where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, on the other hand, the CBIC in their impugned Circular provides that such refunds will not be available in the event that the input supplies and the output supplies are the same, even though there may be a difference in the tax rates on the input supplies and the output supplies.
Hence, such declaration / provision / clarification by CBIC in para 3.2 appears to be in conflict and provides for the contrary to the provisions of section 54(3)(ii) of the CGST Act of 2017. In the facts of the instant case, the Court noted that the buyer availed specific partial exemption given under Notification No. 45/2017-GST (Rate) dated 14th November, 2017 and is neither a case of Nil rate nor is it a case of full exemption, hence, the refund provided u/s 54(3)(ii) would be applicable as there is difference between the rate of tax of input supplies and the rate of tax on output supplies and output supplies not being fully exempted or chargeable at Nil rate. The Court accordingly remanded the matter to the refund officer to decide the refund on the factual basis as regards the different rates of taxes on inputs and outputs in the present case.
20 Jyoti Construction vs. Deputy Commissioner of CT&GST [2021 131 taxmann.com 104 (Odi)] Date of order: 7th October, 2021
The Court held that it’s not permitted to use the amounts lying in electronic credit ledger for paying 10% pre-deposit u/s 106(7) of the CGST Act
FACTS
The writ petitions were filed challenging the order passed by the first Appellate Authority u/s 107(1) of the CGST Act rejecting the appeals filed by the assessee, holding that the appeals filed are defective since the petitioner had made payment of the pre-deposit, being 10% of the disputed amount under the IGST, CGST and SGST by debiting its electronic credit ledger and did not pay it from the electronic cash ledger and furnished the proof of payment of the mandatory pre-deposit, and that this was in contravention of section 49(3) of the OGST Act read with Rule 85(4) of the OGST Rules, 2017. The Department contended before the Court that u/s 49(4) of the OGST Act, the amount available in the electronic credit ledger could be used for making ‘any payment towards output tax’ under the OGST Act or the IGST Act ‘in such manner and subject to such conditions and within such time as may be prescribed’.
Under Rule 85 (4) of the OGST Rules, the amount deducted u/s 51 or collected u/s 52, or the amount payable on a reverse charge basis, or the amount payable u/s 10, or any amount payable towards interest, penalty, fee, or ‘any other amount under the Act’ shall be paid by debiting the electronic cash ledger maintained under Rule 87 and the electronic ledger liability register shall be credited accordingly. It was submitted that the pre-deposit cannot be equated to the output tax. It was further submitted that as per section 41(2) of the OGST Act, ITC can be utilised for payment of ‘self-assessed output tax as per the return’ and in no other cases can ITC credit be utilised to discharge any liability. The petitioner argued that section 107(6) of the CGST Act is a machinery provision and that it must be interpreted purposively to sub-serve the purpose of collecting the pre-deposit amount which could be done even by debiting the credit ledger.
HELD
The Court held that ‘output tax’ as defined u/s 2(82) of the OGST Act could be equated to the pre-deposit required to be made in terms of section 107(6) of the Act. The Court concurred with the interpretation placed by the Department that the proviso to section 41(2) of the Act limits the usage to which the credit ledger could be utilised and that it cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of section 107(6) of the Act. The Court further held that it is not possible to accept the plea that section 107(6) of the OGST Act is merely a ‘machinery provision’.
Note: The author is of the view that section 41 only deals with utilisation of the ‘provisional ITC’ and hence section 41(2) cannot be interpreted as placing an absolute embargo on the manner in which the balance in the electronic credit ledger is to be utilised. Further, section 49(7) provides that ‘all liabilities’ of a taxable person under this Act shall be recorded and maintained in an electronic liability register in such manner as may be prescribed. Rule 85(1) provides that the electronic liability register specified under sub-section (7) of section 49 shall be maintained in Form GST PMT-01 for each person liable to pay tax, interest, penalty, late fee or ‘any other amount’ on the common portal and all amounts payable by him shall be debited to the said register. Rule 85(3) permits the payment of liability by debiting an electronic credit ledger. Note 5 of Form GST PMT-01 Part II clearly indicates that the said electronic liability ledger can also be used for depositing the amount of pre-deposit and hence provides for refund thereof. Hence, with great respect, it appears that the aforesaid decision needs reconsideration.
III. AUTHORITY FOR ADVANCE RULING
21 M/s Kamdhenu Agrochem Industries LLP [2021-TIOL-248-AAR-GST] Date of order: 2nd November, 2021 [AAR-Maharashtra]
Separate registration is not required in every State where the goods are imported for further supply delivered directly from the container freight station without being cleared for home consumption
FACTS
The applicant seeks to know whether it is required to obtain registration in importing States other than Maharashtra if goods are imported, sold and delivered directly from Container Freight Station / Direct Port Delivery which is under the Customs Boundaries to customers in those States.
HELD
The Authority noted that since the applicant will be selling the goods before clearing the same for home consumption from the port of import, the ‘place of supply’ shall be the place from where the applicant makes a taxable supply of goods which, in this case is the Maharashtra office. Hence, goods can be supplied on the basis of invoices issued by the Maharashtra office and, therefore, it need not take separate registration in importing States other than Maharashtra.
22 Kanahiya Realty Pvt. Ltd. [2021-TIOL-230-AAR-GST] Date of order: 30th September, 2021 [AAR-West Bengal]
Goods given under promotional schemes will be taxed at the rates applicable to such goods – Also, ITC cannot be denied on such goods sold for nominal prices
FACTS
Whether the supply of goods such as gold coins, refrigerator, mixer-grinder, cooler, split air conditioner, etc., at nominal price to retailers against purchase of specified units of hosiery goods pursuant to a promotional scheme would qualify as individual supplies taxable at the rates applicable to each of such goods as per section 9 of the Act, or mixed supply taxable at the highest GST rate as per section 2(74) read with section 8(b) of the Act, in light of the fact that the hosiery goods and goods being sold at nominal price are sold under separate invoices with separate prices? Whether credit of the input tax paid on the items being sold at nominal prices would be available?
HELD
The supply shall not fall under the category of ‘composite supply’ since supply of hosiery goods and goods under promotional scheme cannot be considered as naturally bundled and supplied in conjunction with each other in the ordinary course of business. Supply shall be levied at the rate of each such item as notified by the Government. Provision of providing said goods under the retail scheme Circular would undoubtedly qualify as an activity undertaken in the course or furtherance of business. In the present case, a nominal value shall be assigned to the goods under the promotional scheme. Since the said goods are not supplied free of cost but at a nominal value, therefore, it cannot be termed as ‘gift’; however, the value of the said goods shall be required to be determined as per the provisions of section 15 read with Rule 27 of the Rules, as price is not the sole consideration for the supply. The Authority accordingly held that supply of goods at nominal price to retailers against purchase of specified units of hosiery goods pursuant to a promotional scheme would qualify as individual supplies taxable at the rates applicable to each supply as per section 9 of the GST Act. ITC of tax paid on the items being sold at nominal prices would be available to the applicant.
