Category: Recent Decisions: Part A: Goods and Services Tax

HIGH COURT

88. Gujarat Chamber of Commerce and Industry and Others vs. Union Of India & Others

2025-TIOL-48-HC-Ahm-GST

Dated: 3^rd January, 2025

Assignment by transfer of leasehold rights for plot of land allotted by GIDC to the Lessee in favour of third party against consideration is not supply of service because it is a transfer of immovable property. Also, stay of operation of the judgement not provided to Revenue.

FACTS

i) GIDC, a Nodal agency of Government of Gujarat acquired land in the past and developed it for development of industrial estates in Gujarat, similar to other corporations in other States of India. Consequently, GIDC entered into execution of lease deed for 99 years in favour of various lessees upon terms and conditions. Some of these lessees had transferred their leasehold rights in GIDC land along with constructed building for industry/business to third parties by entering into an assignment deed against consideration for the balance period of lease. while also seeking approval of GIDC for such transfer against payment of fees to GIDC. GST authorities issued summons / show cause notices after 1^st July, 2017 to various assignees to whom the leasehold rights were assigned / transferred by original / subsequent lessees proposing to levy GST @18 per cent on the consideration received/paid for the transactions of assignment/transfer. To examine the issue as to whether such transactions amount to “supply of service” as defined under section 7 of the CGST Act, 2017 to attract the levy of GST, various terms defined under the said CGST Act, 2017, viz. business, goods, registered person, services, supplier, taxable person and importantly, the definition of ‘supply’ were examined and analysed in detail besides examining the terms ‘lease’ and “Immovable Property” under Transfer of Property Act.

ii) The ownership of the plot of land allotted by GIDC remains with it and only the right of possession and occupation are transferred by way of leasehold rights to such third party/assignee.

iii) Various petitioners inter alia contended that transfer/assignment of leasehold rights is nothing but a sale and transfer of benefits arising out of immovable property, viz. the plot of land which cannot be considered as “supply of services” because sale, transfer and exchange of benefits arising out of immovable property is nothing else but sale, transfer and exchange of the immovable property itself. Hence, tax cannot be levied under GST Act as the same does not amount to ‘supply’ for the purpose of section 7 of the CGST Act. The scope of the said section 7 of the GST Act requires to be considered by analysing various provisions of different Acts as to what is an “immovable property” because the term, immovable property is not defined under the GST law. Further, it also requires to be examined whether leasehold rights can be said to be benefits arising out of such immovable property and hence qualify to be covered by item no. 5 of Schedule III of CGST Act which shall be treated neither as supply of goods nor a supply of service.

iv) Petitioners submitted and Hon. High Court analysed and examined a number of provisions of relevant Acts including Transfer of Property Act, The Indian Stamp Act, 1899 etc. to analyse the term “immovable property” and the term ‘lease’ and in such context, a host of precedents were also referred to and/or relied upon.

v) On behalf of Revenue, Ld. Advocate General drew distinctions between “immovable property” and “interest in immovable property”, i.e. difference between tangible rights and intangible rights in the immovable property to contend that immovable property is as such not taxable under the GST law whereas interest in immovable property like leasehold rights transferred by way of sale is liable to the levy of GST falling within the scope of “supply of services” and relied upon various relevant precedents in support of such contention.

HELD

a) When GIDC allotted a plot of land along with the right to occupy, right to construct, right to possess on a long-term basis, it is a supply of service as the right of ownership of the plot in question remains with GIDC which reverts on expiry of the lease period. As against this, the transaction of sale and transaction of leasehold rights by the lessee-assignor in favour of a third party-assignee, divest the assignor of all the absolute rights in the property. Hence, the interest in the immovable property is not different than the immovable property itself.

b) Therefore, when lessee-assignor transfers absolute right by way of sale of leasehold rights in favour of the assignee, the same shall be a transfer of “immovable property”, as leasehold rights is nothing but benefits arising out of the immovable property which according to other statutes would be immovable property, as the GST Act has not defined the term ‘immovable property’.

c) In such circumstances, leasehold rights are nothing but interest in immovable property in terms of section 105 r.w.s108(j) of the Transfer of Property Act and constitutes absolute transfer of rights in such property (because the legal relationship between GIDC and the assignor-lessee comes to an end and the third party-assignee becomes lessee liable for obligation under the Assignment Deed vis-à-vis the GIDC). Such transaction therefore is not one of supply of service but that of immovable property. For this, Hon. High Court relied on Hon’ble Apex Court in case of Gopal Saran vs. Satya Narayana (1989) 3 SCR 56 wherein definition of assignment as per Black’s Law Dictionary, Special Deluxe Edition page 106 is referred to as assignment means “is a transfer or making over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein”. It was further held that assignment would include “transfer by a party of all its rights in lease, mortgage, agreement of sale or a partnership.” In view of this definition of assignment, assignment of leasehold rights is also subject to levy of stamp duty being transfer of “immovable property.”

d) Hon. High Court also noted that in case of Munjal Bhatt vs. UOI 2022-TIOL-663-HC-AHM-GST this Court also observed that the intention of GST regime was not to change the basis of taxation of the Value Added and service tax regime and that supply of land in every form was excluded from the purview of GST Act.

e) The Court further observed that in various cases, GIDC allotted the plot of land to the lessee who constructed the building and developed the land to run the business / industry. Hence what is assigned for a consideration is not only land allotted by GIDC but the entire land with the building constructed on such land along with leasehold rights and interest in land which is a capital asset in the form of “immovable property”. Thus lessee earned benefits there from constructing and operating factory which constitutes “profit in prendre” which is also an immovable property. Therefore not subject to tax under GST Act as clause 5 of Schedule III of the GST Act clearly excludes sale of land and building which fortifies the intention of GST Council not to impose tax on transfer of immovable property continuing the underlying object of erstwhile service tax regime. To analyse” profit in prendre”, relevant discussions in Anand Behera vs. State of Orissa Air 1956 SC 17 and State of Orissa vs. Titaghur Paper Mists Co. Ltd. (1985) Supp SCC 285 were referred to and relied upon. Hon. High Court disagreed with the contention of the Revenue that exclusion from GST for sale of land and building as per Schedule III, would not include transfer of leasehold rights as the interest in immovable property is in intangible form and hence, is covered by the scope of ‘supply’ as per section 7 of the GST Act. The Hon. High Court held that assignment is nothing but absolute transfer of right and interest arising out of land and hence, cannot be considered a service as contemplated under the GST Act. Also, assignment / transfer of rights is outside the scope of supply of service.

f) In view of above, question of utilization of input tax credit to discharge GST on such transactions does not arise and the prayer on behalf of the revenue for stay of operation and implementation of the judgment also was rejected.

89 M. Trade Links vs. Union of India

[2024] 163 taxmann.com 218 (Kerala)

Dated: 4^th June, 2024

The High Court rejected the challenge to the constitutional validity of section 16(2)(c) and section 16(4) of the Central Goods and Services Act (CGST Act) but held that for the period from 1^st July, 2017 till 30^th November, 2022, if a dealer has filed the return after 30th September and the claim for ITC was made before 30th November, the claim for ITC of such dealer should also be processed, if he is otherwise entitled to claim the ITC.

FACTS

In this case, the Petitioners raised the following issues before the Hon’ble Court:

(i) Section 16(2)(c) be declared as unconstitutional and violative of Articles 19(1)(g) and Article 300A of the Constitution of India;

(ii) In the alternative, the provision of section 16(2)(c) may be read down and if the recipient dealer sufficiently establishes that he has paid the tax to the supplier and the default is on the part of the supplier dealer, the ITC should not be denied to the recipient dealer and the action should be taken against the supplier dealer who has defaulted in posting the tax collected from the recipient dealer;

(iii) ITC is a matter of right and not a concession. Hence, the denial of ITC on a mismatch with the figure mentioned in the auto-populated documents in FORM GSTR-2A is unjustified. Authorities must conduct an enquiry and should verify the documents in possession of the purchaser or the recipient dealer to ascertain the bona fide of such a dealer in claiming the ITC on supplies received from the supplier dealer.

(iv) Ona reading the provision of sections 39, 41, 44 and 50, which permit relaxation in furnishing returns, filing returns with late fees and payment of tax with interest on the late period is permitted. The provision under section 16(4) mandating submission of a claim for ITC within a particular time should be read as a directory and not mandatory.

(v) The Court may read down section 16(4) to give effect to the amended provision of providing the 30^th day of November for the due date for furnishing the return under section 39 for the month of September with effect from 1^st July, 2017, considering the peculiar nature of difficulties in initial period of implementation of the GST regime.

(vi) The actual availment of credit happens in the books of account, and it is merely disclosed through the GST return. Hence, the availment of ITC is not dependent on the filing of GSTR-3B. Therefore, if an assessee can prove with evidence that the credit was availed in the books of account within the time limit prescribed in section 16(4), claim the ITC would be in compliance with section 16(4).

HELD

(i) Referring to various decisions, the Court held that both Central and State legislation have the power to enact the CGST / SGST Act, and the Constitution prescribes no limitation for enacting such legislation. Therefore, these legislations are valid legislations.

(ii) In light of the decisions in the cases of Godrej & Boyce Manufacturing Company (P.) Ltd 1992 taxmann.com 967 (SC), India Agencies vs. Addl. Commissioner of Commercial Taxes 2006 taxmann.com 1841, Jayam& Co. vs. Assistant Commissioner [2016] 15 SCC 125], ALD Automotive (P.) Ltd. vs. CTO [2019] 13 SCC 225 and VKC Footsteps (India) (P.) Ltd. 2021] 130 taxmann.com 193, the Hon’ble Court did not find substance in the submissions of the Learned Counsel for the petitioners that section 16(1) of the GST Act provides an absolute right to claim Input Tax Credit and conditions in sub-section (2) of section 16 cannot take away the right conferred under sub-section (1) of Section 16.

(iii) The Court further held that the Scheme of the Act also provides that only tax collected and paid to the Government could be given as input tax credit. When the Government has not received the tax, a dealer cannot be given an input tax credit. Referring to the scheme of transfer of credit under section 53 of the IGST Act, the Hon’ble Court felt that without section 16(2)(c) where the inter-state supplier’s supplier in the originating State defaults payment of tax (SGST+CGST collected) and the inter-state supplier is allowed to take credit based on their invoice, the originating State Government will have to transfer the amounts it never received in the tax period in a financial year to the destination States, causing loss to the tune of several crores in each tax period. It therefore held that the conditions on entitlement of ITC cannot be said to be onerous or in violation of the Constitution, and section 16(2)(c) is neither unconstitutional nor onerous on the taxpayer and that the respondents cannot contend that the conditions, restrictions, and time limits for ITC and time-bound tax collection in a financial year can be substituted or replaced with recovery actions against defaulters, the outcome of which is uncertain and not time-bound. The Court also held that section 16(2) restricts the eligibility under section 16(1) for entitlement to claim ITC. Section 16(2) is the restriction on eligibility and section 16(4) is the restriction on the time for availing ITC. These provisions cannot be read to restrict other restrictive provisions, i.e. sections 16(3) and 16(4). The challenge to the constitutional validity of section 16(2)(c) and section 16(4) of the CGST Act are thus rejected.

(iv) Lastly the Hon’ble Court held that where for the period from 1^st July, 2017 till 30^th November, 2022, if a dealer has filed the return after 30^th September, and the claim for ITC was made before 30^th November, the claim for ITC of such dealer should also be processed, if he is otherwise entitled to claim the ITC. The amendment in section 39 of the CGST Act by section 105 of the Finance Act 2022 (refer to amendment to section 16(4) of the CGST Act by section 100 of the Finance Act, 2022 notified with effect from 1st October, 2022) is procedural and has a retrospective effect. Accordingly, the time limit for furnishing the return for the month of September is to be treated as 30^th November in each financial year with effect from 1^st July, 2017.

90. L and T PES JV vs. Assistant Commissioner of State Tax

[2025] 170 taxmann.com 181 (Telangana)

Dated: 29^th November, 2024

Where the contract sponsored by the State of Telangana was executed partly in Maharashtra and partly in Telangana and the Telangana State Agency has deducted TDS under section 51 of the CGST Act on the entire contract value, including the value in respect of which the petitioner has paid tax in the State of Maharashtra treating the same as Intra-State supply, the State Agency was not required to deduct the turnover taxed in the State of Maharashtra. Consequently, the petitioner’s application for refund in respect of the said TDS lying in the electronic cash ledger of the State of Telangana should not be denied. Where construction works is spread over multiple state boundaries, works executed would be intra-State and liability will be discharged in proportion to work done in each state.

FACTS

Petitioner is an unincorporated Joint Venture (JV), comprising of two partners viz. Larsen & Toubro Ltd (L&T) and PES Private Limited. The petitioner has received a contract from State of Telangana, for construction of Irrigation Barrage, the execution of which was spread over the State of Maharashtra and State of Telangana. The petitioner obtained separate GST registrations in the State of Maharashtra and State of Telangana and reported turnover based on work executed in respective States treating them as Intra-State supplies. However, Telangana State Agency, deducted TDS under section 51 of the CGST Act on the entire contract value (including the portion of turnover which was reported by the petitioner in Maharashtra State). The petitioner discharged tax liability independently in State of Maharashtra and filed a refund application for TDS portion on the said turnover accumulated in the Electronic Cash Ledger of the State of Telangana. In the meanwhile, on a comparison of GSTR-7A and GSTR-1, the former revealed much higher turnover (as it also included the value of the turnover pertaining to Maharashtra). Accordingly, a show cause notice was issued to the petitioner making them liable to pay tax on the entire contract value in the State of Telangana.

HELD

The Hon’ble Court held that the contract in the instant case is for undertaking works contract services and hence, the place of supply of services would fall under section 12(3) of the IGST Act and not under section 12(2)(a) of the CGST Act. Since, the work was admittedly carried out in both the States, the place of supply of service shall be treated as made in each State equivalent to the proportion of work executed in that State, in accordance with the terms of the agreement as specified in the explanation to section 12(3) of IGST Act.

The Hon’ble Court further held that as the State of Telangana was not a registered deductor in the State of Maharashtra, in terms of proviso to section 51 of the CGST Act, the Telangana State Agency can only deduct GST for the invoices raised by the supplier located in Telangana for the works executed in Telangana and ought not to have deducted GST in respect of the bills raised for the works executed in Maharashtra. The Court accordingly held that if the State of Telangana had not transferred tax liability to the extent of work executed in State of Maharashtra to the tax authorities in the State of Maharashtra, there was no reason on part of Telangana State authorities in not granting refund, upon petitioner providing relevant material, proof evidencing discharge of tax liability in the State of Maharashtra.

91. Mrs. Lakshmi Periyasamy vs. State Tax Officer

[2025] 170 taxmann.com 133 (Madras)

Dated: 25^th November, 2024

Order passed after the death of the assessee is null and without jurisdiction. The petition under Article 226 is thus maintainable.

FACTS

The petition was filed before Hon’ble Court on a limited ground that impugned order u/s 62 of the CGST Act was made in the name of a dead person (who was husband of the petitioner) subsequent to his death.

HELD

The Hon’ble Court held that the assessment order passed in name of dead person is nullity and without jurisdiction and thus is an exception to rule of alternative remedy and hence can be entertained under Article 226. The impugned order was set aside.

92. Vigneshwara Transport Company vs. Additional Commissioner of Central Tax

[2025] 170 taxmann.com 264 (Karnataka)

Dated: 28^th November, 2024

Proper Officer cannot issue show cause notice under section 74 of the CGST Act on “borrowed satisfaction”. When investigation including search and seizure was conducted by other officer and the matter was transferred to Proper Officer for want of jurisdiction, the Proper Officer was required to redo the investigation and come to an independent conclusion as contemplated under section 74 of the CGST Act.

FACTS

Petitioner was transporting goods and was registered under the provisions of the CGST Act, 2017. The investigation was initiated against the petitioner on the ground that the petitioner along with several other persons indulged in purchase of areca nut from several persons and supplying the same to various Gutkha manufacturers without payment of appropriate applicable GST. Accordingly, a show cause notice was issued to the petitioner.

Aggrieved, the present writ petition was filed on the ground that investigation was initiated against the petitioner without valid jurisdiction. It was submitted that pursuant to the initiation of such investigation; inspection, search and seizure of several premises belonging to the petitioner as envisaged under Chapter 14 of the CGST Act / KGST Act was carried out, certain materials were seized and the petitioner was called upon for questioning and his statements were recorded. Further, the petitioner was forced to make an adhoc payment towards probable liability during investigation and the same was paid by the petitioner under protest. It was also contended that the inspection, search and seizure was not conducted by a Proper Officer and that when the department realised the same, the case was transferred to the Proper Officer, to conduct the necessary investigation. But the said Proper Officer instead of conducting the investigation afresh, relying upon the records built by other officer issued a show cause notice under section 74 of the CGST Act and KGST Act.

HELD

The Hon’ble Court held that in instant case, a substantial part of investigation including search and seizure of materials had been done by the person who was not Proper Officer and under circumstances, said investigation, inspection, search and seizure was to be considered void ab initio. When the same is considered as ab initio void, notice issued under section 74 of the CGST Act based upon search, seizure and the statements recorded from the petitioner which has been relied upon, has to be considered illegal and that there is no satisfaction on part of the Proper Officer for issuing of the notice under section 74 of the CGST Act. The Court held that the Proper Officer was required to re-investigate and come to an independent conclusion as contemplated under section 74 of the CGST Act and only thereafter a fresh notice could be issued. Under said circumstances, the Hon’ble Court set aside the impugned notice and directed respondents to refund amount deposited by assessee and also return seized documents and other goods.

93. LJ- Victoria Properties Pvt. Ltd. vs. Union of India

(2024) 24 Centax 270 (Bom.)

Dated: 19^th November, 2024

There is no bar on conducting Audit under section 65 of CGST Act even where registration was already cancelled and business was closed.

FACTS

Petitioner filed an application for cancellation of registration on 27^th March, 2023 citing business closure. The registration was cancelled with effect from 2^nd May, 2023. However, on 6^th November, 2023, respondent issued a notice to conduct an audit for the F.Y. 2020-21. Petitioner refused to cooperate stating that audit cannot be conducted as per section 65 of the SGST Act once registration is cancelled. However, respondent proceeded with the audit and concluded that there was non-reversal of ITC and excess of ITC claims in its audit report. Being aggrieved by such audit proceedings, petitioner filed a writ petition before Hon’ble High Court.

HELD

Hon’ble High Court held that the provisions of section 65 of the CGST Act, 2017 apply to conduct an audit for a F.Y. during which a person was registered under GST, even if the registration was subsequently cancelled. The Court emphasized that cancellation of registration under section 29(3) does not absolve a person from obligations under the Act or prevent audit proceedings for the relevant period when the person was registered. Consequently, writ petition was challenging validity of audit was dismissed and decided against petitioner.

94. SBI General Insurance Company Ltd. vs. Union of India

(2024) 24 Centax 158 (Bom.)

Dated: 24^th October, 2024

Appeals should not be dismissed by adopting a hyper technical approach without conducting proper verification and providing an opportunity to rectify the same.

FACTS

Petitioner filed an appeal against impugned order passed by an adjudicating authority. Respondent dismissed petitioner’s appeal on a technical ground that the signature present in the appeal memo was not done by the authorised signatory without verifying the GST portal and that no evidence regarding the same was provided by the petitioner. The respondent failed to verify that the signatory was duly authorised, which lead to the dismissal without granting an opportunity to rectify the alleged defect or prove authorisation. Aggrieved by such dismissal, petitioner challenged the impugned Order-in-Appeal before Hon’ble High Court.

HELD

Hon’ble High Court held that dismissing an appeal on the ground of lack of proof of an authorised signatory, without providing an opportunity to rectify the defect, violates principles of natural justice and fair play. It condemned the practice of dismissing appeals based on hyper-technicalities and emphasised that respondent must allow petitioner to demonstrate authorisation before rejecting appeals. Accordingly, Court set aside the impugned order and restored the appeal directing the Commissioner (Appeals) to hear the matter on merits and pass a reasoned order after granting a fair hearing.

95. MeghmaniOrganocem Ltd vs. Union of India

(2024) 22 Centax 388 (Guj.)

Dated: 14^th June, 2024

Refund of IGST to SEZ unit on credit received through Input Service Distributor (ISD) cannot be denied under the pretext that only supplier to SEZ is eligible to claim refund under Rule 89(4) of CGST Rules.

FACTS

Petitioner was an SEZ unit engaged in business of chemical manufacturing. It filed an application for refund of unutilised Input Tax Credit (ITC) on exports made without payment of tax under Rule 89(4) of the CGST Rules which was duly granted. However, Commissioner (Appeals) subsequently directed respondent to file an appeal, on the ground that under GST law, only suppliers of goods or services could claim a refund for supplies to SEZ units. Appellate Authority set aside the refund. Aggrieved by such order the petitioner filed an application before Hon’ble High Court.

HELD

Hon’ble High Court held that the petitioner was entitled to a refund of unutilised ITC, applying the principles laid down in the decision of Britannia Industries Ltd. vs. Union of India 2020 (42) G.S.T.L. 3 (Guj.) (pending before Supreme Court). It was held therein that it is not possible for suppliers to file refund claims for supplies to SEZ units under Rule 89 of CGST Rules when an ISD distributes ITC on input services. It further held that the Appellate Authority had erred by ignoring the dictum of law merely on the ground that appeal is pending before Supreme Court, especially where no stay has been granted and, also where the facts in the present case were substantially similar, leaving no basis for a different interpretation. Accordingly, Court quashed the order passed by Appellate Authority and restored the refund sanctioned deciding the matter in favour of petitioner.

96. Prince Steel vs. State of Karnataka

(2024) 24 Centax 314 (Kar.)

Dated: 18^th September, 2024

Blocking of Electronic Credit Ledger purely based on report of enforcement authority without providing prior opportunity of being heard does not sustain.

FACTS

Respondent had blocked the electronic credit ledger of petitioner without providing any prior hearing or specific reasons for initiating such a stringent action. Further, the decision to block electronic credit ledger was based solely on the reports received from the Enforcement Authority stating that ITC was fraudulently availed by the petitioner. Being aggrieved by such blocking of electronic credit ledger, hence the petition.

HELD

The Hon’ble High Court held that impugned order blocking petitioner’s electronic credit ledger was violative of principles of natural justice and procedural requirements mandated under Rule 86A of the CGST Rules, 2017. The Court further observed that impugned order lacked independent and cogent reasons to believe that ITC was fraudulently availed or ineligible. Consequently, impugned order was quashed, and respondent was directed to immediately unblocking of the electronic credit ledger.

97. Otsuka Pharmaceutical India Private Limited vs. Union of India

(2024) 24 Centax 141 (Guj.)

Dated: 19^th September, 2024

Demand for erroneous refund made alleging violation of Rule 96(10) of CGST Rules cannot sustain for exports made with payment of tax by utilizing imported duty-free goods under Advance Authorisation / EOU Scheme during 23^rd October, 2017 to 9^th October, 2018.

FACTS

Petitioner was engaged in manufacture and export of pharmaceutical products on payment of IGST by utilising the imported duty-free raw materials against Advance Authorisation during the period from 23^rd October, 2017 to 9^th October, 2018. Respondent concluded that there was violation of Rule 96(10) of CGST Rules and demanded IGST on the exports made with the payment of tax during 23^rd October, 2017 to 9^th September, 2018 based on the decision of Gujarat High Court in case of Cosmo Films Ltd. vs. Union of India (2020 (43) G.S.T.L. 577 (Guj.)). Hence a writ petition.

HELD

The Hon’ble High Court held that there was a mistake in the earlier decision of Gujarat High Court in case of Cosmo Films Ltd. vs. Union of India (2020 (43) G.S.T.L. 577 (Guj.)), which was subsequently rectified vide order dated 19^th September, 2024 (Cosmo Films Ltd. vs. Union of India (2024) 22 Centax 553 (Guj.)).Therein, it was confirmed that the Notification No. 54/2018-CT restricting export with payment of tax, where the benefit of EOU/Advance Authorisation is taken, would apply prospectively from 9^th October, 2018. Therefore, demand made in respect of exports made with payment of IGST during 23^rd October, 2017 to 9^th October, 2018 was set aside.

BCAJ Admin

I. HIGH COURT

82. Parsvnath Traders vs. Principal Commissioner, CGST

2023 (77) G.S.T.L. 413 (P&H.)

Date of Order: 27th July, 2023

Amount deposited during search operation cannot be treated as voluntary deposit and retained by the department where no proceedings were initiated under section 74(1) of CGST Act.

FACTS

Petitioner was engaged in trading of chemicals. Respondent searched the business premises and informed the petitioner that it was in possession of bogus invoices from the supplier without actual receipt of goods and had illegally availed ITC. Further, petitioner was forced to deposit tax amount on the same day and respondent did not provide the copy of statements recorded. On conclusion of search operations, neither any SCN nor any Order determining tax liability as per GST Law was provided to the petitioner. Accordingly, the petitioner requested the respondent to refund the amount deposited during the search. Thereafter, an order rejecting such refund was issued by respondent contending that deposits made voluntarily vide GST DRC-03 amounted to self-ascertainment as per section 74(5) of CGST Act.

Being aggrieved, petitioner preferred a writ petition before Hon’ble High Court seeking refund of amount forcefully deposited during search.

HELD

Hon’ble High Court, relying on its own decision in cases of William E-Connor Associates & Sourcing (P.) Ltd vs. Union of India & Others [76 GSTL 494 (P&H)], Diwakar Enterprises (P.) Ltd vs. Commissioner of CGST & Others [2023 (74) GSTL 202 (P&H)] and Modern Insecticides Ltd vs. Commissioner, CGST and Others [2023 (78) GSTL 423 (P&H)] held that amount deposited during search cannot be retained by department if no proceedings were initiated under Section 74(1) of CGST Act. Further, it was held that the amount deposited during search under stress does not amount to “self-assessment” or “self-ascertainment” as per section 74(5) of CGST Act. Accordingly, Hon’ble High Court instructed respondent to refund the amount deposited back to petitioner within a period of 6 weeks along with interest @ 6 per cent.

Thus, the petition was allowed in favour of the petitioner.

83. TVL. Raja Stores vs. Assistant Commissioner (ST)

2023 (77) GSTL 367 (Mad.)

Date of Order: 11th August, 2023

Audit as per section 65 of CGST Act cannot be conducted by department subsequent to closure of business operations and order for cancellation of registration was passed.

FACTS

Petitioner was a partnership firm registered under GST Act, 2017. It made an application before the department for closure of business. An order was issued allowing the petitioner to close its business with effect from 31st March, 2023. Subsequently, a notice dated 19th May, 2023 was issued for conducting audit under section 65 of CGST Act. Petitioner being aggrieved, filed a writ petition challenging the notice issued for conducting audit before Hon’ble High Court

HELD

It was held that section 65 of CGST Act specifically states that audit can be conducted for “any registered person” “for such period”, “for such frequency” and in “such manner”. Hence, unregistered persons are exempt from purview of the said section. Respondent failed to conduct audit for all these years from 2017–18 till 2021–22. When the section provides for periodical audit, respondent cannot suddenly wake up as per its own sweet will and conduct an audit. However, assessment proceedings could be initiated under sections 73 and 74 of CGST Act against petitioner.

Hence, the impugned order was quashed.

84 Kesoram Industries Ltd vs. Commissioner of Central Tax

2023 (78) GSTL 291 (Tel.)

Date of Order: 20th September, 2023

Garnishee proceedings initiated under section 79(1)(c) of CGST Act without issuing any prior notice are arbitrary and violate the principles of natural justice.

FACTS

Petitioner was engaged in manufacture and supply of cement. A letter was issued to the petitioner on  19th June, 2023 demanding interest of ₹1,28,97,335 on account of delay in payment of tax for the period from July 2017 to January 2023. Also, petitioner was further instructed to discharge the interest liability within 7 days failing which recovery proceedings would be initiated as per section 79 of CGST Act. In its response, petitioner submitted two letters dated 28th June, 2023 and 25th July, 2023, stating that they had already paid interest of ₹13,07,942 on delayed payment of tax dues. However, disregarding the submissions made by petitioner, garnishee proceedings were initiated under section 79(1)(c) of CGST Act vide notice dated 25th July, 2023 and 28th July, 2023 without issuing any SCN or providing opportunity of being heard.

Aggrieved by the same, a writ petition was filed before Hon’ble High Court.

HELD

It was held that respondent had erred while initiating the impugned garnishee proceedings since neither any SCN under section 73 or 74 of CGST Act was issued nor any opportunity of personal hearing was provided resulting in breach of principles of natural justice. Thus, the impugned proceedings are liable to be set aside with a discretion to respondent for initiating fresh proceedings in accordance with law.

85. Ganesh Steel (India) vs. State of Punjab

2023 (79) GSTL 168 (P&H)

Date of Order: 31st October, 2023

Refund of tax fine and penalty deposited for release of goods confiscated under section 130 of CGST Act pursuant to a favourable ordercannot be denied under the pretext that the department intends to file an appeal especially where no appeal was filed for a period of more than 1 year 4 months.

FACTS

An order dated 5th September, 2019 was passed by respondent demanding tax penalty and fine under section 130 of CGST Act amounting to ₹8,80,992. Petitioner for the sake of getting back the goods paid the amount. Subsequently, an appeal was preferred which was decided in favour of the petitioner. Accordingly, the petitioner applied for a refund of the entire amount of ₹8,80,992. Thereafter, application for refund was rejected and refund was declined via order dated 28th April, 2023 by State Tax Officer on the ground that department was under process of filing an appeal against order passed by Appellate Authority which was not filed even after more than 1 year and 4 months had lapsed. Aggrieved, a writ petition was filed before Hon’ble High Court.

HELD

It was held that the department was merely delaying the refund accrued to petitioner since no appeal was filed against the order passed by Appellate Authority for a period of more than 1 year 4 months. Thus, order dated 28th April, 2023 rejecting refund of petitioner was quashed, and respondent was directed to refund the amount within a period of 2 weeks.

86 Praveen Bhaskaran vs. Union of India

2023 (79) GSTL 210 (Ker.)

Date of Order: 20th September, 2023

ITC cannot be denied merely due to non-reflection of transaction in GSTR 2A without examining evidence submitted and giving the opportunity of being heard.

FACTS

ITC claimed by petitioner was denied by an order on the ground that ITC was not reflected in GSTR 2A since the supplier of petitioner had not mentioned supplies while filing GSTR 1. Also, no proof of payment of GST to the department was provided by the petitioner.

Aggrieved, a writ petition was filed before Hon’ble High Court.

HELD

It was held that ITC cannot be denied merely because it was not appearing in GSTR 2A of petitioner. High Court relied on the decisions of Diya Agencies vs. State Tax Officer [2023 (10) Centax 266 (Ker.), Suncraft Energy Pvt Ltd vs. Assistant Commissioner, State Tax, Ballygunge Charge [2023 (77) GSTL 55 (Cal.)] and State of Karnataka vs. M/s. Ecom Gill Coffee Trading (P.) Ltd [2023 (72) GSTL 134 (S.C.)]wherein it was held that reasonable opportunity should be provided to the taxpayer for submitting evidences and ITC should be allowed if the claims were bonafide and genuine. Impugned order for denial of ITC was thus set aside and matter was remanded back to respondent for examining evidences.

BCAJ Admin

I. HIGH COURT

27 Saiher Supply Chain Consulting (P.) Ltd vs. UOI  [2022 134 taxmann.com 154 (Bombay)] Date of order: 10th January, 2022

The Order of Hon’ble Supreme Court issued under Misc. Application No. 665 of 2021 in Suo Motu Writ Petition (Civil) No. 3 of 2020 extending the period of limitation is also applicable to refund applications filed under section 54(1) of the CGST Act

FACTS

The Petitioner filed two refund applications which were rejected by the officer by issuing deficiency memos. When the third application was filed, the same was rejected as time-barred. Petitioner filed a writ petition praying for the restoration of the third refund application and a declaration that Rule 90(3) of the Central Goods and Services Tax Rules, 2017 is ultra vires the Constitution of India.

HELD

Relying upon the Extension of Limitation (Order dated 23rd September 2021), reported in 2021 SCC Online SC 947, passed by the Hon’ble Supreme Court in Misc. Application No. 665 of 2021 in Suo Motu Writ Petition (Civil) No. 3 of 2020 and considering that the third refund application is filed between the period 15th March, 2020 and 2nd October, 2021, the Hon’ble High Court held that the exclusion of the period of limitation falling between 15th March, 2020 and 2nd October, 2021 would also apply to the refund applications filed under section 54(1) of the CGST Act and consequently, the said refund application is within time. The Court however did not go into the question of the validity of the Circular dated 18th November, 2019 and the Rule 90(3) of the Central Goods and Services Tax Rules, 2017.

Note: The above period of 15th March, 2020 to 2nd October, 2021 has been further modified to 15th March, 2020 till 28th February, 2022 by the Order of Hon’ble Supreme Court dated 10th January, 2022.

28 Meritas Hotels (P.) Ltd. vs. State of Maharashtra  [2021 133 taxmann.com 222 (Bombay)] Date of order: 3rd December 2021

The time limit for filing of the appeal under section 107 of the Act would commence from the receipt of a scanned copy of the impugned order by the Petitioner and not from the date of uploading of the appeal on the GST portal

FACTS

In this case, the petitioner did not file the GST return for February, 2019 on account of financial crunch. The petitioner was issued notice for non-filing of return followed by summary assessment order in Form GST ASMT-13 under section 62 of the MGST Act, 2017 fixing the liability of tax amount of Rs. 20,96,888 along with interest of Rs. 32,502 and penalty of Rs. 23,06,577 was made. The physical true copy of the assessment order was not served on the petitioner, nor was the same uploaded on the GSTN portal. However, the scanned copy of the impugned assessment order was sent by email to the General Manager of the petitioner company on the very same day. This email communication remained to be reported by the General Manager to the management of the petitioner company. The petitioner filed GSTR-3B for the said month on 14th June, 2019 based on the actual books of accounts. The petitioner came to know about the impugned assessment order only when their bank account came to be attached on 1st July, 2019. As the impugned assessment order was unavailable online, the petitioner had to file a physical appeal. The petitioner even tried to file the online appeal on the GSTN portal immediately after the order was uploaded on the GSTN portal. However, the status on the portal was showing that there is a delay in filing the appeal.

HELD

The High Court observed that the issue in the present case is whether, in the facts of the present case, the period of limitation to file an appeal under section 107(1) of the said Act would commence from the date when the impugned assessment order is uploaded on the GSTN portal or from the date of service upon the petitioner of the scanned copy of the impugned assessment order by email. The High Court further observed that it is not the case of the petitioner that the General Manager was not competent and/or not authorised to receive the communication of the impugned assessment order on behalf of the petitioner and accordingly held that failure on part of the General Manager to inform the petitioner regarding receipt of the impugned assessment order will not have the effect of extending the period of limitation prescribed under sub-section (1) of section 107 of the said Act. The Court did not accept the contention of the petitioner that the limitation prescribed by sub-section (1) of section 107 of the Act will commence from the date when the impugned assessment order is uploaded on the GSTN portal and that except for communication of the impugned assessment order on the GSTN portal, all other communications are to be disregarded for the purpose of sub-section (1) of section 107 of the said Act. Referring to Rule 108, the Court held that Rule 108 no doubt prescribes that the appeal has to be filed electronically, but it nowhere prescribes that the same is to be filed only after impugned assessment order is uploaded on GSTN portal online. Relying upon the decision of Hon’ble Supreme Court in the case of Assistant Commissioner (CT) LTU, Kakinada, and Ors. vs. Glaxo Smith Kline Consumer Health Care Limited, Hon’ble Court held that the policy behind the Act on the constitution of a special adjudicatory forum is meant to expeditiously decide the grievances of a person who may be aggrieved by the order of the adjudicatory authority. The Hon’ble High Court also did not apply the ratio of the decision of Hon’ble Gujarat High Court in the case of Gujarat Tate Petronet Limited vs. Union of India 2020-VIL-426-GUJ, wherein it was held that filing of the appeal and uploading of the order are intertwined activities. Hence though the physical copy of the adjudication order was handed over to the petitioner, the time period to file an appeal would start only when the order is uploaded on the GST portal as without the order being uploaded, the petitioner could not file the appeal and therefore, the contention raised on behalf of the respondents that the uploading of the order and filing of the appeal are two different processes is not tenable in law.

Note: With great respect, the author (MT) is of the view that the ratio of the Three Members’ decision of Hon’ble Gujarat High Court is more appropriate as the procedure for filing an appeal under Rule 108 electronically cannot be implemented unless the order is uploaded on the GST portal.

29 St. Joseph Tea Company Ltd. vs. State Tax Officer [2021 133 taxmann.com 3 (Kerala)]  Date of order: 17th June, 2021

The recipients shall not be denied the claim of ITC on the ground of non-appearance of the credit in GSTR-2A, if the supplier is restrained from the filing of GST returns for circumstances beyond his control, provided the supplier has paid the tax to the Government

FACTS

The petitioner, a registered dealer under the Kerala Value Added Tax Act, had migrated to the Goods and Services Tax Act regime and applied for registration under the GST statutes. Having failed to obtain registration due to technical glitches in the GST portal, the petitioner filed a writ petition, and by an interim order, he was permitted to apply for registration afresh. Accordingly, he was granted registration afresh from 9th March, 2018. Even though the issue of registration was thus solved, the petitioner’s grievance about the inability to comply with the requirements in terms of the statutes for the period from 1st July, 2017 to 9th March, 2018 subsisted. As the petitioner was unable to upload the returns for the period from 1st July, 2017 to 9th March, 2018 and remit tax, the petitioner’s customers could not claim Input Tax Credit (ITC), and many of them stopped doing business with the petitioner. The department also started issuing notices in Form GST Asmt-10 to the petitioner’s customers, citing discrepancies in the return.

HELD

The Hon’ble Court observed that the department ought to provide the petitioner opportunity for statutory compliance for the period prior to 9th March, 2018. However, as stated by the respondent, it is technically impossible to make changes in the GST portal for providing an opportunity for an individual assessee to comply with the statutory requirements from a date prior to its registration. In such circumstances, the Hon’ble Court held that the only possible manner in which the issue can be resolved is for the petitioner to pay tax for the period covered by provisional registration from 1st July, 2017 to 9th March, 2018 along with applicable interest under Form GST DRC-03 against the show cause notice (SCN) or statement. If such payment is effected, the recipients of the petitioner under its provisional registration (ID) for the period from 1st July, 2017 to 9th July, 2018 shall not be denied ITC only on the ground that the transaction is not reflected in GSTR 2A.

30 Evertime Overseas Pvt Ltd. vs. Union of India [2021 (55) GSTL 257 (Bombay)] Date of order: 8th October, 2021

Refund of Goods and Service Tax paid cannot be withheld by the Revenue merely on the ground of pending Investigation

FACTS

Petitioner had filed a refund application under section 16 of the Integrated Goods and Service Tax Act, 2017 r. w. s. 54 of the Central Goods Service Tax Act, 2017, on account of making zero-rated supply. However, the application for refund was not processed on the ground that an investigation was pending and to secure the interest of revenue. Being aggrieved by such non-processing of the refund, the petitioner submitted an appeal before the Hon’ble Bombay High Court.

HELD

It was held that the petitioner’s application for refund shall be processed expeditiously as per law and directed the department to dispose of the refund application in an expeditious manner after passing a reasoned order based on the merits of the case.

31 Assistant State Tax Officer vs. VST and Sons  (P) LTD.  [2021 (55) GSTL 259 (Kerala)] Date of order: 22nd July, 2021

Transportation of used vehicles categorized as used personal effects are exempted from the requirement of E-Way Bill

FACTS

Respondent filed a writ petition challenging the detention of “Range Rover” motor vehicle while being transported as used personal vehicle from Coimbatore to Thiruvanthapuram. The motor vehicle was new and ran only for 43 kms. The department detained the vehicle on the ground that transportation was done without generation of e-way bill. Aggrieved by such detention the Respondent filed a writ petition before the Hon’ble High Court.

HELD

The High Court relied upon the judgement of Kun Motor Company Private Limited vs. Assistant Commissioner of State Tax 2019 (21) GSTL 3 (Kerala HC) and held that used vehicles are to be categorised as “used personal effects” irrespective of how negligible they have been used. Goods classifiable as “used personal and household effect” are exempt from the requirement of e-way bill in terms of Rule 138(14)(a) of CGST Rules. Thus, there was no requirement for the generation of e-way bill.

32 Daulat Samirlal Mehta vs. Union of India  [2021 (55) GSTL 264 (Bombay)] Date of order: 15th February, 2021

An Arrest cannot be made merely because certain sections of the Central Goods and Service Tax provide for the same for specific violations or offences

FACTS

The petitioner, aged around 65 years, was a director of Twinstar Industries Limited and Originet Technologies Limited. During 2018 an investigation was initiated for the alleged fraudulent availment and utilization of Input Tax Credit (ITC) based on bogus invoices without actual receipt of goods or services. Summons were issued to the petitioner under section 70 of CGST Act on several occasions. In response to the summons, the petitioner appeared before the investigating officer and his statements were recorded on five occasions. After the fifth interrogation, the petitioner was arrested and sent to judicial custody. Petitioner was accused of committing an offence under section 132(1)(c) of CGST Act for availment of ITC around Rs.122.59 crores on strength of bogus invoices and offence under section 132(1)(b) and section 132(1)(c) of CGST Act for issuing bogus invoices and wrongfully passing ITC approximately Rs.191.66 crores without actual supply of goods or services. The petitioner, without admitting the allegations, filed three compounding applications under section 138 of CGST Act, one his personal account and the other two on behalf the two companies in which he is a director to avoid multiple proceedings as well as to avoid rigours of prosecution besides any further prejudice to his personal liberty. With the aforesaid grievance, the petitioner filed a writ petition before the Bombay High Court seeking bail.

HELD

It was held that the requirement under subsection (1) of section 69 of CGST Act is “reasons to believe” that not only a person has committed any offence as specified but also as to why such person needs to be arrested. The primary intention of the Central Goods Service Tax Act is to collect the revenue, and arrest is only incidental to achieve the main objective. An arrest cannot be made only because the offence is cognizable and non-bailable. The officers have to take into account whether arrest is necessary to prevent further commission of offences or tampering of evidences or influence of witness or producing before the courts. Further, once compounding under section 138 of the Central Goods Service tax Act is done, no further proceedings shall be initiated, and all the existing proceedings for the same offence shall stand abated. The Court concluded by granting bail to the petitioner subject to requisite bond, surety and conditions.

II. AUTHORITY FOR ADVANCE RULING

33 Suez India Pvt. Ltd.  [2022-TIOL-15-AAR-GST] Date of order: 31st December, 2021

Even though there are two separate contracts, the contract for design and construction and operation and management for water loss management is a single indivisible contract

FACTS

Applicant entered into a performance-based contract for water loss management with Kolkata Municipal Corporation which includes construction of water distribution networks and operation and maintenance. The contract was awarded to him for a single lump sum amount, however, for the contract signing purposes, two separate contracts were prepared namely design and construction phase and operation and maintenance phase along with the Letter of Award. Applicant therefore, wished to know whether such an agreement be considered as divisible supplies or a single contract under the GST law and the taxability thereof.

HELD

Contract for water loss management made by the applicant with Kolkata Municipal Corporation which includes construction of water distribution networks and operation and maintenance shall be treated as an indivisible single contract and qualifies as works contract as defined under clause (119) of section 2 of the GST Act. Such composite supply of works contract gets covered under entry serial number 3(iii) of the Notification No. 20/2017-Central Tax (Rate) dated 22nd August, 2017 and therefore, would attract tax @ 12% with effect from 22nd August, 2017 – For the period from 1st July, 2017 to 21st August, 2017, however the supply would be taxable @ 18% vide entry serial number 3(ii) of the Notification No. 11/2017-Central Tax (Rate).

34 M/s Emcure Pharmaceuticals Ltd.  [2022-TIOL-10-AAR-GST] Date of order: 4th January, 2022  [AAR-Maharashtra]

Recoveries made for providing canteen facility, bus facility and notice pay recovered from employees are not liable to GST

FACTS

The Applicant, a pharmaceutical company, makes recoveries at subsidized rates for providing canteen and bus transportation facilities to its employees and engages third- party service providers to provide the said facilities. These service providers raise invoices with applicable GST. The Applicant recovers a certain portion of the consideration paid to such third-party service providers from its employees. Also, there are instances where the employees leave without serving the mandated notice period. In such cases, the salary is deducted for the tenure not served as compensation for the breach of terms of Employment Agreement. The question before the Authority is whether such recoveries made are liable to GST.

HELD

The Authority noted that the canteen services are provided by the third-party service providers, and the company is not in the business of providing canteen facility, thus it is not their output service. Thus, the provision of a canteen facility is not a transaction made in the course or furtherance of business in terms of section 7 of the CGST Act, 2017 for a transaction to qualify as supply. Essentially it has to be made in the course or furtherance of business. Hence the canteen services cannot be considered as a ‘supply’ to attract GST payable on such recoveries. Also, recoveries made for the bus facility will not be liable for GST. With respect to the notice pay recovery, the Authority noted that the services by an employee to the employer in the course of or in relation to his employment are neither supply of goods nor supply of service. The employee opting to resign by paying an amount equivalent to month of salary in lieu of notice, has acted in accordance with the contract, and that being the case, no question of any forbearance or tolerance does arise. Thus notice pay recovered is also not liable to GST.

35 M/s. Chikkaveeranna Sweet Stall  [2022-TIOL-08-AAR-GST]  Date of order: 24th November, 2021 [AAR-Karnataka]

GST rate for composition tax payers engaged in the manufacture of sweet and namkeens and doing only the counter sales, is one  percent

FACTS

Applicant is a composition taxpayer engaged in the manufacture of sweets and making counter sales without having any facility of restaurant or hotel. The question before the authority is the rate of GST applicable on the same.

HELD

The Authority held that since the applicant is into the manufacture of sweets, he can opt to pay GST at one per cent of the turnover subjected to the condition mentioned in the Notification No. 8/2017 (Central Tax) dated  27th June, 2017 and further amended notifications related to composition tax.

BCAJ Admin

66 Sunny Jain vs. UOI

[2022] 145 Taxmann.com 601 (Del)

Date of order: 5th December, 2022

The non-payment of consideration within a period of 180 days cannot be the ground for blocking ITC in terms of Rule 86A of the CGST Act. The ineligible credit mentioned in Rule 86A covers only such ITC which has suffered ineligibility on account of situations mentioned in the said Rule and not any other cases of ineligibility. Rule 86A is a drastic measure and has to be construed strictly.

FACTS

The petitioner challenged the action of the GST officer blocking a certain amount of ITC which was credited to the Electronic Credit Ledger (ECL) of the petitioner. The assessee was intimated about the said blockage of ITC by email without any inquiry and without affording the petitioner opportunity of being heard. The petitioner had earlier filed his objection with the department for blocking of the ITC for a period of eighteen months contending that it has been done without inquiry and is beyond the time limit prescribed in Rule 86A of the CGST Act. The petitioner also submitted various documents called for by the GST officer. The GST officer directed the petitioner to deposit the interest on account of non-payment of consideration to a supplier, within a period of 180 days as required in terms of section 16(2) of the Central Goods and Services Tax Act, 2017 (hereafter “the CGST Act”) and Rule 37 of the CGST Rules. The petitioner disputed the said demand on the ground that they are not liable to pay interest as the said amount was never utilised. Before the High Court, the department filed an affidavit to the effect that the ECL of the petitioner has been blocked pursuant to an email received from the Directorate General of Analysis and Risk Management (DGARM) that contained the list of taxpayers who have availed inadmissible credit and had petitioners name in it. The department claimed that in view of the said e-mail, they have a reason to believe that the ITC available in the ECL of the petitioner had been wrongly availed and therefore, the same was blocked on 11th February, 2020.

HELD

Referring to the provision of Rule 86A, the Hon’ble Court held that the restriction applies, where the ITC available in the ECR has been “fraudulently availed” or is “ineligible” as specified in the said rule. The Court noted that in the present case, there is no allegation that the petitioner has fraudulently availed the ITC lying to the petitioner’s credit in the ECR and the only reason for blocking the ECL is that the petitioner is ineligible to take ITC in view of section 16(2) of the CGST Act. The Court held that the said provision is a drastic measure and therefore, can be taken only when the conditions for taking such measures are met as the statutory provisions empowering harsh measures such as freezing the assets of a person, have to be strictly construed. The Court held that the words “inasmuch as” used in Rule 86A(1) qualify the word ‘ineligible’ and is not a phrase of wide import and hence is used in a restrictive sense to qualify the subject. Thus, the use of the expression “inasmuch as” restricts the scope of ineligibility to the conditions as set out in sub-clauses of Rule 86A(1) of the CGST Rules. It is only if any of these conditions are satisfied that the restriction under Rule 86A(1) can be imposed in respect of ITC on the grounds that the ITC available in the taxpayer’s ECL is ‘ineligible’. The Court then referred to the provisions of section 16(2) and provisos thereto and held that it is, clearly, not the scheme of the CGST Act to restrain a person from availing the ITC till he has paid the supplier for such goods/services.  The second and third provisos to section 16(2) of the CGST Act make it clear that a party is not disentitled to avail the ITC in respect of goods/services prior to his discharging the liability to pay the supplier for such goods/services and tax thereon. However, if the taxpayer does not discharge his liability to the supplier within a period of 180 days, he is required to account for the benefit of the ITC availed by the taxpayer along with interest as a part of the output liability. However, the taxpayer would be entitled to avail of the ITC once again on payment being made to the supplier. The Court thus held the respondents have completely misdirected themselves in proceeding on the basis that unless a taxpayer pays the supplier, he is ineligible to avail of the ITC lying to his credit in the ECL and directed the GST department to unblock the ITC available to the petitioner in his ECL.

67 OLA Fleet Technologies (P.) Ltd. vs. UOI

[2023] 146 taxmann.com 83 (Telangana)

Date of order: 16th March, 2022

The High Court held that calling upon the respondents to adjust IGST paid by the petitioner with CGST and SGST would amount to going beyond the statute and directs the petitioner to comply with the SCN issued demanding CGST/SGST and file a refund application in respect of IGST.

FACTS

The petitioner inadvertently mapped the State of Telangana as the State of Andhra Pradesh in its IT system and hence the IT system of the petitioner determined the nature of supply to be that of inter-state supply, though the transaction was very much within the State of Telangana and would therefore amount to intra-state supply. Consequently, the petitioner paid IGST instead of CGST/SGST. Hence, a show cause notice was issued to the petitioner demanding CGST/SGST. The petitioner filed the writ praying that the respondents be directed to adjust the amount of IGST against the CGST/SGST. The respondents objected to the same on the grounds that such an adjustment is beyond the provisions of CGST Act, TGST Act and IGST Act. The petitioner however relied upon the decision of Kerala High Court in the case of Saji S. Proprietor, Adithya and Ambadi Traders vs. Commissioner, State GST which allowed a similar petition.

HELD

The Hon’ble Court referred to the provisions of section 77 of the CGST Act and section 19 of the IGST Act which permits the refund of taxes paid erroneously by treating intra-state supply as inter-state supply. The Court also observed that Rule 92(1) lays down a procedure for sanctioning the refund. The Court held that calling upon the respondents to adjust IGST paid by the petitioner with CGST and SGST would amount to adopting a procedure, which is not provided under the relevant statute. The Hon’ble Court, therefore, did not agree with the decision of Kerala High Court in the case of Saji S Proprietor (supra) and directed the Petitioner to respond to show a cause notice with a liberty to file a refund application in respect of IGST erroneously paid.

68 Bharti Airtel Ltd vs. State of UP
[2022] 145 taxmann.com 326 (Allahabad)
Date of  order: 25th November, 2022

If the owner of the goods disputes and does not volunteer the payment of penalty specified in clauses (a) or (b) or (c) of section 129(1) of the Act, the department must initiate proceedings under sections 73, 74 or 75 of the CGST Act and penalty can be determined only in terms of section 122 of the CGST Act. In other words, in disputed cases, there is no provision for the determination of tax due under section 129 of the CGST Act.

FACTS

The Petitioner challenged the order purportedly to be passed in the exercise of the power under section 129 of the CGST Act and order dismissing the appeal filed by the petitioner against such order. The petitioner transported the goods on the strength of tax invoice, however, he failed to generate Part B of the E-way Bill. After the vehicle was intercepted, the petitioner generated the Part B of the E-way Bill, however despite that the revenue authorities passed a detention order after four days mainly on the grounds that when the vehicle was intercepted, Part B of the E-way Bill was not generated. A show cause notice was issued to the petitioner under section 129(3) of the CGST Act read with section 20 of the IGST Act. The petitioner submitted a detailed reply to the show cause notice and prayed that the show cause notice be dropped mainly on the ground that the tax was duly paid as was required under the Act and that Part B of the E-way bill was also uploaded prior to the passing of the detention order. Before the High Court petitioner contended that the order is bad in law as no proceedings under sections 73, 74 or 75 are initiated in the present case and the penalty can be determined only in terms of section 122 of the CGST Act. In other words, the petitioner submitted that in terms of the mandate of section 129, the proper officer is neither authorized nor justified in determining the tax or imposing the penalty as has been done by means of the impugned orders.

HELD

The Hon’ble Court held that under the scheme of the Act, the procedure for the determination of tax and penalty is contained in Chapter XV read with sections 122, 123, 125, 126, 127 and 128 of the Act and a parallel procedure is prescribed under section 129 of the Act in case of goods, which are in transit. The Court further held that if in the event the owner of the goods comes forward for payment of penalty as specified in clause (a) or (b) or (c) of section 129(1) of the Act and pays the same, the intent is to give quietus to the litigation. However, if the owner of the goods does not volunteer to pay the penalty, the department is well equipped to initiate proceedings by taking recourse to sections 73, 74, 75 of the Act r.w.s 122 for determination of tax and the penalty leviable.

The Court noted that in the present case, the department has proceeded to determine the tax liability as well as penalty only under the provisions of section 129 of the Act. However, on a plain reading of section 129, there is no provision for the determination of tax due, which can be done only by taking recourse to the provisions of section 73 or 74 of the CGST Act, as the case may be.

The Court, therefore, allowed the appeal and directed the department to refund the amounts paid by the petitioner for the release of the goods.

69 Aartos International LLP vs. Deputy Commissioner (Customs)

[2022] 145 taxmann.com 558 (Gujarat)

Date of order: 2nd December, 2022

Where the petitioner’s claim for refund could not be processed due to system limitations, and there being no other dispute, the Court allowed the petition and directed the refund along with applicable interest.  

FACTS

The petitioner exported the goods in the month of  February and March 2020 and shipping bills along with GSTR-3B and GSTR-1 are a part of the record. Out of three export invoices, the petitioner received a refund for only two invoices. As regards one invoice, they attempted to approach the department as there is a portal of the Department of Administrative Reforms and Public Grievance (“the CPGRAMS”). However, for two months, there was no response and subsequently, the matter was disposed of stating that Customs Mudra has forwarded various requests to ICEGATE and is also in touch with NIC Team and requesting them to look into and resolve the matter at the earliest. It was also stated that the exporter is advised to contact ICEGATE helpdesk. Aggrieved by the delays caused in processing the refund, the petitioner filed this writ.

HELD

The department filed an affidavit before the High Court contending that the Indian Customs EDI System (“the ICES” hereinafter) has an in-built mechanism to automatically grant a refund after validating the shipping bill data available in ICES against the GST Returns data transmitted by the GSTN. The department then explained the entire system process, validation checks, etc, and stated that since the process of sanction of refund claim is automatic and system driven, as and when the Shipping Bill will be available again in Scroll PC, the same will be taken up for processing for refund and the relevant amount of IGST paid with respect to each Shipping Bill or Bill of Export shall be electronically credited to the petitioner’s bank account. The Court held that as per provisions of section 54(6) read with Rule 91(2) of the CGST Rules the amount is required to be refunded and it is the respondent’s obligation to make an order sanctioning 90 per cent of the amount claimed in Form RFD-04 within a period of seven days from the date of acknowledgment received. There are no separate applications for the refund. The shipping bills are deemed to be refund applications when the goods are exported with the payment of tax. Admittedly, in the present case, it appears to be the difficulty at the end of the GST network or some error in the software itself which would require a cure. When nothing is disputed and everything is done electronically if there is any difficulty at the level of the mismatch or the processing of the claim of the refund, it becomes the duty of the GSTN to look into the same. The Court noted that there is nothing for the Court to adjudicate in this matter except pointing out the limitation of the software of the respondent department. The Court, therefore, allowed the refund along with applicable interest.

70 Sheetal Dilip Jain vs. State of Maharashtra

2022 (67) GSTL 11 (Bom.)

Date of order: 20th September 2022.

30 days’ time limit under section 73(8) of MGST Act for making the payment of tax and interest after the issuance of SCN cannot be reduced by the Adjudicating Authority as per its personal preference.

FACTS

Petitioner was issued a SCN under section 73(8) of MGST Act, demanding the payment of tax along with interest within 7 days on 2nd March, 2022. On 10th March, 2022,  the  impugned order was passed by the respondent confirming the liability before the completion of minimum time period of 30 days. Being aggrieved by the impugned order passed by the respondent, the petitioner preferred this petition before Hon’ble High Court.

HELD

The High Court held that the impugned order passed without application of mind ignoring and contradicting the basic provisions of the MGST Act and rules made thereunder are unacceptable and resulted in undue hardship to the public. Accordingly, the writ petition was allowed with cost.

71 Mahalaxmi Infra Contract Ltd vs. GST Council

2022 (67) GSTL 140 (Jhar.)

Date of order: 18th October, 2022

Rectification of inadvertent mistake by the supplier in mentioning details of the recipient in his FORM GSTR-1 for the passing of ITC should be allowed in absence of a mechanism to verify inward and outward supplies details.

FACTS

The petitioner was engaged in the business of mining and transportation of goods. While filing of FORM GSTR-1 for January 2019, the petitioner inadvertently quoted GSTIN of its own joint venture company MIPL(NKAS) instead of the recipient of service (Respondent). The petitioner realized this error quite late in June 2021 during the settlement of accounts with the recipient of supplies. However, by then, the time limit to amend the details of outward supply on GSTN portal had already lapsed. Further, MIPL(NKAS) did not utilise the ITC reflected in its GSTR 2A and provided an affidavit for the same. Also, there was no operative mechanism under GST Law to verify or correct the details of outward and inward supply during the said period. Being aggrieved by the absence of a mechanism at the GSTN portal to allow rectification of such errors to pass on the ITC to the respondent, the present petition was filed.

HELD

The Hon’ble High Court observed that the petitioner’s rationale for his inability to rectify this error in absence of a mechanism under GST Law was valid and hence communication for such discrepancy could not be made. Also, the Court held that there was no loss to the Government as the tax was already deposited and the respondent was rightly eligible for the ITC. The Court further held that the respondent should be allowed to rectify the said mistake by amending the details electronically through the portal or manual mode if the same is not possible due to technical reasons. Accordingly, the writ was allowed.

72 Chromotolab and Biotech Solutions vs.
Union of India
2022 (67) G.S.T.L. 160 (Guj.)
Date of order: 21st October, 2022.    

Refund cannot be denied when a refund application was submitted within the prescribed time limit on the common portal merely because CBIC Circular dated 15th November, 2017 required for physical submission of the application before the jurisdictional officer was done after the expiry of the time limit.

FACTS

The petitioner was engaged in trading of various goods used by pharmaceutical companies. During the period of August 2017 to October 2017, the petitioner made zero-rated supplies of goods to pharmaceutical companies located in the Special Economic Zones by issuing tax invoices. He  filed a refund application as per section 54 of CGST Act read with Rule 89 of CGST Rules, for the invoices raised during the period of August 2017 to October 2017 on unutilised input tax credit electronically on 28th December, 2018 and acknowledgment for the same was generated. However, documents were submitted physically to the jurisdictional officer belatedly. The respondent rejected the refund claim on the grounds that the refund application was time-barred by passing an order dated 19th November, 2019 since submission of physical printout of the application as required by Circular No. 17/17/2017 dated 15th November, 2017. Being aggrieved by such rejection, the petitioner preferred a writ before this Hon’ble Court.

HELD

It was held that Circular No. 17/17/2017 dated 15th November, 2017 providing the procedure of filing an application cannot have an overriding or restrictive effect over the applicability of GST Act in a manner prejudicial to the appellant. Accordingly, the date of filing of refund application on the common portal shall be considered for adhering to the requirement of section 54 of CGST Act and Rule 89 CGST Rules. Thus, the refund application was  allowed in favour of petitioner.

BCAJ Admin