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“Delhi HC: Proper Officer Must Carefully Evaluate The Response On Its Merits Before Forming An Opinion”

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Case title: Canara Bank v. Assistant Commissioner, DGST

Case no.:  W.P.(C) 4689/2024 & CM APPL. 19233-34/2024

Order on: 2nd April 2024

Coram: Hon’ble Mr. Justice Sanjeev Sachdeva & Hon’ble Mr. Justice Ravinder Dudeja

FACTS OF THE CASE

In the High Court of Delhi, a significant judgment was delivered on April 2, 2024, in the case of W.P.(C) 4689/2024 involving Canara Bank and the Assistant Commissioner, DGST. The case revolved around a disputed show-cause notice dated 25.09.2023, proposing a substantial demand against the petitioner under Section 73 of the Central Goods and Services Tax Act, 2017. The court’s meticulous analysis of the facts and legal submissions led to a pivotal decision that merits closer examination.

Canara Bank challenged an order dated 26.12.2023, whereby the impugned show-cause notice proposing a demand of Rs.20,07,15,517.00 against the bank was disposed of, and a demand including penalty was raised. The bank had submitted a detailed reply dated 19.10.2023 to the show-cause notice, providing full disclosures under each of the heads mentioned in the notice. However, the impugned order dismissed the reply as incomplete, unsupported by adequate documents, and unsatisfactory.

CONTENTIONS OF THE PETITIONERS

  • Canara Bank, represented by Mr. G. Shivadass, Senior Advocate, argued that their reply to the show-cause notice was comprehensive and should have been considered on its merits.
  • They contended that the order was cryptic and failed to address the points raised in their reply.

CONTENTIONS OF THE RESPONDENTS

  • The Assistant Commissioner, DGST, represented by Mr. Rajiv Aggarwal, ASC, defended the impugned order, asserting that the petitioner’s reply was inadequate and unsatisfactory.

LEGAL PROVISIONS

Section 73 of the Central Goods and Services Tax Act, 2017 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts.

ISSUE – The primary issue before the court was whether the impugned order dismissing the petitioner’s reply as incomplete and unsatisfactory was valid.

COURT’S ANALYSIS AND JUDGEMENT

Upon careful consideration of the submissions and perusal of the show-cause notice and the petitioner’s reply, the court found the impugned order untenable. Despite the petitioner’s detailed response, the order summarily dismissed it without proper consideration. The court noted that the Proper Officer had not applied his mind to the petitioner’s submissions and failed to seek further clarification if needed.

Consequently, the court set aside the impugned order and remitted the matter to the Proper Officer for re-adjudication. The Proper Officer was directed to intimate the petitioner regarding any additional details or documents required and provide an opportunity for a fresh hearing. The court clarified that it had not adjudicated on the merits of the case, leaving all rights and contentions of the parties reserved.

The judgment in W.P.(C) 4689/2024 underscores the importance of proper adjudication and due process in tax matters. It emphasizes the need for authorities to carefully consider the submissions made by taxpayers and provide them with a fair opportunity to present their case. By setting aside the impugned order and directing a re-adjudication, the court upheld the principles of natural justice and procedural fairness.

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Judgement Reviewed by – Chiraag K A

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Bonafide error in making GST return through GST forms should be allowed for rectification : Bombay HC

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TITLE : Star Engineers Pvt. Ltd v Union of India

CITATION : WP No 15368 of 2023

CORAM : Hon’ble justice G.S Kulkarni & Hon’ble justice Jitendra Jain

DATE:  14th  December, 2023

INTRODUCTION :

A writ was filed under Article 226 of the Constitution to challenge a communication issued by the Deputy Commissioner, State Tax whereby an application was filed by the petitioner for seeking approval to modify Form GSTR-1 for the financial year 2021-2022.

FACTS :

The petitioner is engaged in designing, developing, manufacturing and supplying wide range of electronic components for industrial purpose.  The petitioner had carried out delivery of the goods to several third party vendors and simultaneously issued invoices. The petitioner is a regular supplier of Bajaj Auto Limited (BAL). There was an error made during filing the form GSTR -1. The petitioner contends that BAL was made aware of such error and the correction was shown in GSTIN-1 form. However, the invoices submitted in favour of BAL did not appear in BAL’s form. The petitioner approached the Deputy commissioner of State Tax and requested the petitioner to rectify Form GSTR-1 to resolve the issue. The petitioner’s request was rejected.

COURT’S ANALYSIS

The court relied on Section 37, 38 and 39 of the CGST/MGST, 2017. The sections talk about furnishing details of outward, inward supplies along with details of return goods.

Section 37 talks about the returns from outward supplies of goods. Section 37(3) of the act states that if there are any error or omission in the return. Such error or omission can be rectified in the manner prescribed. Section 38 provides for the returns from inward supplies.  Section 38(3) provides that the rectification on inward supplies should be communicated to the supplier.  The section also provides for rectification of error under section 37(3).  Section 39 provides for furnishing of returns under which it is clearly provided that a return is required to be furnished electronically indicating the inward and outward supplies of goods and services or both, input tax credit availed, tax payable, tax paid or such other particulars in such form and manner, and within such time, as may be prescribed.

The court held that Section 37 cannot be interpreted in a manner that it would prevent the assessee from rectifying the mistakes.

The court held that “Any inadvertent error which had occurred in filing of the returns, once is permitted to be rectified, any technicality not making a window for such rectification, ought not to defeat the provisions of sub-section (3) of Section 37”

A bonafide, inadvertent error in furnishing details in GST return forms should be recognized and permitted to be corrected.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Sanjana Ravichandran

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A writ of certiorari can be issued only when there is an error in law: Bombay HC

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TITLE : Nutan Warehousing Company Pvt.Ltd V The commissioner, Central Tax, Pune

CITATION : WP 12775 of 2019

CORAM : Hon’ble justice G.S Kulkarni & Hon’ble justice Jitendra Jain

DATE:  11th December, 2023

INTRODUCTION :

A writ was filed under Article 226 of the Constitution to challenge the orders passed by the Appellate Authority for Advanced Ruling for Goods and Services Tax, Maharashtra on the issue whether the petitioner would be entitled to be exempted from service tax under the Notification No.12 of 2017, pertaining to loading, unloading, packing, storage or warehousing of agricultural produce.

FACTS :

The petitioner company is incorporated under the Companies Act of 1956 which carried out the business of warehousing, cold storage and refrigeration. The petitioner also has licence for carrying our their business. The petitioner has let out its warehouse to Unilever India Exports Ltd on payment of compensation as per the provisions of the Bombay Warehouses Act, 1959. The warehouse was used for manufacturing and bulk storing of tea from various qualities of tea. The petitioner was in the contention that tea procured in bulk would be exempted from central tax as it a  result of agricultural produce.

The authority fir advance ruling held in the negative and stated that tea procured were already processed and are undertaking the process of further manufacturing and packaging.

COURT’S ANALYSIS

The court stated that under Section 11 of the Central Goods and Services Act, the government can grant exemption from tax by passing a notification. The order of the AAR stating tea was a dried product is flawed.

It was held by the court that a writ of certiorari can be issued only when there is failure of justice and not merely because its available. There must be an error apparent on the face of the record as the High Court acts merely in a supervisory capacity.  The writ should be issued when there is a mistake in the jurisdiction and not when there is a scrutiny of an order passed by a authority. The court found that there is a error in law in the order passed by AAR and the writ was maintained.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Sanjana Ravichandran

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Goods and service tax litigation

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Abstract

GST Litigation means a unified tax system that has replaced multiple indirect taxes imposed by both the Central and State Governments. This new tax structure grants authority to both the Central and State Governments to impose and collect taxes on goods and services. The primary aim of implementing GST is to enhance the efficiency of tax collection, reduce corruption, and simplify inter-state movement of goods. GST serves as an indirect tax, effectively replacing various indirect taxes in India, including excise duty, VAT, and services tax. The Goods and Services Tax Act was enacted by the Parliament on March 29, 2017, and was implemented on July 1, 2017. GST is levied on the supply of goods and services, operating as a comprehensive, multi-stage, destination-based tax that is imposed at each value addition

 the litigation related to GST including – carry forward of transitional credits from the previous indirect tax system, eligibility for input tax credit on various goods/services and denial of refund claims, non or short payment of output tax liability – comes under the umbrella of GST Litigation.

.Crucial facts about GST

  • France was the first country to impose the Goods and Services Tax (GST).
  • The GST in India is modeled after the one in Canada.
  • The Vijay Kelkar Committee recommended that GST be implemented in India.
  • The Goods and Services Tax (GST) was imposed in India on July 1, 2017.
  • Assam was the first state to implement the GST.
  • GST has appointed Amitabh Bachchan as its brand ambassador.
  • The GST was enacted by Article 279 of the Indian Constitution.
  • In September 2016, the President of India established the GST Council.
  • The GST Council is now chaired by Finance Minister Arun Jaitley.
  • The GST Council currently has 31 members.

Important features of GST

  • Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. Here are some of the salient features of GST:
  • One Nation, One Tax: GST replaced multiple indirect taxes levied by the Central and State Governments, such as excise duty, service tax, value-added tax (VAT), and others. It brought uniformity in the tax structure across India, eliminating the cascading effect of taxes.
  • Dual Structure: GST operates under a dual structure, comprising the Central GST (CGST) levied by the Central Government and the State GST (SGST) levied by the State Governments. In the case of Inter-state transactions, Integrated GST (IGST) is applicable, which is collected by the Central Government and apportioned to the respective State. Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties.
  • Destination-based Tax: GST is a destination-based tax, levied at each stage of the supply chain, from the manufacturer to the consumer. It is applied to the value addition at each stage, allowing for the seamless flow of credits and reducing the tax burden on the end consumer.
  • Input Tax Credit (ITC): GST allows for the utilization of input tax credit, wherein businesses can claim credit for the tax paid on inputs used in the production or provision of goods and services. This helps avoid double taxation and reduces the overall tax liability.
  • GST would apply to all goods and services except Alcohol for human consumption. GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural Gas) would be applicable from a date to be recommended by the GSTC. Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products. Exports are zero-rated supplies. Thus, goods or services that are exported would not suffer input taxes or taxes on finished products.
  • Threshold Exemption: Small businesses with a turnover below a specified threshold (currently, the threshold is ₹ 20 lakhs for suppliers of services/both goods & and services and ₹ 40 lakhs for suppliers of goods (intra–Sate) in India) are exempt from GST. For some special category states, the threshold varies between ₹ 10-20 lakhs for suppliers of goods and/or services except for Jammu & Kashmir, Himachal Pradesh, and Assam where the threshold is ₹ 20 lakhs for a supplier of services/both goods & services and ₹ 40 lakhs for a supplier of goods (Intra–Sate). This threshold helps in reducing the compliance burden on small-scale businesses.
  • Composition Scheme: The composition scheme is available for small taxpayers with a turnover below a prescribed limit (currently ₹ 1.5 crores and ₹ 75 lakhs for special category states). Under this scheme, businesses are required to pay a fixed percentage of their turnover as GST and have simplified compliance requirements.
  • Online Compliance: GST introduced an online portal, the Goods and Services Tax Network (GSTN), for registration, filing of returns, payment of taxes, and other compliance-related activities. It streamlined the process and made it easier for taxpayers to fulfill their obligations.
  • Anti-Profiteering Measures: To ensure that the benefits of GST are passed on to the consumers, the government established the National Anti-Profiteering Authority (NAA). The NAA monitored and ensured that businesses did not engage in unfair pricing practices and profiteering due to the implementation of GST. All GST anti-profiteering complaints are now dealt with by the Competition Commission of India (CCI) from 1st December 2022.
  • Increased Compliance and Transparency: GST aims to enhance tax compliance by bringing more businesses into the formal economy. The transparent nature of the tax system, with the digitization of processes and electronic records, helps curb tax evasion and increase transparency.
  • Sector-specific Exemptions: Certain sectors, such as healthcare, education, and necessities like food and grains, are either exempted from GST or have reduced tax rates to ensure affordability and accessibility.
  • Accounts would be settled periodically between the Centre and the States to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly, IGST used for payment of SGST would be transferred by the Centre to the Importing State. Further, the SGST portion of IGST collected on B2C supplies would also be transferred by the Centre to the destination State. The transfer of funds would be carried out based on information contained in the returns filed by the taxpayers.

Landmark cases on GST laws

Case Details: Union of India v. Mohit Minerals (P.) Ltd. (2022 SCC OnLine SC 657…)

Facts of the Case

The assessee had challenged the IGST levy on a reverse charge basis on the Ocean Freight in respect of the import of goods under CIF contracts for which it was already paying the IGST at the time of import with the value of imported coal under the Customs laws. The Hon’ble Gujarat High Court held that the IGST levy on ocean freight is ultra-vires the levy provisions of the IGST Act. Against the said order, the Government filed the appeal before the Apex Court.

The Apex Court has observed that the ocean freight from a foreign location to a customs station in India in CIF import contracts has sufficient territorial nexus for levying IGST under reverse charge. On an interpretation of Sections 5(3) and 5(4) of the IGST Act, read with Section 2(93) of the CGST Act, the importer can be classified as the ‘recipient’ of the services. On this interpretation, the validity of the notifications levying GST under RCM on ocean freight has to be upheld.

Supreme Court Held

The Apex Court held that there is no legal fiction or power to bifurcate the composite supply into the supply of goods and supply of services and to levy reverse charge GST on the supply of services component under section 5(4) of the IGST Act. Given this, the GST on a reverse charge basis can’t be levied on ocean freight in CIF contracts as it is part of ‘composite supply’ attracting section 2(30) and section 8 of the CGST Act.

Given the above, it was held that the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, but it would violate Section 8 of the CGST Act and the overall scheme of the GST legislation as no such power can be noticed concerning interpreting a composite supply of goods and services as two segregable supply of goods and supply of services.

Some crucial sections of the GST act

1                 7    Meaning & Scope of Supply
2 9 Levy and Collection of CGST on Intra-State Supply
3 12  Time of Supply of Goods
4 13 Time of Supply of Services
5 15 Value of Supply of Goods & Services
6 16  Eligibility and conditions for taking input tax credit
7 17(5) ITC is not allowable on certain supplies (Blocked Credit)
8   18  ITC in Special Circumstances

My analysis and view

According to my analysis of the implementation of a fresh act, some disturbances are expected in its first days it is yet to be seen how innovation and the right set of plans can help with new compliances and over the route of expanding the economy.

Conclusion

Managing tax litigation in India, especially indirect tax (GST) litigation, can be a complex and challenging process. However, by staying informed on the latest GST laws, maintaining accurate records, seeking professional advice, and following the steps involved in the litigation process, businesses can effectively navigate GST disputes and minimize the risks associated with non-compliance.

Written by

Kaulav Roy Chowdhury

Footnotes

https://vidhilegalpolicy.in/research/a-fatal-blow-to-the-goods-and-services-tax/

https://irisgst.com/what-is-gst-litigation/

https://blog.saginfotech.com/highly-popular-industry-experts-share-views-over-gst-india

https://tgct.gov.in/tgportal/Docs/Model_GST_Law.pdf

https://www.creditmantri.com/gst-act-and-rules/

https://www.taxmann.com/post/blog/landmark-gst-case-laws/

 

 

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Department directed to refund IGST On Telecommunication Services Rendered By Vodafone Idea To Foreign Telecom Operators: Delhi High Court

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Title: Vodafone Idea Limited Versus Union Of India & Ors.

Citation: W.P.(C) No.2472/2023, CM Nos.9473/2023, 9474/2023 & 51283/2023

Decided on: 09.10.2023

Coram: Justice Vibhu Bakhru and Justice Amit Mahajan

Introduction

The Delhi High Court in the present matter directed the respondents to refund IGST On Telecommunication Services Rendered By Vodafone Idea To Foreign Telecom Operators. The Delhi High Court, while delivering its judgement made the observation that the date on which payments had been received from FTOs would be the relevant date for the purpose limitation under Section 54(1) of the CGST Act. Further, the court noted that the place of supply of services under Rule 6A of the ST Rules are similar to Section 2(6) of the IGST Act inasmuch as the services will be treated as export of services when (a) the provider of service is located in the taxable territory, (b) the recipient of the service is located outside India, and (d) the place of provision of the service is outside India.

Facts of the case

The petitioner holds a telecommunication license from Government of India, and is engaged in providing telecommunicationservices including services in the nature of International Inbound Roaming Services (“IIR”) and International Long Distance Services (“ILD”) to inbound subscribers of FTOs. The petitioner has entered into various service agreements (International Roaming Agreements) with FTOs for providing IIR and ILD services. Undisputedly, the consideration for providing IIR and ILD services to subscribers of FTOs during their visit to India, is paid by FTOs to the petitioner. The petitioner filed its applications for refund of IGST claiming that it had exported services and paid integrated tax as provided under Section 16 (3) of the Integrated Goods and Services Tax Act (hereafter ‘IGST Act’).

The petitioner has filed the present petition challenging the order passed by the Appellate Authority, wherein the petitioner’s appeal under under Section 107 of the Central Goods and Services Tax Act was dismissed. The petitioner is aggrieved by rejection of its claims for refund of Integrated Goods and Service Tax (hereafter ‘IGST’) in respect of telecommunication services rendered by the petitioner pursuant to agreements with Foreign Telecom Operators (FTOs). The petitioner’s appeal was rejected on mainly two grounds: First, that the services provided by the petitioner in respect of which refund of IGST was claimed did not as qualify export of services. And second, that the claims preferred were beyond the period of two years from the relevant dates and therefore, were barred by limitation.

Issue before the court

whether the telecom services provided by the petitioner to inbound subscribers of FTOs constitute export of services and whether its claims were within the period of limitation as specified under Section 54(1) of the CGST Act.

Court’s observation and analysis

In terms of Section 54(1) of the CGST Act, a claim for refund may be made within a period of two years from the relevant date. The Delhi High Court, while delivering its judgement made the observation that the date on which payments had been received from FTOs would be the relevant date for the purpose limitation under Section 54(1) of the CGST Act.

Further, the court noted that the place of supply of services under Rule 6A of the ST Rules are similar to Section 2(6) of the IGST Act inasmuch as the services will be treated as export of services when (a) the provider of service is located in the taxable territory, (b) the recipient of the service is located outside India, and (d) the place of provision of the service is outside India. There is no contention that the decisions rendered on the question of export of services in the context of Rule 3 of the Export of Services Rules, 2005 are also applicable to the controversy in question.

Hence, the present petition was allowed and the respondents were directed to refund the amounts as claimed by the petitioner.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Amrita Rout

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