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Burden To Prove The Actual Physical Movement Of The Goods Is Upon The Purchasing Dealer For Availament Of Input Tax Credit : High Court Of Allahabad

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Title: M/S Malik Traders v State Of U.P. And 2 Other

Citation: WRIT TAX No. – 1237 of 2021

Decided On: 18.10.2023

Coram: Justice Rahul Divedi

Introduction:

The current Writ Tax is accepted by the Court in view of the fact that G.S.T. Tribunal is not functional in the State of Uttar Pradesh pursuant to the Gazette notification of the Central Government, dated 14.09.2023. proceedings of Section 74 of UP GST Act was initiated demanding Rs. 12,32,148/- as wrong availment of input tax credit which was confirmed by the impugned order dated 6.3.2021.

Facts:

petitioner is a registered dealer, and he is engaged in the purchase and sale of waste materials, plastic scrap, paper scrap and metal scrap. The petitioner from April 2018 to September 2019 has disclosed the turnover of Rs. 34,22,634/- on which input tax credit of Rs. 6,16,074.12/- was availed.

Thereafter a show cause notice was issued on 23.1.2019 under Section 74 of UP GST Act on the ground of wrong availment of input tax credit to which a reply was submitted by the petitioner. Later on tax liability to the tune of Rs. 6,16,074/- along with penalty of Rs. 6,16,074/- total amount Rs. 12,32,148/- was demanded from the petitioner by the order dated 4.10.2019.

It was argued that the benefit of tax credit in the G.S.T. regime is being brought with intention to avoid cascading effect and once the tax has been charged on the bill and paid by the petitioner through banking channel, the benefit of input tax credit cannot be denied.

It is submitted that petitioner has rightly discharged its tax liability by paying the tax charged on the bills raised by the selling dealer and if the selling dealer have not deposited the tax so charged from the petitioner, the selling dealer shall be penalized and not the petitioner.

On the other hand Mr. Rishi Kumar, learned A.C.S.C. has supported the impugned orders and submitted that under Section 16 of UP GST Act it has been provided that input tax credit can be availed with certain conditions stipulated therein, in the event of non-fulfilment of such conditions as enumerated therein, the benefit of input tax credit cannot be accorded.

or availment of input tax credit, the petitioner is duty bound to prove beyond any reasonable doubt and establish that actual transaction took place and merely furnishing the details of tax invoices, e-way bills, GR is not sufficient. The petitioner was required to give details i.e. vehicle number which were used for transportation of goods, payment of freight charged, acknowledgement of taking delivery of goods and payment etc.

Court’s Analysis and Judgement:

In the case of State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private and in M/s Aastha Enterprises Vs. State of Bihar, it has been held that the burden to prove the actual physical movement of the goods is upon the purchasing dealer for availament of input tax credit.

According to Section 16 of U.P.G.S.T. every registered dealer can claim the benefit of input tax credit only on fulfilment of certain conditions as enumerated under the Act. And section 74 of U.P.G.S.T. it is clear that determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts empowers to issue notice that tax has not been paid or short paid or erroneously refunded or input tax credit has wrongly been availed or utilized by any reason or wilful misstatement or suppression of fact.

the petitioner has only brought on record the tax invoices, e-way bills, GR and payment through banking channel, but no such details such as payment of freight charges, acknowledgement of taking delivery of goods, toll receipts and payment thereof has been provided. Thus in the absence of these documents, the actual physical movement of goods and genuineness of transportation as well as transaction cannot be established thus the proceeding has rightly been initiated against the petitioner.

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Written By: Sushant Kumar Sharma

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A Petitioner cannot be permitted to argue the case without there being any pleading in support of his arguments: Allahabad High Court

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Title: M/S Millennium Impex Pvt. Ltd. v. Additional Commissioner Grade-2 (Appeal) – I State Tax, Noida And 2 Others

Citation: [WRIT TAX No. – 721 of 2020

Decided on: [WRIT TAX No. – 721 of 2020

Coram: Justice Piyush Agrawal

Introduction

The petitioner in this writ petition challenged the impugned order wherein the seizure of the goods was held to be valid. An argument was raised by the counsel for petitioner raised before the court that there was not intention to evade tax in this circumstance. However, it was noted that the petitioner nowhere mentioned this argument in his writ petition, hence, he cannot be allowed to raise such argument before the court. The Allahabad High court in this matter came to the conclusion that the petitioner cannot be permitted to argue the case without there being any pleading in support of his arguments.

Facts of the case

The petitioner is a registered company and is involved in the business of supply of supreme quality of metal seated zero leakage Ball Valves and purchaser of Ball Valve, Diaphragm Valves in bulk. The petitioner was supplying the said goods from New Delhi to Telangana via Agra, U.P. , where the same was intercepted. After physical verification of the goods, it was found that part B of the e-way bill accompanying with the goods, was not filled on which notice was issued proposing to impose tax @ 18 %. On deposit of impugned tax along with penalty, the goods were released and an order was passed  for the penalty order under Form GST MOV 09 under Section 20 of IGST read with Section 129 (3) of CGST Act observing that part B of e-way bill was not filled, hence the seizure of the goods was valid. Feeling aggrieved by the said order, the petitioner approached this court.

Court’s observation and analysis

The Allahabad High Court, in this matter has observed that no explanation was granted by the petitioner when a show cause notice was issued to him regarding the part- B of the e- way bill which was left blank. Even when the goods were released, he did not provide any explanation that under what circumstances, part B of the e-way bill was not filled. Further, he has also not assigned any reason for not complying the provisions under Rule 138.

The counsel for petitioner raised an argument before the court that there was not intention to evade tax in this circumstance. However, it has been noted that the petitioner has nowhere mentioned this argument in his writ petition, hence, now he cannot be allowed to raise such argument before the court.

The court referred to the Supreme Court judgement of Bachhaj Nahar Vs.Nilima Mandal and another, (2008) 17 SCC 491, wherein it was held,

When there is no prayer for a particular relief and no pleadings to support such a relief, and when defendant has no opportunity to resist or oppose such a relief, if the court considers and grants such a relief, it will lead to miscarriage of justice. Thus it is said that no amount of evidence, on a plea that is not put forward in the pleadings, can be looked into to grant any relief.

Further reference was also made to the case of Shri Shiv Prakash Vs. Additional District Judge (Matter under Article 227 No. 3423 of 2018, decided on 18.10.2019) Neutral Citation No. 2019: AHC:194707, wherein it was held that a party cannot make out a case on the basis of an evidence for which he/ she has laid no foundation in the pleadings. It is fairly well settled that no amount of evidence can prove a case for a party who has not set up the same in his/ her pleadings. Again in the case of Bharat Singh and others vs. State of Haryana and others,

(1988) 4 SCC 534, the Supreme Court held that when a point which is ostensibly a point of law is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evidence which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter- affidavit, as the case may be, the court will not entertain the point.

Taking into account all the above mentioned judgements, the Allahabad High court in this matter came to the conclusion that the petitioner cannot be permitted to argue the case without there being any pleading in support of his arguments. Hence, the present writ petition failed on the above ground and was dismissed.

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Written by- Amrita Rout

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GST | SHOW CAUSE NOTICE MUST CONTAIN FOUNDATION OF CASE ON WHICH ACTION IS NECESSITATED: ALLAHABAD HIGH COURT

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CASE TITLE:  M/S Abhay Traders v. Commissioner Commercial Tax U.P. Lucknow and Another (WRIT TAX No. – 1265 of 2022)

DECIDED ON: 14.7.2023

CORAM: Hon’ble Siddhartha Varma,J. Hon’ble Arun Kumar Singh Deshwal,J.

PETITIONER: – M/S Abhay Traders

RESPONDENT: – Commissioner Commercial Tax U.P. Lucknow and Another

COUNSEL FOR PETITIONER: – Aloke Kumar

COUNSEL FOR RESPONDENT: – C.S.C.,Ankur Agarwal,Gopal Verma

INTRODUCTION:

The Allahabad High Court has ruled that a show cause notice must include the grounds on which the action is being initiated. If the show cause notice is deemed adequate, the assessee has the option to respond and raise objections before the relevant authorities.

In the present case, the petitioner received a show cause notice under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, stating that Input Tax Credit was incorrectly claimed by the petitioner based on purchases from a fictitious firm. The petitioner was required to provide reasons as to why tax and penalty should not be imposed on them.

FACTS:

The counsel representing the petitioner asserted that the show cause notice lacked clarity and was not in accordance with the law. They argued that it was solely based on the report from the Special Investigation Branch.

On the other hand, the counsel representing the Department contended that the proceedings had not been initiated yet, and the show cause notice served as an opportunity for the petitioner to respond and present objections. Additionally, they argued that further action based on the show cause notice could only be taken if it appeared to the proper officer that tax had not been paid or was underpaid, or if there were issues with Input Tax Credit due to fraudulent activities, willful statements, or concealment of facts. According to them, the writ petition was premature and should be dismissed.

CASE ANALYSIS AND DECISION

Based on the precedent set in the case of Gorkha Security Services Vs. Government (NCT of Delhi) [(2014) 9 SCC 105], the court emphasized that a show cause notice must explicitly state the charges against the individual under scrutiny, ensuring compliance with the principles of natural justice.

The Court observed that the show cause notice was not unlawful merely because the Petitioner was asked to provide reasons as to why tax and penalty should not be imposed, rather than seeking a response on the merits of the allegations. The show cause notice issued under Section 74 (1) of the 2017 Act was deemed sufficient as it contained all the necessary details and grounds for its issuance. Consequently, it cannot be invalidated under Article 226 of the Constitution of India.

As a result, the petition was resolved by directing the petitioner to submit their reply and objections, along with evidence related to the disputed transactions, to the concerned authorities within a month.

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Written by- Mansi Malpani

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Delhi High Court set aside the show cause notice, order in original and order in appeal against the petitioner under section 107 of the GST act

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Title: Kartik Agarwal vs UOI

Date of Decision: 18.07.2023

+ W.P.(C) 9424/2023 and CM Nos. 36000/2023 & 36001/2023

CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU

     HON’BLE MR. JUSTICE AMIT MAHAJAN

Introduction

Delhi High Court set aside the show cause notice, order in original and order in appeal against the petitioner and also held that the GST’s cancellation The process of registering a taxpayer has far-reaching effects on the taxpayer and often causes their business to halt. Legislators could never have intended to exclude anyone from operating a lawful company. As a result, the step of cancelling the GST should only be used sparingly and when absolutely required.

Facts of the case

In essence, the petitioner is offended by the revocation of her GST Registration. The petitioner has also asked for a return of Rs. 20,00,000 (Rupees twenty lacs only), which she alleges was placed under duress from the respondent authorities rather than willingly in response to any demand. However, the petitioner does not want to seek any remedy in relation to the deposit, totaling 20,00,000 as requested in the petition at this time, according to the experienced counsel for the petitioner. However, the petitioner wants to retain her rights so that, if required, she might subsequently avail herself of the proper remedies in this respect.

Given the foregoing, the current petition is limited to the petitioner’s challenge of the Order-in-Original dated 28.10.2022, which cancelled the petitioner’s GST registration, and the Order-in-Appeal dated 30.05.2023, which rejected the petitioner’s appeal against the Order-in-Original dated 28.10.2022.

The petitioner claims to be involved in the import and distribution of different minerals, lubricant preparations, and chemicals that come under Chapters 27 and 34 of the Customs Tariff Act, 1975. She asserts that she began operating the aforementioned business under the name and style of a sole proprietorship concern called “Vivaan International” before the GST Regime went into effect on July 1st, 2017, and that she was registered as a dealer under the Delhi Value Added Tax Act.

The petitioner claims that on September 7,2022, her premises were visited and examined by the Anti Evasion Staff of the Central Tax CGST, Delhi North Commissionerate. She says they also removed a few documents from her property without first drafting a panchnama. and they were pressured to deposit 20 lakh rupees, they gave in to their demands and, after speaking with the petitioner, deposited a sum of Rs. 10,00,000/- (Rupees ten lacs only) through DRC-03 dated 7.9.2022.

On October 10,2022, the petitioner replied to the aforementioned Show Cause Notice of 06.10.2022. The petitioner claimed in her response that her accountant had been to the office as needed and had asked for more time to complete the documentation. The petitioner also asked for the cancellation of her GST Registration, which had been suspended.

The competent officer issued the Order-in-Original dated 28.10.2022, which is also challenged in the current case, terminating the petitioner’s GST Registration with effect from 03.07.2017 since the petitioner’s argument was rejected.

Under Section 107 of the Central Goods and Services Tax Act of 2017 (hereafter referred to as “the CGST Act”), the petitioner filed an appeal against the aforementioned ruling. By an Order-in-Appeal of 30 May 2023, the aforementioned appeal was, however, denied. The petitioner was prompted by this to submit the current petition.

Analysis of the court

It is significant to note that the petitioner’s appeal against the first Orderin-first dated October 28, 2022 was denied on the basis of time limitations alone. According to Section 107(1) of the CGST Act, an appeal against an Adjudicating Authority order must be lodged within three months of the date the order was communicated. Therefore, the petitioner in this instance had until January 28, 2023, to submit an appeal. But on February 13, 2023, the petitioner submitted the same. This delay was caused due to involvement in the procedure of filing documents at anti evasion department for verification.

Undoubtedly, the Appellate Authority had the option to excuse the appeal’s filing delay as long as it did not exceed one month in accordance with Section 107(4) of the CGST Act. In the current instance, it is clear that the petitioner was in communication with the Department to resolve the issue with the cancellation of the GST Registration, and in our opinion, the petitioner provided an acceptable justification for the fourteen-day delay.

We believe that the Appellate Authority should have excused the delay given the extensive consequences of cancelling the GST Registration.

As previously mentioned, the ruling of October 28, 2022, terminating the GST registration, was only made in response to directives given by another body. The DC(AE), CGST, North Delhi had, by letter dated 30.09.2022, directed cancellation of the taxpayer’s registration as of the date of her GST Registration. This is the only basis for cancellation of the GST Registration as mentioned in the Order-in-Original.

It is significant to remember that the Order-in-Original dated October 28, 2022 also included a tabular statement indicating that no tax was determined to be owing. Generally speaking, a decision-making authority must independently use its authority and cannot do so only on the instructions of another authority unless it has independently verified the validity of the decision. In this instance, it is clear that the challenged Order-in-Original dated 28.10.2022, which was issued exclusively on the advice of a different authority without taking the petitioner’s response to the Show Cause Notice dated 6.10.2022, into consideration. It is obvious that the challenged Order-in-Original dated October 28, 2022, cannot be upheld.

The Show Cause Notice dated 6.10.2022 sought to revoke the petitioner’s GST Registration for the sole reason that the petitioner had not answered to the summons issued under Section 70 of the CGST Act, which is also relevant information to note. The petitioner had outlined how her accountant had come to the office and requested a postponement so that they could complete the paperwork. There is no indication in the Order-in-Original dated 28.10.2022, that the aforementioned argument was taken into consideration.

the GST’s cancellation The process of registering a taxpayer has far-reaching effects on the taxpayer and often causes their business to halt. Legislators could never have intended to exclude anyone from operating a lawful company. As a result, the step of cancelling the GST should only be used sparingly and when absolutely required.

We annul the contested Show Cause Notice dated 06.10.2022, the Order in Original dated 28.10.2022, and the Order in Appeal dated 30.05.2023, in light of the foregoing. Further clarification is provided, stating that the respondent authority would be free to submit a formal Show Cause Notice outlining the grounds for any planned adverse action against the petitioner. It goes without saying that any orders issued in response to the aforementioned Show Cause Notice would be supported by justifications.

The petition is dismissed on the aforementioned conditions.

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Written By – Shreyanshu Gupta

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Madras High Court Directs Authorities To Exempt Vehicle Tax, GST For Car Purchased By Visually Challenged Person.

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Case Title:  Carunia Seelavathi          … Petitioner                                  
                                              Versus

      Department of Transport State of Tamil Nadu.       … Respondents

Date of Decision:  Pronounced On 26.06.2023.

Coram: THE HONOURABLE MR.JUSTICE P.T. ASHA.

Citation: W.P.(MD) Nos.12955 and 13043 of 2023cand W.M.P.(MD) No.11040 of 2023 W.P.(MD) No.12955 of 2023.

Introduction:

Writ Petition filed under Article 226 of the Constitution of India for issuance of Writ of Certiorarified Mandamus, to call for the records relating to the impugned email communication dated 04.05.2023 vide his proceedings in registration application MHI- 290423185541-6629 sent by the 4th respondent and quash the same as illegal and consequently for a direction, directing the respondent No.1 to extent the GST, Road Tax, Tool Tax and registration concession to the petitioner for purchasing a four wheeler (TATA NEXON XECar (Petrol) Derik Motors Private Limited ) in the light of the orders passed by the Honble Court of Chief Commissioner for persons with Disabilities (Divyangjan) in Case No.12149/1141/2020 dated 01.12.2020. The relief is sought for on the basis of the order passed by the Court of Chief Commissioner for Persons with Disabilities (Divyangjan) New Delhi in Case No.12149/1141/2020 dated 01.12.2020 and the order passed by this Court in W.P.(MD) No.20511 of 2021 dated 22.12.2021.

Facts:

The petitioner, who is visually handicapped and who holds the unique disability identity card showing that she is a person with 100% physical impairment, has planned to purchase a car for her own use. She is dependent on a third person for her travels. Considering the fact that she is a lady and visually challenged, travelling in the taxies and autos in the present scenario is a scary choice for the petitioner. Therefore, she would try to take advantage of the Government Order in G.O.Ms.No.3352, Home (Transport-T) Department, dated 29.12.1976, which grants exemptions from payment of tax leviable under the Tamil Nadu Motor Vehicles Taxation Act, 1974 for the motor vehicles designed or adapted for the use of disabled persons. She has also relied upon the aforementioned case of the Court of Chief Commissioner for Persons with Disabilities (Divyangjan) as also the order of this Court in W.P.(MD) No.20511 of 2021 dated 22.12.2021. However, her request has been rejected by the authorities by stating that the vehicle of the petitioner would not undergo any change in its form and it cannot be considered as a adapted vehicle, which is the basis of the exemption. Like wise, the request for exemption of GST has been rejected with the one line order that the scheme is only for ortho/locomotory applicants.

Issue:

  • Whether the petitioner is suffering from any disability?

Legal Analysis:

The petitioner is a person suffering from a disability has not been denied by the respondents. In the order of the Court of the Chief Commissioner for Persons with Disabilities (Divyangjan) New Delhi, the Commissioner was dealing with cases of various kinds of disabilities, like locomotory, hearing impairment, visually handicapped etc. The Commission has held that a personsuffering from complete blindness can never drive the vehicle by himself/herself, which is also the case of hearing impairment. The Commission went on to hold that the person who is visually challenged also belongs to the PwD category (Person with Disability) and the Commission had recommended that the Department of Heavy Industries, Ministry of Heavy Industries and Public Enterprises and Department of Revenue, Ministry of Finance, Union of India should make amendments to their rules to give concession with reference to GST, Road Tax, Toll Tax etc to all these persons. This recommendation of the Commission has been followed by the learned Judge of this Court in the order passed in W.P.(MD) No.20511 of 2021, wherein the learned Judge has relied upon this recommendation and directed the respondents to process the applications at the earliest. This Court on an earlier occasion was dealing with the cases of exemption in respect of the adapted vehicle adapted for the use of a physically challenged person. Relying upon Sections 2(1) and 52(1) of the Act, this Court had directed that the petitioner is entitled to the concession.

Judgement:

Considering the recommendation of the Commission, which is a Commission specifically established for the disabled and taking into consideration the fact that today the visually challenged persons are having more opportunities of employment even in the Government sector and their commuting to the place of work becomes challenging, this Court is of the opinion that the exemption has to be granted to the petitioner and accordingly, the Writ Petitions are allowed. The authority concerned shall ensure that necessary orders exempting the petitioner from the motor vehicle’s tax as well as the GST are passed within a period of four weeks from the date of receipt of a undertaking letter by the petitioner. However, there shall be no order as to costs. Consequently, connected Miscellaneous Petition is closed.

Conclusion:

Justice PT Asha of the Madurai bench took note of the recommendations made by the Chief Commissioner for Persons with Disabilities to Department of Heavy Industries, Ministry of Heavy Industries and Public Enterprises and Department of Revenue, Ministry of Finance for amendments to their rules to give concession with reference to GST, Road Tax, Toll Tax etc to the visually challenged persons.

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 JUDGEMENT REVIEWED BY JANGAM SHASHIDHAR.

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