“Explore the latest GST case law updates in our July edition Compendium. From attachment of cash-credit accounts to revocation of GST registration and ITC on taxable works contracts, stay informed. Read expert insights on pivotal judgments, procedural nuances, and the impact on taxpayers. Stay ahead with our comprehensive analysis.”
1. Whether Cash-credit account be provisionally attached by the Revenue?
No, The Honorable Calcutta High Court, in the case of J. L. Enterprises v. Assistant Commissioner, State Tax [W.P.A. No. 12132 of 2023 dated May 25, 2023] held that cash-credit facility is not a debt, and thus cannot be attached through provisional attachment order.
The Calcutta High Court relied on, the judgment of Manish Scrap Traders v. Pr. Commissioner (2022 (64) G.S.T.L. 482 (Guj.)) wherein the Gujarat High Court specifically held that the cash-credit account of the assessee cannot be provisionally attached in the exercise of powers under Section 83 of the CGST Act.
Author’s Comments:-
This is a welcome judgment by the Honorable Court. In case of provisional attachment, the taxpayers within 7 days of the attachment must file an objection to the effect that the property attached is not liable to attachment, and the commissioner after providing the opportunity of being heard, releases the said property by an order in form GST-23.
Taxpayer’s application to present; (i) Undertaking to discharge liability when a lawful demand is made; (ii) Ability of taxpayer to meet future obligations (iii) Liability is not free from doubt about underlying interpretation of facts or of law; (iv) all other returns and compliances up to date by taxpayer; (v) no other delinquency detected and; (vi) no risk of light and any perception to be redressed by offering surety or suitable security. When these factors are presented, it would be a herculean task to reject the application as the decision to reject is subject to ‘judicial review’ of the reasons for dissatisfaction with the explanation offered by the taxpayer. Plead for lenience (without addressing these factors) would be an unhelpful approach in such an application.
2. Whether the Petitioner can file a writ for revocation of cancellation of GST registration?
No, The Honorable Karnataka High Court in the case of Sri Annadurai Muniswamy v. the Additional Commissioner Office of the Commissioner of Central Tax [W.P. No. 3966 of 2023 dated April 6, 2023] ordered the assessee to file an application for revocation of cancellation of registration in accordance of the procedure outlined in the Notification No 03/2023-Central Tax dated March 31, 2023 (“the Notification”), which allowed the registered person to apply for revocation of the cancellation of GST registration up to June 30, 2023.
The Court observed that the notification allows the registered person to file an application for revocation, whose registration has been canceled under Section 29(2)(b) or (c) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), on or before December 31, 2022, and ordered, the Petitioner to file necessary application for revocation of GST registration according to the procedure outlined in the Notification.
Author’s Comments:-
Very rightly, the Honorable Court has rejected the writ petition of the taxpayer because there is a due process given under the law (notification) to address the concern of the taxpayer in regard to the cancellation of GST registration.
Taxpayers are expected to appreciate that the writ petition must be preferred only where there is an abuse of the principle of natural justice, not ordinarily.
3. Is the GST ITC available on Taxable Works Contract Services For the Construction of Hotel Buildings to the Works Contractors?
Yes, The Honorable High Court In M/s SR Constructions v. The Union of India and Ors. [W.P.(C) No. 399 of 2022 dated April 4, 2023] held that the assessee is entitled to take Input Tax Credit (“ITC”) on taxable work contract services availed for the supply of construction of immovable property services.
The Honorable Court Observed that, the petitioner has fulfilled all the conditions of the works contract and is providing work contract services to the owner of the hotel and not using on its own and hence do not fall within the definition of Section 17(5)(c) of the CGST Act and is entitled to take ITC on the goods and Services utilized for providing the taxable work contract services.
Held that the demand raised by the Revenue Department vides the SCN is ultra vires and is contrary to law and thus, the Impugned Order is liable to be set aside and quashed.
4. Whether writ can be filed if an alternate remedy is available?
The Honorable Madras High Court in the case of Tvl. Sri Maharaja Industries v. The Assistant Commissioner (ST) (FAC) [W.P Nos. 16075, 16077, 16080, and 16082 of 2023 and W.M.P.Nos.15499, 15500, 15501, 15502, 15506, 15508, 15509 & 15511 of 2023, dated May 24, 2023]rejected the writ by stating if the alternate remedy is available the assessee should exercise that before filing a writ petition.
The Honorable Court observed that the Revenue Department issued notice and the Petitioner has also submitted a reply and thereafter inquiry was completed.
The Court noted that the prayer of the Petitioner does not stand correct as the finding was recorded only after considering the material produced by the Petitioner and, even if the Petitioner is aggrieved due to any omission committed on the part of the department, there is an effective alternative remedy available to the petitioner to challenge the impugned orders by way of filing appeal before the competent authority.
Author’s Comments
A similar judgment has been delivered by The Honorable Madras High Court in the case of Thiruchy Royal Steels v. Deputy State Tax Officer [W.P.NO. 15338 OF 2023, W.M.P. NOS. 14861 and 14863 of 2023 dated May 11, 2023] wherein the Honorable Court dismissed the writ and directed the assessee to file an appeal before the Appellate Authority and directed the Appellate Authority to dispose of the case on an emergent basis.
5. Is the Service Tax leviable on the Cost of Spares and accessories used for free services during the warranty period?
No, The CESTAT, Chennai in M/s. T.A.F.E Access Ltd. v. Commissioner of GST & Central Excise [Service Tax Appeal No. 526 of 2012 dated May 26, 2023]set aside the order demanding Service Tax on the cost of the spares/materials used for providing the free services provided during the warranty period. Held that the assessee is not liable to pay Service Tax on the cost of spares and accessories reimbursed by the manufacturer.
Author’s Comments
The CESTAT relied upon the judgment of the Honorable Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt Ltd [2018(10) GSTL 401(SC)] wherein, the court had held that reimbursable expenses cannot be included in the taxable value.
The CESTAT also observed that, in the Appellant’s own case the very same issue was decided for the subsequent periods in M/S. TAFE Access Ltd. v. Commissioner of GST & Central Excise, Coimbatore [Final Order No.40394-40397/2019 dated February 28, 2019]. The same issue as to whether the cost of spares and materials used for free services during the warranty period has to be included in the taxable value or not was considered by the CESTAT, Chennai in M/s. ABT Ltd. And others v. Commissioner of Central Excise, Coimbatore [Final Order No. 40618-40628/2018] wherein, it was held that the cost of spares and accessories used in replacement during the warranty period were sold on payment of VAT thus, the cost of spare parts cannot be included for purposes of levy of service tax.
6. Whether fabrication of documents can be the ground for the denial of anticipatory bail?
Yes, The Honorable Supreme Court in the matter of Sheetal Mittal Etc. v. The State of Rajasthan &Anr. Etc. [Special Leave to Appeal Crl. Nos. 5491-5500/2023 dated May 12, 2023] held that anticipatory bail cannot be granted if a taxpayer fabricates the firm name and GST number, and other details were found to be non-existent.
The Honorable Supreme Court noted that no case of anticipatory bail is made out looking at the role attributed to the petitioners and the observation made by the High Court that the GST number and name of the firm were fabricated, and other details were found to be non-existent and dismissed the Special Leave Petitions.
7. Services rendered to the holding company under an agreement do not make the service provider an intermediary
The Honorable Delhi High Court in M/s Mc Donalds India Pvt Ltd. v. Additional Commissioner, CGST Appeals – II, Delhi & Anr. [W.P.C No. 11430 of 2022 dated May 18, 2023]has set aside the order denying refund of tax paid on inputs, on the ground that, the assessee was providing services to its holding company, as against the allegation that the assessee was acting as mediator between the holding company and franchisees in India. Held that no additional grounds for rejecting the assessee’s claim for refund could be raised suomotu by the Appellate Authority, in an appeal preferred by the assessee.
The Court observed that the Appellate Authority presumed that the Petitioner was acting as a mediator between prospective joint ventures and franchisees, where the main supplies were made by the foreign counterpart and ancillary supplies were provided by the Petitioner and failed to consider the fact that the MLA, which granted the Petitioner the right to enter into sub-licenses with franchisees, was a separate agreement.
The Court stated that it is essential that the principal service, the supplier of such services, and the service purchaser are identified to ascertain whether the services performed by the Petitioner are those of a facilitator or one that arranges such services, which have not been analyzed in Order-in-Original.
Noted that, as per the service agreement the service recipient is the foreign counterpart and the Petitioner is the service provider. There is no basis for the Appellate Authority to have concluded that the Petitioner acts as a mediator between joint ventures/ franchisees and the foreign counterpart. Thus, the Appellate Authority was wrong in considering the service provided by the Petitioner as intermediary services and opined that, no additional grounds for rejecting the Petitioner’s claim for refund could be raised suomotu by the Appellate Authority, in an appeal preferred by the Petitioner. Further observed that the services provided by the Petitioner had no connection with the services as contemplated under Section 13(5) of the IGST Act.
8. Whether the Short tax paid in returns can be adjusted with the excess tax paid in subsequent months/quarters?
The CESTAT, Delhi in M/s. B.L. Kashyap & Sons Ltd. v. Commissioner of Service Tax [Service Tax Appeal No. 54315 of 2014 dated May 30, 2023], while quashing the impugned order, set aside the liability, and held that the appellant is eligible to adjust the short tax paid with the excess tax paid in subsequent month/quarter in line with the provisions of Rule 6 (4A) of the Service Tax Rules, 1994 (“the Service Tax Rules”) as the appellant has made good the service tax short paid by them, along with interest.
The CESTAT observed that the Adjudicating authority failed to discuss the submissions made by the Appellant and the Chartered Accountant’s certificate and also did not counter or negate the claims and submissions made by the Appellant.
The Bench relied upon the judgment of Schwing Stetter (India) Pvt. Ltd. v. Commissioner of Central Excise, LTU [2016 (45) S.T.R. 101 (Tri. – Chennai)], wherein the Tribunal held even though the appellants have not specifically intimated the department in this regard, but the adjustment was declared in their ST-3 returns. Accordingly, intimation of such adjustment stands made to the department. At most, it is a procedural lapse, and merely for this, the excess amount paid cannot be permitted to be retained by the Government.
Further relied upon the judgment of Dell India Pvt. Ltd. v. Commissioner of Service Tax [2016 (42) S.T.R. 273 (Tri. – Bang.)], wherein the Tribunal held that if excess payment of tax in a month is not on account of reasons involving interpretation of law, taxability, classification, valuation or applicability of exemption notification and is purely on account of the inability of the assessee to exactly determine the total amount collected during the month against the bills raised as a result of which he had determined his tax liability on estimation basis, then the excess amount of tax paid during the month can be adjusted against his tax liability during other months. In this regard, there cannot be any monetary limit.
9. Whether the service provider has to charge GST on the whole amount of the bill including night charges and fuel charges?
Yes, The AAR, Uttarakhand, in the case of M/s. Uttarakhand Public Financial Strengthening Project [Ruling No. 15/2022-23 dated March 27, 2023], ruled that the service provider has to charge GST on the whole amount of the bill including i.e. monthly rental, night charges, and fuel cost.
The AAR, observed section 15(2)(b) of the Central Goods and Service Tax Act, 2017 (“the CGST Act”) which states that the value of a supply of goods or services will be the transactional value, which is the price actually paid or payable for the supply where the supplier and the recipient of the supply are not related persons and the price is the sole consideration for the supply.
Further observed that without fuel the motor vehicle cannot operate and without running the activity of motor vehicle hire services does not happen, thus, the motor vehicle hire services have the integral component of running/ operating the vehicle from one place to another for transportation.
Opined that the contract entered between the Applicant and the Service providers is a comprehensive contract with the consideration and the reimbursement of expenses, such expenses are nothing but the additional consideration for the provision of service.
Observed that, AAR, Karnataka in the case of M/s. Goodwill Auto’s, Hubbali [Advance Ruling No. KAR ADRG 44 /2021 dated July 30, 2021]held that the cost of the diesel incurred for running DG Set in the course of providing DG Rental Service is nothing but additional consideration for the supply of DG Set on rent as per section 15 of the CGST Act.
Ruled that the Service providers have to charge GST on the whole amount of the bill which in the instant case is rentals, night charges, and fuel costs.
Author’s comments:
By no standards of measurement, Advance Ruling is not a Quasi-judicial proceeding and as per Section 103(1) of the CGST Act, the advance ruling is binding only on the Applicant who seeks the advance ruling.
It is to be noted that, AAAR, Tamil Nadu in M/s. Erode Infrastructure Pvt. Ltd. [2021 (50) G.S.TL. 222 App. AAR. GST] held that if the recipient obtains a ruling on the tax liability of his inward supply of goods or services, the supplier of such goods or services is not bound by the ruling and is free to assess supply according to his own determination, and, thus ruling will lose its relevance and applicability.
10. Can the excise duty be demanded on the differential value of the stock of finished or semi-finished goods?
No, the CESTAT Bangalore in M/s. Steel Authority of India Ltd. v. The Commissioner of Central Excise [Appeal No. E/562/2008 dated May 25, 2023] set aside the order demanding excise duty on the differential quantity of goods based on the ER-1 returns as against the number of goods shown in the audited books of accounts. Held that the discrepancy in comparison of values stated in RG-1 and the physical stock statement prepared by the assessee is inherently inaccurate because both are estimated values. Observed that the Respondent vide the Impugned Order has demanded the duty on the differential quantity between ER-1 and audited books which appears to be beyond the framework of Impugned SCNs. The parameters relied upon by the Respondent in the Impugned SCNs and the parameters relied upon in the Impugned Order are at variance, which is legally not sustainable.
Relied on its earlier judgment in the Appellant’s case [2006 (200) ELT 229 (Tri. -Bang,)], wherein, it was held that the discrepancy between the RG-1 stock and the physical stock is based on the estimated production and not on actual weight. Thus, a comparison between two estimations is inherently inaccurate and considering the practical difficulties in estimating the actual stock.
Further opined that even if there are differences in the stock taking and the shortages are found, the duty can be demanded only when the goods are removed from the factory.
11. Do the GST authorities have the power to conduct search and seizure proceedings in SEZ zone?
Yes, The Honorable Gujarat High Court in the case of M/s. RHC Global Exports Pvt. Ltd. v. Union of India [R/Special Civil Application No. 5978 of 2023 dated June 06, 2023] held that GST authorities have the power to conduct search and seizure against the assessee operating in Special Economic Zone (“SEZ”). The Gujarat High observed, Section 22 of the SEZ Act and stated that any officer or agency who is authorized by Central Government may carry out search or seizure or investigation or inspection in the special economic zone and the authorized officer of the Central Government is empowered to carry out such proceeding without any prior approval or intimation. Stated that the order issued by the proper officer under the SEZ Act will be deemed that he has issued an order under the CGST Act.
Further observed that provisions of the IGST Act are applicable to the whole of India and since the Petitioner is registered under the IGST Act and the Petitioner is under misbelief that once business is carried out through and within SEZ, the Petitioner is outside the purview of GST authority and hence these SEZ units are not exempted from any investigation or inspection.
Author’s Comments:-
This is a welcome judgment and the Honorable Court has relied on Section 22 of the SEZ Act:
“Investigation, inspection, and search or seizure. which states
The agency or officer, specified under section 20 or section 21, may, with prior intimation to the Development Commissioner concerned, carry out the investigation, inspection, and search or seizure in the Special Economic Zone or in a Unit if such agency or officer has reasons to believe (reasons to be recorded in writing) that a notified offense has been committed or is likely to be committed in the Special Economic Zone: Provided that no investigation, inspection and search or seizure shall be carried out in a Special Economic Zone by any agency or officer other than those referred to in sub-section (2) or sub‑section (3) of section 21 without prior approval of the Development Commissioner concerned: Provided further that any officer or agency, if so authorized by the Central Government, may carry out the investigation, inspection and search or seizure in the Special Economic Zone or Unit without prior intimation or approval of the Development Commissioner.”
The taxpayer before resorting to filing a Writ petition must have asked the authorities about the basis for jurisdiction and then could have made an informed decision.
12. Is the Refund of any payment made vide DRC 03 allowed, if no DRC 04 or SCN or Order issued?
Yes, The Punjab and Haryana High Court in the case ofM/s. Samyak Metals Pvt. Ltd. v. Union of India and Others [CWP No.26529 of 2022 dated May 24, 2023]directed the Revenue Department to return the amount paid by the assessee during the search proceeding where neither DRC-04 nor notice under Section 74(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) was issued. The Honorable Court observed that, Instruction no. 01/2022-23 issued by the CBIC dated May 25, 2022 (“the Instruction”) in respect to the GST investigation wherein it was clarified that no recovery of tax should be made during search, inspection or investigation unless it is voluntary.
Further observed the case of M/s. Vallabh Textiles vs. Senior Intelligence Officer and others, 2022 SCC Online Del 4508 wherein the Honorable Delhi High Court held that deposit of tax by the assessee during the search was not voluntary and the amount cannot be retained, if no summons had been issued under Section 74 (1) of the CGST Act.
Author’s Comments
This is an applaudable judgment by the Honorable Court as the proper officer is duty-bound to issue acknowledgment, accepting the payment made by any taxpayer (in Form DRC-03) in Form DRC-04. However, if, neither DRC-04 is issued nor any notice is issued pursuant to the proceedings u/s 67 acknowledging the voluntary payment, it is a gross violation of administrative instructions by the board and the provisions of Rule 142 (2) of the Central Goods and Services Tax Rules, 2017.
If the taxpayers are encountering any such situation, it is highly advisable to file a refund application u/s 54 for the amount deposited through DRC-03 as excess payment of tax.
13. Whether the SCN is valid if it did not sufficiently disclose the reason for the suspension of GST registration?
No, The Honorable Delhi High Court in the case of Rishiraj Aluminium Pvt. Ltd. v. Goods and Services Tax Officer [W.P.(C) No. 4125 of 2023 dated April 17, 2023] set aside the Show Cause Notice and restored the petitioner’s registration as did not sufficiently disclose the reason of suspension of GST registration and proposed cancellation.
The Honorable Court observed that the SCN must clearly set out the reasons for proposing an adverse action in order for the notice to respond to the same. Hence, the petitioner was at a loss as to how to respond to the SCN as it did not disclose any intelligible reason for proposing the cancellation of the petitioner’s registration.
Author’s Comments
This is a welcome decision by the Honorable High Court of Delhi and it comes to the rescue of the taxpayer and once again the Rule of Land stands tall against the over-passionate administration.
The Revenue Department has to understand that this kind of approach renders the “due process” laid down in the statute “Superfluous, unnecessary and nugatory”, which is impermissible in the law.
14. Can the Recipient’s ITC be denied in case the supplier becomes non-existent or his registration is canceled retrospectively?
No, The Calcutta High Court in M/s. Gargo Traders v. The Joint Commissioner, Commercial Taxes [WPA No. 1009 of 2022 dated June 12, 2023] set aside the order rejecting the GST refund claim to the assessee by holding that supplier was registered on the common portal when the assessee entered into the transaction, it was on a later date that registration was canceled from retrospective date and directed the Revenue Department to consider documents submitted by assessee substantiating genuineness of the transaction.
The Honorable High Court observed that at the time of the transaction, the name of the Supplier was available with the government record and the Petitioner paid the amount along with the tax to the Supplier through the bank and stated that, the Revenue Department solely on the basis of cancellation of registration of the Supplier with retrospective date rejected the claim, without considering the documents relied by the Petitioner which duly state that there was no failure on the part of the Petitioner in compliance of obligation required under the statute before entering into the transaction.
The Court relied upon the judgment of M/s. LGW Industries Ltd. &Ors. v. Union of India &Ors. [WPA 23512 of 2019] and held that the allegation raised by the Revenue Department is not correct for rejecting the Petitioner’s refund application unless it is established that the Petitioner has not received the goods.
Author’s Comments:-
This is an applaudable judgment by the Honorable Court and the most celebrated case in recent times. This judgment will act as a savior to all the genuine taxpayers who have claimed ITC after fulfilling the conditions specified U/s 16 of the act.
Once the conditions specified in U/s 16 are fulfilled, now the ITC becomes the vested right of the taxpayer from a conditional concession. As per Article 300A of the constitution of India, no person shall be deprived of his/her property with the authority of the law.
The CBIC must consider the hardships forced by the taxpayer where ITC is disputed, in case the supplier’s registration is cancelled retrospectively.
15. Whether the detention of goods without proper hearing to the assessee is acceptable?
No, The Honorable Madras High Court in the case of M/s. SHIDO Pharma v. Assistant Commissioner (ST) [W.P. Nos. 10371 to 10373 of 2023 and W.M.P Nos. 10334 to 10336 of 2023 dated April 03, 2023] held that opportunity of being heard was not granted to the assessee, which is contrary to the principle of natural justice, hence set aside the impugned order and directed the Revenue Department to conduct proceeding afresh.
The Honorable High Court observed that the Petitioner was permitted to appear before Revenue Department for the SCN dated March 18, 2023, and was not granted any further hearing for the Impugned SCN and the proceeding was concluded by violating the principle of natural justice.
Author’s Comments
This is a welcome judgment and this highlights a major issue being faced by the taxpayer, where Principles of Natural Justice are grossly violated when the opportunity of being heard is not provided. This is expressly given in the statute [Section 75(4) and 126(3)] that opportunity of being heard must be presented where it is specifically asked by the taxpayer or where the adverse order is contemplated.
This shows that there is an urgent need for all the adjudicating officers to undergo rigorous training and let go of their experience and practices of the erstwhile laws and strictly adhere to the legislation.
Similar judgment where delivered by The Bombay High Court in the case of M/s. Knowledge Capital Services V. Union of India (WRIT PETITION NO. 61 OF 2023) dated March 29, 2023.
16. Can the Revenue Department issue the SCN without providing the date, time, and venue for personal hearing and pass order on the basis of such SCN?
No, The Honorable Madhya Pradesh High Court in ConcordTieup Pvt. Ltd. v. State of MadhyaPradesh [Writ Petition No.26956 of 2022 dated April 25, 2023]quashed the order and remitted back the matter for afresh hearing in the case where the show cause notice was issued without containing the details like date, time and venue of personal hearing.
The Honorable High Court relied upon, the case of Bharat Mint & Allied Chemicals v. Commissioner of Commercial Tax, 2022 (59) G.S.T.L. 394 (All.), wherein the Honorable Allahabad High Court held that opportunity of hearing has to be granted by Revenue Department either on request of the person chargeable with tax for the opportunity of hearing or where any adverse decision is given against such person. The Court observed that the SCN failed to provide the opportunity for a personal hearing before passing the Impugned Order and noted that, so far the argument raised by the Revenue Department regarding the availability of the alternative remedy of appeal, is concerned, it is well settled that when due opportunity of hearing, as required under the law, has not been afforded and the principle of natural justice has not been followed, then the question of availability of alternative remedy does not come in the way.
17. Whether a contract involving the supply of material and labor a ‘Works Contract Service’ and whether the extended period of limitation is invokable?
Yes, The CESTAT, Chandigarh in the case of Bajrang Lal Gupta v. The CCE Gurgaon [Service Tax Appeal No. 560 of 2011 dated June 5, 2023] held that the contract involving both supply of material and labor is a ‘Works Contract Service’ which was not taxable prior to June 1, 2007.
The CESTAT Chandigarh relied on the judgment of the Honorable Supreme Court in the case of CCE vs. Larsen & Toubro Limited [2015 (39) STR 913 (S.C.)] wherein it was held that the composite contracts are classifiable under the taxable category of ‘Works Contract Service’ and the same is taxable only from June 01, 2007. Further, relied on the judgment of the CESTAT, Chandigarh in the case of M/S. Srishti Constructions Versus Commissioner Of Central Excise And St, Ludhiana [Order No.- A/62071-62072/2017-CU[DB] dated November 30, 2017] wherein the Tribunal had set aside the service tax demand under Works Contracts Service and also declared that the extended period of limitation is not invokable.
18. Whether the unregistered person eligible to get a refund of service tax paid on the advance amount paid to the real estate developer upon cancellation of booked flats?
Yes, The CESTAT, Mumbai in the case of M/s.Guardian Landmarks LLP v. Commissioner of Central Excise & Service Tax, Pune II [Service Tax Appeal No. 88084 of 2019 dated June 06, 2023]allowed a refund claim of service tax to a real estate developer on behalf of the unregistered customer, who has paid the service tax along with advance payment and due to some reason the real estate purchase contract was canceled.
The CESTAT observed that, once the customer cancels the booking and the booking amount was returned, the service contract gets terminated and once it is established that no service is rendered, the refund of tax for such service becomes admissible. Further stated that when no service has been provided then the assessee cannot be saddled with service tax liability and the tax deposited by the assessee will be considered as a ‘deposit’ and keeping the said tax amount by the Revenue Department is violative of Article 265 of the Constitution which specifically provides that “No tax shall be levied or collected except by authority of law.”
The CESTAT noted that the Revenue Department has erred in applying the limitation stated in Section 11B of the CE Act since the amount retained by the Revenue Department does not have a character of tax but an amount paid under a mistake of law. Thus, the provisions of Section 11B would not be applicable.
Held that the amount of service tax retained by the Revenue Department is not backed by any authority of law thus, the same is liable to be refunded to the Appellant.
Author’s comments:
This is a welcome judgment by the CESTAT, Mumbai to refund the service tax amount held by the Revenue Department without authority of law. The judgment is helpful for all unregistered persons who have paid service tax at the time of payment of booking amount pertaining to real estate and due to some reason have canceled the contract and have not received a refund of the service tax amount till now. Since, the limitation of Section 11B of the CE Act, would not be applicable to such service tax amount withheld by the Revenue Department, the customer even in the current financial year i.e. 2023-24 can approach the respective developer(s) for demanding a refund of service tax paid which was not refunded to them at the time of cancellation of the contract.
In the GST regime, the CBIC vide Circular No. 188/20/2022-GST dated December 27, 2022, has provided relief to unregistered persons by prescribing a manner of filing an application for refund of GST paid to real estate developer(s) in the event of cancellation of the contract on account of non-completion/delay in construction activity or due to any other reason.
19. Whether GST registration of the Petitioner is liable to be canceled solely on the basis of the Impugned SCN which does not have any specific reason?
No, The Honorable Delhi High Court in Fayiz Nangaparambil v. Union of India &Anr. [W.P.(C) 7477/2023 dated May 26, 2023]set aside the Show Cause Notice (“SCN”) proposing to cancel the GST Registration of the assessee, on the grounds that SCN is bereft of any specific reasons that could be addressed by the assessee. Held that the SCN was short of the necessary requirements as it did not contain any specific allegation.
The Honorable Court observed that it is well-settled that the SCN is required to set out the relevant material in order to enable the notice to meaningfully respond to the same and noted that, the Impugned SCN is bereft of any specific reasons that could be addressed by the Petitioner.
The Court held that the Impugned SCN was short of necessary requirements as it did not contain any specific allegation that could be addressed with a meaningful response from the Petitioner.
20 .Whether the benefit of OIA can be denied to the Petitioner and the refund amount be withheld solely on the ground that the Respondent has decided to file an appeal against the OIA?
No, The Honorable Delhi High Court in G.S. Industries v. Commissioner Central Goods and Services Tax [W.P.(C) NO. 14719 of 2022 dated March 28, 2023] held that the Order of Appellate Authority allowing refund to assessee cannot be ignored solely because Revenue decided to challenge the order allowing a refund, directed the Revenue to disburse refund along with interest, and clarified that Revenue is not precluded from availing any remedy and in case Revenue succeeds they would be entitled to recover the amount disbursed.
The Honorable High Court observed that the Respondent has not filed any appeal against the OIA and there is no order of any Court or Tribunal staying the OIA and the issue is covered by the earlier decision of the Delhi High Court in Brij Mohan Mangla v. UOI [W.P.(C) 14234/2022 dated February 23, 2023].
Held that OIA cannot be ignored by the Respondent solely because according to them, the OIA is erroneous and is required to be set aside.
21. Whether the Co-owners of the property are liable to pay service tax on the rental income jointly?
No, The CESTAT, Chennai in M. Vijaya Bharathi v. Commissioner of GST & Central Excise [Service Tax Appeal No. 42320 of 2014 dated June 14, 2023] set aside the order levying service tax on total rent received by co-owners jointly and held that the income received as rent by each co-owner is much below the threshold limit to subject the levy of service tax thus, no service tax can be imposed.
The CESTAT, Chennai held that the rent received by the Appellant individually is much below the threshold limit of levy of service tax thus, no service tax can be imposed.
Allowed the Appeal and set aside the Impugned Order.
22. Whether activity of providing a corporate guarantee to an associate enterprise is a taxable service?
No, The CESTAT, New Delhi in Sowar Pvt. Ltd. v. Commissioner of Service Tax [Final Order No. 50607 Of 2023 dated March 29, 2023] held that the assessee has not received any consideration for providing corporate guarantee and hence no service tax is payable by the assessee.
The CESTAT, New Delhi observed that the SCN stated that the Appellant has given the corporate guarantee on behalf of their group companies but has not charged any commission or interest, or fees for providing the said corporate guarantee and further observed that, the definition of banking and other financial services (BFOS) and stated that only such persons can be made liable to service tax who can be classified in the category of Banking/ Non-banking Company, Financial Institutions, any other body corporate or commercial concern.
Further stated that the definition of BFOS uses the word ‘means’ i.e. the services comprehensively and specifically listed in the definition would alone be excisable to service tax.
Referred the judgment of DLF Projects Ltd. v. CCE & ST, Gurgaon [2020(38) G.S.T.L.56 (Tri-Chan)] and DLF Cyber City Developers Ltd. v. Commissioner of S.T., Delhi -IV [2019 (28) G.S.T.L. 478 (Tri-Chan)], wherein court held that the Appellant has not received any consideration either from the financial institutions or from their associates for providing corporate guarantee, so no service tax is payable by the Appellant.
23. Whether the Assessee is entitled to claim ITC on a vehicle modified and supplied as an ambulance?
Yes, The AAR, Telangana in M/s. Raminfo Limited [TSAAR Order No.02/2023 dated April 03, 2023] ruled that the assessee can claim Input Tax Credit (“ITC”) on the purchase of 7 seater vehicle which will be transformed into an ambulance for further supply.
The AAR, Telangana in TSAAR Order No.02/2023 observed that the Applicant will purchase the Maruti Suzuki Eeco (7 seaters) and thereafter he will transform such vehicle into an ambulance and will supply such ambulances to the Government of Tripura.
AAR noted that the purchased vehicle falls under HSN 8703 which inter alia covers “Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702)”.
Further noted that, as per Section 17(5)(a) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) the ITC on purchase of vehicles which are meant for further supply is not a blocked under Section 17(5) of the CGST Act.
Held that, the Applicant is eligible to take ITC of tax paid on purchase of vehicle which is used in furtherance of his business and the Applicant will charge GST @ 28% as per Schedule IV of the Notification 01/2017-Central Tax (Rate) dated June 28, 2017 (“Goods rate notification”) on supply of ambulance to the Government of Tripura.
*****
(The content and views stated in this article are solely for informational purposes. It does not constitute professional advice or recommendation in any manner whatsoever. For any feedback and queries write to me at [email protected])
ABOUT THE AUTHOR
CA Ritesh Arora
Partner, Ritesh Arora & Associates
Author
CA Ritesh Arora is highly skilled and experienced practicing Chartered Accountant specializing in the indirect tax regime. With over a decade of experience in this field, he possesses in-depth knowledge and expertise in handling various aspects of indirect taxation.
Ritesh Arora’s key strength lies in providing comprehensive solutions to his clients, catering to their diverse business, financial, and regulatory requirements. He is committed to offering a one-stop solution that addresses the specific needs of his clients, ensuring their compliance with tax laws and regulations.
As a trusted professional, Ritesh Arora offers a wide range of services to his clients, including GST compliance, tax consultancy, advisory, and litigation support. He assists businesses in navigating the complex and ever-evolving indirect tax landscape, helping them optimize their tax positions and minimize any potential risks.
With his extensive experience and practical insights, Ritesh Arora is well-equipped to guide his clients through various tax-related matters, providing expert advice and strategic solutions. His dedication to delivering high-quality service and his ability to understand the unique requirements of each client make him a valuable partner in managing their tax affairs effectively.
Author Bio
