Case Law Details
Nexus Innovatice Solutions Private Limited Vs Additional Commissioner of Central Taxes (Madras High Court)
In a significant ruling, the Madras High Court has set aside an assessment order dated 28th December 2023, specifically concerning the imposition of Goods and Services Tax (GST) on vouchers, in the case of Nexus Innovative Solutions Private Limited versus Additional Commissioner of Central Taxes.
Nexus Innovative Solutions Private Limited, engaged in managing and implementing reward programs for corporate clients, including the purchase and sale of gift vouchers, received a show cause notice dated 4th September 2023 following an audit report. The petitioner responded to the notice on 4th October 2023 and 30th November 2023, but the subsequent order issued raised concerns.
The petitioner’s counsel argued that the petitioner’s role was that of an intermediary, procuring vouchers from suppliers and selling them to clients, and thus, they should not be subject to GST on vouchers. Referring to relevant sections of the Central Goods and Services Tax Act, the counsel highlighted the lack of reasoned analysis in the order and cited precedents, including a judgment by the Karnataka High Court and a recent judgment by the Madras High Court.
The respondent’s counsel contended that the matter should be examined by the appellate authority rather than the court.
Upon examination, the Court noted that while the respondent summarized the petitioner’s contentions, the order lacked reasoned analysis for rejecting those contentions. Despite the respondent’s assertion that vouchers are actionable claims and subject to GST, the absence of explicit reasoning rendered the order unsustainable.
Therefore, the Court set aside the impugned order concerning GST on vouchers and remanded the issue to the respondent for reconsideration. The respondent was directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within two months, duly addressing each contention raised by the petitioner.
The Madras High Court’s decision in the case of Nexus Innovative Solutions Private Limited underscores the importance of reasoned orders in tax matters. By setting aside the unreasoned order and remanding the issue for reconsideration, the Court ensures procedural fairness and upholds the principles of justice in tax administration.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 28.12.2023 is the subject of challenge in this writ petition only insofar as it dealt with the imposition of GST on vouchers.
2. The petitioner is engaged in the business of managing and implementing various reward programmes for its corporate clients. This includes buying and selling gift vouchers on behalf of clients such as Amazon. Pursuant to an audit report, a show cause notice dated 04.09.2023 was received by the petitioner and replied to on 04.10.2023 and 30.11.2023. The order impugned herein was issued thereafter.
3. Learned counsel for the petitioner referred to the definition of voucher in sub-section (118) of Section 2 of the Central Goods and Services Tax Act, 2017 (the CGST Act) and pointed out that a voucher is an instrument wherein there is an obligation to accept the same as consideration or part consideration for the supply of goods or services provided the goods or services to be supplied or the identities of the potential suppliers are indicated in the instrument or in related documents. He also referred to the time of supply in relation to vouchers by relying on sub-section (4) of Section 12. By pointing out that the petitioner is not a supplier of the goods underlying the vouchers and that the role played by the petitioner is limited to that of an intermediary, which procures vouchers from suppliers and thereafter sells such vouchers to its clients, he contended that the case of the petitioner is squarely covered by the judgment of Karnataka High Court inPremier Sales Promotion Pvt. Ltd. v. Union of India 2023(70) GSTL 345 (Kar). He also referred to and relied upon the recent judgment of this Court in Kalyan Jewellers India Limited v. Union of India and others, order dated 27.11.2023 in W.P.No.5130 of 2023.
4. He thereafter referred to the impugned order at internal page 71 thereof and pointed out that the assessing officer captured the contentions of the petitioner in brief and, thereafter, recorded conclusions unsupported by reasons.
5. Mr. B. Ramanakumar, learned senior standing counsel, accepts notice on behalf of the respondent. He submits that the issue raised by the petitioner is an issue to be examined by the appellate authority and not by this Court.
6. The operative portion of the impugned order, as regards the issue relating to vouchers, is as under:
“2. The assessee has given an elaborate reply in which they claim that
b. Supply of Unidentified Vouchers – Time of Supply would not attract
c. Notice acting in the nature of pure agent – Value of Vouchers should be excluded from
3. I find no validity in the argument of the assessee. Vouchers issued by the assessee are of the nature of actionable claims. Actionable claims, though included within the definition of goods under Section 2(52) of CGST Act. Hence It-follows that vouchers are subject to levy of tax under the GST Act.
Accordingly I confirm the demand of Rs.7,74,21,911/- (IGST-Rs.4,11,08,934/-, CGST- Rs.1,81,56,489/- & SGST-Rs.1,81,56,489/-) in this regard.”
7. The above extract indicates that the respondent summarized the contentions of the petitioner. After doing so, the sweeping conclusion that the argument was not valid is recorded. The respondent also records that vouchers are in the nature of actionable claims, which are included within the definition of goods under Section 2(52) of the CGST Act. Conspicuous by its absence in the impugned order, is the recording of reasons as to why the contentions of the petitioner were rejected. Since the impugned order is unreasoned in this respect, such order is unsustainable.
8. For reasons set out above, the impugned order is set aside only insofar as it relates to the imposition of GST on vouchers. As a consequence, this issue is remanded for re-consideration by the respondent. After providing a reasonable opportunity to the petitioner, including a personal hearing, the respondent is directed to issue a fresh speaking order after duly taking note of and dealing with each contention raised by the petitioner in this regard. Such fresh order shall be issued within two months from the date of receipt of a copy of this order.
9. W. P.No.8845 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.9841 and 9842 of 2024 are closed.
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