Q.1 Whether an appeal can be filed beyond the time period prescribed under section 107 (4) of the CGST Act?
Ans. No, the Honorable Kerala High Court in M/s Penuel Nexus Pvt Ltd. v. The Additional Commissioner (Appeals), Cochin [WP(C) No. 15574 of 2023 dated June 13, 2023] held that the Additional Commissioner (“the Respondent”) is right in rejecting the time-barred appeal as section 107 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) has an inbuilt mechanism and has impliedly excluded the application of the Limitation Act, 1963.
The Honorable Kerala High Court relied on the judgment of the Honorable Supreme Court in Singh Enterprises v. Commissioner of Central Excise, Jamshedpur and others [(2008) 3 SCC 70] wherein the court held that since there is complete exclusion of section 5 of the Limitation Act, therefore the Commissioner and the High Court were justified in holding that there was no power to condone the delay after the expiry of 30 days period.
The Honorable Court held that the CGST Act is a special statute and a self-contained code and impliedly excluded the application of the Limitation Act, 1963 and further construed that it is rudimentary that the provisions of a fiscal statute have to be strictly construed and interpreted. Thus, the Respondent is right in rejecting the time-barred appeal.
This particular judgment by the Honorable court highlights the importance of procedures and timelines in the CGST Act. Appellate Authority u/s 107 (4) has power to condone the delay up to maximum of one month after the end of due date.
Limitations Act, 1963 states in section 5 and 14 that “sufficient cause” must be shown to justify the delay. In Ramlal v. Rewa Coalfields ltd. Apex court has held that:
(a) Non-filing of appeal within normal time allowed not questionable;
(b) Every day of delay to be explained with affidavit;
(c) Reasons cited verified and rejected if not found satisfactory; and
(d) Condonation allowed by a speaking officer.
The principle of law is that when time to file appeal lapses, counterparty gets a vested right (or advantage or benefits from such failure) which cannot be denied by condonation of appeal in a routine and mechanical manner without ‘good and sufficient’ reasons.
Q.2 Whether the refund of ITC on account export of service can be withhold on the ground the Revenue intend to file appeal against the refund sanctioning order before GST tribunal which is not operative yet?
Ans. No, The Honorable Delhi High Court in Alex Tour and Travel Pvt. Ltd. v. Assistant Commissioner, CGST [W.P.(C) NO. 5722 OF 2023 dated May 8, 2023] directed the Revenue department to disburse the assessee’s refund claim along with interest as payable and held that, the Revenue cannot withheld assessee’s refund merely on account that it intends to file appeal before the GST tribunal that to when the Tribunal is not constituted.
The Honorable Delhi High Court noted that the Revenue Department is entitled to file an appeal under Section 112 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) however, the said appeal is required to be filed within a period of three months. The said period has been extended as the Appellate Tribunal has not been constituted as yet.
Further noted that, it was important to note that more than one year had passed since the Order in Appeal had been pending while another Order in Appeal had been pending for nearly for ten months and as result the Petitioner is entitled to receive interest in accordance with the law.
The Honorable Court stated that the Revenue Department cannot ignore the order passed by the Appellate authority mainly on the ground that it proposes to file an appeal and allowed the Appeal of the Petitioner.
Very rightly the Honorable Delhi High Court has allowed the appeal of the petitioner. Similar judgments were passed by the Honorable Delhi High Court in case of Brij Mohan Mangla v. UOI [W.P. (C) 14234/2022 dated February 23, 2023], when it was 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.
All the procedures laid down in the statute must be followed strictly and in the instant case, with holding refund does not make any sense because if GST tribunal rules in the favor of the department, then tax can be demanded along with interest.
Q.3 Whether Revenue Department can seize cash during the inspection?
Ans. No, The Honorable Kerala High Court in Dhanya Sree kumari v. State Tax Officer (IB) [WP(C) No. 21772 of 2022 dated June 27, 2023] held that cash not being a stock-in-trade of the assessee, was not a thing that ought to have been seized and directed the Revenue Department to release the cash seized to the assessee.
The Honorable Kerala High Court observed the contention of Revenue Department that, the word ‘things’ in Section 67(2) of the CGST Act will include cash also and hence the seizure of cash was very much in accordance with the law and opined that, cash not being a stock-in-trade of the Petitioner, was not a thing that ought to have been seized, and the seizure was one year back, so there is no reason to retain it any further.
The Honorable court directed the respondent to release the cash seized from the Petitioner.
It is a important to note that even cash must be ‘secreted’ to qualify for seizure but, more importantly, cash is not ‘goods liable to confiscation’ under section 130(1) but are ‘things’ which are considered “useful or relevant” by the Authorized Officer to carrying out “any further proceedings”. What, therefore, can be the ‘use or relevance’ of cash to be seized?
There is a popular, mysterious, and erroneous understanding that ‘cash’ is illicit if discovered in search proceedings. Officers tend to seize cash without even ascertaining to whom it belongs.
‘Cash’ seizure does not directly point to proceeds from unaccounted sales. That would have been easy but the Legislative wisdom is that (i) ‘Evasion of tax is a must for proceedings under section 67 to be with the jurisdiction and lawful and (ii) No presumption flows in favour of the Revenue, especially, when cash may be treated to be ‘things’ and not ‘consideration from supply’. After all, ‘things’ seized can only be if they are “useful or relevant” for that Authorized Officer in carrying out “any further proceedings”.
Q.4 Whether the provisions of Section 16(4) prescribing the time limit for claiming ITC under section 16(4) of the CGST Act, ultra virus?
Ans. No, the Honorable Andhra Pradesh High Court in Thirumalakonda Plywoods v. The Assistant Commissioner [W.P.No.24235 of 2022 dated July 18, 2023] held that, mere acceptance of GSTR-3B returns with late fee will not exonerate the delay in claiming Input Tax Credit (“ITC”) beyond the period specified under section 16(4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
The Honorable Andhra Pradesh High Court observed that Section 16(2) of the CGST Act has no overriding effect on Section 16(4) of the CGST Act as both are not contradictory with each other, they will operate independently.
The Honorable Court opined that mere acceptance of Form GSTR-3B returns with late fee will not exonerate the delay in claiming ITC beyond the period specified under section 16(4) of the CGST Act and the time limit prescribed for claiming ITC under section 16(4) of the CGST Act is not violative of Articles 14, 19(1)(g) and 300-A of the Constitution of India.
The Honorable Andhra Pradesh High Court explicitly held that ITC under GST law is a concession/benefit, not a statutory right. Thus, the legislature can impose conditions. Currently, the law allows claiming ITC until November 30 after the end of the financial year or furnishing the relevant Annual Return. The Honorable Andhra Pradesh High Court upheld the validity of this timeline. Further, both Section 16(2) & 16(4) of the CGST Act will operate independently.
Thus, taxpayers are advised to ensure timely availing of credits. However, the Honorable Andhra Pradesh High Court has not struck down any central law. Therefore, the judgment is binding in the relevant state only. In other states, it only has a persuasive value as several writ petitions are pending in various other High Courts.
Q.5 Whether the amount collected at the time of search by the Revenue Department should be refunded?
Ans. Yes, The Honorable Punjab and Haryana High Court in William E Connor Associates and Sourcing Pvt Ltd. and Anr v. Union of India and Others [C.W.P-733 of 2021 dated May 04, 2023] held that amount collected without authority of law at the time of search should be refunded along with the interest @ 6% p.a. from the date of filling this petition, within 30 days after the receipt of certified copy of order.
The Honorable Punjab and Haryana High Court noted that the Respondent is in process to issue notice under section 74(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) but till the date no notice has been issued to Petitioner imposing the penalty or raising any demand.
The Honorable Court relied upon the judgment of Union of India and others vs. Bundl Technologies Pvt. Ltd and others [ILR 2022 Karnataka 3077] wherein the Karnataka High court held that any amount deposited voluntarily by the Petitioner during search would not amount to collection of tax under Article 265 of the Constitution of India and amount collected without authority of law, would not amount to collection of tax and the same would amount to depriving a person of his property without any authority of law and would infringe his rights under Article 300A of the Constitution of India.
Further held that the Respondent had failed to place any material record to show that they got deposited amount of INR 83,89,196 from the Petitioner with any authority of law and allow the refund along with interest @6% p.a. from the date of filling of this petition, within the period of 30 days after the receipt of certified copy of order.
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.
Q.6 Whether the provisional attachment of bank account is to be lifted up after one year?
Ans. Yes, the Honorable Bombay High Court in Bharat Parihar v. State of Maharashtra Thr. PP Office and Ors. [Writ Petition No. 3742 of 2023 dated June 30, 2023] set aside the provisional attachment order and held that the provisional attachment order is not valid after one year.
The Honorable Bombay High Court observed that the Respondent has failed to show that the order was passed and served on the Petitioner, much less prior to the provisional attachment order ceased to operate by virtue of Section 83(2) of the CGST Act and the communication dated April 19, 2023, furthermore no fresh order had been passed by the Respondent to attach the Petitioner’s bank account on April 19, 2023.
The Honorable Court opined that the noting in the file of the Respondent could not constitute an order without a formal order, as the law may mandate, being passed and being communicated to the affected person, whose bank account was attached and held that the communication dated April 21, 2022, for provisionally attaching the bank account of the Petitioner was illegal and invalid as per Section 83(2) of the CGST Act.
Author’s comments :
Section 83(2) of the CGST Act, 2017 expressly provides that such provisional attachment of any property, including a bank account to protect the interest of the revenue, after the initiation of proceedings under Chapter XII, XIV or Chapter XV shall cease to have effect after the expiry of the period of one year from the date of the order made.
These are preemptive and emergency powers and must be exercised strictly in accordance with the law. Post expiry of one year period, this turns out to be institutionalized theft, and passion to protect the revenue does not authorize by passing the law.
Q.7 Whether the taxpayer should pay taxes along with interest due to the supplier’s error in GST reporting?
Ans. No, The Honorable Madhya Pradesh High Court in Agrawal and Brothers v. Union of India [Writ Petition No.14297 of 2020 dated June 13, 2023], while allowing the claim, held that the taxpayer paid tax but his supplier inadvertently deposited the amount of GST in the wrong GSTIN. The Court further noted that it is a settled law that no one can’t be made to suffer for the fault of another.
The Honorable Madhya Pradesh High Court stated that the taxpayer should not suffer due to a supplier’s error in GST reporting and directed that the Railway Department can seek a refund, as the Revenue Department has received the amount of tax contained in ITC twice.
Further, held that, the Petitioner may seek refund from the Railway department.
This is an applaudable judgment delivered by the Honorable Madhya Pradesh High Court and its important one in the context of GSTR-2A vs. GSTR-3B mismatch notices-
CBIC has issued circular No. 183/15/2022 dated December 27, 2022 to give relief to the taxpayers in the context of same subject matter. This judgment will allow all the taxpayers to seek refund, where the tax has been paid twice and the government cannot tax on the same transaction twice (Article 265 of The Constitution of India).
Q.8 Whether the Revenue can issue SCN without offering opportunity of being heard?
Ans. No, The Honorable Allahabad High Court in the case of Mohini Traders v. State of U.P. [WRIT TAX No. 551 of 2023 dated May 3, 2023] had set aside the order and held that assessee is not required to request for opportunity of personal hearing since, it is a compulsion on the Assessing Authority to provide opportunity of being heard before passing an adverse order.
The Honorable Allahabad High Court noted that the stand of the Petitioner may remain unclear unless minimal opportunity of hearing is first granted and directed to issue a fresh SCN to the Petitioner within a period of two weeks.
The Honorable Court observed that the opportunity of being heard is a must and the principle of natural justice would commend to the Court to bind the authorities to always ensure and provide such opportunity of hearing and held that, not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the appeal stage.
This is a welcome decision by the Honorable High Court of Madhya Pradesh 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.
Similar judgment were passed in 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.
Q.9 Whether goods can be released by furnishing a bank guarantee and conveyance by paying the required penalty?
Ans. Yes, The Honorable Gujarat High Court in Ravi Trading Co. v. Deputy Commissioner of State Tax [SCA no. 6407 of 2023 dated May 4, 2023] directed the Revenue Authority to release goods on conditions that the assessee deposits a certain amount of penalty towards tax in lieu of confiscation of conveyance and furnish bank guarantee in lieu of confiscation of goods. The Honorable Gujarat High Court directed that the goods of the Petitioner as well as vehicle will be released subject to the following conditions:
Further, the Honorable Gujarat High Court tagged the present Petition with Special Civil Application No. 8353 of 2022.
This is a welcome judgment by the Honorable Gujarat High Court. Proceedings u/s 130 of the GST Act is not emergency Proceedings like u/s129.
The taxpayers are entitled to seek provisional release in form GST INS-04 under section 67(6) read with rule 140. There is no reason with the department to deny request for provisional release provided taxpayer is willing to execute bond and furnish security. Once the form INS-02 is issued, taxpayer may immediately request the proper officer to grant provisional release in form GST INS-04.
Q.10 Whether furnishing bank guarantee is required for seeking bail?
Ans. No, The Honorable Supreme Court in Makhijani Pushpak Harish v. The State of Gujarat [SLP (CRL.) No. 2868 of 2023 dated April 19, 2023] set aside the order passed by the Superintendent which was modified by the Honorable Gujarat High Court directing the assessee to furnish bank guarantee for bail.
The Honorable Supreme Court observed that, the condition of furnishing bank guarantee has been held bad in multiple cases by the Honorable Supreme Court and Referred the case of Subhash Chouhan v. Union of India Criminal appeal No. 186 of 2023, wherein the Honorable Supreme Court has set aside the order passed by the High Court imposing the condition of pre-deposit while granting bail to the assessee.
The Honorable Court noted that the view taken in the SubhashChouhan (supra) has been reaffirmed by Honorable Supreme Court in another case, Anatbhai Ashokbhai Shah v. State of Gujarat & Ors.
Q.11 Whether the Petitioner can file rectification application even in case where he has not co-operated with Assessing officer for assessment?
Ans. No, the Honorable Madras High Court in Seoyon E-Hwa Summit Automotive India (P.) Ltd. v. Deputy Commissioner (ST)-I [W.P. Nos. 16535 & 16538 of 2023 dated June 6, 2023] held that rejection of rectification application filed under section 161 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is justified as the assessee has not cooperated with the Assessing Officer during the assessment.
The Honorable Madras High Court observed that the revenue department enumerates various opportunities to the Petitioner to supply the break-up of the ITC claimed and the reconciliation and notes non-compliance with those directions and the Petitioner had not cooperated in proceedings for assessment leaving the revenue department no choice but to complete assessment on basis of available materials and without any explanations for his benefit.
The Honorable Court held that, it is not for the Petitioner who has not made even a solitary attempt to cooperate or assist in the assessment proceedings to lay the blame at the doorstep of the revenue and dismissed the Writ Petitions.
Q.12 Whether denial of cross-examination of witnesses was violative of principles of natural justice?
Ans. Yes, The CESTAT, Ahmadabad in M/s Indu Overseas Pvt. Ltd. v. Commissioner of Central Excise & ST, Rajkot [Excise Appeal No. 12085 of 2013-DB dated June 26, 2023] remanded the order passed by the Adjudicating Authority and held that denial of cross-examination of witnesses is violative of principles of natural justice.
The CESTAT Ahmedabad observed that the Order in Original passed without providing opportunity of cross-examination of witness whose statement have been used as evidence and relied upon by the authorities.
The CESTAT relied on its own judgment in the case of Patidar Products v. CCE & ST [Appeal No. E/11756/2017 dated October 18, 2022] wherein it held that denial of cross-examination and non-production of witnesses for cross-examination was violative of principles of natural justice.
The CESTAT held that the adjudication order passed without allowing cross-examination is an act of gross violation of natural justice and set aside the SCN and the Impugned Order and remanded back the matter to the Adjudicating Authority for passing a fresh order after allowing the opportunity for cross-examination of the witnesses.
Q.13 Whether the unregistered person can claim refund of GST on cancellation of purchase of flat for the period when there was no policy related to refund for unregistered person?
Ans. Yes, The Honorable Bombay High Court in C.P. Rabindranath Menon v. Deputy Commissioner of State Tax [Writ Petition No. 5131 of 2022 dated April 21, 2023] set aside the order rejecting the refund claim filed by the unregistered person pursuant to agreement for purchase of residential flats and held that the Petitioner should be given opportunity for reconsidering their claim for refund and restored the refund application before the Deputy Commissioner of State Tax for decision.
The Bombay High Court noted that the policy governing the application of refund by unregistered person came after the Petitioner filed the refund application and opined that, an opportunity needs to be given to the Petitioner for reconsideration of their claim for refund and entitlement of refund will be decided on merits by the Deputy Commissioner of state tax, after giving adequate opportunity of hearing to the Petitioner.
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.
Q.14 Whether an order passed by the Adjudicating Authority before the dates provided for filing the reply and personal hearing is violative of the principles of natural justice?
Ans. Yes, The Honorable Allahabad High Court in Sunil Enterprises v. Commissioner Commercial Tax [Writ Tax no. 730 of 2023 dated May 29, 2023] set aside the order passed by the Adjudicating Authority and held that once the dates have been fixed and communicated to the assessee for the purpose of filing of written reply and for the purpose of oral hearing then no adjudication order could be passed before the dates have passed.
The Honorable Allahabad High Court observed that the Impugned Order had been passed much before the arrival of the dates of reply and personal hearing which was not permissible neither on the basis of principles of natural justice nor Section 75(4) of the Central Goods and Services Tax, Act, 2017 (“the CGST Act”)
The Honorable Allahabad High Court set aside the Impugned Order and the matter is remitted to the Adjudicating Authority to pass fresh order strictly in accordance with law after providing adequate opportunity of hearing to the petitioner.
The department has to ensure robust training and must enforce a system to track the quality of orders passed by the adjudicating authorities.
Section 75(4) expressly provides for granting of personal heading before an adverse order.
In author’s opinion, even providing personal hearing along with the SCN, shows presumption in the mind of adjudicating authority to be adverse order without going through the reply to be submitted by the taxpayer.
Such kind of adjudication is a waste of limited national resources (time and cost).
Q.15 Whether the Petitioner is liable to deposit the tax demand if the tax was entirely paid and the Appellate Tribunal is not yet constituted?
Ans. No, The Honorable Orissa High Court in Nalinikanta Barik v. Commissioner of CT & GST [W.P (C) NO. 15244 of 2023 dated May 15, 2023] held that if the deposit of tax had been already made and the Appellate Tribunal is not yet constituted then the rest of the demand shall remain stayed.
The Honorable Orissa High Court observed that the Petitioner wanted to avail the remedy under the provisions of law by approaching the Appellate Tribunal which is not yet constituted and held that, as an interim measure, if the deposit of tax has been already made and the Appellate Tribunal is not yet constituted then the rest of the demand shall remain stayed during the pendency of the writ petition.
Q.16 Whether the Appellate Authority can issue order beyond the allegations mentioned in the SCN?
Ans. No, The Honorable Calcutta High Court in Earthmark Traders v. Joint Commissioner, State Tax, Chinabazar & Rajakatra Charge &anr. [MAT 791 of 2023 dated May 12, 2023] set aside the order passed by Appellate Authority and held that the Appellate Authority cannot travel beyond the allegations made in the Show Cause Notice (“the SCN”).
The Honorable Calcutta High Court observed that the Appellant Authority will take into account the complete submission made by the Appellant, including the documents submitted in response to the Memo.
The Honorable Calcutta High Court noted that the Appellant Authority will provide the Appellant with an opportunity to provide further clarification regarding the allegations stated in the Impugned SCN and submit additional supporting documents and a chance for a personal hearing will be granted to the authorized representative of the Appellant and Held that the Appellate authority should not have travelled beyond the allegation of the SCN as, the SCN itself is defective on account of non-consideration of the submissions made by the Appellant to the Memo.
Q.17 Whether the Appellant is liable to pay interest on the amount of differential duty paid which is available as CENVAT Credit to the Appellant’s Sister Concern?
Ans. No, The CESTAT, Kolkata in M/s Jai Balaji Industries Limited v. Commissioner of Central Excise, Bolpur [Excise Appeal No. 552 of 2011 dated June 22, 2023] set aside the order confirming interest on differential duty and held that where the differential duty paid by the assessee is available as CENVAT credit to the Assessee’s sister concern then it is a revenue-neutral situation. Thus, as duty was not actually payable, the payment of interest does not arise in the case of revenue neutral situation.
The CESTAT, Kolkata noted that the Appellant was not liable to pay duty as per the terms of Rule 8 of the Excise Rules and relied on the judgment of the Honorable Gujarat High Court in CCE & C v. Gujarat Narmada Fertilizers Co. Ltd. [[2012 (285) ELT 336 (Guj.)] wherein the court held that if the Appellant was not liable to pay the duty, then no interest would be payable by the Appellant.
Further observed that the criterion laid down by the CESTAT, New Delhi for determining a revenue-neutral situation in the case of Jai Yuhshin Ltd. v. Commissioner of Central Excise, New Delhi [2000 (39) RLT 501] was fulfilled by the Appellant and further relied on the judgment of the Honorable Gujarat High Court in CCE & C. v. Indeo Abs Ltd. [2010 (254) ELT 628 (Guj.)] wherein the court held that in case the sister concern was eligible for Modvat Credit on the goods cleared then the whole exercise would be construed to be revenue neutral.
The CESTAT held that, it was a revenue-neutral situation, no duty is to be paid by the Appellant and therefore no question of payment of interest arises and Set aside the impugned orders.
Q.18 Whether the Provisional Attachment can be lifted as assessee agreed to pay tax liability in installments?
Ans. Yes, The Honorable Gujarat High Court in Nirajkumar Nareshkumar Lakhyani v. State of Gujarat [Special civil application no. 6777 of 2023 dated April 27, 2023] set aside the order of Adjudicating Authority and allowed the assessee to make payment of tax liability in installments and thereby lifted the provisional attachment of bank account of the assessee.
The Honorable Gujarat High Court observed that the Petitioner has expressed his willingness to pay the demand raised by the Adjudicating Authority within span of 15 equal monthly installments and held that the attachment of the current bank account of the Petitioner shall be lifted forthwith.
Similar judgment was passed, the Honorable Kerala High Court in the matter of Pazhayidom Food Ventures (P) Ltd v. Superintendent Commercial Taxes [WP(C). No. 14275 of 2020 dated July 24, 2020], cases like these must not have reached Honorable courts and the commission u/s 80 of the act has power to allow time for the payment of tax and other amounts in installments.
Q.19 Whether the Applicant is liable to reverse the ITC proportionately to the extent of financial/ commercial credit note issued by the supplier?
Ans. No, The AAR, Andhra Pradesh, in the matter of Vedmutha Electricals India Pvt. Ltd. [Advance Ruling no. 05/AP/GST/2023 dated May 26, 2023] ruled that assessee is eligible to take full credit of GST charged in invoice issued by the supplier even though later commercial/financial credit note has been issued.
The AAR, Andhra Pradesh observed that the provisions of section 15(3)(b) of the CGST Act can only be applicable if there was a prior agreement and a link is established between the relevant invoices and the discounts provided. In this case, no such correlation was found between the credit notes issued by the supplier and the Applicant. As a result, the benefit of reducing the value of the discount from the transaction value, as per the provisions of section 15(3)(b), was not allowed.
The AAR noted that the financial credit note should not be used as a means of fraudulently transferring ITC by inflating an invoice and held that the post-supply discount received by the Applicant from the supplier did not impact the transaction value between the parties. Therefore, the Applicant is eligible to take full credit of the GST charged in the tax invoice and was not required to reverse the ITC to the extent of the financial or commercial credit notes issued by the supplier.
Similar to the above ruling the AAAR, Tamil Nadu in Re: M/s. MRF LTD. [2019 (27) G. S. T. L. 578 (App. A. A. R. – GST)] ruled that, in case of financial/commercial credit note which is only adjustment of commercial transaction, no GST impact is there. Thus, there is no need of reversal of ITC by the buyer.
Therefore, the buyer is eligible to take full credit of GST charged in the tax invoice issued by the supplier, even if a financial/ commercial credit note is issued later, subject to the condition that there is no mis-utilization of financial/ commercial credit note.
Q.20 Whether the Respondent is liable to pay penalty on account of suppression fact by relying on the judgment which was later overturned by higher authority?
Ans. No, The Honorable Supreme Court in Commissioner of Central Excise and Service Tax v. M/s Reliance Industries Ltd. [Civil Appeal No. 6033 of 2009 dated July 04, 2023] held that the assessee was bonafide and has correctly discharged duty liability by relying on the CESTAT decision even though the same was later overturned by the Honorable Supreme Court.
The Honorable Supreme Court noted that the Respondent has self-assessed the liability on the assessable value on the basis of an interpretation given by the CESTAT in its order in the case of IFGL Refractories Ltd.
Further observed that the Respondent had communicated to the Revenue Department about their pricing policy by giving separate letters, which holds a bonafide belief that the Respondent has correctly discharged the liability and opined that the mere fact that the belief was ultimately found to be wrong by the judgment IFGL Refractories Ltd, does not render the belief malafide, more particularly when such a belief was originate from the view taken by a division bench of the CESTAT.
The Apex Court clarified that the term “suppression of facts” should not be interpreted as a mere act of omission. It should be considered a deliberate act of non-disclosure aimed at evading duty. The Honorable Court held that the Respondent’s conduct during the period 2000 to 2005, of not including the monetary value of the duty benefits in assessable value, could not be considered to be malafide when it merely followed the view taken by the Tribunal.
Q.21 Whether the Petitioner is required to pay additional 20 per cent of interest liability as deposit for availing stay order?
Ans. No, The Honorable Calcutta High Court in Liakhat Ali Mallick v. State of West Bengal [M.A.T. NO.823 of 2023 dated June 16, 2023] set aside the order of the Single Bench directing the assessee to deposit 20 per cent of the interest liability and directed the Appellate Authority to consider the appeal of the assessee on merits and held that, condition of deposit of 20 per cent need not be imposed since the same is not statutory requirement.
The Honorable Calcutta High Court observed that single Bench has granted stay of the garnishee notice but has imposed a condition that the Petitioner has to deposit 20 per cent of the interest liability which was originally quantified as INR 31, 58,936, subsequently rectified as INR 29, 85,527.
The Honorable Court held that the condition need not be imposed by directing the Petitioner to pay 20 per cent of the interest and allowed the appeal and set aside the order. Further, directed the Appellate Authority to consider the appeal on merits in accordance with law after affording an opportunity of personal hearing.
Q.22 Whether Petitioner’s Advocate can be present while interrogation during GST proceedings?
Ans. Yes, The Honorable Bombay High Court in Shri Prakash Kumar Ramesh bhai Patel v. State of Maharashtra [Criminal Writ Petition no. 2053 of 2023 dated June 28, 2023] held that, the Petitioner’s Advocate can remain present during the recording of the Petitioner’s statement at a visible distance but not audible distance.
The Honorable Bombay High Court held that the Petitioner’s Advocate is allowed to remain present at a visible distance, but not at an audible distance at the time of recording of the Petitioner statement.
This is a welcome judgment by the Honorable High Court of Bombay, as per Article 20(3) and Article 22(1) of the Indian Constitution; an accused person is entitled to presence of his Advocate during interrogation by a Police Officer. This position has been asserted without reservation in Nandini Satpathy’s case A.I.R. 1978 S.C. 1025. Hence, an accused person during interrogation by a Police Officer is permitted the right to the presence of his Advocate.
Q.23 Whether the rejection of appeal by the Appellate Authority, after generation of a new e-way Bill due to breakdown of vehicle within three minutes of interception, is valid or not?
Ans. No, the Honorable Calcutta High Court in M/s OFB Tech Private Limited v. State of West Bengal & Ors. [WPA 1271 of 2023 dated January 24, 2023] has set aside the order passed by the Appellate Authority and remanded back the matter to Appellate Authority to pass a fresh speaking order after giving petitioners an opportunity of being heard, as the assessee had duly prepared the e-way bill within 3 minutes of the interception of the vehicle.
The Honorable Calcutta High Court observed that the Appellate Authority failed to properly take into account the petitioner’s argument regarding the breakdown of the first vehicle and the generation of a fresh e-way bill for the same goods within three minutes after the second vehicle was intercepted. Further observed that, the rejection and dismissal of the appeal on this ground is overly technical in this particular situation and held that the Impugned Order should be set aside and the matter should be brought back to the Appellate Authority to pass a fresh speaking order after giving an opportunity of hearing to the petitioner or its authorized representative.
Q.24 Whether the penalty can be levied, in case e-way bill expires during the transit?
Ans. No, The Honorable Calcutta High Court in Perfect Enterprise v. State of West Bengal [W.P.A. No. 532 of 2023 dated June 15, 2023] set aside the penalty order passed by the Adjudicating Authority which was later upheld by the Appellate Authority and opined that, there is no penalty on the bonafide assessee if e-way bill gets expired while transporting goods.
The Honorable Calcutta High Court relied upon, Judgment of Calcutta High court in the case of M/s Hanuman Ganga Hydro Projects Private Limited v. Joint Commissioner, State Tax Authority [WPA 1480 of 2022 dated July 6, 2022] wherein court held that where assessee had no mala fide intention to evade payment of tax, the orders passed by the Appellate Authority and the penalty were all set aside and quashed.
The Honorable Court observed that there is no other allegation against the Petitioner as e-way bill gets expired due to a national holiday while transporting the goods then there is no wilful misconduct committed by the Petitioner and opined that the Petitioner may apply for refund before the Revenue Department.
Further, directed the Revenue Department to refund the penalty within 15 days from the date on which refund application filed by the Petitioner.
Q.25 Whether the Applicant is eligible to claim ITC of the inward supplies used in the construction of the warehouse?
Ans. No, The AAR, West Bengal, in the case of Mindrill Systems and Solutions Pvt. Ltd. [TS-287-AAR(WB)-2023-GST dated June 06, 2023] ruled that, Input Tax Credit (“ITC”) cannot be claimed on construction of immovable property which is capitalised in the books of account.
The AAR, West Bengal observed that the Applicant has constructed the warehouse and capitalised the same in books of accounts and retains the ownership/ title of the said warehouse, thus it is clear that the warehouse has been constructed in the Applicant’s own account and the contention of the Applicant in this regard is not acceptable.
Further observed that, the warehouse cannot be exempted from the definition of immovable property, this view is supported by the fact that the warehouse, despite being constructed of removable parts, is not meant to be relocated and has not really been moved after construction.
The AAR Held that, the Applicant is not eligible for ITC charged on inward supply of goods and services related to construction of warehouse which is capitalized in the books of account.
Q.26 Whether suppression of fact needs to be willful in order to attract penalty?
Ans. Yes, The CESTAT, New Delhi in the matter of M/s. Mount Everest Breweries Limited v. Commissioner of CGST & Central Excise [Service Tax Appeal No. 50145 of 2019 dated July 03, 2023] held that the assessee had not suppressed any facts and thus, extended period of limitation cannot be invoked.
The CESTAT, New Delhi observed that section 73 (1) of the Finance Act does not mention that suppression of facts has to be ‘willful’ since the word ‘willful’ precedes only misstatement, therefore, it is to be seen whether even in the absence of the expression “willful” before the term “suppression of facts” under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax.
The CESTAT relied upon the judgment of the Honorable Supreme Court in the case of Pushpam Pharmaceuticals Company [1995 (78) E.L.T. 401 (SC)] wherein the court while dealing with the meaning of the expression “suppression of facts” held that the term must be construed strictly. It does not mean any omission; the act must be deliberate and willful to evade payment of duty.
The CESTAT stated that the Revenue Department had passed the order without examining the facts and a mere conclusion had been drawn that there was suppression of facts by the Appellant and the suppression was with an intent to evade payment of service tax and held that, the Impugned order holding that the extended period of limitation has been correctly invoked cannot be sustained and is set aside.
Q.27 Whether ITC is admissible in respect of goods purchased from vendors in case payment is settled through book adjustment?
Ans. Yes, The AAR, Kerala, in the matter of Paragon Polymer Products Private Limited [Advance Ruling No. KER/03/2023 dated March 02, 2023] ruled that ITC is admissible for goods purchased from outsourced vendors when the consideration is settled through book adjustment, subject to the conditions outlined in Sections 16, 17 and 18 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and their corresponding rules.
The AAR, Kerala observed that the settlement of the mutual debts through book adjustment by the Applicant is a valid mode of payment of consideration for the receipt of goods and services since, it satisfies all the requirements and opined that the term consideration under the CGST Act, is has an inclusive definition which covers any form of payment, therefore if the payee owes the payer a debt, and accepts a reduction in such a debt liability as a valid form of payment, that should also be regarded as a valid ‘consideration’ for a supply.
The AAR held that the ITC is admissible when consideration is settled through book adjustment, subject to the conditions outlined in Sections 16, 17, and 18 of the CGST Act and their corresponding rules.
Q.28 Whether renting of Immovable property in nature of sharing profit is leviable for service tax?
Ans. No, The CESTAT, Chennai in M/S. Hotel Shreelekha Regency Limited [Service Tax Appeal No. 40073 of 2014 dated July 14, 2023] set aside the order demanding service tax on rental property and held that, income received from rent by assessee is not subject to levy of service tax.
The CESTAT, Chennai relied upon the judgment of the Honorable Supreme Court in Commissioner of Service Tax-1, Chennai Vs Grand Royale Enterprises Ltd. [2022(63) GSTL 412 (SC)], wherein the Court held that no service tax is liable for renting the property and this is untenable in law. Further held that the amount received is in the nature of sharing of profits and the same cannot be considered as rent received for renting / licensing of immovable property as the intention is not merely to permit the use of space and that the consideration is based on the annual sales.
Q.29 Whether court vide writ petition can interfere with the statutory power of Revenue Authority by imposing conditions?
Ans. No, the Honorable Supreme Court in State of Gujarat v. Choodamani ParmeshwaranIyer & Anr. [SLP (Crl.) No. 4212-4213 of 2019 dated July 17, 2023] set aside the order passed by the Honorable Gujarat High Court and held that power to arrest a person by an empowered authority under the GST Act may be termed as statutory in character and ordinarily the high courts should not interfere with exercise of such power under writ jurisdiction.
The Honorable Supreme Court observed that, if any person is summoned under Section 69 of the CGST Act for the purpose of recording of his statement, the provisions of Section 438 of Criminal Procedure Code, 1908 cannot be invoked.
The Honorable Apex Court opined that the power of officers under the CGST Act to arrest a person could be termed as statutory in character and a writ court should not ordinarily interfere with exercise of such power.
The Honorable Court relied upon the Judgment of the Honorable Supreme Court in Union of India v. Padam Narain Aggarwal and Ors. (2008) criminal appeal No. 1575 of 2008 wherein the court observed that normally the court should not impose any condition before effecting arrest, if any conditions are imposed before effecting arrest for instance giving prior intimation to the person concerned etc., the statutory provisions would render ineffective and meaningless.
Q.30 Whether the Applicant being a fair price shop is liable to charge GST from the state government against the supply made to them?
Ans. No, The AAR, West Bengal, in the matter of M/s. Chanchal Saha [Advance Ruling No.09/WBAAR/2023-24 dated June 26, 2023] ruled that the assessee is supplying goods to ration card holder and not to State government and since, the recipient is ration card holder and not the state government thus, no tax will be charged from the State government.
The AAR, West Bengal observed that the Applicant is engaged in supply of kerosene Oil to the ration card holder and the Applicant is receiving monetary consideration against that supply of from ration card holder and no other monetary or non-monetary consideration is received for that transaction.
Held that, since no supply was made to State government thus, no tax should be charged in accordance with Section 9 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
Q.31 Whether hostel accommodation provided by the Applicant to the students for residential purposes where charges are less than INR 1,000 per day during the period August 01, 2021 till July 12, 2022 is exempt from GST?
Ans. Yes, the AAR, Uttar Pradesh, in the matter of V S Institute & Hostel Private Limited [Advance Ruling No. UP ADRG 26/2023 dated May 08, 2023] ruled that hostel accommodation charging less than INR 1,000 per day from August 2021 till July 18, 2022 is exempt from GST. However, from July 19, 2022 and onward the exemption longer applies, and the applicable GST rate is 12%.
The AAR, Uttar Pradesh observed that the nature of service has not changed from August 01, 2021 only the provider of services has changed because the map has been sanctioned by the Greater Noida Industrial Development Authority of Uttar Pradesh established in January 1991 under the UP Industrial Area Development Act 1976 for the residential as well as for commercial use and the Applicant has started to provide the hostel service directly to the students of educational institutions like GL Bajaj, Daron Acharya, GNIT, Sharda University, Amity University and several others from August 01, 2021 without charging GST, as students are residing for a fixed term on annual basis.
Further observed that, the word hostel is not defined in GST. If the Government had intended to exclude hostel services, then it would have been excluded the same from the service exemption notification. As the word ‘Hostel’ is neither a new word nor uncommon word, thus it can be simply concluded that also the hostel accommodation services provided by Applicant falls under SAC Code 996322 as mentioned under the service exemption notification.
The AAR noted that through Notification No. 03/2022 Central Tax (Rate) dated July 13, 2022 w.e.f. July 18, 2022 amended Notification No. 11/2017 Central Tax (Rate) S. No. 7, by omitting the word ‘above one thousand rupees but’ making accommodation taxable @12% in case where unit accommodation per day is less than INR 1000 and held that the hostel accommodation services provided by the Applicant to the students for the period August 2021 till July 18, 2022 was exempt from GST. However, after July 19, 2022 the same was taxable @ 12% in case where charges were less than INR 1000 per day.
(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.)
About the Author: CA Ritesh Arora, Partner at Ritesh Arora & Associates and an Author, is a seasoned Chartered Accountant with over a decade of expertise in indirect taxation. He offers comprehensive solutions in areas like GST compliance, tax consultancy, advisory, and litigation support, catering to his clients’ diverse business needs. Ritesh’s key strengths include in-depth knowledge of tax laws, helping clients optimize their tax positions, and delivering high-quality service that ensures compliance and minimizes risks. For inquiries, write to him at email@example.com.