GST Case Law Compendium – January 2024 Edition

Welcome to the January 2024 edition of our GST Case Law Compendium, a comprehensive guide providing crucial insights into the latest legal developments surrounding Goods and Services Tax (GST) in India. In this edition, we delve into diverse topics, ranging from appeal limitations and registration cancellations to penalties, court examinations, and procedural intricacies. Stay informed as we unravel the complexities of GST jurisprudence, offering valuable perspectives on compliance, regulatory changes, and notable court decisions. Whether you’re a tax professional, business owner, or legal enthusiast, this compendium aims to keep you abreast of the ever-evolving landscape of GST law.

1. Whether the period of limitation for filing the appeal is extended pursuant to the 52nd GST Council Meeting?

The Honorable Allahabad High Court in M/s Modern Steel v. Additional Commissioner and Another [Writ Tax No. 1192 of 2023 dated October 19, 2023] remanded back the matter to the Appellate Authority to examine the question of limitation in the light of the provisions contained in 52nd GST Council Meeting and directed to pass an appropriate order.

The Honorable Allahabad High Court observed that no plausible ground has been taken in the appeal filed by the assessee for condoning the delay except that the earlier counsel, to whom papers were handed over, did not file the appeal, and by mistake, the delay had occurred.

The Honorable Court held that the matter be remanded back to the Appellate Authority to examine the question of limitation in light of the recommendations made in the 52nd GST Council Meeting and directed to pass an appropriate order.

Author’s Comments

In the 52nd GST Council meeting, which was held on 7th October 2023 in New Delhi, the GST Council recommended an amnesty scheme for filing of appeals against demand orders in cases where an appeal could not be filed within the allowable time period and this recommendation was officially notified by CBIC vide Notification No. 53/2023-Central Tax dated 2nd November 2023.

The Council has recommended providing an amnesty scheme through a special procedure under section 148 of the CGST Act, 2017 for taxable persons, who could not file an appeal under section 107 of the said Act, against the demand order under section 73 or 74 of the CGST Act, 2017 passed on or before the 31st day of March 2023, or whose appeal against the said order was rejected solely on the grounds that the said appeal was not filed within the time period specified under section 107(1) of CGST Act, 2017. In all such cases, filing of appeal by the taxpayers will be allowed against such orders up to 31st January 2024, subject to the condition of payment of an amount of pre-deposit of 12.5% of the tax under dispute subject to a maximum of twenty-five crore rupees, out of which at least 20% of pre-deposit (i.e. 2.5% of the tax under dispute) should be debited from Electronic Cash Ledger.

2. Whether the GST registration be cancelled, without specifying the reason and explanation in the SCN?

No, the Honorable Delhi High Court in the case of M/s. VAB Apparel LLP v. Commissioner, Delhi GST and Ors [W.P.(C) 13642/2023 dated November 10, 2023] held that without specifying any particular reason and explanation for the cancellation of GST Registration by means of fraud, wilful misstatement or suppression, also there is no explanation as to why the buyers and suppliers have been found to be suspicious. Merely because the Petitioner’s shop was found closed, absent anything more, is not a ground for cancellation of the Petitioner’s GST registration. Thus, the impugned order is set aside, the Respondents have been directed to restore the GST Registration and the writ petition stands disposed of. The Honorable Delhi High Court observed that the Impugned Order neither refers to any fraud that was found to have been committed by the petitioner nor mentions any misstatement allegedly made by the Petitioner and opined that there is no explanation as to why the buyers and suppliers have been found to be suspicious. Merely because the Petitioner’s shop was found closed, absent anything more, is not a ground for cancellation of Petitioner’s GST registration and directed the Respondent to restore the GST Registration forthwith.

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.

A similar judgment was passed in the case of Singla Exports v. Central Board of Indirect Taxes and Customs & Ors W.P.(C) 2732 of 2023 dated August 09, 2023, by the Honorable Delhi High Court and 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.

3. Whether the penalty u/s 122(1)(iii) can be imposed when there is only a delay in depositing the amount of tax collected by the Supplier?

No, The Honorable Allahabad High Court in the case of Clear Secured Services Private Limited v. Commissioner, State Tax GST UP, [Writ Tax No. 5 of 2023 dated November 23, 2023] allowed the writ petition and reduced the amount of penalty from Rs.56,00,952.72/- to Rs.10,000/-, thereby holding that, the maximum penalty of Rs.10,000/- could be imposed by the Revenue Department, when no amount of tax has been evaded by the Assessee and there is only delay in depositing the amount of tax collected by the Supplier.

The Honorable Allahabad High Court observed that the Government has issued guidelines for waiving of late fees for filing returns vide Notifications dated June 1, 2021 (“the Notification”). The Court stated that the aforementioned factor has to be taken into consideration along with the factors stated in Section 126(2) of the CGST Act while imposing the penalty. The Honorable Court noted that there is no material on record or even an allegation that the amount has been collected but not paid or evaded. The Respondent only alleged that the Petitioner had not paid the amount within the prescribed period i.e., three months from the date on which such payment becomes due. The Honorable Court opined that the maximum penalty of Rs.10,000/- could be imposed by the Respondent on the Petitioner as no amount of tax has been evaded by the Petitioner. Also, the Court stated that the amount of penalty of Rs.10,000/- could have been lowered by the Respondent if the mandate of Section 126(2) of the CGST Act along with the Notifications was taken into consideration, which was not done by the Respondent.

Author’s Comments

This judgment will have far-reaching consequences. Section 122(1)(iii) provides for levying a penalty in case of tax collected is not remitted within three months from the date on which such payment becomes due.

Infraction of law triggers the imposition of penalty and this places the burden on Revenue to bring “every non-payment of tax or inadmissible claim of credit” within the ambit of infraction of law. No penalty can be imposed without showing (i) which of the special circumstances needed exist and (ii) what were the gains that Noticee would stand to derive to support ‘evasion of tax’. Without discharging the burden of proof, Revenue cannot impose any penalty.

It is pertinent to mention here that circular 76/50/2018–GST dated December 31, 2018, has been issued to specify that no penalty shall be levied U/s 73(11) in case of delayed filing of GSTR–3B return because tax along with applicable interest has already been paid but after the due date for payment of such tax.

4. Whether the penalty be imposed on the erring Government official for non-compliance with the orders of the Tribunal?

Yes, The CESTAT Allahabad in the case of M/s. Mahesh & Co. Pte Ltd. Singapore v. Commissioner of Customs Noida [Customs Miscellaneous Application 2 of 2022 dated November 9, 2023], imposed a penalty of Rs.2,00,000/- for causing delay in implementation of the earlier order of the Tribunal without any justified reason, and said amount needs to be paid by the erring Commissioner. Also, the Tribunal referred the matter to the Honorable Allahabad High Court for initiation of Contempt proceedings against the concerned Commissioner.

The CESTAT, Allahabad noted that after the order passed, specific directions were given twice but the Respondent Authorities have not permitted the re-export of goods even after giving the Bank Guarantee. The Respondent officers are acting in defiance of the Orders passed by the Tribunal, therefore violating the principles of natural justice.

The Central Board of Excise and Customs vide Circular No. 1035/26/2016-CX dated July 4, 2016, has directed that the order of the Tribunal needs to be implemented even if a stay application against the orders of the Tribunal is pending before the High Court or Supreme Court.

The CESTAT Allahabad opined that, as the Respondent Commissioner has acted in defiance of the authority of the Tribunal, the present case is fit for the imposition of cost on the Respondent Commissioner to ensure that the concerned Respondent Officer understands the meaning of judicial discipline and held that the matter needs to be referred to the Honorable High Court for initiation of Contempt proceedings against the concerned Commissioner.

Author’s Comments

This is a welcome step by the Honorable CESTAT bench to set an example against the erring officers. Judicial discipline demands all the subordinate Courts, Quasi-judicial authorities, and administrative officers to follow the decision of the higher authorities. Passion to protect the revenue cannot be a justification for bypassing the decision of higher authorities and abusing the Law of Administration.

Also Read: CESTAT aside order to initiate contempt proceedings against govt officials considering Apology

5. Gujarat High Court to examine the validity of Notification extending the period for issuance of SCN u/s 73 of the CGST Act

The Honorable Gujarat High Court heard the case of SRSS Agro Pvt. Ltd. v. Union of India [R/Special Civil Application No. 19720 of 2023] on November 10, 2023.

M/s. SRSS Agro Pvt. Ltd. (“the Petitioner”) filed a writ petition contending that the Notification No. 09/2023- Central Tax dated March 31, 2023, wherein the time limit specified under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) has been extended is unjustified as the extension of time limit can be made under special circumstances only. Also, once the period has been extended vide Notification No. 13/2022-Central Tax dated July 5, 2022, no subsequent extension can be made.

The Court directed that the Petitioner shall be granted time if the Petitioner asks time for filing a reply to the Show Cause Notice.

Author’s Comments

Section 168A of the Act gives power to the government to extend the time limit in special circumstances, in respect of actions that were not completed due to force majeure. The expression ‘force majeure’ means a case of war, epidemic, flood, drought, fire, cyclone, earthquake, or any other calamity caused by nature or otherwise, affecting the implementation of any of the provisions of this Act. Without force majeure, time limit extension seems ultra-vires and the final decision has to be taken by the judiciary. But it is advisable to incorporate this as one of the grounds to challenge the validity of notice and proceedings.

6. Can the revenue department seize cash under Section 67 of the CGST Act?

No, the Honorable Delhi High Court in the case of Gunjan Bindal and Anr. v. Commissioner of CGST, Delhi West and Ors. [W.P. (C) 8713 of 2023 dated November 17, 2023] disposed of the writ petition and directed the Revenue Department to remit the amount of cash seized along with interest thereby holding that, the Revenue Department has no power to seize cash under Section 67 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

The Honorable Delhi High Court opined that the aforementioned issue is already covered by the earlier decisions of the Court in the case of Deepak Khandelwal, Proprietor, M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West and Anr. P.(C) 6739/2021 dated August 17, 2023, and Rajeev Chhatwal v. Commissioner of Goods and Services Tax (East) W.P.(C) 5880/2021 dated August 24, 2023, wherein it was held that the Revenue Department does not have the power to seize cash under Section 67 of the CGST Act. The Honorable Court held that the petition is disposed of and the Respondent is empowered to take any other steps or measure available in accordance with law.

Author’s Comment:-

It is important to note that even cash must be ‘secreted’ to qualify for the 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 favor 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”.

A similar decision was given by the Honorable Gujarat High Court in the case of M/s. Bharat Kumar Pravin Kumar and Co. v. State of Gujarat [Special Civil Application No. 26222 of 2022 dated October 26, 2023, and by the Honorable Kerala High Court in the case of Shabu George v. State Tax Officer (IB) [WA No. 514 of 2023 dated March 23, 2023.

7. Whether the Petitioner is entitled to the custody of the vehicle to be released by the Revenue Department after furnishing of bond and security by the Assessee?

No, The Honorable Kerala High Court in the case of BIJU V.T v. The Senior Enforcement Officer, Ernakulam and Ors. [WP (C) No. 37521 of 2023 dated November 16, 2023]  directed the Revenue Department to release the confiscated vehicle as per its own discretion after bond and surety are furnished by the Assessee.

The Honorable Kerala High Court held that as the Petitioner is willing to furnish bond and security for the release of the vehicle confiscated by the Respondent, the Court directed the Respondent authority to release the vehicle confiscated as per its own discretion after the bond and security are furnished by the Petitioner, in accordance with law.

Author’s Comments

Provisions of the law give the power to seize (i) u/s 67(2)- Seizure of secreted documents, books or things (ii) u/s 129 – Detention, Seizure, and release of goods and conveyance in transit and (iii) u/s 67(11) – Spot Seizure of accounts, registers or documents.

Section 129(1)(c) expressly provides for provisional release upon furnishing a security equivalent to the amount payable. Section 67(6) read with Rule 140 also provides for provisional release in form INS-04.

There is no reason for the department to withhold seized goods, articles, books, or things upon furnishing a bank guarantee when the law expressly provides for such facility.

8. Whether an order can be passed within nine days of issuance of SCN and what is considered a reasonable time to file a reply to SCN?

The Honorable Madhya Pradesh High Court in the case of M/s. Raymond Ltd. v. Union of India [WP No. 26693 of 2022 dated November 20, 2023] allowed the writ petition and held that the Reasonable time period for filing a reply to the SCN is to be considered as 30 days as no reasonable opportunity of being heard was granted by the Revenue Department to the Assessee when the Impugned Order has been passed within nine days of issuance of SCN.

The Honorable Madhya Pradesh High Court observed Section 73 of the CGST Act is applicable in cases other than cases of fraud or wilful misstatement or suppression of facts wherein Section 73(1) of the CGST Act, states that the notice should be served to the taxpayer in cases where the tax has not been paid or shortly paid or being beneficiary of erroneous refund or wrongful availing or utilization of Input Tax Credit. Also, it is mandatory to issue the notice at least three months prior to the time limit stated in sub-section (10) of Section 73 of the CGST Act.

Further observed that Section 73(3) of the CGST Act states that after the issuance of notice u/s 73(1) of the CGST Act, the proper officer may serve a statement mentioning details of tax not paid/short paid/ erroneous refund or Input Tax Credit wrongly availed or utilized for time period other than the time period in Section 73(1) of the CGST Act. Further sub-section (5), (6), (7), and (9) of Section 73 of the CGST Act stipulate that the opportunity should be given by way of issuing SCN to Noticee for depositing tax, interest, and benefit stated in the SCN, within 30 days and the effect on taxpayer post compliance, part-compliance, and non-compliance.

The Honorable Court noted that Section 73(1) of the CGST Act grants the opportunity to the Noticee to respond as to why the Noticee should not pay the amount specified in the SCN along with interest and penalty. Also, the Reasonable time period for reply to the SCN is to be considered as 30 days.

Further Note that any SCN issued under section 73 of the CGST Act, or otherwise, should contain enough or adequate material based on which the proceeding has been initiated against the Noticee. The SCN is subject to judicial review in cases where the SCN is vague in nature.

The Honorable Court opined that the gap period between issuance of Impugned SCN and Impugned Order is only 8 days, therefore, no reasonable opportunity of being heard is being granted by the Respondent to the Petitioner and held that Impugned SCN and Impugned Order is set aside. However, liberty was granted to the Respondent for issuance of fresh legal and valid SCN and thereafter proceeds in the matter, thereby granting the reasonable and sufficient opportunity to the Petitioner and allowing the writ petition.

Further directed that the Petitioner is entitled to the cost of Rs.10,000/- which has to be paid by the Respondent by way of depositing the said amount in the bank account of the Petitioner within 60 days.

Author’s Comments

This is a welcome decision by the Honorable Madhya Pradesh High Court and it comes to the rescue of the taxpayer 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.

It is aptly decided that the reasonable time to reply to the SCN is 30 days. Passing the orders before the expiry of 30 days is also violative of the mandate given u/s 73 sub-sections (5),(8). This amounts to a denial of opportunity to put forward the defense.

9. ITC can be blocked when no order is issued under Section 74 of the CGST Act or Rule 86A of the CGST Rules.

No, The Honorable Telangana High Court in the case of M/s. A.S.E. India v. Union of India [Writ Petition No. 4756 of 2023 dated November 6, 2023] held that the impugned Notice, being in contravention of the provisions of the Central Goods and Services Act, 2017 (“the CGST Act”) and Telangana Goods and Services Act, 2017 (“the TNGST Act”), is set aside, thereby holding that it would be difficult to sustain the Impugned Notice issued for blocking of ITC when it is neither an order under Section 74 of the CGST Act nor under Rule 86A of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”).

The Honorable Telangana High Court noted that the Impugned notice issued pertains to the blocking of the electronic credit ledger of the Petitioner under Rule 86A of the CGST Rules. Also, nowhere it has been stated that the Impugned Notice is an intimation pertaining to proceedings initiated under Section 74 of the TNGST Act. Further, noted that the Impugned Notice issued is not an order of attachment of the ITC account of the Petitioner. Also, it would be difficult to sustain the Impugned Notice issued for blocking of ITC when the Impugned Notice issued is neither an order under Section 74 of the CGST Act nor under Rule 86A of the CGST Rules.

The Honorable Court held that the Impugned Notice, being in contravention of the provisions of the CGST Act and the TNGST Act, is set aside.

Author’s Comments

There are only five (5) reasons for which this pre-emptive and emergency power under Rule 86A can be invoked. And if there are any other reasons, not falling with these, the use of this exceptional power would be contrary to law. Blocking the use of input tax credit, which is a vested and indefeasible right in the nature of the property of a Registered Person, would be institutionalized theft. Passion to protect the interests of Revenue does not authorize bypassing the law.

It is advisable to call for reasons to believe by the Commissioner or any other officer authorized whenever Rule 86A is used for pre-emptive action.

Moreover, this decision by the Commissioner or any other authorized officer is a non-appealable decision, although not specified u/s 121 of the Act.

10. Whether the notice uploaded “View Additional Notices and Orders” Valid?

No, the Honorable Madras High Court in the case of East Coast Constructions and Industries Ltd. v. Assistant Commissioner [W.P. No. 26457 of 2023 dated September 11, 2023] allowed the writ petition by setting aside the Impugned Order and remanded back the matter to Appellate Authority thereby holding that, the Petitioner deserves a fair chance as the Petitioner failed to acknowledge the notice issued due to issuance of notice in different option on GST dashboard. The High Court also directed the Revenue Department to address the issues arising out of hosting information in the Menu in the Dashboard for “View Additional Notices and Orders” when already there is another drop Menu for “View Notices and Orders”, which was all along since inception and used for communicating notices in various forms and orders.

The Honorable Madras High Court noted that the Petitioner deserves a fair chance to address the discrepancy pointed out in Form GSTR-1 and Form GSTR-3B, as pointed out in Form ASMT-10. The Honorable Court held that the Impugned Order is set aside and the case is remitted back to the Respondent authority for passing fresh orders on merit in accordance with the law within a period of three months.

Author’s Comments:

Although Section 169 of the CGST Act, 2017 specifies 14 different ways/modes of serving any decision, order summons, notice, or order communication under the Act, care must be taken by the authorities not to simply pick and choose any option, rather the best possible option must be chosen by which it is mostly likely to reach the notice. The notice or any other communication cannot be termed to be served until it has reached the intended notice.

11. The Honorable Supreme Court dismissed the Special Leave Petition and reaffirmed the order passed by the Honorable Calcutta High Court in the aforementioned case.

The Honorable Supreme Court in the case of the Assistant Commissioner of State Tax, Ballygunje, and Others v. Suncraft Energy Pvt. Ltd. [Special Leave Petition (C) No. -27828 of 2023 dated December 14, 2023] reaffirmed the order passed by the Honorable Calcutta High Court in the case of M/s. Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax [MAT 1218 of 2023 dated August 02, 2023] wherein the Court set aside the order of reversing excess credit availed in Form GSTR-3B as compared to Form GSTR-2A and held that the demand notice issued to the assessee for reversing the ITC could not be sustained without proper inquiry into the supplier’s actions.

Aggrieved by the Order, the Respondent filed an appeal before the Honorable Calcutta High Court.

The Honorable Calcutta High Court in the case of M/s. Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax [MAT 1218 of 2023 dated August 02, 2023] (“the Impugned Order”) set aside the order of reversing excess credit availed in Form GSTR-3B as compared to Form GSTR-2A and held that the demand notice issued to the assessee for reversing the ITC could not be sustained without proper inquiry into the supplier’s actions.

Aggrieved by the Impugned Order, the Petitioner filed a Special Leave Petition before the Honorable Supreme Court of India.

The Honorable Supreme Court in the case of SLP (C) No. 27827-27828 of 2023 dismissed the Special Leave Petition and reaffirmed the order passed by the Honorable Calcutta High Court in the aforementioned case.

12. Does the entire amount of pre-deposit have to be paid from the Electronic Cash Ledger for filing an appeal under the Amnesty Scheme?

No, the Honorable Patna High Court in M/s. Friends Mobile v. State of Bihar and Others [CWJC No. 6457 of 2023 dated December 6, 2023] allowed the Writ Petition and held that the Revenue Department cannot direct the Appellant to pay the entire amount of pre-deposit for filing an appeal from Electronic Cash Ledger under the Amnesty Scheme.

The Honorable Patna High Court observed that Notification No. 53/2023 dated November 2, 2023 (“the Notification”) issued by the Respondent, allowed the filing of delayed appeals beyond the period specified in Section 107 of the Central Goods and Service Tax Act, 2017 (“the CGST Act”). The Notification mandates the payment of 12.5 percent of the pending amounts to the Department, as opposed to the 10 percent prescribed under the CGST Act. The notification further states that at least 20 percent of the remaining 12.5 percent should be paid from the Electronic Cash Ledger. The Honorable High Court further observed that the Division Bench of the Court in the case of M/s. Flipkart Internet Pvt. Ltd. v. The State of Bihar & Ors [CWJC No. 1848 of 2023 dated September 19, 2023] wherein it was held that pre-deposit amount of remaining 10 percent under Amnesty scheme as per Notification has to be paid from Electronic Cash Ledger. However, certain observations made in para 77 and 78 of that judgment pertaining to the aforementioned points were stayed by the Honorable Supreme Court in the case of M/s. Flipkart Internet Pvt. Ltd. v. The State of Bihar & Ors. [Special Leave Petition No. 25437/2023 dated December 4, 2023] and noted that the Notification clearly implies a recognition by the GST Council that the ten percent could be paid through the Electronic Credit Ledger. The Honorable High Court opined that during the pendency of the aforementioned appeal pending before the Honorable Supreme Court the appeal should be decided on merits and held that the Impugned Order is set aside and as the amount of 10 percent is already deposited by the Petitioner from Electronic Credit Ledger, therefore, the Appeal filed is maintainable. Hence, the Writ Petition is allowed.

Further directed that the Appeal should be considered on merits and no insistence should be made by the Respondent Commissioner (Appeals) for payment of 10 percent amount as pre-deposit from Electronic Cash Ledger.

Author’s Comment:-

Notification No. 53/2023 dated November 2, 2023, issued pursuant to the 52nd GST Council decision Clearly states that the enhance’s pre–deposit requirement of 12.5% of the tax under dispute has to be paid, and out of this at least 20% of pre–deposit (i.e 2.5% of the tax under dispute) should be debited from the Electronic cash ledger.

Such a decision to demand an entire pre–deposit 12.5% in cash is a classic example of over–passionate administration.

13. Whether GST Registration canceled without granting any hearing and proper reasoning sustainable?

No, the Honorable Delhi High Court in the case of M/s. Att SYS India Pvt. Ltd. Estex Tele Pvt. Ltd. Consortium v. Commissioner of Goods and Service Tax [W.P. (C) 14494/2023 dated November 20, 2023] allowed the writ petition and directed the Revenue Department to restore Petitioner GST Registration thereby holding that, GST Registration canceled without granting any hearing and proper reasoning is not sustainable.

The Honorable Delhi High Court noted that nowhere the date and time of the personal hearing was mentioned in the copy of the Show Cause Notice (“the SCN”). Therefore, the Petitioner was not afforded an opportunity of hearing to contest the SCN. Further Noted that the Impugned Order is not informed by reason and does not set any ground for cancellation of the Petitioner GST registration. The Honorable Court opined that the Impugned Order canceling the GST Registration is void and has been passed in violation of principles of Natural Justice and Held that the Impugned Order is not sustainable and set aside. Hence, the Writ Petition is allowed.

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.

A similar judgment was passed in the case of Singla Exports v. Central Board of Indirect Taxes and Customs &OrsW.P.(C) 2732 of 2023 dated August 09, 2023, by the Honorable Delhi High Court and 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.

14. Whether the extraordinary jurisdiction under Article 226 can be invoked when the statutory remedy of appeal is not availed?

No, the Honorable Patna High Court in the case of M/s. Punit Kumar Choubey v. Commissioner Commercial Tax, Patna [CWJC No.9975 of 2023 dated August 10, 2023] held that the extraordinary jurisdiction under Article 226 cannot be invoked when the statutory remedy of appeal is not availed.

The Honorable Patna High Court relying upon the judgment of the Honorable Supreme Court in the case of State of H.P. & Ors. v. Gujarat Ambuja Cement Ltd. &Anr. [Civil Appeal No. 2641 of 2000 dated July 18, 2005] observed that Article 226 of the Constitution confers wide powers on the High Court, the High Court has the discretion to not grant relief if there is an adequate and effective remedy elsewhere. The High Court can exercise the powers conferred only in cases where there is a breach of principles of natural justice, the due procedure has not been adopted or the orders or proceedings are wholly unjust, without any jurisdiction, or when the vires of the Act is challenged. However, no such plea has been raised by the Petitioner in the present case.

Further observed that the appellate remedy is provided under Section 107 of the BGST Act. This remedy has to be availed within the period of three months and if due to any sufficient reason appeal cannot be filed, the delay can be condoned for a further period of one month.

The Honorable High Court noted that as the Petitioner has not availed the available statutory remedies, therefore, the Petitioner cannot approach the High Court, challenging the Impugned Order under Article 226 as the Petitioner has failed by his own accord to avail the appellate remedy within the limitation period.

Further Noted that, when a specific period for condonation of delay is provided, there cannot be any extension of period by the Appellate Authority or the High Court under Article 226 of the Constitution. The Honorable Court opined that the Petitioner by his own failure has not availed the appellate remedy, therefore, the Petitioner cannot invoke extraordinary jurisdiction under Article 226 of the Constitution. Also, there is no jurisdictional, violation of principles of natural justice or abuse of process of Court averred or argued by the petitioner in the above writ petition.

Author’s Comments

Limitations Act, 1963 states in sections 5 and 14 that “sufficient cause” must be shown to justify the delay. In Ramlal v. Rewa Coalfields Ltd. ibid, Apex Court has held that:

• Non–filing of an appeal within the normal time allowed is not questionable;
• Every day of delay is to be explained with affidavit;
• Reasons cited verified and rejected if not found satisfactory; and
• Condonation allowed by a Speaking Order.

The principle of law is that when the time to file an appeal lapses, the 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.

When an appeal is filed after the period of condonation permitted in section 101(4), the Appellate Authority does not have statutory authority to condone the delay, not even if the reasons are ample and deserve to be entertained. The appeal must be dismissed for being fatally belated because the legislature has allowed appellate authority this much authority and not more.

15. Whether the Taxpayer entitled to a refund under the Inverted Duty Structure when Input tax is erroneously charged by the Supplier at a higher rate?

Yes, the Honorable Madras High Court in The Commercial Tax Officer v. M/s Suzlon Energy Limited and Others, [W.P. No. 10852 & 10855 of 2021 dated November 16, 2023]  dismissed the Writ Petition filed by the Department and reaffirmed the order of refund passed by the Assistant Commissioner (Appeals), thereby holding that, the Taxpayer is entitled to refund under Inverted Duty Structure when Input tax is erroneously charged by Supplier at higher rate.

The Honorable Madras High Court noted that Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) states that if the rate of tax of input is higher than the rate of tax of output, the refund application can be filed to refund the excess amount paid in Input Tax. Further Noted that the Respondent is entitled to refund even when the duty on input is charged at the rate of 18 percent erroneously though it is chargeable at the rate of 5 percent. The Honorable High Court opined that there is no illegality in the Impugned order passed by the Assistant Commissioner (Appeals). Therefore, the Respondent, as per the Impugned Order is entitled to refund along with interest at the rate of 9 percent per annum.

16. Whether rectification in return be allowed when ITC in GSTR-3B is accounted as IGST credit instead of CGST and SGST credit erroneously?

Yes, the Honorable Kerala High Court in the case of M/s. Chukkath Krishnan Praveen v. the State of Kerala [WP(C) No. 41219 OF 2023 dated December 8, 2023] allowed the writ petition and directed that the rectification in return should be allowed when Input Tax Credit (“ITC”) in GSTR-3B is accounted as the Integrated Goods and Services Tax (“IGST”) credit instead of the Central Goods and Services Tax (“CGST”) and the State Goods and Services Tax (“SGST”) credit erroneously.

The Honorable Kerala High Court disposed of the writ petition and directed that the Representation filed by the Petitioner be treated as a Rectification application and pass the necessary order in accordance with law after granting a proper hearing to the Petitioner within a period of two months.

17. Whether the Tax Research Unit (TRU) have any vested authority to issue circulars under the GST law?

No, the Honorable Delhi High Court in the case of Association of Technical Textiles Manufacturers and Processors &Anr. v. Union of India & Ors. [W.P.(C) 5933/2019 dated November 16, 2023] held that the respondents could not draw attention to any provision of the Central Goods and Services Tax, 2017 (“the CGST Act”), in terms of which the Tax Research Unit (“TRU”) could be said to have been clothed with the authority or jurisdiction to render a clarification, with respect to the classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us. Thus, in the absence of conferral of any power upon the TRU, or it is recognized as being statutorily enabled to issue any clarification or directive under Section 168 of the CGST Act, Circular No. 80/54/2018-GST dated December 31, 2018, is liable to be quashed and set aside on this ground alone and thus, the writ petition shall stand allowed.

The Honorable Delhi High Court noted that the Impugned Circular while purporting to convey a position with respect to the classification of non-woven polypropylene bags has rested its conclusions solely on the basis of the provisions contained in Chapter 39. It has neither alluded to Section XI of the First Schedule to the Customs Tariff Act nor has it referred to Chapter 56 thereof. The contention of the petitioners that non-woven polypropylene is an article that would fall within Tariff Heading 5603 was neither questioned nor contested before us by the respondents. In any case, a reading of the impugned circular would establish that it fails to examine the issue on the anvil of the distinction that the Customs Tariff Act appears to construct when it places plastics under Chapter 39 and textiles and articles thereof separately in Section XI, and more particularly, as was contended by the petitioners in Chapters 56 and 63 of the said enactment. The Impugned Circular also fails to advert to the Notes placed in Chapter 39, and which in unambiguous terms, exclude textiles from the ambit thereof.

The Honorable Court held that the Revenue could not draw our attention to any provision of the CGST Act, in terms of which the TRU could be said to have been clothed with the authority or jurisdiction to render a clarification with respect to the classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us. In the absence of a conferral of any power upon the TRU, or it being recognized as being statutorily enabled to issue any clarification or directive under Section 168 of the CGST Act, the circular is liable to be quashed and set aside on this ground alone.

Further held that the writ petition itself stood restricted to the validity of the circular, it would be imprudent for us to hand down a verdict imbued with attributes of finality. We are thus of the considered opinion that the issue of classification should be left open for the consideration of the competent authority in appropriate proceedings. Thus, a writ petition stands allowed. The Impugned Circular is hereby quashed.

18. Whether the Assessee is entitled to interest on GST Refund from the date of expiration of 60 days of the first application filed when the subsequent application for refund is filed as per Appellate Order?

Yes, the Honorable Delhi High Court in the case of Bansal International v. Commissioner of DGST and Anr. [W.P.(C) 11629/2023 dated November 21, 2023] allowed the writ petition and held that interest at the rate of six percent would be payable for the period which commences from the date immediately after the expiry of sixty days from the first application till the filing of the second application according to the appellate orders.

The Honorable Delhi High Court observed that the provision of Section 56 of the CGST Act, refers to the rate of six percent interest applicable on the amount of refund due, which has not been paid after sixty days from the date of application for refund whereas the proviso provides for increased rate of nine percent interest for the period from the date of application in cases wherein the claim for refund attains finality in appellate proceedings. The Honorable Court noted that the applications for refund filed pursuant to the orders passed by the Appellate Authority are filed to implement the orders already passed, therefore the said application does not require fresh adjudication. The subsequent application filed pursuant to the successful orders issued by the Appellate Authority is solely to push the process of disbursal claim and for the proper officer to determine and disburse the interest as payable.

The Honorable Court opined that the interest at the rate of six percent would be payable for the period which commences from the date immediately after the expiry of sixty days from the first application till the filing of the second application pursuant to the appellate orders.

19. Whether the Director liable for payment of tax amount when it is not determinable that the Company is unable to pay the tax amount during liquidation proceedings?

No, the Honorable Madras High Court in the case of K. Malathi v. State Tax Officer &Anr. [W.P.No.19728 of 2020 & 484 of 2021 dated October 30, 2023] held that the Director is not liable for payment of tax amount when it is not determinable that the Company is unable to pay the tax amount during liquidation proceedings. However as per Section 88 (3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), the Directors can be held liable jointly and severally, when it is conclusively determined that the Company is unable to settle the amount of tax, interest or penalty payable.

The Honorable Madras High Court observed that Section 88(3) of the CGST Act, incorporates the principle of vicarious liability of Directors of debtor company wherein it is provided that when any private company is liquidated and any tax, interest, or penalty under the CGST Act is un-recovered, then the Directors of the Company shall be jointly and severally liable for payment of tax.

The Honorable Court noted that the Impugned Orders were passed based on the alleged irregularities which have taken place prior to the commencement of the Corporate Insolvency Resolution Process against the Company and served on the Petitioner. Further Noted that the Respondents shall approach the Liquidator for disbursement of the claims and if Liquidator finds that the company has insufficient funds to pay the dues of Sales Tax, a new cause of action would arise wherein the Respondent would be entitled to recover the amount of sales tax due from Ex-Directors of the company at the time of liquidation.

The Honorable Court opined that no cause of action arises against the ex-directors to recover the sales tax dues payable by the Company in liquidation. Hence, the action taken by the Respondent in passing the Impugned Orders of demand in the name of the Company being in liquidation is not sustainable and held that the Impugned Orders are set aside and liberty is granted to Respondent to approach the Liquidator when it is concluded that the Company has no sufficient funds to settle the tax dues payable, the Respondent under Section 88(3) of the CGST Act, is empowered to proceed against Ex-Directors of the Company in accordance with law.

20. Whether the Revenue Department has the power to re-adjudicate or re-quantify Refund Orders?

No, the Honorable Madras High Court in the case of GET and D India Limited v. Deputy Commissioner (ST) [W.P. No. 2460 & 3674 of 2023 dated November 16, 2023] directed the Revenue Department to refund the amount of tax as per refund order thereby holding that the Notice cannot be issued when the excess tax amount has already been assessed and Revenue Department has passed the Refund Order. Also, the Revenue Department is not empowered to re-adjudicate or re-quantify while passing the Refund Order. Therefore, the Petitioner is entitled to a refund.

The Honorable Madras High noted that the Refund Order was passed wherein the amount of excess tax with the Respondent was determined. Pursuant to the Refund Order passed, the Petitioner filed a refund application. The Respondent, after passing the Refund Order and filing the Refund Application, once again issued the Impugned Notice to the Petitioner and called for the particulars, as if to revise its order.

The Honorable Court opined that the Impugned Notice cannot be issued when the excess tax amount has already been assessed and the Respondent has passed the Refund Order. Also, the Respondent is not empowered to re-adjudicate or re-quantify while passing the Refund Order. Therefore, the Petitioner is entitled to a refund.

21. Whether the High Court have the power to reduce or waive the amount of pre-deposit to be paid at the time of filing the appeal due to financial hardship faced by the Assessee?

Yes, the Honorable Punjab and Haryana High Court in the case of M/s. Shiva TexFabs Ltd. v. State of Punjab and Ors. [CWP 2650 of 2022 dated October 3, 2023] reduced the amount of pre-deposit required under the Punjab Value Added Tax Act, 2005 (“the Punjab VAT Act”) from twenty-five percent to ten percent due to financial hardship faced by the Petitioner thereby holding that, the High Court has inherent powers under Article 226 of the Constitution to waive or reduce the pre-deposit amount required at the time of filing the appeal.

The Honorable Punjab and Haryana High Court relied upon the judgment of the Honorable Supreme Court in the case of M/s. Tecnimont Pvt. Ltd. v. State of Punjab & Others [Civil Appeal No. 7358 of 2019 dated September 18, 2019] wherein it was held that the High Court has inherent powers to grant exemption from payment of pre-deposit or limitation in cases of genuine hardship by way of writ petition.

The Honorable Court noted that the Petitioner being in debt is paying loan installments, and the Petitioner in order to avoid cancellation of GST Registration prays for direction to the Respondent to entertain the appeal on merits. However, as of now, the Petitioner has agreed to pre-deposit ten percent of the amount.

Further opined that, if the Petitioner is forced to pay the twenty-five percent pre-deposit, the Petitioner would not be able to pay the loan. Also, the Petitioner is regularly paying the GST amount and if the business is shut down, it would lead to cancellation of GST registration. Therefore, the condition of a twenty-five percent deposit is liable to be modified.

By exercising the inherent powers granted under Article 226 of the Constitution, the Petition disposed of by directing the Petitioner to entertain the appeal and decide in accordance with law, after accepting the ten percent of the pre-deposit amount paid by the Petitioner.

Author’s Comments:

Only the Honorable High Court has the power to waive off the pre-deposit requirement as stated in section 107(6) of the Act. It is pertinent to mention here that the right to appeal is not an inherent right; in fact, it is a conditional right subject to payment of the pre-deposit amount, among other conditions prescribed.

22. Whether the Credit be denied due to an incorrect description of Service on invoices when Service Tax has been correctly paid?

No, the CESTAT, Mumbai in the case of M/s. Tata AIG General Insurance Co. Ltd. v. Commissioner of Service Tax, Mumbai [Service Tax Appeal No. 85359 of 2017 and 85635 of 2021 dated November 08, 2023] allowed the appeal and held that Credit cannot be denied due to an incorrect description of Service on invoices when the recipient who had paid the required Service Tax through the service receiver to avail the input services.

The CESTAT, Mumbai opined that the Credit cannot be denied to the recipient who had paid the required Service Tax through the service receiver in order to avail of the input services.

23. Whether time limit prescribed for claiming a refund under Section 11B of the CEA would be applicable in cases when Service Tax is paid erroneously?

No, the CESTAT, in Kolkata M/s. Bansal Biscuits Private Limited v. Commissioner of Central Excise & Service Tax, Patna [Service Tax Appeal No. 75363 of 2016 dated November 17, 2023] held that the time limit prescribed for claiming a refund under Section 11B of the Central Excise Act, 1944 (“the CEA”) would not be applicable in cases when Service Tax is paid erroneously.

The CESTAT, Kolkata relying upon the judgment of the CESTAT, Hyderabad in the case of Credible Engg. Construction v. CCE, Hyderabad (Final Order No. A/30082/2022 dated September 5, 2022) noted that the limit prescribed under Section 11B of the CEA would not be applicable in cases where the Service Tax is deposited erroneously when there is no requirement to pay any tax/duty. The CESTAT opined that the aforementioned judgment would be applicable in the present case and provision Section 11B of the CEA prescribing time limit is not applicable.

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(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 protected].