Assessment order without considering the Supreme court pronouncement, liable to set aside: Calcutta High Court
Summary: The Calcutta High Court in Sunrise Timply Company Pvt. Ltd. vs. Union of India & Ors held that a judgment of a Constitutional Court declaring the correct position of law applies retrospectively unless it is expressly stated to operate prospectively, while statutes ordinarily apply prospectively unless made retrospective. In this case, proceedings were initiated under Section 74 of the CGST Act alleging non-payment of IGST on ocean freight under reverse charge. Despite the taxpayer relying on binding judicial precedent that invalidated such levy, the adjudicating authority confirmed the demand and later rejected a rectification application on the ground that the Supreme Court judgment did not specify its retrospective effect. The High Court found this approach legally unsustainable, observing that the proper officer wrongly ignored settled constitutional principles governing the effect of judicial declarations. Once the Supreme Court affirmed the relevant legal position, it applied retrospectively to pending matters. Consequently, the Court set aside both the original demand order and the order rejecting rectification, reaffirming that departmental authorities cannot deny relief by misapplying the law on retrospectivity of judicial decisions.
Fact of the case:-
A proceeding under Section 74 of the said Act of 2017 had been initiated against the petitioner by issuing a notice to show cause alleging that the petitioner had failed to make of IGST on ocean freight under RCM, same was duly replied by the petitioner.
Without considering the submission of the petitioner order in original confirming the demand was passed, The petitioner thereafter filed an application for rectification of the said order in original citing the reference of Hon’ble Supreme Court in the case of Mohit Minerals (P.) Ltd. (supra) as well as other subsequent judgments. However application for rectification was rejected and Order in Original upheld.
Court Observation:
Show cause notice was issued in pursuant to the Department Audit conducted and audit observation issued. The petitioner responded to the audit observation thereby referring to the judgment of the Hon’ble High Court of Gujarat in the case of Mohit Minerals (P.) Ltd (supra), While the adjudications proceedings were under way the Hon’ble Supreme Court confirmed the judgement of High court. The aforesaid aspect was brought to the notice of the Proper Officer by the petitioner by way of a written submission filed by the petitioner after the hearing. The Proper Officer took note of the petitioner’s submission and differed with the petitioner while observing that the Hon’ble Supreme Court “did not highlight the retrospective or prospective effect of judgment on the instant issue”.
It is well-settled that a judgment of a Constitutional Court declaring a law applies retrospectively unless it is expressly made prospective, whereas a statute applies prospectively unless it is expressly made the Proper Officer was not right in concluding that since the judgment of the Hon’ble Supreme Court in the case of Mohit Minerals (P.) Ltd. (supra) did not indicate as to whether the same would apply prospectively or retrospectively, the same should be given prospective effect.
Conclusion
Court set aside the order in original along with rejection order passed for rectification application.
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