This article delves into the latest developments in GST, focusing on recent instructions from the Central Board of Indirect Taxes and Customs (CBIC), notable case laws, and the operationalization of the GST Appellate Tribunal.
82 Months have already been passed in GST since its birth. Comparing to life cycle of a human its very short span to gather strength and wisdom. Same is happening with our one of the most significant source of government revenue ie. GST.
Change is the only factor which is constant. Similarly, GST also evidencing lots of changes in terms of law, rules and interpretations made by our judiciary. In this letter, an attempt is made to compile changes made in terms of Notifications, Circulars and Judicial precedents occurred during last 100 days approximately.
At the beginning let’s discuss an instruction which is issued by CBIC for directing their officers to start and conduct investigations. For stake holders, this instruction is important in terms of the fact that this is obligatory for officers to follow these instructions. An Instruction No. 01/2023-24-GST (Inv.) dated 30/03/2024 has been issued by Ministry of Finance, Department of Revunue. These instructions shall be followed by CGST Units while conducting investigation with respect to various matters.
Following are the salient features of the said insttructions-:
1. (Pr.) Commissioner or zonal (Pr.) Chief Commissioner shall be responsible for developing and approving any search based on any intelligence. Also for conducting any search and completing all the processes rwelating to post search also.
2. It has to be an coordinated action considering the role of DGGI or the State GST department
3. Each Investigation must be initiated only after the approval of Principal Commissioner.
4. However, in the following situations, prior written approval of the zonal (Pr.) Chief Commissioner is required, namely in cases involving-
i. matters of interpretation seeking to levy tax/ duty on any sector/ commodity/ service for the first time, whether in Central Excise or GST; or
ii. big industrial house and major multinational corporations; or
iii. sensitive matters or matters with national implications; or
iv. matters which are already before GST Council.
In all of above four categories of cases, the concerned CGST field formation should also collect details regarding the prevalent trade practices and nature of transactions carried out from the stakeholders. The implications / impact of such matter should be studied so as to have adequate justification for initiating investigation and taking action
5. The fact of initiation of inquiry, if any, already on same subject matter with respect to the same taxpayer/GSTIN by another investigating office or tax administration must be ascertained for purposes of obtaining approval to initiate investigation. The position must be placed before the authority who is to approve initiation of investigation. This will solve problem of concurrent proceedings by multiple agencies for same issues in same tax payer.
6. There may be the situation where the (Pr.) Commissioner has initiated an investigation with respect to a GSTIN in its jurisdiction, and the issue is relevant to other taxpayers’ GSTINs registered (under multiple PANs) across various CGST jurisdictions. In this scenario, the (Pr.) Commissioner shall within 30 days of initiation of investigation take either of the following two actions with the approval of zonal (Pr.) Chief Commissioner
a. If description of GSTINs or similar entity types involved (or likely to be involved) across various jurisdictions related to the issue or topic is available, the self-contained reference be shared with each concerned Zone or all the Zones.
b. In other situations, Pr. DG DGGI shall be requested to issue suitable alert
7. Where an issue investigated by one of the (Pr.) Commissioners is based on an interpretation of CGST Act/ Rules, notifications, circulars etc, and it is in the direction of proposing non-payment or short payment of tax, however, the background is that the taxpayer(s) is/are following, or have followed, a prevalent trade practice based on particular interpretation on that issue in the sector/industry. This scenario results in more than one interpretation and likelihood of litigation, change in practice etc. In such cases, it is desirable that the zonal (Pr.) Chief Commissioner make a self-contained reference to the relevant policy wing of the Board.
8. In initiating investigation with respect to a listed company or PSU or Corporation or Govt Dept./agency or an Authority established by law, or seeking details (that are record-based and/or are reflected in statutory books of account or filings) from them, the practice to be adopted by the CGST field formation should be of initially addressing official letters (instead of summons) to the designated officer of such entity (detailing the reasons for investigation, and the legal provisions therefor) and requesting the submission of the relevant specified details in a reasonable time period which should be mentioned in the letter. Divergence from this practice at the initial stage must be backed by written reasons.
9. In letter mentioned in above point, the reference can be to inquiry “with respect to” or “in connection with” that entity. Further, the letter/summons should disclose the specific nature of the inquiry being initiated/undertaken. The vague (or general) expressions such as that the officer is making inquiry in connection with “GST enquiry” or “evasion of GST” or “GST evasion” etc. must not be mentioned.
10. Information available digitally/online on GST portal should not be called for under letter/summons from a regular taxpayer. Further, a letter or summons should not be used as a means to seek information filled in formats or proforma (specified by investigation).
11. If a taxpayer has utilized ITC towards payment of GST on its outward supplies, it is not acceptable to seek via summons/letter aspects such as – ‘please clarify whether ITC availed and utilized was proper.”
12. An investigation initiated must reach the earliest conclusion which is not more than one year. It is not necessary to keep investigation pending till limitation in law approaches. Show cause notice should not be delayed after conclusion of investigation. The closure report consequent to the appropriate payment of government dues by the person concerned should also not be delayed and should have a brief self-explanatory narration of the issue and the period involved. Expeditious actions without delay at these stages are part of preventive vigilance ensuring that no room remains for malpractices.
13. Conclusion of investigation may also take the form of recording that investigation is not being pursued further as nothing objectionable was found in terms of matter investigated In this Part let’s discuss two case laws which author found useful for all professionals working in GST across the board.
Head Note and Ratio established– Appellate Authority could condone delay and consider appeal on its merits if tax payer demonstrates that delay in fling appeal before appellate authority u/s 107 was due to sufficient reason such as serious medical condition.
Detail Discussion by the Court– The petitioner challenges order in original dated 14-8-2023 insofar as the imposition of penalty and interest under section 73(9) and Section 73(7) of the Central Goods and Services Tax Act, 2017 (the CGST Act) are concerned.
The petitioner states that pursuant to the show cause notice, the impugned assessment order was issued on 14-8-2023. Such order was received by the petitioner on 16-8-2023. Accordingly, the appeal should have been filed within 90 days thereof.
It is further stated that the appeal could not be filed in time both on account of the petitioner being diagnosed with septic shock and on account of the consequential difficulties in following up with the consultant. As a result, it is stated that the time limits for filing an appeal with an application to condone delay expired on 16-12-2023.
Under Section 107 of the CGST Act, the Appellate Authority does not have the power to condone delay beyond 120 days. In this case, the period of further delay is only 24 days and the petitioner has provided cogent reasons to explain such delay.
It is pertinent to note that the petitioner has paid the entire tax liability and the proposed appeal is limited to penalty and interest.
Therefore, the Appellate Authority is directed to receive and dispose of the appeal on merits if the appeal is received within a maximum period of ten days from the date of receipt of a copy of this order
Author’s Note-120 days are given in totality to taxpayer to file appeal with one month condonation by appellate authority. In the present case, 24 days more were passed beyond 120 days. High court directed to appellate authority to accept the appeal and adjudicate the case on merits on the basis of sufficient cause shown by the tax payer ie his serious health issue.
Citation No.2– Qualcomm India (P.) Ltd. v. Deputy Commissioner (ST)(FAC), [2024] 161 taxmann.com 819 (Telangana), HIGH COURT OF TELANGANA
Head Note and Ratio established-Where claim for interest on delay in refund of unutilised ITC by department rejected, specific provision under section 56 for grant of interest only in event of delay in making of refund by department, no reason or material available with department for not releasing refund amount promptly respondents-authorities were to be directed to make payment of interest on delayed refund
For calculation of interest on delayed refund of unutlised ITC, order by Appellate Authority, Tribunal or Court of law, as case may be, has to be treated as order passed under sub-section (5) of section 54, interest to be calculated immediately after sixty days within which payment of refund was to be made starts as per section 56. Interest on refund has to be granted automatically either 6% or 9% pa as the case may be.
Detail Discussion by the Court- The broad facts, for convenience without referring to the dates as the issues are in common, are that, the petitioners had filed a refund claim petition before the respondents claiming for refund of the unutilized ITC. Upon raising the said claim, the respondents issued a deficiency memo to which the petitioners promptly replied. Subsequently, show causes notices were issued to which also the petitioners replied and finally orders were passed rejecting the refund claims. The rejection of the refund claims was subjected to challenge in the appeals and the appeals filed by the petitioners were substantially allowed and refund amounts were also disbursed.
Later on, the petitioners moved applications with the respondents requesting them for grant of interest on the amount refunded by them for the period it was withheld by the Department resulting in delayed releasing. In spite of persistent efforts by the petitioners, the interest on the delayed refunded amount was not granted. The request finally stood rejected by the Department vide orders dated 09.05.2022 and 19.02.2023 respectively, which are under challenge in the instant writ petitions.
From plain reading of the Section 56 there is absolutely no ambiguity so far as the intention, object and purpose of enactment of the said provision. The heading of the said Section itself says ‘Interest on delayed refund’ which by itself leads to the only conclusion that can be drawn that of interest automatically accruing on the delayed refund made by the Department. The very Section starts with the wordings that of any tax ordered to be refunded is not refunded within the stipulated period of time, interest at such rate shall be payable on the said refund amount.
Similarly, the proviso also to the said Section clearly envisages that of any claim of refund which arises from an order passed by the Adjudicating Authority or Appellate Authority or Appellate Tribunal or for that matter any Court of law and if the refund is not made within sixty (60) days, the said amount of refund would also carry interest at such rates notified by the Government.
In the given factual and statutory provisions, we are of the considered opinion that the Section, the proviso and its explanation provided to the Section does not provide for any circumstances or situation under which the delayed refund not attracting interest. If we also look into the provisions of Rule 94 of the CGST Rules, 2017, the said provision also provides for certain periods which shall not be included in the period for which the interest is payable. This in other words also means that interest on the delayed refund is automatic. As soon as there is a delay in refund of the money to the applicant beyond the period stipulated under Section 56 or where any amount is due and payable to the applicant under Section 56 and if the said amount of refund gets delayed, the said amount shall automatically be entitled to carry interest.
There can be no dispute or doubt so far as a provision of grant of interest in a particular statute is concerned. The same has to be treated as a beneficial legislation and should be enforced non-discriminately. Since there is a specific provision under Section 56 for grant of interest only in the event of delay in making of the refund by the Department, the said statutory prescription carries an obligation to pay interest.
What is also required to be appreciated is that there was no reason or material available with the Department for not releasing refund amount promptly. There was no preventive or prohibitory order or any such restrictive directions from any Court of law in their favour from making refund within the stipulated time. In the said circumstances, non-granting of interest in such a case would amount failure to discharge statutory duty/obligation by the refund sanctioning authority.
Another contention of the State Counsel would not be sustainable for the reason that what is intended by the explanation is that the moment the Appellate Authority or the Tribunal or the Court as the case may be decides the issue of refund, the order so passed shall be deemed to have been passed as under sub-section (5) of Section 54. Which in other words means the said order by the Appellate Authority, Tribunal or the Court of law as the case may be for the purpose of its enforceability has been treated as if it is an order under subsection (5) of Section 54 and as such interest would be calculated immediately after sixty (60) days within which the payment of refund has to be made starts.
For all the aforesaid reasons, we are of the considered opinion that both these writ petitions therefore deserve to be allowed and are accordingly allowed. The respondents are directed to forthwith take steps for payment of interest on the delayed refund of ITC released to the petitioners in terms of sub-section (1) of Section 56 and the proviso thereto. Allowed in favour of tax payer and interest on delayed refund granted.
Author’s Note – In this judgement it is reinforced by the high court that interest on delayed refund should always be granted if there is no material evidence that refund is required to be rejected. Another important take home in this case is about the rate of interest. Sec 56 per say talks about interest at the rate of 6% but explanation to said section also talks about the interest at the rate of 9% pa. One must be careful when explanation to the said section applies.
Appointment of President of GST Appellate Tribunal
On 6th of May, 2024, Union Finance Minister Smt. Nirmala Sitharaman administers Oath of Office to Justice (Retd.) Sanjaya Kumar Mishra as the first President of GST Appellate Tribunal in New Delhi. Justice (Retd.) Mishra’s appointment marks the beginning of the operationalization of the GSTAT, a crucial body for resolving GST-related disputes.
Constitution of Appellate Tribunal and Benches thereof
As per Section 109 of CGST Act, 2017, Principal Bench will be formed in New Delhi, consisting of the President, a Judicial Member, a Technical Member (Centre) and a Technical Member (State). State Benches of GSTAT will consist of two Judicial Members, a Technical Member (Centre) and a Technical Member (State). There will be one (1) Principal Bench and thirty-one (31) State Benches be constituted.
This brings the start of era of justice with justification. Another significant event which is marks the beginning from this day of 6th May, 2024 is about the filing of appeal before the GSTAT.
As per Section 112(1) of CGST Act, 2017, appeal before the GSTAT has to be filed within 3/6(by the department) months from the date of the order appealed against. During such time when GSTAT were not formed, for filing appeal before GSTAT was suspended by passing a removal of difficulty Order No. 09 /2019-Central Tax New Delhi, the 03rd December, 2019, by CBIC.
In this order following dispensation was made-
For the removal of difficulties, it is hereby clarified that for the purpose of calculating: –
(a) the “three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal” in sub-section (1) of section 112, the start of the three months period shall be considered to be the later of the following dates: –
(i) date of communication of order; or
(ii) the date on which the President or the State President, as the case may be, of the Appellate Tribunal after its constitution under section 109, enters office;
(b) the “six months from the date on which the said order has been passed” in sub-section (3) of section 112, the start of the six months period shall be considered to be the later of the following dates: –
(i) date of communication of order; or
(ii) the date on which the President or the State President, as the case may be, of the Appellate Tribunal after its constitution under section 109, enters office.
Therefore, on the basis of this ROD, reckoning of period of 3/6 months shall start from the date on which president enters office. Now whether this appointment shall begin ticking clock? Needs to be clarified by CBIC, specially when none of the other information / infrastructure / GST Portal enablement is not in public domain.
Conclusion : The recent developments in GST reflect ongoing efforts to refine and enhance the system. The new CBIC instructions aim to ensure more structured and fair investigations, while judicial precedents continue to safeguard taxpayer rights. Additionally, the establishment of the GST Appellate Tribunal marks a new era in GST dispute resolution. As GST continues to evolve, staying informed about these changes is crucial for all stakeholders involved.
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The author can be contacted at gstrfbharat@gmail.com His mobile number is +91-9891112120.
DISCLAIMER: This publication serves as a general guide for informational purposes only. The references and content provided are for educational purposes and should not be considered as legal advice. We assume no liability for any losses incurred directly or indirectly through the use or reliance upon the information or conclusions presented in this publication. Prior to taking any action based on this publication, it is recommended that you seek professional advice. This work is solely intended to contribute to the subject of GST and serves the best interests of the profession.
For further inquiries, the author can be contacted at gstrfbharat@gmail.com or via mobile at +91-9891112120.
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