prpri Top 15 Case Laws related to GST for October 2020 Top 15 Case Laws related to GST for October 2020

1. Supply of goods and supply of service made form different registration of the same taxpayer is neither a works contract nor composite supply?

Maharashtra Appellate Authority for Advance Ruling in the case of Vertiv Energy Pvt Ltd has ruled when the goods are supplied from one registration and the installation of such goods has been made from different registration would not be a composite supply.


1. Single contract for supply and installation of UPS with separate consideration

2. UPS supplied by Maharastra registration by issuing the invoice.

3. Installation service started after the transfer of ownership of the UPS

4. Installation service billed from the Delhi Registration

Ruling: The presence of two taxable persons would clearly preclude the impugned supplies from being considered as being in the nature of composite supply, wherein one of the essential conditions is that there should be a single taxable person who is undertaking all the supplies involved in a particular transaction.

Comment: The crux of the ruling is that the supply of installation service is after the transfer of ownership of the UPS and hence the same is neither a works contract nor a composite contract. In which case, individual tax treatment needs to be given for the respective supplies. If the same is done together then it could be treated as a works contract. Merely the same is billed from two different registration will not take away the essence of the transaction.

Action Point: For all the contracts where there is a supply of goods as service the point of transfer of title in goods and the supply of service thereon needs to be determined for the appropriate tax treatment.

2. Contesting the show cause notice vis a vis settlement

The High Court of Kerala in the case of Nadiya Timbers Vs State Tax Officer has held that when the scheme under Section 74 for avoiding a show-cause notice is one that is optional to an assessee, the assessee has either to opt for it or look away from it.

Provision: Section 73 (5) of the CGST Act provides payment of GST, interest, and penalty of 15% (u/s 74) on his ascertainment and inform in writing then no show cause notice can be served.

Comment: In case of the notice proposed to be issued under 73 (non-fraud cases) the amount to be paid before the issue of SCN or after the 30 days of issuance of the SCN has the waiver of penalty. But allows fighting out the case to its logical end. In case of notice proposed to be issued u/s 74 (fraud cases) having an interpretation issue may opt for seeking notice and pay a 10% additional penalty and get an opportunity to contest the case to its logical end.

3. Blocking of the e-credit ledger – Mismatch of GSRT – 2A and 3B

High Court of Delhi in case of Goyal Iron And Steel Traders directed to decide the matter by way of a reasoned order where the electronic credit ledger was blocked citing a mismatch in the Input Tax Credit claimed in GSTR-3B and that appearing in GSTR-2A.

Comment: Rule 86A (blocking of credit) is becoming a powerful tool in the hands of the department, by blocking the credit when there is a ‘reason to believe’. This decision required the passing of the reasoned order considering the representation of the assessee, it cannot be just automatic. Further Rule 86A does not provide the mismatch of credit in 3B & 2A as a reason for blocking the credit. This rule of 86A has been challenged in High Court of Gujarat in the case of M/s Kalpsutra Gujarat V/s UOI .

Action Point: Where the credit ledger is blocked, a speaking order to be insisted. So that the opportunity to cure the defect would exist.

4. Misclassification and voluntary registration perse will not create liability

The High Court of Gujarat in the case of M/s N J Devani Builders Pvt Ltd Vs. UOI held petitioner had voluntarily registered under the head of ‘commercial /industrial construction services’, the petitioner is liable to pay service tax, is not tenable as the petitioner cannot be held to be liable to pay service tax before 01.06.2007, where, it is not in dispute that the petitioner was rendering ‘works contract service’, taxable only from 01.06.2007.

Comments: It is a settled law that the Principle of Estoppel does not apply to fiscal statute, which means the taxpayer is not bound by his previous act of assessment. In case anyone has adopted a wrong classification, the wrong rate of tax or wrong valuation, that can be corrected. The previous act which was incorrect shall not be binding on the taxpayer’s present assessment.

Two office folders with text GST Goods & Services Tax

5. Property sold during the pendency of proceedings – Void?

The High Court of Madras in the case of Mrs Saraspathy Sundaraj has held since the defaulter had transferred the property in favour of his brother’s wife, by appointing his own brother as the Power Agent to act on his behalf and such a sale has happened within six months from the date of which the demand of arrears of tax was made, it can be said there are no bona fides in such a transfer.

Comment: Section 81 of the CGST Act, 2017 voids certain cases of transfer of property made to defraud the Government revenue. The proviso also provides that the transfer shall be valid in case

a. The transfer is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act, or

b. Without notice of such tax or other sums payable by the said person, or

c. With the previous permission of the proper officer

Action Point: As a bonafide buyer, one has to ensure to check if there are any tax dues/pending litigation  and the payment of adequate consideration as a part of their due diligence

6. Time limit not applicable for the refund to SEZ

The Delhi CESTAT in the case of Lanco Solar Pvt Ltd Vs CCT, CE&C has held that the ab initio exemption provided under the SEZ provisions, having overriding effect on the service tax provision. Under such position of law, a notification under service tax cannot restrict or provide a time limit for grant of refund to the SEZ unit and developer.

Comments: The SEZ Act has an overriding effect on the GST, thereby any supplies to SEZ used for the authorised operations, should be eligible for exemption irrespective of the conditions and limitations imposed in the GST provisions.

7. Vague SCN

The High Court Of Gujarat in the case of Mahadev Trading Company has held the show cause notice is as vague as possible and does not refer to any particular facts much less point out so as to enable the noticee to give his reply. The impugned show cause notice and the impugned cancellation order are hereby quashed.

Comments: The process of the SCN, personal hearing, and the order thereon are as per the principles of natural justice. This has to be followed in its true spirit. An order passed deviating the same is liable to be quashed.

Action Point: Once the SCN is challenged on this ground and gets quashed, the same could be issued again by curing the defects within the prescribed time limit. One has to take the grounds on merits so that there would be no back and forth.

8. Sale V/s. Job Work

Maharashtra Authority For Advance Ruling in the case of Kolhapur Foundry And Engineering Cluster have ruled where the principal sends minor input to the job worker and all other inputs and goods utilized in the final products belong to the job worker then the said process cannot be considered as job work.

Facts to consider:

a. The principle/Customer has supplied waste sand which had Nil value and the treated sand was purchased for market value

b. The principle/customer has no right over the sand which has been dumped, rather he could demand the processed sand in that proportion

c. Waste sand is stored at common pool Storage Location for production activity and it is not possible to segregate the sand as per the receipt from foundries

Comment: The main differentiating factor to be categorised as the sale or a job would identify the dominance of the transaction, supply of service on the goods sent by the principal, or the goods that have been incorporated by the supplier?

9. Tax payment in instalments

The High court of Kerala in the case of Malayalam Motors Pvt Ltd vs. Assistant State Tax Officer permitted to discharge the tax liability, inclusive of any interest and late fee thereon, in equal successive monthly installments.

Comment: Section 80 of the CGST Act, 2017 allows payment of tax due (other than the due self-assessed in any return) in monthly installments not exceeding 24 months. GSTR -1 is not a return. In case of temporary financial distress in the erstwhile Central Excise regime Circular No. 996/3/2015-CX, dated 28-2-2015 provided for payment of the tax dues in installments.

Action Point: If there is a financial crunch due to pandemic/other reasons, one can file the GSTR-1 and seek payment of the tax in installments.

10. Wrong Classification – No detention of Goods in Transit

The High Court Of Kerala in the case of Asharaf Ali K H Vs Assistant State Tax Officer held the allegation of misclassification of goods cannot warrant detention of the goods during transit. If the officer feels that there have been misclassification of the goods, then a report to be prepared and sent to the Assessing Officer, who can consider the said report and objections at the time of finalising the assessment.

Comments: This has been one of the reasons the common reason why the goods are retained during the transit. This judgment would be handy where there is a classification dispute of the goods being supplied.

Action Points: Representation needs to be made to the State GST Commissioner drawing their attention to various such judgments and request a circular or the internal instruction for the procured to be followed in case of a classification dispute.

11. Provisional Attachment – Pending Investigation/Adjudication/Assessment

The High Court Of Gujarat in the case of Khushi Sarees Vs State Of Gujarat has held the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside.

Comment: Section 83 of the CGST Act, 2017 provides provisional attachment of the property if the Commissioner is of the opinion it is necessary so to do to protect the interest of the Government revenue. The issue that comes up is what makes the commissioner form such an opinion during the investigation or adjudication of the assessment

Pointer from this decision:

a. There must be material based on which alone the authority could form its opinion, if challenged it must be disclosed.

b. Word “may” indicates an obligation to consider that a necessity has for provisional attachment to protect the interest of the revenue

c. Authority cannot be on the imaginary ground, wishful thinking, howsoever laudable that may be

d. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings

12. Mobilization Advance Taxability

The Mumbai CESTAT, in Gammon India Ltd Vs. CST had held demand on Mobilization advance is not consistent with law and deserves to be set aside.

Pointers from the decision: 

– Not linked to the work but a pledge of the contract between the appellant and principal.

– It is subject to furnishing of ‘bank guarantee’;

– It is not having any connection with the performance of the contract.

– It is carrying interest,

– It is a separate financial transaction within the contract for providing service

Comments: Proviso to Section 2(31) of the CGST Act 2017 provides that deposits shall not be considered as payment made unless the supplier applies such deposit as consideration. Thereby mobilization advance can be a deposit, and GST to be paid only on adjustment against the Bill.

13. An order passed without granting Personal Hearing

The High Court of Madras in the case of Jansons Industries Ltd Vs State Tax Officer, has held orders are contrary to law insofar as they are non-speaking and have been issued in violation of principles of natural justice, despite the specific request of the petitioner for personal hearing.

Comment: There have been many instances where the order passed does not speak out in terms of reasons to confirm the demand. Further order passed to comply time limits without granting Personal Hearing. This judgment can be used in all such cases. The de-novo order in case of remand has to be within the prescribed time limit.

14. Interest for Delayed refund – From the date of application or date of order?

The Bangalore CESTAT in case of Scribetech India Healthcare Pvt Ltd Vs CCT ordered for the interest for a delayed refund on the expiry of period of three months from the date of receipt of application, following the decission Supreme Court in the case of Ranbaxy Laboratories Ltd. 2011-TIOL-105-SC-CX

Comments: Section 56 of the CGST Act provides interest if the amount not refunded within sixty days from the date of receipt of application. In general, the refund application is followed with a show-cause notice, adjudication, and appeal thereon. Finally, the refund is granted if eligible. In this context, the SC decision helps to claim the interest from the refund application’s date.

Action point: Interest payment is not automatic. Hence, an application has to be made for claiming the interest in all cases where the refund is granted beyond 60days from the date of refund application.

15. E-way bill for a consignment of value < 50K for multiple invoices in the same conveyance

The High Court of Kerala in case of Bon Cargos Pvt Ltd Vs Assistant State Tax Officer (INT)  has held it is the duty of the transporter or the consignor, consignee to generate e-way bill when the aggregate value of the consignment is more than Rs.50,000/- and if otherwise ie., less than Rs.50,000/- there is no such requirement is not acceptable.

Relevant Provision:

1. Rule 138(1) provides that every registered person who causes movement of goods of consignment having a value exceeding Rs.50,000/- in relation to supply has to generate an e-way bill.

2. The proviso to Sub-rule 3 provides generation of the e-way bill at the option of registed person/transporter to general e-way bill when the value of the invoice is less than Rs.50,000/-

3. Sub-Rule 7 provides the transporter to generate e-way bill, where the consignor/consignee has not generated an e-way bill where the aggregate of the consignor value of the goods carried in the conveyance is more than Rs.50,000/-

Comment: In many cases, the consignment has been split to reduce each invoice value to less than Rs.50,000/- to avoid the generation of e-way bill. It is to be noted that the e-way bill is required when carried in the same conveyance even if the invoice value is less than 50,000 but exceed in aggregate.

Action Point: It is recommended to generate the e-way bill irrespective of the value to avoid any disputes during transportation.

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August 2021