HIGH COURTS GUJARAT HIGH COURT
VKC Footsteps India (P) Ltd. v.
Union of India & Ors.
[J.B. Pardiwala & Bhargav D. Karia, JJ]
Special Civil Application No.2792 of 2019 Date of Decision: July 24, 2020
Refund—Inverted duty Structure—Vires of Rule 89(5) of CGST Rules,2017— Refund of ITC on ‘input services’ denied by respondent in view of Rule 89(5) of the Rules—Said rule excludes ITC on input services as apart from Inputs used—Rule held to be contrary to section 54(3) of the Act as the said provision permits ITC on ‘any’ unutilised ITC—Rule held to be ultra vires the section 54(3) of the Act—Respondent directed to refund the accumulated ITC on input services also.
A writ has been filed for declaring Rule-89(5) of CGST Rule, 2017 as ultra vires to the extent it denies refund of ITC related to Input Service in case of inverted duty structure.
The petitioner receives input services on payment of GST in course of its business and avails ITC of GST paid thereon. The input and input services attract GST rate of about 18% which is higher than rate of tax paid on outward supply of goods. Thus the unutilized credit is accumulated which is not being refunded
fully by the respondent in view of the aforesaid amended rule. Section 54(3) of CGST Act provides for refund of any unutilized input tax credit and the said provision specifies the quantum of refund which includes credit availed on input services apart from inputs. A circular No.79/53/2018 dated 31.12.2018 was issued by the Govt. revising the formula to calculate refund on account of inverted duty structure. This formula excluded input services from the scope of net ITC for computation of refund which violates the provision Section 54(3) of the Act.
By prescribing the formula in Rule 89(5) of the rules, exclusion of tax paid on ‘input service’ as part of the refund of unutilized input tax credit is contrary to provisions of subsection 3 of section 54 of the CGST Act. Analyzing the provisions of the Act and Rules, keeping in mind the scheme and object of the Act, the intent of the government by framing the rule restricting the statutory provision cannot be the intent of law as interpreted in the circular dated 31.12.2018 so as to deny refund on input services as part of refund of unutilized ITC. Therefore, explanation (a) to Rule-89(5) which denies the refund of unutilized ITC paid on Input Services as part of ITC accumulated is ultra vires the provision of Sec.54 of the CGST Act. Therefore, respondents are directed to allow the claim of refund made by petitioners considering unutilized ITC of input services for claiming refund under Sub-section 3 of 54 of the Act.
HIGH COURT FOR THE STATE OF CHHATTISGARH
Dhamtari Krishi Kendra v.
Union of India & Ors.
[P. SAM KOSHY, J]
WRIT PETITION NO.70 of 2019
Date of Decision: July 17, 2020
Technical Glitch—TRAN 1 & TRAN 2— Inability to submit the forms due to technical glitch—Direction sought from High court to respondents for considering the same— Rejection on grounds that no evidence given showing submission within time and facing technical glitch—Writ filed— Held—Contentions raised in earlier round of litigation ought to have been considered by department—Complaint regarding failure to submit lodged at petitioner’s end well within time—Manual returns and registered post sent in this regard—Absence of reasoned order by department—matter remitted back for reconsideration keeping in mind documents proving the contentions of petitioner on record Submission of TRAN-1 and TRAN-2 was done a day before the last date of filing but failed due to technical glitch. Though a direction was sought from High Court to the authorities to consider the records and documents of the petitioner for filing of returns, the Commissioner refused the grant of permission to submit TRAN-1 and TRAN-2 on the ground that the petitioner had failed to produce any evidence to show that he tried to submit the forms within the stipulated period and that he faced technical glitch. The petitioner thus approached the High Court. It is held that the respondents should have considered the contentions of the petitioner earlier. Considering the timely complaint filed by the petitioner i.e. a day before the last date of filing , manual filing done shortly within a period of one month in addition to sending returns through
registered post; the Commissioner should have given reasons of rejection. Hence, the matter is remitted back to the Commissioner for passing a fresh order, keeping in mind that the petitioner has produced certain documents of his being unable to submit forms electronically. The Commissioner may refer the matter to GST Council for its recommendations. The Commissioner shall take a decision at the earliest.
KERELA HIGH COURT
Devices Distributors v.
The Assistant State Tax Officer [A.K. Jayasankaran Nambiar, J] WP No 14969 of 2020
Date of Decision: July 23, 2020
Detention of goods—Goods in transit covered with proper documents—Detention on grounds that invoices furnished not consecutively numbered—Transportation of other goods under the invoices falling in between those invoices suspected—Held goods in question covered with proper documents—Suspicion of other goods being transported without information no ground for detaining the goods in question u/s 129 of the GST Act—writ allowed—
The goods in transit were detained for the reason that the invoices furnished were not consecutively numbered for three invoices. It was suspected that the invoices in between the sets of invoices might have been used for transportation of other goods that were not brought to the notice of department. A writ is filed in this regard
Held that such a doubt cannot be a justification for detention u/s 129 of the GST Act, especially when the goods were covered with an e- way bill and invoice. In any case the doubt here was about the goods that could have been transported and not about the goods that are detained actually. Allowing the writ, the goods are ordered to be released.
TRIPURA HIGH COURT
Kalpana Stores v.
State of Tripura & Ors.
[CJ Akil Kureshi and Arindam Lodh, JJ] WP No 729/2019
Date of Decision: December 17, 2019
Natural Justice—Detention of goods—Goods in transit seized—Tax and penalty imposed by passing mere ‘order of demand of tax and penalty’ instead of assessment order—No opportunity of hearing given before confirming the demand—Writ entertained since impugned order was in breach of provisions of law— Impugned order quashed—
The goods in transit were detained and tax and penalty was imposed by the officer. The goods were released upon payment. A writ is filed on the ground that the said tax with penalty was imposed without affording an opportunity of hearing to the petitioner.
Disapproving the action of authorities, it is held that the impugned order is not an assessment order of petitioner’s tax liability but a mere order of demand of tax and penalty. Such order has to be confirmed after giving an opportunity of hearing to the petitioner. The order is in breach of subsections 3 and 4 of section 129 of the GST Act, 2017. Therefore, despite there being an appellate remedy, present petition is entertained and the impugned order is quashed.
GUJARAT HIGH COURT
Sawariya Traders v.
State of Gujarat
[J.B. Pardiwala and Bhargav D. Karia, JJ]
R/ Special Civil Application No. 22211 of 2019 Date of Decision: February 26, 2020
Detention of goods—Show cause notice issued u/s 130 of CGST Act, 2017 silent about discrepancy of goods and conveyance— Notice served to driver of conveyance—Writ applications filed for quashing of notice and release of goods—Permission to file application before concerned authority for provisional release of goods and conveyance granted— Also, applicants to file reply for discharge of the said notice—writ disposed of
A detention notice in form GST MOV-10 was issued u/s 130 of CGST Act thereby detaining both goods and the vehicle. The show cause notice was silent about the discrepancy noticed on physical verification of goods and conveyance. Moreover, the said notice was issued to the driver of the vehicle instead of owner of goods. Disposing off the Writ- applications filed for quashing of notice and for release of goods, the Hon’ble court has permitted the writ applicants to prefer an application addressed to the authority concerned u/s 67(6) of the Act for provisional release of goods and conveyance. Regarding challenge to the show cause notice, it is held that the applicants shall file a reply and make good his case that the impugned notice deserves to be discharged.
GUJARAT HIGH COURT
Cera Sanitaryware Limited v.
State of Gujarat & Anr.
Civil Application No. 8050 of 2020
Date of Decision: July 14, 2020
Writ—Maintainability of—notice of intimation issued u/s 74(5) of GST Act, 2017—writ filed for quashing of—writ not maintainable against such notice of intimation—applicant entitled to ignore it till further issuance of show cause notice
Where the writ applicant seeks issuance of writ against the notice of intimation issued in form GST DRC-01A u/s 74(5) of the Act by the respondent, the Hon’ble High court has held that such a challenge is not maintainable in law. It may be ignored by the applicant till further show cause notice is served u/s 74(1) of the Act. When further notice is served under section 74(1), the applicant would be given opportunity of hearing before his actual liability is determined.
IN THE HIGH COURT OF DELHI
Jian International v.
Commissioner of Delhi Goods and Service Tax
[Manmohan and Sanjeev Narula, JJ.] WP NO.4205 OF 2020
Date of Decision: July 22, 2020
Refund—Zero rated supply—Application filed for refund u/s 54 of Delhi GST Act, 2017 alongwith interest on zero rated supply of goods—Application neither acknowledged nor deficiencies pointed out within the stipulated period as required u/r 90 of GST Rules— Held—Application to be presumed as complete—Permitting rectification after statutory timelines period would mean fresh filing thereby sabotaging petitioner’s right to claim interest from the relevant date of filing— A writ is filed seeking direction to the respondent to grant refund claimed under Section 54 of the Delhi GST Act, 2017 alongwith interest. It is contended by the petitioner that it had filed an application for refund claimed on account of zero rated supply of goods and services which was neither acknowledged by the respondent within the stipulated time period nor any deficiency was pointed out within a period of 15 days from date of filing, as required under Rule 90 of the DGST Rules.
It is held that in such a case the refund application would be presumed to be complete in all respects in accordance with Rule 89 of CGST/DGST Rules. Permitting the respondent to process the refund application beyond the statutory time limes as provided under Rule 90 of CGST Rules shall mean rejection of petitioner’s initial application for refund and that would require filing of fresh application after rectifying the alleged deficiencies. In such an eventuality the petitioner’s right to seek refund would be delayed and its right to claim interest from the relevant date of filing of original application for refund would also be impaired.
The respondent has lost right to point out any deficiency at this stage. Therefore, refund alongwith the interest shall be payable within 2 weeks as per law.
HIGH COURT OF ORISSA AMIT BERIWAL
STATE OF ODISHA [S.K. PANIGRAHI, J.] BLAP NO. 2217 OF 2020
Date of Decision: July 27, 2020
Bail—Bogus ITC—Arrest against offence punishable u/s 132 of GST act, 2017—Bail application filed—Threat of tampering evidence—Two accused still at large—Huge amount of fake ITC involved involving many fake identities—Court cannot lose sight of impact of such activity on economy—Efforts of government to collect tax cannot be permitted to be sabotaged by such criminals—bail denied A bail application is filed against the arrest made being accused of an offence punishable under Section 132 of OGST Act, 2017. The petitioner is accused of engaging in fabricating fake invoices without supply of physical goods to other existing and non-existing firms thereby enabling the recipients to avail and utilize the ITC while discharging tax liabilities. On search and inspection by the State authorities it was found that no business is being conducted at the declared place of business, no transport documents to show actual supply of goods, no warehouses to stock such goods, no equipments to measure were available in the premises.
Out of the four accused, two are still evading arrest. The GST fraud committed is having huge ramification on the revenue collected by State and there is a possibility that the accused may tamper the evidence.
These complications created by the unscrupulous fraudsters could lead to arrest of innocent traders. The Government officials are doing their best to ensure tax collection. Their efforts cannot be permitted to be sabotaged by such criminals who prey on public exchequer. The increasing numbers of fraud in respect of ITC are alarming and a system needs to be devised to ensure that ITC is not misused. Hence, the court is not inclined to release the petitioner on bail at this stage. The bail application is dismissed.
MADHYA PRADESH HIGH COURT AMIT BOTHRA
STATE OF MP
[Virender Singh, J] MCRC No.21628/2020
Date of Decision: July 27, 2020
Bail—Clandestine manufacturing—evasion of GST—search conducted—confessional statement alleged to have been taken under threat—nature and allegation and specific evidence collected considered—facts put forth by applicant taken into account—bail granted As per revenue the petitioner was indulging in clandestine clearance of Pan Masala without payment of GST and that they had confessed to evasion of GST payment to the tune of
Rs.225 Cr. The revenue is contesting against the grant of bail to the petitioner. The petitioner has alleged that no clandestine purchase is possible as purchases are done from government companies or from traders registered under GST Act, 2017. It is contended that their statements were recorded under threat and pressure. The tax evasion was presumed by the Department due to delay in paper work and submissions of invoices on account of COVID-19 and complete lock down pursuant thereto.
Considering nature and gravity of the allegations made and the specific evidence collected in respect of these allegations, elaborate discussion of which would not be apt as it may adversely affect the interest of either party, specific facts put forth by appellant, the Court is granting bail subject to furnishing of bond with separate sureties.
TELANGANA HIGH COURT
Mallemaala Entertainments (P) Ltd. v.
Deputy Commercial Tax Officer
[M.S. Ramachandra Rao, J] Writ Petition No.10862 of 2020 Date of Decision: 30:07.2020
Assessment—Amalgamation of X and Y— Assessment proceedings to be dropped against X for the period when X and Y stood amalgamated—
Natural Justice—show cause notice served without mentioning date is against the rules of natural justice
After the two companies MAPL and MEPL were amalgamated a show cause notice was issued by first respondent proposing to levy tax for inter-State sales effected by MAPL for the period subsequent to the period when amalgamation was brought into effect. The petitioner stated not having received it.
No date of the show cause notice given to MAPL nor did the petitioner receive it. This leads to violation of Natural Justice. The amalgamated companies ought to be assessed in the name of the petitioner with whom it is merged. Thirdly it is observed that the assessment is alive before the 2nd respondent. Hence writ petition is allowed with permission to the 2nd respondent to issue a show cause notice to the petitioner for the period concerned and the petitioner may file objections to the said notice including plea of bar of limitation.
KERALA HIGH COURT
State Tax Officer, The Commissioner of Commercial Taxes
Village International School, K.K.S.
[K. Vinod Chandran & T.R. Ravi, JJ]
W.A. NO.573 OF 2020 Date of Decision: July 21, 2020
Rejection of application—Amnesty scheme— Whether application can be rejected on grounds of appeal intended by state from the order of first appellate authority—Held—No requirement of a specific provision for the state to withdraw the appeal filed as settlement based on statutory provision binding on the department—cases where revenue proceedings already initiated, proceedings have to be withdrawn on settlement under section 31 A of KGST Act as it would be render them infructuous on deposits made by assessee— No power to state to reject the application and requirement under subsection 7—circular stating where appeal already filed by state, settlement would be based on original assessment order is regarded to be issued in absence of any such provision in the scheme In this case the petitioner had filed an application under the Amnesty scheme introduced by Sec.31A of Kerala VAT Act, 2003
providing the assessee to absolve itself from the arrears. The question that arose was that if such application could be rejected on the ground that an appeal was intended by the State from the order of the 1st Appellate Authority.
The rejection was based on a circular of the Tax Department which was held to traverse beyond the statutory provisions by the single Ld. Judge. An appeal is filed by the State against the said order.
It is held there is no requirement of a specific provision that requires the State to withdraw the appeal filed since the settlement arrived at on the basis of statutory provision is binding on the department. If revenue proceedings are already initiated, they have to be withdrawn when the matter is settled under 31 A. The State appeals would be rendered infructuous on a settlement arrived at under Sec.31A as it is an inevitable consequence of deposits of amount determined under Sub-section of the amnesty scheme. There is no power given to the State to reject an application.
The circular was issued in contemplation of cases where appeals have been filed by the State wherein the requirement is to make settlement on basis of demand raised on the original assessment order. Such a provision is absent in the scheme. The appeals are thus rejected.
MADRAS HIGH COURT
P.R. Mani Electronics v.
Union of India & Others
[A.P. Sahi, C.J. & Senthil Kumar Rama Moorthy, JJ]
W.P. No.8890 of 2020 Date of Decision: July 13, 2020
Vires—Rule 117 of CGST Rules, 2017—Govt is empowered to make rules u/s 164 of the Act— Insertion of words ’within such time’ in S 140 of CGST Act, 2017 after amendment prescribes the time limit without relying on generic of s 164—therefore, rule 117 is intra vires Sec 140 of CGST Act—
Scope of Rule 117—ITC is not a property but a concession given to assessee which can be availed only with prescribed conditions— Extending time limit of the said Rule does not mean there is no time limit for availing ITC—
Section 16 of CGST Act is indicative of the legislative intent of prescribing the time limit for availing ITC—Against the statutory backdrop , the time limit for availing ITC is compelling which otherwise would make it unworkable—Meaning of word ‘shall’ in section 16 of CGST Act is peremptory which makes the provision mandatory—
Rule 117 makes it obligatory for the GST TRAN 1 to be filed electronically and not through hard copy—thus writ is dismissed
The validity of Rule 117 of the CGST Rules, 2017 is challenged on the ground that it is ultra vires Sec.140 of the CGST Act, 2017. The petitioner had submitted its returns in form of hard copy of Form GST TRAN-1 two days later after the last date of electronic filing due to inability to log into the portal. No response was received with regard to entitlement to transactional ITC. The petitioner has contended that the ITC is in the nature of property and it cannot be deprived of it. It is also contended that Rule 117 is directory and not mandatory.
U/s 164 the Govt. has the power to makes rules to give effect to the provisions of the Act and also confer retrospective effect to the rules.
Rule 117 was framed whereby a time limit was fixed for submitting the said form. By inserting words, “within such time” in Sec.140 with retrospective effect the time limit is prescribed without relying entirely on the generic section 164, therefore, Rule 117 is intra vires Sec.140 of the CGST Act.
The ITC is not a property of the petitioner but has to be construed as a concession and cannot be availed without complying with the conditions prescribed. The fact that the time limit may be extended under certain circumstances specified in Rule 117 including Rule 117A does not mean that there is no time limit for transitioning credit.
Keeping the statutory backdrop in mind in reference to section 16 of CGST Act and section 19 of TNVAT Act, in the context of transactional ITC, the case for time limit is compelling and disregarding the time limit and permitting a party to avail transactional ITC in perpetuity would render the provision unworkable.
In Sec.16(4) of the CGST Act , the word “Shall” used is peremptory. Thus the object and purpose of Sec.140 warrants the necessity to be finite. The time limit is therefore, mandatory and not directory.
Lastly the Form GST TRAN-1 is required to be filed electronically and not manually as specified in Rule-117, therefore, the respondents cannot be directed to permit the petitioner to file to Form GST TRAN-1 and claim the transactional ITC, unless any dispensation are granted by the Tax Authorities.