India: Indirect Tax E-Bulletin – July 2021

01. GOODS AND SERVICES TAX

NOTIFICATIONS AND CIRCULARS

Key GST Notifications pursuant to 44th GST Council Meeting

Clarification on limitations pursuant to Supreme Court's order

CBIC has issued various clarifications with respect to Order dated 27 April 2021 issued by Supreme Court extending period(s) of limitation under any general or special laws in respect of all judicial or quasi-judicial proceedings. The Circular clarified as under:

• The Order of the Supreme Court would not apply on proceedings / compliances of the taxpayer
• The order would not apply on quasi-judicial proceeding such as refunds, application for revocation of cancellation of registration, adjudication proceedings of demand notices, etc.
• Appeals against quasi-judicial order would stand extended as per Supreme Court order.

[Circular No. 157/13/2021 – GST dated 20 July 2021]

CASE LAWS | SUPREME COURT & HIGH COURTS

Anticipatory Bail in relation to investigation conducted by DGGI

Supreme Court rejected DGGI's appeal against the order of Delhi High Court allowing the assessee to seek anticipatory bail in lieu of a personal bond in an alleged case of fake invoices. Supreme Court upheld the High Court order holding that custodial interrogation is not required as the applicant was called upon only after conducting investigation for 1 year and the same was challenged by the Applicant. In case of an arrest the applicant shall be released upon furnishing a personal bond.

[Lupita Saluja vs. DGGI in Special Leave Petition No (Crl.) No(s).4328-4329/2021]

SC issued notice in Transitional Credit matter pertaining to Cesses

Notice has been issued in SLP filed by Sutherland Global Pvt. Ltd., against the ruling given by the Madras High Court order on transition of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess into GST regime. Division Bench of Madras High Court disallowed entitlement to transitional credits of the cesses into GST.

[Sutherland Global Services Pvt. Ltd. Vs. Assistant Commissioner of CGST and Central Excise and Ors. In Special Leave to Petition (C) No. 7780/2021]

Attachment proceedings

The Madras High Court while allowing writ petition challenging attachment order under Section 83 of the CGST Act, held that attachment proceedings cannot be at the cost of rights protected under Article 19(1)(g) of the Constitution to practise any profession, or to carry on any occupation, trade or business. Court considered that petitioner discharged 27% of the proposed tax dues and a mechanism is available under Sections 73 and 74 of the Act for proper determination and adjudication of liability. Court held that there is no need to attach bank accounts of the petitioner and directed DGGI to complete the investigation / adjudication expeditiously.

[Sri Marg Human Resources Pvt Ltd vs The Principal Additional Director General, DGGI, Chennai Zonal Unit – WP No 11284 of 2021 and WMP No 11936 of 2021]

Cancellation of GST registration

Rajasthan High Court held that Petitioner should be allowed sufficient time for submissions against cancellation of GST registration as per timeframe mandated Rule 22(2) of CGST Rules. Respondent department issued a notice to Petitioner seeking reply within 7 days from the date of receipt of the notice. The respondent went ahead and suspended the GST registration pending the cancellation proceedings as the Petitioner did not file the response within 7-day period. Rule 22(2) mandates 30 days for filing reply to such notice. It was held that suspension has consequences on the petitioner's business even worse than cancellation because it affects the day-to-day business. High court held that the respondent ought to have passed an order in cancellation proceedings within the 30-day period from the date of receipt of reply as per Rule 22(3) of the Rajasthan goods and service tax rules. The petitioner having filed the reply for justifying reasons of cancellation with the period as per Rule 22(2), the respondent ought to have passed an order to that effect. The matter is remanded for consideration of reply on merits and the High Court has not ruled upon the same. Going a step forward, the High Court has also directed the Respondent to grant a personal hearing to the Petitioner in light of the principles of natural justice.

[Avon Udyog Vs. State of Rajasthan and Ors. S.B. Civil Writ Petition No. 7463/2021]

Refund of IGST paid on Ocean Freight

The Rajasthan High Court allowed the Writ Petition on the issue of levying IGST on Ocean Freight. The High Court followed the decision in case of Mohit Minerals and COMSOL Energy rendered by the Gujarat High Court. It is a settled position that Notification No. 08/2017 -IT(Rate) in so far as it levies IGST on service provided in transportation of goods from a place outside India to the customs station wherein both the entities are foreign is ultra vires to the provisions of IGST Act. The High Court allowed refund of IGST by following a position that 'importer' cannot be a service recipient in terms of the provisions of GST regulations. The High Court observed that revenue ought to have considered the decision of Gujarat High Court (supra) wherein even Notification No. 10/2017 – (IT) Rate has been held unconstitutional to an extent it seeks to include an importer with the ambit of 'recipient' of a service.

It is pertinent to note that the decision in case of Mohit Minerals has been appealed against, and the same pending before the Apex Court. However, operation of the judgement has not been stayed.

[Shree Mahesh Oil Products vs Union of India - D.B. Civil Writ Petition No. 14177/2019]

CASE LAWS | ADVANCE AUTHORITY RULINGS

Inter-state movement of pallets, crates & containers on lease to branch, constitutes 'supply of service'

As per the AAR dated 23 July 2021, the Authority held that transfer of pallets, crates, and containers on lease by the Applicant to its own branch constitutes as taxable supply. Each branch of the Applicant in different states has a separate registration. The Applicant facilitates transfer of such movable property from one branch office to another based on a lease agreement. The authority held that the transfer is between two entities of the same company and shall be considered as 'deemed supplies' between distinct persons. It is essentially supply of services in form of a lease transaction.

[Chep India Private Limited - TS-359-AAR(KAR)-2021-GST]

Date of handing over flat possession by Builder to land-owner supplying developmental rights construable as 'Point of taxation'

AAR dated 22 July 2021 sought to determine the point of taxability in case of an agreement for sharing of constructed flats between the landowner and developer. The Applicant entered into a supplementary agreement with the landowner for allocation of flats. The AAR opined that, the time of supply and liability to pay tax arises on the date of transfer of possession of the constructed flats or a right in such constructed building to the land owner supplying the development rights.

[Vajra Infracorp India Pvt. Ltd. TS-354-AAR(TEL)-2021-GST]

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