IMPORTANT CASE LAWS

Goods and Services Tax (GST)

a. The Government of India (GOI) issued Notification No. 50/2003-C.E. dated June 10, 2003 (Notification No. 50/2003) granting exemption from payment of Excise Duty to new and existing industrial units for 10 years from the date of commencement of commercial production by such industrial units. However, with implementation of GST, Notification No. 21/2017 dated July 18, 2017 (Notification No. 21/2017) withdrew Notification No. 50/2003 and restricted the benefit (by way of refund) to 58% of Central Goods and Services Tax (CGST) and 29% of Integrated Goods and Services Tax (IGST) instead of providing 100% refund to the Appellant.

The question was whether the Government was bound to give 100% tax exemption till completion of 10 years' period from the date of commencement of commercial production?

The Supreme Court held that there can be no estoppel against the legislature in the exercise of its legislative functions. Notification No. 21/2017 was issued in pursuance of statutory mandate as provided under Section 174(2)(c) of the Central Goods and Services Tax Act, 2017 (the CGST Act) which has been specifically incorporated by the legislature in its wisdom. If the contention of Appellant is accepted, it will permit an estoppel to be operated against the legislative functions of the Parliament. Therefore, the claim of Appellant on ground of principle of estoppel is without merit and rejected. Further, it observed that it will be appropriate that States should consider reimbursing such amount of 42% to the industrial units out of its share of revenue received through devolution from the Central Government. Also, GST Council was directed to make appropriate recommendations to the States in this regard and the Appellant would be permitted to make representations to respective State Government as well as GST Council.

Takeaway: Doctrine of promissory estoppel not applicable against the Legislature in exercise of its legislative functions

[M/s Hero Motocorp Ltd. Vs UOI, Civil Appeal No. 7405 of 2022, Order dated October 17, 2022 (Supreme Court)]

b. The GST Department passed order regarding cancellation of GST registration of the Petitioner on account of non-filing of GST returns for consecutive six months. Instead of filing application for revocation of cancellation of registration within prescribed time, the Petitioner filed appeal before the Appellate Authority with delay of 660 days which got dismissed for being time barred.

The Petitioner filed Writ Petition (WP) seeking permission to file application for revocation of cancellation of registration upon making payment of tax, interest, penalty along with late fees.

The High Court held that the Petitioner has been deprived to carry on business under Article 19(1)(g) and right to livelihood under Article 21 of the Constitution of India (the Constitution). Hence, cancellation of GST registration by the GST Department would work against the interest of revenue. The taxpayer/Petitioner should not be treated as a person hostile to the GST Department. Hence, the GST Department was directed to grant permission to the Petitioner to file returns for the period prior to the cancellation of registration along with payment of tax, interest and statutory fees fixed for belated filing of returns, however, unutilized balance of input tax credit (ITC) was not allowed to be used for payment of tax/interest/penalty/fine etc. The High Court further directed that upon payment of tax, interest, penalty and late fee and uploading of GST returns, the Petitioner should be given a liberty to file the application for revocation of cancellation of registration.

Takeaway: Cancellation of GST registration deprive right of taxpayer to carry its business

[M/s Durga Raman Patnaik Vs Additional Commissioner, GST (Appeals), WP(C) No. 7728 of 2022, Order dated October 13, 2022 (High Court, Orissa)]

c. The Petitioner is engaged in business of manufacture and supply of various pyrotechnic products (fireworks). The Petitioner filed GST returns periodically and availed ITC in terms of Section 16 of the CGST Act. Upon scrutiny of GST returns, the GST Department issued notice in Form ASMT-10 (Notice for intimating discrepancies in return after scrutiny) pointing out discrepancies between Form GSTR-3B, Form GSTR-1 and Form GSTR-2A of the Petitioner. Thereafter, the GST Department issued summary of notice in Form DRC-01 and passed order in Form GST DRC-07 on the basis of defects/discrepancy which were completely different from what was pointed out in Form ASMT-10.

The Petitioner filed writ petition challenging notice issued in Form GST DRC-01 and order passed in Form GST DRC-07 on ground that entire proceedings stand vitiated for violation of principles of natural justice as procedures under Rule 99 of the Central Goods and Services Tax Rules, 2017 were not followed by the GST Department.

The High Court held that issuance of Form ASMT-10 is mandatory before issuance of Form DRC-01 and Form DRC-07 with respect to discrepancies in the returns as alleged by the GST Department. Therefore, it is trite law that when the GST laws prescribes the method and manner for performing an act, such act shall be performed in compliance with prescribed method. Therefore, impugned order passed by the GST Department is set aside and the matter is remitted back to the GST Department for re- assessment and passing of order after affording a reasonable opportunity to the Petitioner in the manner contemplated under GST laws.

Takeaway: Issuance of Form ASMT-10 is mandatory on same subject matter before issuance of Form DRC-01 and Form DRC-07

[M/s Vadivel Pyrotech Private Limited Vs The Assistant Commissioner (ST), Commercial Tax Department, W.P. (MD) No. 22642 of 2022, Order dated September 27, 2022 (High Court, Madras)]

d. The Petitioner supplied finished goods to pharmaceutical companies located in Special Economic Zones (SEZ) units and accordingly, treated it as 'zero rated supply' under Section 16 of the CGST Act. The Petitioner filed refund application for the period August to October, 2017 in Form RFD-01 on December 28, 2018 on GST portal but submitted print out of the same along with the necessary documents on October 17, 2019. The GST Department rejected refund claim on ground that the Petitioner was required to file refund application physically within two years from relevant date by relying on Circular No. 17/17/2017-GST dated November 15, 2017 (the Circular dated November 15, 2017) issued by the Central Board of Indirect Taxes and Customs (CBIC). Being aggrieved by the order, the Petitioner filed Writ Petition praying for directions to the GST Department for grant of refund to the Petitioner.

The High Court held that the Circular dated November 15, 2017 issued by CBIC provided clarification in relation to procedure for filing refund application and therefore, physical application filed by the Petitioner with documents cannot have an overriding operation to the detriment of the Petitioner who has filed the refund application on the GST portal within the prescribed time, Application Reference Number for which was also generated. Hence, the date of filing of the refund application by the Petitioner on GST portal is to be treated as date of filing claim for refund in terms of Section 54 of the CGST Act. Thus, the procedure as per Circular dated November 15, 2017 cannot operate as delimiting condition on the applicability of statutory provisions. Accordingly, the GST Department was directed to re-credit the amount in the electronic credit ledger of the Petitioner along with interest @9% pa from the date of order of rejection of the claim till realisation.

Takeaway: Due date for filing refund application on GST portal to be treated as date of filing refund claim

[M/s Chromotolab and Biotech Solutions Vs UOI, R/Special Civil Application No. 16308/2020, Order dated October 21, 2022 (High Court, Ahmedabad)]

e. The Petitioner transported goods from Lucknow to Haryana through transporter on which a tax invoice and Part-A of e-way bill was generated. The goods were detained on ground of non-generation of Part-B of E-way bill prior to commencement of transport. Subsequently, Show Cause Notice (SCN) was issued by GST Department under Section 129 of the CGST Act and goods were detained due to non-issuance of Part-B of e-way bill. The Petitioner filed WP before High Court seeking prayer for release of goods.

The High Court held that the GST Department has proceeded to determine the tax liability as well as penalty under the provisions of Section 129 of the CGST Act which does not provide for determination of tax due. It has been further held that tax determination can be done only as per Section 73 or 74 of the CGST Act. Accordingly, the impugned order passed under Section 129 of the CGST Act was set aside with instructions of refund of the amount paid by the Petitioner for release of goods.

Takeaway: Tax determination can be done only under Section 73 or 74 of the CGST Act

[M/s Bharti Airtel Limited Vs State of U.P., Writ – C.No. 6620/2021, Order dated October 19, 2022 (High Court, Allahabad)]

f. The Petitioner did not file the GST returns from 2018 till 2021 and consequently, registration of Petitioner was cancelled by the GST Department. Thereafter, the Petitioner filed appeal before the Appellate Authority for revocation of cancellation of registration which got dismissed for being time barred as such appeal is required to be filed within 3 months, while it was filed after 9 months of receipt of order of cancellation. Being aggrieved by the order of the GST Department, the Petitioner filed WP before the High Court.

The High Court held that in case the Petitioner is willing to file the GST returns as well as pay all the required dues including interest and penalty, the GST Department must consider revocation of cancellation of registration of the Petitioner. Accordingly, the Petitioner was directed to file an application within fifteen days, and authorities to consider the same within two months thereafter.

Takeaway: The GST Department required to revoke cancellation of GST registration in case tax along with interest and penalty is deposited

[M/s Mayflower Hotels and Resorts LLP Vs Principal Commissioner of State Goods and Service Tax , Case No. WP (C)/6621/2022, Order dated October 20, 2022 (High Court, Gauhati)]

g. The question before the Appellate Authority for Advance Ruling Authority (the Appellate AAR) was whether the ruling passed by the Authority for Advance Ruling (the AAR) declaring its previous advance ruling as void ab initio, was legally correct wherein the Appellant had not divulged a fact regarding ongoing search proceedings initiated by the GST Department.

The Appellate AAR held the use of words 'any proceedings' in proviso to Section 98(2) of the CGST Act shall cover the investigation initiated against the Appellant and intimation of notice of tax liability issued by the GST Department in Form DRC-01A. It has been further held that the Appellant has not revealed about proceedings/investigation pending before the State Tax Department as well which was initiated on the same issue on which advance ruling was sought. Accordingly, the AAR declaring its earlier ruling as void ab initio is legal.

Takeaway: Investigation initiated by the GST Department/s qualifies as 'any proceedings'

[M/s Shalby Limited (Shalby Hospital), Advance Ruling (Appeal) No. GUJ/GAAAR/APPEAL/2022/22, Order dated October 6, 2022 (Appellate AAR, Gujarat)]

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