Recent rulings by courts and authorities
High Courts
SCN1 seeking to levy GST2 on expat salary quashed
The Hon'ble High Court of Delhi ("Delhi HC") in the case of Metal One Corporation India Pvt. Ltd. vs. Union of India3 ruled on the liability to pay GST on salary paid to seconded employees by an Indian entity, in view of the recent CBIC4 circular5 dated June 26, 2024 ("Circular"). Metal One Corporation India Private Limited ("Petitioner") entered into employment agreements with the employees of Metal One Corporation Japan, its parent entity. As per the employment agreement, employees of the foreign parent entity were deployed with the Petitioner. SCN was issued to the Petitioner seeking to levy GST on placement of foreign expatriates with the Petitioner. Aggrieved by the SCN, the Petitioner invoked the writ jurisdiction of the Delhi HC.
The Petitioner contended before the Delhi HC that while the Hon'ble Supreme Court of India in the case of CCE & Service Tax vs. Northern Operating Systems Pvt. Ltd.6 had held that salary of seconded employees to India will be taxable and the same will have to be evaluated basis fact pattern of each case. Further, vide the Circular, CBIC has clarified that where no invoice (self-invoice) is raised by domestic entity in respect of services rendered by its foreign affiliate, the value of such services will be 'deemed' to have been declared as 'Nil' and that 'Nil' value will be treated as the market value for the purposes of the second proviso to Rule 28 of the CGST Rules7. Given that the foreign parent entity of the Petitioner had not raised any invoice for secondment of employees to the Petitioner, the value of such services will be deemed to be Nil and accordingly, no GST can be levied thereon.
Relying on the Circular, the Delhi HC quashed the SCN seeking to levy GST on placement of foreign expatriates in India.
Notification extending period of limitation for passing order under Section 73(10) of the CGST Act8 held ultra vires
In the case of Barkataki Print and Media Services vs. Union of India9, the Hon'ble Gauhati High Court ("Gauhati HC") decided on the vires of Notification10 dated December 28, 2023 ("Impugned Notification"), which extended the time limit to pass an order under Section 73(10) of the CGST Act.
The Gauhati HC observed and held as under:
- Section 168A of the CGST Act was introduced to address the difficulties faced by the assessees and GST authorities due to COVID-19 pandemic. Section 168A of the CGST Act empowers the Government to extend time limit in special circumstances, such as force majeure. However, Section 168A of the CGST Act unequivocally states that the time limits can be extended only after the recommendation of the GST Council;
- with respect to the extension of time for issuance of order under Section 73(10) of the CGST Act, for FY11 2017-18, 2018-19 and 2019-20, the GST Council in its 49th meeting recommended that the time limit will be extended by 3 (three) months. Further, it was specifically recorded that no further extension must be granted beyond 3 (three) months.
- Prior to the expiry of the additional 3 (three) months provided by the GST Council for FY 2018-19, the Central Government issued the Impugned Notification thereby further extending the time limit for FY 2018-19 upto April 30, 2024, and for FY 2019-20 upto August 31, 2024.
- While the Impugned Notification states that the said notification is issued at the behest of the 'recommendation of the GST Council', it is undisputed that there was no GST Council recommendation on record, recommending that time limits be further extended for FY 2018-19 and FY 2019-20.
- The Gauhati HC held that Section 168A of the CGST Act provides that a notification can be issued only after a recommendation of the GST Council. It is not open to the Government to set aside such a requirement. A 'recommendation' by the GST council has to be a favourable report to enable the Government to exercise its power under Section 168A. Such a recommendation is a sine qua non for a notification under Section 168A of the CGST Act. The fact that a recommendation may not be binding on the Government cannot be construed to mean that the Government can act without a recommendation.
- Accordingly, in absence of a force majeure situation to be considered by the GST Council as required under Section 168A of the CGST Act, the Impugned Notification is ultra vires Section 168A of the CGST Act and thereby unsustainable.
Based on the judgement of the Gauhati HC, the Hon'ble Calcutta High Court in Shiv Murat Seth vs. Joint Commissioner of State Tax12, and the Hon'ble High Court of Karnataka in DC Rajanna Contractor vs. Assistant Commissioner13 stayed the adjudication proceedings and order respectively, which were initiated/issued invoking the extended period of limitation. It was contended that the Impugned Notification extending the time limit for issuance of adjudication order for FY 2019-20 is bad in law and without the authority of law as the same was issued without the recommendation of GST Council, which is a prerequisite for issuance of Notification under Section 168A of the CGST Act.
Conclusion: While the Gauhati HC has set aside the notifications extending the time limit for issuance of adjudication orders for period FY 2018-19 and FY 2019-20, the Hon'ble Allahabad High Court in the case of Graziano Trasmissoni vs. GST Council14 has upheld the validity of the said extension notifications. Accordingly, given that contrary views have been adopted by High Court(s), the Department is likely to file an appeal before the Supreme Court of India against the judgement of the Gauhati HC.
SCN liable to be quashed where adjudication proceedings faced inordinate and unexplained delay
The Hon'ble Bombay High Court ("Bombay HC") in the case of Paresh Mehta vs. Union of India15 ruled upon the validity of SCN pending adjudication for the last 15 (fifteen) years. Paresh Mehta ("Petitioner") was issued a SCN in the year 2008 seeking to impose penalty under Section 112(a) of the Customs Act, 1962. In response thereof, the Petitioner filed a detailed response. After a lapse of around 9 (nine) years from the date of issuance of SCN a notice of personal hearing was issued in the year 2017, wherein the Petitioner appeared for the hearing. However, the same was an ineffective hearing. Pursuant to it, another personal hearing was scheduled in the year 2021 (13 (thirteen) years after the issuance of SCN) wherein the Petitioner requested for a virtual hearing. However, no link was provided to the Petitioner. Aggrieved by the pendency of SCN on account of inordinate delay, the Petitioner approached the Bombay HC, seeking quashing of SCN.
The Petitioner contended that when faced with such inordinate and unexplained delay, the SCN must be quashed and cannot be allowed to be adjudicated. Placing reliance on the decisions of the Bombay HC wherein the court had set aside SCNs which involved inordinate and unexplained delay16, the Bombay HC set aside the SCN in the current case as the same had unjustifiable and inordinate delay in conducting the adjudication proceedings.
No bar on issuance of SCN under Section 74 of the CGST Act after conclusion of the adjudication proceedings under Section 73 of the CGST Act
The Hon'ble Punjab and Haryana High Court ("P&H HC") in Group M Media Pvt. Ltd. vs. Union of India17 ruled on the legality of initiating proceedings under Section 74 of the CGST Act after dropping proceedings initiated under Section 73 of the CGST Act.
SCN under Section 73 of the CGST Act was issued to Group M Media Pvt. Ltd. ("Petitioner") which was dropped after taking into consideration the reply submitted by the Petitioner. Subsequently, another SCN under Section 74 of the CGST Act was issued alleging excess availment of ITC18 by the Petitioner. In addition to the SCN under Section 74 of the CGST Act, the DGGI19 had also issued enquiry notices to the Petitioner, to which the Petitioner had submitted its reply. Aggrieved by the multiple issuances of notices, the Petitioner approached the P&H HC in writ jurisdiction.
The Petitioner contended the following:
- SCN under Section 74 of the CGST Act did not outline incriminating allegations against the Petitioner for any wilful misstatement or suppression of facts to evade tax; and
- given that the DGGI had already initiated an enquiry, the SCN under Section 74 of the CGST Act cannot be issued as the same will amount to parallel proceedings.
The P&H High Court observed that issuance of SCN under Section 73 of the CGST Act and dropping the same would not prevent the authorities from independently initiating proceedings under Section 74 of the CGST Act. Further, in relation to parallel proceedings being conducted, the P&H HC observed that the DGGI had only issued notice seeking certain clarifications/information and no adjudication proceedings were initiated. Accordingly, no parallel proceedings were initiated. Considering the above, the P&H HC did not allow the writ petition filed by the Petitioner.
Notifications and circulars
Scope of term 'as is/where is basis' used in GST circulars
Circular No. 236/30/2024-GST, dated October 11, 2024
The term 'as is/where is basis' used in GST circulars is clarified to mean payment made at lower rate/exemption claimed by the taxpayer will be accepted as the intent of the GST Council is to regularise payment of GST at lower rate due to the tax position adopted. Accordingly, in case of 2 (two) competing entries, payment at lower rate will be treated as tax fully paid for the period that is regularised. Further, no refund will be available to the taxpayer if tax has been paid at the higher rate.
Conclusion: While the circular seeks to regularise the past period, the tax position will have to be analysed by the taxpayers for the period going forward based on the provisions of the GST law, including circulars and notifications issued thereof.
Procedure for availing benefits under Section 128A of CGST Act
Circular No. 238/32/2024-GST dated October 15, 2024
The CBIC has issued the said circular to clarify the procedure for availing the benefits of amnesty scheme notified under Section 128A of the CGST Act read with Rule 168 of the CGST Rules. The key clarification provided are as under:
- Procedure:
- for the purposes of availing benefits under Section 128A of the
CGST Act, a registered person is required to apply under the
following form(s):
Applicable Provisions of the CGST Act Form SCN issued under Section 73(1) SPL-01 Statement under Section 73(3) SPL-01 Revision Order under Section 108(1) SPL-02 Original under Section 73(9) SPL-02 Order in Appeal under Section 107(11) SPL-02 Order re-determining the tax liability under Section 73 SPL-02 - where notice/ order contains multiple issues, benefit of the scheme cannot be taken for part of the issues by making payment of tax only in respect of such issues and litigate other matters;
- where demand of tax is enhanced in appeal against the order in respect of which benefit of the scheme is being taken, the taxpayer will be required to pay such additional amount of tax within three months from the date of the appeal order; and
- taxpayer is also required to withdraw any pending appeals/ writs/ SLPSs for the purpose of availing benefits under the scheme.
- for the purposes of availing benefits under Section 128A of the
CGST Act, a registered person is required to apply under the
following form(s):
- Conditions:
- any appeal/ petition pending before the Appellate Authority/ Tribunal/ Court to be withdrawn by March 31, 2025;
- full amount of tax under SCN/ statement/ order to be paid by March 31, 2025; and
- no appeal to be filed for the matters for which benefits of the Scheme is intended to be availed.
- Payment of tax:
- for cases covered under Section 128A(1)(a) of the CGST Act, tax to be paid through Form DRC-03; and
- in case of order/appeal, tax to be paid through the following
mechanism:
- tax demand to be credited to the ELR20 against the debit entry created by the respective order; and
- if payment is made through Form DRC-03, a separate application in Form DRC-03A to be filed to facilitate credit of the amount in the ELR against the debit entry.
Notifications based on recommendations of 54th GST Council meeting
Based on the recommendations made during 54th GST Council meeting held on September 9, 2024, CBIC has issued the following various notifications. We have outlined below the key notifications:
| Notification | Particulars | ||||||
| Notification no. 20/2024 – Central Tax dated October 8, 2024 – Amendment of CGST Rules |
The following amendments have been notified in the provisions of CGST Rules:
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| Notification no. 21/2024 – Central Tax dated October 8, 2024 – Notification of date under Section 128A of CGST Act | The date mentioned in Section 128A of the CGST Act
is notified as below:
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| Notification no. 22/2024-Central Tax dated October 8, 2024 – Rectification of orders for wrongful availment of ITC |
Registered persons against whom an order has been issued under Sections 73, 74, 107, or 108 of the CGST Act for wrongful availment of ITC due to violation of Section 16(4), may seek rectification thereof in view of Sections 16(5) and 16(6) of CGST Act, as follows:
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| Notification No 23/2024 – Central Tax dated October 8, 2024 – Waiver of late fees for late filing of Form GSTR 7 (TDS return) | Late fees payable for late filing of Nil return in Form GSTR-7 have been waived. Further, late fees exceeding INR 25 per day for delayed filing of Form GSTR-7 from June 2021 onwards waived with a maximum cap of INR 1,000. | ||||||
| Notification no 06/2024 – Central Tax (Rate) dated October 8, 2024, and Notification no. 06/2024 – Central Tax (Rate) dated October 8, 2024 – Levy of GST under RCM |
Levy of GST under RCM extended to the following supplies:
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| Notification no. 05/2024-Central Tax (Rate) dated October 8, 2024 – Reduction of GST rates | Effective rates of GST have been reduced for cancer drugs such as Trastuzumab Deruxtecan, Osimertinib and Durvalumab from 12% to 5%. |
Footnotes
1. Show Cause Notice
2. Goods and services tax
3. 2024 (10) TMI 1534
4. Central Board of Indirect Taxes and Customs
5. Circular No. 210/4/2024-GST
6. 2022 (5) TMI 967
7. Central Goods and Services Tax Rules, 2017
8. Central Goods and Services Tax Act, 2017
9. W.P. (C) No. 3585 of 2024
10. No. 56/2023-CT
11. Financial year
12. WPA No. 20964/2024
13. W.P. No. 26065/2024
14. 2024 (86) G.S.T.L. 4 (All.)
15. 2024 (10) TMI 1412
16. Coventry Estates Pvt. Ltd. vs. The Joint Commissioner CGST and Central Excise & Anr. [2023 (10) Centax 38 (Bom)] and Eastern Agencies Aromatics (Pvt.) Ltd. vs. Union of India & Ors. 2022 (12) TMI 323 (Bom).
17. 2024 (10) TMI 1611
18. Input tax credit
19. Directorate General of GST Intelligence
20. Electronic Liability Register
21. Reverse Charge Mechanism
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
