HIGH COURT

2019-TIOL-2095-HC-MAD-GST

Calcutta Canvas Company Vs UoI

GST - Petitioner seeks for a mandamus directing the 4th respondent to permit the petitioner to correct the bona fide error in TRAN-1 form to avail Tax Input Credit to the tune of Rs.8,27,000/- by considering their representation dated 26.05.2019.

Held: Counsel for the respondents 1, 3 to 6 submitted that for redressal of these grievances, a Nodal Officer was already appointed and it is for the petitioner to approach the said Nodal Officer and file a representation and seek for redressal of their grievance - Writ Petition is disposed of by granting such liberty to the petitioner to approach the said Nodal Officer and make a representation within a period of two weeks and on receipt of which, the said Nodal Officer shall consider the same and pass appropriate orders on merits and in accordance with law, within a period of three weeks thereafter-Petition disposed of: High Court [para 8, 9]

- Petition disposed of: MADRAS HIGH COURT

2019-TIOL-2094-HC-AHM-GST

GST - Petitioner has prayed for quashing and setting aside the order of the Commercial Tax officer whereby the petitioner is demanded to pay the total amount of Rs.1,60,79,302/-; to quash and set aside the orders of provisional attachment of the stock of goods amounting to Rs.1.60 crores and the orders of provisional attachment of petitioner's current account/FD/RC CC account at Bank of Baroda and the blockage of Input Tax Credit.

Held:  

++ Power conferred upon the Commissioner by the legislature could not have been delegated to the subordinate officers by virtue of the order dated 15th January 2018 passed in exercise of power u/ss (3) of s.5 r/w clause 19 of s.2 of the Act and the Rules framed thereunder - Although there is no specific challenge to the order dated 15th January 2018 passed by the Commissioner of State Tax delegating his power u/s 83 to the subordinate officers, yet, Bench is of the view that by virtue of such order, such impugned order of provisional attachment cannot be defended: High Court [para 34, 35]

++ Section 83 of the Act talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue - Any opinion of the authority to be formed is not subject to objective test - The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue - existence of relevant material is a pre-condition to the formation of opinion - use of the word “may” indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue - therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be - statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings - it is equally true that it is not necessary for the authority under the Act to state reasons for its belief but if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed, that the Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court - the word “necessary” must be construed in the connection in which it is used - formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act - in the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment u/s 83 of the Act, then such action amounts to malice in law - Any use of discretionary power exercised for any unauthorised purpose amounts to malice in law - it is immaterial whether the authority acted in good faith or bad faith: High Court [para 36, 42]

++ When the search of the industrial premises of the writ applicant was undertaken, further inquiry revealed that there were no goods involved but only billing transactions - at the time of search, goods worth Rs.2,48,59,485/- were found stored at the industrial premises of the writ applicant and the authority came to the conclusion that the tax liability which may be determined in future u/s 74 of the Act may be to the tune of Rs.1.60 crores and in such circumstances thought it fit to provisonally attach the goods worth only Rs.1.60 crores from the total goods worth Rs.2,48,59,485/- - It would be a big mistake on the part of the respondents to understand that the reasons to believe necessary for the purpose of carrying out inspection, search and seizure u/s 67 of the Act would be sufficient enough for the purpose of formation of the opinion that it is necessary to provisionally attach the goods or other articles for the purpose of protecting government revenue - Section 83 stands on an altogether different footing - considerations also are quite different for the purpose of exercising the power of provisional attachment u/s 83 - Just because some proceedings are initiated u/s 67, by itself, would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of government revenue - power has been specifically conferred upon the Commissioner to form such an opinion - Legislature was quite alive to the fact that an order of provisional attachment cannot be as a matter of course - It is one of the drastic measures which the authority may be compelled to take if the situation demands - u/s 67, the legislature has thought fit to use the words “proper officer not below the rank of Joint Commissioner”, however, in s.83 even that discretion is taken away and it is only the Commissioner who has empowered to act - therefore, subjective satisfaction which is required for the purpose of s.83 of the Act is not dependent upon s.67 of the Act or to put it in other words, just because, a search has been undertaken resulting in seizure of goods, by itself, may not be sufficient to arrive at the subjective satisfaction that it is necessary to pass an order of provisional attachment to protect government revenue: High Court [para 43, 44]

++ Challenge is also to the order in form GST DRC-07, Rule 142(5) of the Rules - This order is an assessment order purported to have been passed u/s 74 of the Act - It appears from the material on record that without issue of any SCN, the tax liability came to be determined u/s 74 of the Act - There could not have been any assessment u/s 74 of the Act without giving any opportunity of hearing to the writ applicant - Order is, therefore, not tenable in law and deserves to be quashed and set aside - Bench also fails to understand as to on what basis the Input Tax credit could have been blocked by way of computer entry and at the most the same could have been ordered to be provisionally attached - Although the provisions of s.281B of the Income Tax Act is pari materia to s.83 of the State GST Act, yet one pertinent feature of s.281B of the Act is that it gives guidelines for making the provisional attachment, which guidelines are missing insofar as s.83 of the State GST Act is concerned: High Court [para 45, 48]

++ Respondents have not acted in accordance with law, therefore, Writ applicant succeeds and is allowed - Assessment order dated 17th June 2019 passed by Commercial Tax Officer demanding duty amount of Rs.1,69,79,302/- towards tax, penalty and interest is quashed and set aside - if the authority wants to proceed against Writ applicant u/s 74 then it shall be open for the authority to do so after issuing appropriate show cause notice and giving an opportunity of hearing to the writ applicant: High Court [para 54, 55]

++ Order of provisional attachment of the stock of goods amounting to Rs.1,60,00,000/- as well as order of provisional attachment of writ applicant's current account and FD/RD/CC account registered at Bank of Baroda is quashed and set aside - Blockage of input tax credit by way of computer entry is also held to be illegal and is ordered to be released forthwith: High Court [para 55]

Conclusions:

+ The order of provisional attachment before the assessment order is made, may be justified if the assessing authority or any other authority empowered in law is of the opinion that it is necessary to protect the interest of revenue. However, the subjective satisfaction should be based on some credible materials or information and also should be supported by supervening factor. It is not any and every material, howsoever vague and indefinite or distant remote or far­ fetching, which would warrant the formation of the belief. ?

+ The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons.

+ The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. ?

+ The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his / her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is required to achieve this objective.

+ The power under Section 83 of the Act should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.

+ The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings.

+ The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things: (i) whether it is a revenue neutral situation (ii) the statement of “output liability or input credit”. Having regard to the amount paid by reversing the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment.

- Petitions allowed: GUAJRAT HIGH COURT

2019-TIOL-2088-HC-KERALA-GST

Jabbar Vs State Tax Officer

GST - Appellant is challenging the judgment dated 21.01.2019 through which the writ petition was dismissed by the Single Judge - One of the main grounds raised was that, the assessment proceedings was initiated beyond the time limit stipulated under Section 25(1) of the Kerala Value Added Tax Act (KVAT Act) - the appellant had also challenged constitutional validity of Section 174 of the Kerala State Goods and Service Tax Act (KSGST Act) in the writ petition, however, the High Court had dismissed the petition by holding that the issue agitated stands squarely covered against the appellant, through the judgment in Sheen Golden Jewels (India) (P.) Ltd. = 2019-TIOL-441-HC-KERALA-GST - appellant contended that, the Single Judge had omitted to consider the ground raised on the question of limitation.

Held: Bench is of the considered opinion that remittance of the writ petition for a fresh consideration and disposal on the question of limitation agitated against Ext.P1 order of assessment, would serve the ends of justice - writ appeal is hereby allowed and the impugned judgment in WP(C) No. 402/2019 dated 21.01.2019 is hereby set aside - writ petition is restored on to the files of this Court and remitted to the Single Judge dealing with the subject matter for fresh consideration and disposal - Interim order of stay if any existed as on the date of dismissal of the writ petition shall stand revived and shall continue to be in force, as against the collection and recovery of amounts covered under Ext.P1 order of assessment: High Court [para 4, 5]

- Matter remanded: KERALA HIGH COURT

2019-TIOL-2087-HC-KERALA-GST

Calicut Ceramics Vs ASTO

GST - Petitioner challenges the order of detention made under s.129(1) of the Act as well as the notice issued u/s 129(3) of the Act on the ground that the subject matter of the proceedings is fully compliant with all the requirements of the Act and the petitioner was in a position to demonstrate within the time given by the authorities that Part B/E-Way Bill was also generated and produced for inspection; that the proceedings now initiated are not warranted and illegal.

Held: Issues raised are at preliminary stage and the Court is not convinced to entertain the writ petition and adjudicate upon merits at this stage - writ petition is disposed of by directing the petitioner to furnish bank guarantee for the tax and penalty and therefter apply for release of goods - respondent to release the impugned goods within twelve hours from the date and time of receipt of bank guarantee - bank guarantee to be kept valid for one month - respondent to complete enquiry and pass an order within four weeks - if such order is not passed, the petitioner is not under obligation to keep the bank guarantee alive beyond one month: High Court [para 5]

- Petition disposed of: KERALA HIGH COURT

2019-TIOL-2086-HC-AHM-GST

Shree Ambica Trading Company Vs State Of Gujarat

GST - An amount of Rs.1,64,934/- has been paid by the writ applicant towards tax and penalty as determined by the authority under Section 129 of the GST Act - In such circumstances, the conveyance and the goods are ordered to be released forthwith, subject to the final outcome of this writ application – Rule returnable on 24 th October 2019: High Court

- Matter posted: GUJARAT HIGH COURT

2019-TIOL-2085-HC-MAD-GST

Sri Ayyappan Constructions Vs Chief Engineer

GST - Contract which forms subject matter of the writ petition is prior to the GST regime and, therefore, the contract does not provide for payment of GST - When the work was under way, the GST regime became operational on and with effect from 01.07.2017 and therefore, writ petitioner wrote to the second respondent i.e., Salem City Municipal Corporation on 11.07.2018, regarding liability to pay GST - respondent informed the writ petitioner that GST payable is 1% as far as the State GST is concerned and 1% as far as Central GST is concerned - On this basis, second respondent informed the writ petitioner that they would be deducting 2% at the time of making payments under said contract pursuant to which work is under progress - adverting to Heading 9954 captioned 'Construction Services', it is submitted that the GST liability qua aforementioned contract dated 23.01.2015 is 12% and, therefore, petitioner prayers inter alia to direct the respondents 1 and 2 to pay the difference of 10% GST on the original agreed contract value, so that the tax liability is in accordance with law that has become operational when contract was in vogue and work pursuant to the contract was in progress.

Held: Parties will now stand governed by paragraph 10(a) and paragraph 12 of G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 wherein it is clarified that procuring entities shall negotiate existing agreements with works contractors and enter into supplemental agreements with revised agreement value fixed as the original contracted value minus the value of subsumed tax above plus GST as applicable - exercise of quantification qua para 10(a) shall be completed by both the parties as expeditiously as possible and in any event within 12 weeks from the date of receipt of a copy of this order - petition is disposed of: High Court [para 4, 5]

- Petition disposed of: MADRAS HIGH COURT

2019-TIOL-2084-HC-MAD-GST

Sri Ganapathy And Company Vs Chief Engineer

GST - Contract which forms subject matter of the writ petition is prior to the GST regime and, therefore, the contract does not provide for payment of GST - When the work was under way, the GST regime became operational on and with effect from 01.07.2017 and therefore, writ petitioner wrote to the second respondent i.e., Salem City Municipal Corporation on 11.07.2018, regarding liability to pay GST - respondent informed the writ petitioner that GST payable is 1% as far as the State GST is concerned and 1% as far as Central GST is concerned - On this basis, second respondent informed the writ petitioner that they would be deducting 2% at the time of making payments under said contract pursuant to which work is under progress – adverting to Heading 9954 captioned 'Construction Services', it is submitted that the GST liability qua aforementioned contract dated 23.01.2015 is 12% and, therefore, petitioner prayers inter alia to direct the respondents 1 and 2 to pay the difference of 10% GST on the original agreed contract value, so that the tax liability is in accordance with law that has become operational when contract was in vogue and work pursuant to the contract was in progress.

Held: Parties will now stand governed by paragraph 10(a) and paragraph 12 of G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 wherein it is clarified that procuring entities shall negotiate existing agreements with works contractors and enter into supplemental agreements with revised agreement value fixed as the original contracted value minus the value of subsumed tax above plus GST as applicable – exercise of quantification qua para 10(a) shall be completed by both the parties as expeditiously as possible and in any event within 12 weeks from the date of receipt of a copy of this order - petition is disposed of: High Court [para 4, 5]

- Petition disposed of: MADRAS HIGH COURT

2019-TIOL-2072-HC-DEL-GST

HCL Infosystems Ltd Vs UoI

GST - Refund - Petitioner states that though the amount claimed by the Petitioner was sanctioned, the same has subsequently been rejected by a one line communication dated 22.07.2019 without disclosing any reason for the rejection.

Held: Bench would, normally, not entertain a petition at this stage considering that the assessee has a statutory remedy, however, looking into the manner in which the rejection has taken place, the petition is entertained - rejection order has been passed without hearing the Petitioner and without recording any reasons for the rejection, that too in the face of the refund sanctioned by the Respondent (as is evident from the screenshot of the portal account of the Petitioner on Goods and Services Tax website) - Bench, therefore, considers it appropriate to direct respondents Principal Chief Commissioner and Special Commissioner, Delhi GST to remain personally present in Court with the complete record relating to Petitioner's case, to explain as to why the refund, which had earlier been sanctioned, has now been rejected - the Respondents to remain present with instructions for a time-bound refund of the Petitioner's claimed amount, in case, the said rejection is not justified - Matter to be listed on 06.09.2019: High Court [para 3, 4, 6]

- Matter listed : DELHI HIGH COURT

2019-TIOL-2068-HC-AHM-GST

GST - Writ applicant had sought issuance of a writ of mandamus to allow filing of declaration in form GST TRAN-1 and GST TRAN-2 to enable it to claim transitional credit of eligible duties in respect of inputs held in stock on the appointed day in terms of s.140(3) of the CGST Act; to issue a writ of declaration for declaration of the due date contemplated u/r 117 of the Rules to claim transitional credit as being procedural in nature and thus merely directory and not a mandatory provision; grant ad interim reliefs and award costs.

Held: Section 140(3) of the Act allows carry forward of the eligible duties in respect of inputs held in stock subject to fulfilment of conditions (i) to (v) as mentioned therein - Section 140(3) of the Act is a complete Code in itself and the substantive right conferred by the Act cannot be curtailed by way of rules - entitlement of credit of eligible duties on the purchases made in the pre-GST regime as per the then existing CENVAT Credit Rules is a vested right and, therefore, it cannot be taken away by virtue of Rule 117 of the CGST Rules with retrospective effect for failure to file form GST TRAN-1 within the due date i.e. 27.12.2017 - provision for facility of credit is as good as the tax paid till the tax is adjusted and, therefore, the right to credit had become absolute under the CEA and, therefore, the credit is indefeasible and the same cannot be taken away - right to carry forward credit is a right or privilege acquired and accrued under the repealed CEA, 1944 and it has been saved u/s 174(2)(c) of the CGST Act, 2017 and, therefore, it cannot be allowed to lapse u/r 117 of the Rules for failure to file declaration in form GST TRAN-1 within the due date i.e. 27.12.2017 - right to carry forward CENVAT credit for not being able to file the form GST TRAN-1 within the due date offends the policy of the Government to remove the cascading effect of tax by allowing the Input Tax Credit as mentioned in the Objects and Reasons of the Constitution 122 nd Amendment Bill, 2014, and which clearly sets out that it is intended to remove the cascading effect of taxes and bring out a nationwide taxation system - Denial of carry forward of tax paid on stock on the appointed day may lead to cascading effect of tax because the GST will again have to be paid on the Central Excise duty already suffered on the stock - It is an established principle of law that it is necessary to look into the mischief against which the statute is directed, other statutes in pari materia and the state of law at the time - It is arbitrary, irrational and unreasonable to discriminate in terms of the time-limit to allow the availment of the Input Tax Credit with respect to purchase of goods and services made in the pre-GST regime and post-GST regime and, therefore, it is violative of Article 14 of the Constitution of India - Section 16 of the Act allows the entitlement to take input tax credit in respect of post-GST purchase of goods or services within return to be filed u/s 39 for the month of September following the end of the financial year to such purchase or furnishing of the relevant annual return, whichever is earlier - whereas rule 117 allows time limit only up to 27th December 2017 to claim transitional credit on pre-GST purchases, therefore , it is arbitrary and unreasonable to discriminate in terms of the time limit to allow the availment of ITC with respect to the purchase of goods and services made in the pre-GST regime and post-GST regime - as this discrimination does not have any rationale, therefore, it is violative of Article 14 of the Constitution - It is legitimate for a going concern to expect that it will be allowed to carry forward and utilise the CENVAT credit after satisfying all the conditions as mentioned in the CEX law and, therefore, disallowing such vested right is offensive against Article 14 as it goes against the essence of doctrine of legitimate expectation - By not allowing the right to carry forward the CENVAT credit for not being able to file the form GST TRAN-1 within the due date may severely dent the writ-applicants working capital and may diminish their ability to continue with the business and such action violates the mandate of Article 19(1)(g) of the Constitution - liability to pay GST on sale of stock carried forward from the previous tax regime without corresponding input tax credit would lead to double taxation on the same subject matter and is, therefore, arbitrary and irrational; CBEC GST Flyer no. 20 dated 01.01.2018 refers - CENVAT credit earned under the erstwhile Central Excise law is the property of the writ-applicants and it cannot be appropriated for merely failing to file declaration in the absence of law in this respect (Article 300A refers) - It could have been appropriated by the government by providing for the same in the CGST Act but it cannot be taken away by virtue of merely framing Rules in this regard - All four writ-applications succeed and are allowed - respondents are directed to permit the writ-applicants to allow filing of declaration in form GST TRAN-1 and GST TRAN-2 so as to enable them to claim transitional credit of the eligible duties in respect of inputs held in stock on the appointed day in terms of s.140(3) of the Act - Furthermore, it is declared that the due date contemplated u/r 117 of the CGST Rules, 2017 is procedural in nature and thus should not be construed as a mandatory provision: High Court     [para 21, 23, 27, 28, 29, 34, 36, 38, 40, 41, 42, 43]

- Applications allowed: GUJARAT HIGH COURT

2019-TIOL-2067-HC-KERALA-GST

CST/GST - Petitioner challenges the assessment orders passed under the CST Act as being illegal and without jurisdiction - Case of the petitioner is that in the absence of notification issued by the Central Government in exercise of powers u/s 9(2) of the CST Act, the notices issued by referring to rule 6(5) of CST Rules by second respondent are without jurisdiction.

Held: Interim stay of recovery for eight weeks - Matter to be posted on 01.10.2019: High Court 

- Interim stay granted: KERALA HIGH COURT

AAR CASES

2019-TIOL-280-AAR-GST

Reliable Hospitality Service

GST - Applicant is supplying facility management services like mechanised and manual cleaning, housekeeping, security services etc. to various Central Government and State government hospitals and seeks a ruling as to whether exemption from payment of GST in terms of 12/2017-CTR.

Held: Security services provided to govt. hospitals are not covered under either the Eleventh Schedule or the Twelfth Schedule of the Indian Constitution under Articles 243G or 243W - Cleaning and sweeping services can be considered as related to the function listed under Sl. no. 26 of Eleventh Schedule, namely ‘Health and Sanitation, including hospitals, primary health centres and dispensaries' - 'Sanitation and similar services' classified under SAC 99945 includes 'sweeping and cleaning' but only with reference to cleaning of a road or street - Cleaning of hospital premises is, therefore, not classified under Sanitation or similar services and hence are not exempt under Sl. no. 3 or 3A of the exemption notification 12/2017-CTR - Therefore, benefit of exemption from payment of GST in terms of 12/2017-CTR is not available to the applicant for the supply of security services and cleaning and sweeping services: AAR

- Application disposed of: AAR

2019-TIOL-279-AAR-GST

West Bengal Medical Services Corporation Ltd

GST - Govt. of West Bengal has set up the applicant corporation as a fully owned entity for managing the procurement of drugs and equipment for the medical college and hospitals and construction and maintenance of health facilities and it charges as an administrative cost, a percentage of the vetted project cost/procurement cost - applicant seeks a ruling as to whether exemption in terms of Sl. no. 3/3A/4/5 of 12/2017-CTR is available on such administrative cost which is the consideration received for the management services provided.

Held: Applicant is a government authority as defined under paragraph no. 2(zf) of 12/2017-CTR in view of being a body established by a State government notification with 100 per cent participation by way of equity and control to carry out a function entrusted to a panchayat under Sl. no. 23 of the Eleventh Schedule under Article 243G of Constitution - Applicant is, therefore,  eligible for exemption under sl. no. 5 of the said notification on supply of any service in relation to establishment and maintenance of hospitals and similar health facilities: AAR

- Application disposed of: AAR

 

SGST (DELHI RULES NOTIFICATION)

49/2019

Delhi Goods and Services Tax (Tenth Amendment) Rules, 2018

 

ARTICLES

Input Credit - Taken, Availed or Utilized?

Who moved my Cheese, asks the taxpayer - Me, says the Government!

GST - An agenda for reforms - Part 54 - Credit is transitional but dispute is eternal

SVLDRS, 2019 scores brownie points over the KVSS, 1998 here

Input Tax Credit: GSTR-3, GSTR-3B and eligibility

 

JEST GST by Vijay Kumar

Input Credit - Taken, Availed or Utilized?