APRIL 03, 2019

By Vijay Kumar

High Court Order has only referential value

RECENTLY, a GST Advance Ruling Authority sagely observed,

"The judgement of the Hon'ble Patna High Court is having a referential value while deciding the similar issue in Gujarat. The interpretation of Hon'ble Patna High Court is therefore not binding. - 2019-TIOL-72-AAR-GST"

So, two Joint Commissioners in Gujarat have decided that the interpretation of an issue by the Patna High Court is not binding on them as they, for the time being, are stationed in Gujarat.

And what is referential value? Referential is not reference. What they meant was perhaps persuasive value. Anyway this was far from reverential.

Even a High Court does not brashly brush aside the decision of another High Court. Especially in tax matters that have impact all over the country, decision of a High Court is to be followed by other High Courts and certainly by lower authorities. Sometime back I appeared before a Commissioner in Bangalore and cited a decision of the Chennai bench of CESTAT. He told me that it was not binding on him as his jurisdictional Bench was, CESTAT, Bangalore, the orders of which he would follow. I told him that even CESTAT, Bangalore (whose orders he was prepared to follow) was bound by the order of the Chennai Bench.

Suppose a Tribunal Bench at Mumbai is faced with the problem of deciding as to which High Court decision it has to follow. If there is a decision of the Bombay High Court, there is no problem (to a large extent), but what happens if there are two conflicting decisions of say Madras and Calcutta High Courts? Which decision should the Tribunal follow? What happens if the issue is before a Larger Bench of the Tribunal?

I had an interesting case some years ago. A CESTAT Larger Bench had given an order in favour of the assessees - and there were several assessees spread across several States in this case.

Revenue appealed to the Kerala High Court against some of the assessees in the LB case and the High Court allowed the appeal setting aside the Tribunal decision. Around the same time, the Revenue appealed in the AP High Court against another assessee covered in the same LB order. The AP High Court upheld the CESTAT Order and dismissed the Revenue appeal.

The same issue again reached the Tribunal for a different period. The Tribunal Bench in Bangalore had territorial jurisdiction for both AP and Kerala. It happened that on the same day an appeal each was listed from Kerala and AP on the issue. When the Kerala case was called, the Bench observed that the issue was covered against the assessee by the Kerala High Court judgement and so dismissed the party's appeal. Next came my case from Andhra Pradesh. I was armed with an order of the AP High Court in my favour in the same LB case and submitted that the Tribunal was bound by the AP High Court order in my case.

The Tribunal wondered if it could take two contradictory decisions (on the same day) in two identical cases because of two different orders from two High Courts. I submitted that as the Tribunal was working under the jurisdiction of three High Courts, it was bound by the decisions of each of the High Courts in matters pertaining to the assessees from the respective States. Tribunal agreed and ordered in my favour.  Much Obliged!

I discussed this issue with a retired High Court judge and a former President of CESTAT who was of the opinion that the Tribunal sitting in Bangalore was under the jurisdiction of the Karnataka High Court and if there was no order of the Karnataka High Court and there were conflicting orders from other High Courts, the Tribunal should decide the case on merits and follow one of the High Courts and not both.  Not much obliged!

What happens when a taxing provision is struck down by a High Court? Is this decision binding on another High Court?

This issue was discussed in the National Judicial Academy some time back where several judges (past and present, of High Courts and Supreme Court) and academics participated.

Justice G. Raghuram sharing his experience as President of a tribunal, CESTAT opined that the process of invalidation and interpretation of a statute looks similar; if a judgement of a High Court interpreting the statute has persuasive value on other High Courts then a judgement invalidating a statute should also have persuasive value only. He said that these difference of opinions are bound to exist and if one High Court is bound by invalidation of other, then they should also be bound by in  pari materia  statutes of other States. One of the participants said that if one High Court invalidates a particular Act, it must be invalidated in other High Courts also. What would be binding then if two High Courts on the same day give contradicting opinions? There has to be certainty and uniformity across the country.

Chief Justice Chagla said in a judgment that if a High Court is deciding a judgment then the other High Courts must follow the earlier judgment unless there is a different perception and in case of such different perception, the judge must mention the reasons for such different perception. While giving a different judgment, such High Court's judge must inform about this change in perception and this different judgment to the High Court whose judgment has not been followed because these judgments are statutes for the entire nation.

In several cases, where the levy of Service Tax was struck down by a High Court, the assessees were in a dilemma whether to pay the tax or not to pay.

In 2009, when the Delhi High Court struck down Service tax on renting, the Chennai Service Tax Commissioner in an RAC Meeting clarified,

Board was aware of the decision of the Hon'ble High Court of Delhi and a SLP along with Stay Petition has been filed before the Hon'ble Supreme Court of India. It would be incorrect to stop payment of service tax, as otherwise demand notice would be issued by the jurisdictional officers invoking interest and penalty provisions. In the event of Revenue winning the appeal, the responsibility for the payment of applicable Service Tax with interest would squarely fall on the landlord. Hence, till the Hon'ble Supreme Court decides the case, it would be proper to mention service tax in the bills and remit the tax collected into the Govt. Account.

Incidentally, in another case, D r. T. Rajakumari & Ors vs. Govt. of Tamil Nadu & Ors,  the Madras High Court held -

"4. It is trite to say that once a High Court has struck down the provisions of the Central Act, it cannot be said that it would be selectively applied in other States. Thus, there is no question of applicability of provisions struck down by the High Court as of now until and unless the Hon'ble Supreme Court upsets the Judgment or stays the operation of the Judgement." - See -  2016-TIOL-1792-HC-MAD-MISC

Remember the Indsur case in which the Gujarat High Court held the condition contained in sub-rule (3A) of rule 8 of the Central Excise Rules for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest as unconstitutional. - 2014-TIOL-2115-HC-AHM-CX

Several other High Courts followed Indsur and the matter is resting in the Supreme Court. No Tribunal bench anywhere held that it need not follow Indsur as it is not in Gujarat. The AAR seems to be on a higher pedestal.

In the Godavaridevi Saraf case - 2003-TIOL-1136-HC-MUM-IT, the Bombay High Court held,

Until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. 

A Post Graduate Degree in "entire" Mathematics - Minimum qualification to understand GST. Recently, to be precise on 29 th March 2019, the Government notified the Central Goods and Services Tax (Second Amendment) Rules, 2019 to amend several Rules. The Simple Tax Rules prescribe the method to calculate the amount of common credit.

(a) The aggregate amount of common credit on commercial portion in the project (C3aggregate_comm) shall be calculated as under,

C3aggregate_comm = [aggregate of amounts of C3 determined under sub- rule (1) for the tax periods starting from 1st July, 2017 to 31st March, 2019, x (AC / AT)] + [ aggregate of amounts of C3 determined under sub- rule (1)for the tax periods starting from 1st April, 2019 to the date of completion or first occupation of the project, whichever is earlier]

Where, -

A C = total carpet area of the commercial apartments in the project

A T = total carpet area of all apartments in the project

(b) The amount of final eligible common credit on commercial portion in the project (C3final_comm) shall be calculated as under

C3final_comm = C3aggregate_comm x (E/ F)

Where, -

E = total carpet area of commercial apartments which have not been booked till the date of issuance of completion certificate or first occupation of the project, whichever is earlier.

F = A C = total carpet area of the commercial apartments in the project

(c) where, C3aggregate_comm exceeds C3final_comm, such excess shall be reversed by the registered person in FORM GSTR-3B or through FORM GST DRC-03 in the month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation takes place of the project and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment;

(d) where, C3final_comm exceeds C3aggregate_comm, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation takes place of the project.

There is yet another complicated formula. But it's all very simple like swimming - once you learn it, it's very easy; if you don't, you may drown. See Notification No. 16/2019 - Central Tax, dated 29.03.2019.

IRS Officer in the run for Parliament: Mr. Metta Rama Rao an IRS (C&CE) officer of the 1991 batch
who was a Principal Commissioner took voluntary retirement from Government service and is contesting for the Lok Sabha from Srikakulam in Andhra Pradesh. Mr. Rao was the President of the IRS Association earlier.
He has seven more years to go in the service. But why does he want to leave the comforts of the government job to fight elections?

"What prompted me to leave my comfort zone is the continued neglect of my native district Srikakulam and Uttarandhra region. I want to dedicate rest of my life to work among people of Srikakulam and Uttarandhra to restore its pride of place it once enjoyed, says Rama Rao.

Also see Meet Dr. Ravindra Babu IRS - MP? & Dr. Ravindra Babu IRS is now MP -Triumphant .

In fact, Dr. Ravindra Babu TDP MP had (in August 2016) suggested in the Lok Sabha that a new Central Service called the IRS (GST) should be created to administer the GST.

Until next week