The Indian Judiciary has been quite busy over the last couple of months delivering some key judgements that would have a considerable impact on the industry! Not just the Supreme Court, but the High Courts have also delivered some spectacular judgements, which certainly re-affirms the faith of the taxpayers in the Judiciary and cautions the Revenue to not exceed its jurisdiction. We have covered all such developments in this Newsletter. Apart from this, following are the key developments covered in this Newsletter:
Compiling all such developments, we are glad to bring to you the 21st Edition of our ‘Vision 360’ Newsletter in association with TIOL. We have covered the key judicial and legislative developments in Direct, Indirect Tax other regulatory areas in the months of April and May 2022. We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome at consult@gstlegal.co.in or updates@gstlegal.co.in
The DGFT vide Policy Circular No. 39/2015-20 dated 07 June 2022 relaxes the documentary requirements of submitting 'Bill of Export' for supplies made to SEZ prescribed under the Foreign Trade Policy (‘FTP’), in case of supplies made to SEZ units under Advance Authorization. This requirement was challenged by several exporters before various High courts in the country on the ground of non-availability of this provision for the period covered upto FTP 2009-14.
In most of the cases, Hon'ble Courts have granted relief to the Advance Authorization holders. Accordingly the DGFT has decided to relax this condition of requirement of submission for all such supplies made prior to 01 April 2015.
The DGFT has further notified that for the purpose of discharge of export obligation under Advance Authorizations, in case of supplies made to SEZ units prior to 01 April 2015, the exporters can submit corroborative evidence in lieu of 'Bill of Exports' such as:
Sr. No. |
Corroborative evidence |
1 |
ARE-f form duly attested by jurisdictional Central Excise/GST Authorities of AA holder |
2 |
Evidence of receipt of the supplies by the recipient in the SEZ |
3 |
Evidence of payment made by the SEZ unit to the AA holder |
The Petitioner had dispatched a consignment of tobacco products from Panipat to Nepal. However, on account of the COVID-19 pandemic and the consequent travel restrictions imposed by the Nepal Government, the goods were unloaded at Gorakhpur. Accordingly, till the arrangement of a driver and vehicle was made, period specified in E-way bill expired. Therefore, a second e-way bill was generated by Petitioner to dispatch the goods to its destination at Nepal.
The Revenue authorities had intercepted and seized the goods and vehicle on the premise that owing to pandemic situation, the Petitioner should not have exported the goods, and instead of getting the second e-way bill generated, should have extended the validity of the 1st E-Way Bill within 8 hours of its expiry.
Aggrieved, the Petitioner preferred a Writ before the Allahabad HC contending that there was no intention of evasion of tax. The HC observed that the goods were covered by valid documents, and hence the entire proceedings were totally arbitrary, illegal and without jurisdiction. It was further also the goods were intercepted and seized by the Respondents on hyper-technical ground and assumptions, without there being any allegation of intention to evade payment of tax. It was also observed that the second e-way bill was generated bona fide and in circumstance beyond control of the Petitioner. Furthermore, it was held that the action of the Respondents was evidently an act of harassment to the Petitioners, and breach of their fundamental rights guaranteed under Article 14 of the Constitution of India and blatant abuse of power by the respondents.
The HC further relied on the Apex Court’s ruling in Satyam Shivam Papers Private Limited [2022-TIOL-07-SC-GST] where it was held that no presumption can be drawn that there was an intention to evade tax on account of non-extension of the validity of the e-way bill. Basis the above observations, the HC quashed the orders of the Respondent and directed release of goods and vehicle along with costs of Rs. 1 lakhs (Rs 50,000 to be paid to exporter and goods transport agency each).
Gobind Tobacco Manufacturing Co. And Another [WRIT TAX No. 600 of 2022 dated 17 May 2022]
The Petitioner had effected legitimate exports for the period July, September and October 2017. However, during the filing of the return in Form GSTR-3B, the Petitioner had inadvertently reported the same as outward taxable supplies instead of zero-rated supplies. Accordingly, the refund claimed by them in respect of the legitimate exports had been denied.
Aggrieved, the Petitioner filed a Writ before the Madras HC. The HC observed that the export incentives had been given to encourage exports, so that there was inward remittance of foreign currency and the procedure prescribed under the CGST Rules is not intended to defeat such legitimate export incentives. It was further observed that the procedures under the prescribed CGST Rules cannot be applied strictly to deny legitimate export incentives. The HC further drew referred to the SC decision in Auriya Chamber of Commerce [1986 (25) ELT 867 (SC)] wherein the Court had held that “procedures are nothing but handmaids of justice and not mistresses of law”.
Basis the above observations, the HC disposed of the writ and directed the Revenue to obtain the data directly from the Petitioner and its counterparts in the customs Department and if indeed there was an export and a valid debit of tax by the Petitioner, the refund shall be granted. Thus, in conclusion, HC asserted that, “procedural infraction shall not come in the legitimate way of grant of refund under the IGST Act r/w CGST Act, and the Rules made thereunder”.
Abi Technologies [ W.P(MD). No. 4562 of 2022 dated 28 April 2022]
The Petitioner filed a Writ before the Patna HC challenging the demand order and the appellate order issued by the Revenue in violation of principles of natural justice. The Petitioner submitted that their Appeal against the demand order had been rejected on the sole ground of non-submission of certified copy of the original order.
The HC observed that such an order is bad in law for two reasons i.e. (a) Violation of principles of natural justice-fair opportunity of hearing, (b) Order passed ex parte in nature, does not assign any sufficient reasons from the record, also the authorities not have adjudicated the matter on attending facts and circumstances. Accordingly, the HC set aside the demand order and the appellate order.
Further, the HC direct the Revenue to de-freeze/ de-attach the bank account of the Petitioner immediately. Furthermore, the HC direct the Revenue to decide the case on merit expeditiously and to pass a speaking order.
Shree Murliwala Textile [Patna HC CWJC No.6697/2022 dated 09 May 2022]
The Petitioner had been subjected to Form DRC-01A u/s. 74(1) and (5) of the CGST Act. The said Form DRC-01A, although in the form of an intimation, is as good as a final order in as much as it demands the Petitioner to pay the demand within 15 days vide Form DRC-03. Aggrieved, the Petitioner preferred a Writ before the Gujarat HC.
The HC held that intimation notice issued under DRC-01A is an intimation of tax ascertained by officer and cannot propose recovery of tax on failure to comply with the same. It was further held that as per the CGST Act, DRC-01A is followed by DRC-01 i.e., Show Cause Notice and then Order confirming demand therein and demand can be recovered only subsequent to issuance of such Order. In view of the above, the HC quashed the Form DRC-01A.
The CBIC vide various Notifications dated 21 May 2022, has regularized the Import and Export duties of various goods in the manner as tabulated hereunder:
Notification No. and Date |
Particulars |
Notification No. 25/2022 dated 21 May 2022 |
The Customs Duty upon import of Petrol has been reduced to Rs. 5 per litre |
The Customs Duty upon import of Diesel has been reduced to Rs. 2 per litre |
|
The Customs duty on ferronickel, anthracite coal, coking coal, PCI coal has been reduced from 2.5% to Nil |
|
Notification No. 26/2022 dated 21 May 2022 |
The Customs Duty upon import of coke and semi-coke of coal has been reduced from 5% to Nil |
The Customs Duty upon import of Naphtha has been reduced from 2.5% to 1% |
|
The Customs Duty upon import of propylene oxide has been halved to 2.5% |
|
The Customs Duty upon import of Ferro-nickel has been reduced from 2.5% to Nil |
|
The export duty on Iron ore and concentrates Non- agglomerated has been increased from 30% to 50% |
|
Notification No. 28/2022 dated 21 May 2022 |
The export duty on Iron ore and concentrates Agglomerated has been increased from 30% to 50% |
The export duty on Iron ore pellets has been increased from Nil to 45% |
|
The export duty on Pig iron and spiegeleisen in pigs, blocks, or other primary forms has been increased from Nil to 15% |
|
Notification No. 29/2022 dated 21 May 2022 |
The export duty on Flat rolled products of iron or non-alloy steel, hot rolled, not clad, plated, or coated has been increased from Nil to 15% |
The export duty on Flat rolled products of iron or non-alloy steel, cold rolled (cold-reduced), not clad, plated, or coated has been increased from Nil to 15% |
|
Notification No. 29/2022 dated 21 May 2022 |
The export duty on Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated has been increased from Nil to 15% |
The export duty on Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel has been increased from Nil to 15% |
|
The export duty on Other bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded, but including those twisted after rolling has been increased from Nil to 15% |
The above-mentioned notifications shall come into force with effect from the 22 May 2022.
On account of the non-availability of Form GSTR-2B for the month of April 2022 on time i.e. by 14 May 2022, the CBIC vide Notification No. 05/2022 - GST (Central Tax) dated 17 May 2022, has extended the due date for furnishing return in Form GSTR-3B for the month of April 2022 till 24 May 2022
During the filing of Form GSTR-1 for the month of June 2019, the Petitioner had inadvertently missed out to tick mark on the column of 'Deemed Export' in respect of 9 invoices. Upon realization, the Petitioner had sought permission for rectification of Form GSTR-1, which had been granted to them. However, the Petitioner successfully amended only 4 out of the 9 invoices. Thereafter, the Respondent refused to grant another permission to rectify the balance 5 invoices. Aggrieved, the Petitioner preferred a Writ before the Gujarat HC.
The HC observed that Section 37(3) of the CGST allows rectification of returns for unmatched invoices. However, without going into the merits, the HC allowed the Writ, directing the Respondents to process the request of the Petitioner for carrying out amendment in its GSTR -1 returns pertaining to June 2019 with respect to ticking of the 'Deemed Export' column in regard to the balance 5 invoices, which the writ applicant did not amend in the first request.
Screenotex Engineers Private Limited [2022-TIOL-452-HC-AHM-GST]
Author’s Notes:
It would be pertinent to note that the Apex Court in RE: Bharti Airtel Limited [2021-TIOL-251-SC-GST], had denied rectification in Form GSTR-3B, stating the same to be impermissible under the law. However, the Gujarat HC in the instant case has exercised its discretionary power to allow rectification. Such liberal approach of the Courts are welcome.
During the course of audit of accounts conducted by CERA Audit party for the erstwhile regime, it was observed by the Revenue authorities that the petitioner is liable to pay service tax under reverse charge on services rendered at two quarries, for which, royalty had been paid by the petitioner to the Government of Tamil Nadu for mining stones since such royalty payments are liable to service tax consequent to the issuance of Notification No.22/2016 ST dated 13 April 2016. The Petitioner duly paid the ST, however, the same had been paid post the transitional date.
Accordingly, as the Petitioner could not avail the transitional credit of service tax paid, post the transitional date, the same had been claimed as refund. The refund application came to be rejected by the Revenue authorities mainly on the ground that there is no provision in the new regime to allow such refund. Aggrieved, the Petitioner preferred a Writ before the Madras HC.
The HC observed that the Petitioner should be allowed benefit of service tax paid under RCM post implementation of GST. The Court noted that neither refund under Section 142(3) of the CGST Act can be allowed being not eligible under erstwhile laws nor credit under Section 140(1) of the CGST Act can be allowed when time limit to transition such credit has lapsed. The Court invoked ‘Doctrine of Necessity’ and remanded matter back to department for reconsidering the Petitioner’s application for allowing GST credit under Section 142(3).
Ganges International Private Limited [2022-TIOL-325-HC-MADGST]
Authors’ Notes:
The Court exercised its discretionary powers to remand matter back for reconsideration under Section 142(3) for allowing credit. ‘Doctrine of Necessity’ is however misplaced in this case in the absence of statutory provisions to this effect. In past, the CESTAT has consistently allowed refund under Section 142(3) on similar facts.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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