Newsletter

The Goods and Services Tax Network (‘GSTN’) has issued an update on new functionalities made available for taxpayers on GST Portal in the month of August 2022. These functionalities pertain to different modules such as Registration, Returns, Advance Ruling, Payment, Refund and other miscellaneous topics. As per the update the follows changes have been made;

1. Registration 

1.1. Enabling CORE Amendment Link for Taxpayers who fail To Update Bank account 

• If taxpayers didn't update their bank account details on the GST Portal within a specified period after registration, they couldn't file a core amendment application. Further updating bank account details through a non-core amendment would fail if their name was modified in CBDT database post-registration. To address such scenarios, newly registered taxpayers can now file core amendment applications, pending bank account updation through the Portal.

2.Returns 

2.1. Changes implemented in Form GSTR-3B

• As per Section 9(5) of the CGST Act, 2017, Electronic Commerce Operators (ECOs) must pay tax on specified services notified by the government, such as Passenger Transport, Accommodation, Housekeeping, and Restaurant Services. Therefore, vide NN 14/2022 – Central Tax, dated 05th July, 2022, new Table 3.1.1 has been added to Form GSTR-3B for reporting such deliveries ECOs and registered individuals making such supplies must report them per the notification.

2.2. Late fee waiver up to 28th July, 2022, for delayed filing of return in Form GSTR-4 (Annual) for the FY 2021-22

• In accordance with Notification No. 12/2022-CT, issued 5th July 2022, if a taxpayer had previously filed Form GSTR-4 with a late fee payment, the same has been returned by the system and credited to the taxpayer's ECL.

2.3. Generation of GSTR-11 based on GSTR-1 / 5 for UIN holders

• UIN holders file Form GSTR-11 with details of inward supplies every quarter and seek refund using Form GST RFD-10. To help UIN holders and authenticate refund claims, the Portal allowed auto-population of Form GSTR-11 based on filed GSTR-1/5. Further the portal has disabled auto-population of inward supplies received on RCM basis from Form GSTR-1/5 furnished by suppliers in Form GSTR-11 of UIN.

2.4. HSN based validation implemented in Form GSTR-9

• It had been mandatory for the taxpayers to report HSN at least of 4-digit for taxpayers having turnover up to Rs 5 Crore and 6-digit HSN for taxpayers with more than Rs 5 Crore turnover. Consequently, a validation has been implemented on the portal for taxpayers with AATO up to Rs 5 Crore and for taxpayers with AATO of Rs 5 Crore or above to disclose HSN at 4 digit or 6 digits accordingly in Table -17 of Form GSTR-9 for FY 2021-22.

2.5. Changes in HSN length validation in Form GSTR-1

• In Phase-1, AATO-based validation was introduced on the portal to verify taxpayers with AATO up to Rs 5 Crore had to reported minimum 2-digit HSN and 4-digit HSN for AATO more than 5crore in Table 12 of GSTR-1. In Phase-2, the minimum length of HSN that must be submitted in Table 12 of Form GSTR-1 has been increased from 4 to 6 digits, both online and offline, on the portal.

3. Refund

3.1. Filing for Refund in Form RFD-01 for exports without payment of tax

• Taxpayers must provide invoice details in Statement 3 while filing the refund application in Form RFD-01 under Category "Refund of unutilized ITC on account of Exports (Without payment of Tax)" According to para 47 of Circular No. 125/44/2019-GST, dated 18 November 2019, if the export value reported on the shipping bill is different than the amount declared in the tax invoice, the lowest of the two values will be used for processing unutilized input tax credit on account of export of goods made without payment of tax. Therefore, a column “FOB value” has been added in Statement 3 format for the taxpayers to declare the value while filing for refund.

4. Front Office

4.1. Updation of Statistics on GST Portal

• A five-year GST statistical report is available on the portal under Downloads > GST Statistic.

The National Informatics Centre (NIC) had earlier released an update on the generation of E-Way Bills for the movement of gold, gold jewellery, and precious stones. Accordingly, the ‘EWB for Gold’ option has been currently removed from the E-Way Bill portal. Consequently, the E-Way bill for Gold option will be accessible once notified.

In pursuance of the Government recommendations, a facility for the generation of E-Way Bills for the transportation of gold has been incorporated to the E-Way Bill portal. The National Informatics Centre ('NIC') has published an update dated 12 September 2022, apprising the details of the E-Way Bill for gold. E-Waybill for Gold will be mandatory when all the items belong to HSN Chapter 71 only. Moreover, if other items which do not belong to HSN Chapter 71 exists along with HSN Chapter 71, then it will be treated like a normal E-Way Bill and the details of Part-B shall be required. If the respective  state has notified the requirement for the generation of an E-Way Bill in which taxpayer is registered, the taxpayer should review the notices and exemptions issued by their respective states. The E-Way Bill for gold consists primarily of two parts, as follows:

Part-A of E-way Bill for gold

• The E-Way Bill for Gold has all the same parameters as that of normal e-waybill except that such E-Way Bills will not be updated with Part-B details;
• Cancellations and rejection of E-Way Bill of gold will be similar to E-Way Bill of goods consignment; and
• The validity of the E-Way Bill will be calculated based on the pin-to-pin distance of origin and destination and have the same parameters as that of a normal E-Way Bill.

Part-B of E-way Bill for gold

• The generation of an E-Way Bill for gold will not require updating of part B i.e. details of vehicle number and details of transporter shall not be provided;
• Extension of E-Way Bill is permitted but without updating the Part-B details (Responsibility of extension of E-Way Bill will be with the consignor/consignee and not the transporter);
• Consolidated E-Way Bill cannot be generated; and
• The multi-vehicle facility will not be available for the E-Way Bill of gold.

We are glad to bring you the 24th Edition of our ‘Vision 360’ Newsletter in association with TIOL. In this edition, we have covered the key judicial and legislative developments in Direct, Indirect Tax other regulatory areas in the month of August 2022. Following are some key highlights of this Newsletter:

• An Isometric view into Alternate Efficacious Remedy and Powers of NCLT;
• Recent developments in the GST in relation to assignment of leasehold rights;
• SC’s decision in relation to obligation of the State in relation to quoting of HSN in the tender;
• International Tax Bulletin released by CBDT’s FT&TR Division covering comparative revenue effect of Amount A vis-à-vis Article 12B
• Judicial and Regulatory updates in the Direct Tax, Indirect Tax and Regulatory fronts!

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 CBIC vide Circular No.180/12/2022-GST dated 09 September 2022 has issued guidelines for filing/revising TRAN-1/TRAN-2 in terms of order passed by Hon’ble Supreme Court in the case of Union of India vs. Filco Trade Centre Private Limited. 

The Apex Court on 22 July 2022 vide the landmark judgment had directed re-opening of GSTN portal for filing Form TRAN-1 and TRAN-2 for a period of 2 months. Further, the Apex Court also directed the GST Council to issue appropriate guidelines in scrutinizing the claims. Subsequently in Miscellaneous Application No. 1545-1546/2022, the Apex Court vide order dated 02 September 2022 has extended the time for opening the GST Common portal for further period of 4 weeks i.e. from 01 October 2022 to 30 November 2022.

In pursuance to the aforementioned order, the CBIC vide the captioned Circular had issued various guidelines for filing TRAN-1/TRAN-2 or revising earlier filed TRAN-1/TRAN-2 as tabulated hereunder:

The CBIC vide the captioned Circular also clarified that, once the Applicant files TRAN-1/TRAN-2 or revises the said form filed earlier, no further opportunity will be given to the Applicant to again file or revise the form either during this period or subsequently.

The Apex Court vide order dated 02 September 2022 has extended the time for opening GST Common Portal for a further period of 1 month. It has also been clarified that all questions of law decided by the respective High Courts concerning Section 140 of the CGST Act read with the corresponding Rule/Notification or direction are kept open

The CBIC vide instruction No. 04/2022-23 [GST – Investigation] dated 01 September 2022 has issued guidelines for initiating prosecution under the CGST Act. The Instructions inter alia provide that any person who violates the provision of section 132 of the CGST Act, may be subjected to criminal proceedings and prosecution. Following are the key highlights of the Instructions.

Sanction of prosecution

• The consequences of a criminal prosecution are drastic, so the nature of evidence collected during the investigation should be carefully assessed and proven beyond a reasonable doubt that the accused was guilty and had mens-rea for committing the offence. Decisions should be made case-by-case based on the severity of the crime and the nature and quality of the evidence collected.
• The Prosecution can be initiated only after adequate evident and not merely on technical grounds. Further prosecution cannot be indiscriminately  made against all directors of the company and that it should be only restricted to persons who oversee day-to-day operations.

SC’s observations in RE: Radheshyam Kejriwal [(2011)3SCC 581]

• The Prosecution complaint may be filed prior to adjudication or even before a show cause notice is issued, particularly if the offender has been arrested u/s 69 of the CGST Act, the offence is serious, or there is evidence that the concerned person may delay adjudication proceedings.

Monetary limits

• Prosecution should normally be launched where amount of tax evasion, or misuse of ITC, or fraudulently obtained refund in relation to offences specified under sub-section (1) of section 132 of the CGST Act is more than Five Hundred Lakh rupees. However, in following cases, the said monetary limit shall not be applicable:
  • Habitual evaders: A company/taxpayer can be prosecuted for habitual tax evasion, ITC misuse, or fraudulent refund. A company/taxpayer is considered a habitual evader if it has been involved in two or more recorded instances of tax evasion/fraudulent refund or misuse of ITC involving fraud, suppression of facts, etc. in the past two years and the total tax evaded, total ITC misused, and/or fraudulently obtained refund exceeds Five Hundred Lakh rupees. DIGIT can identify habitual evaders.
  • Arrest Cases: Instances in which arrests were made pursuant to Section 69 of the CGST Act during the course of an investigation.

Authority to sanction prosecution

• The prosecution complaint should only be filed with the Pr. Commissioner/Commissioner of CGST's approval, per section 132(6) of the CGST Act.
• In DGGI-investigated cases, the prosecution complaint should be filed only with the Pr. Additional Director General/Additional Director General of  the concerned zonal unit/HQs.

Procedure for sanction of prosecution

• When an investigation results in arrests u/s 69 of the act without bail, a prosecution complaint should be filed within 60 days of arrest. In all other arrest cases, prosecution must file a complaint within a certain timeframe. The proposal of filing complaint has to be in the format of investigation report prescribed in Annexure-I.
• As per the provision of sec 137(i) of the CGST Act, companies, both the legal person as well as natural person are liable for prosecution under section 132 of the CGST Act. Similarly, under section 137(3), the provisions have been made for partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a Trust.
• In cases investigated by DGGI, except for single/multiple taxpayer(s) under Central Tax administration in one Commissionerate, prosecution complaints shall be filed and followed up by DGGI. In other cases, the complaint must be filed by a Superintendent authorised by the Pr. Commissioner/Commissioner of CGST. In all DGGI-investigated cases, the prosecution must be approved by a DGGI officer.

Appeal against Court order in case of inadequate punishment/acquittal

• Prosecution Cell in the Commissionerate shall examine the judgment of the Court and submit their recommendations to the Pr. Commissioner/ Commissioner, in cases where appeal is required to be filed.

Procedure for withdrawal of prosecution

• If a prosecution is sanctioned without a complaint, the Commissionerate should notify the sanctioning authority immediately. The sanctioning authority may recommend dropping charges after reviewing new evidence.

General guidelines

• The officer authorised to file a complaint is also responsible for all required documents, statements, and exhibits that would be required to be produced before a Court. The board advised officials to consult with the Public Prosecutor while finalising the draft of the complaint.
• The Superintendent in-charge of adjudication section should endorse copy of all adjudication orders to the prosecution section.          

Publication of names of persons convicted

• Section 159 of the CGST Act allows the Pr. Commissioner/Commissioner or any officer he authorises to publish the name and other details of a convicted person. In deserving cases, the department must invoke this section for all the convicts.

Monitoring of prosecution

• Once prosecution is started, it should be vigorously pursued. The officer should monitor prosecution cases monthly and take corrective action where necessary to ensure satisfactory prosecution progress. Within 48 hours of sanctioning a prosecution, all cases should be entered into DIGIT/Investigation Module and updated regularly.

Compounding of offence

• Under section 138 of the CGST Act, the Pr. Commissioner or Commissioner to compound offences upon payment of a compounding amount. The prosecuting party shall be made aware of this, and the responsible official should make a compounding offer to that party.

Transitional Provisions

• Cases sanctioned for prosecution following these instructions are handled according to their rules, regardless of the date of the offence. Cases where prosecution has been sanctioned but no complaint has been submitted before the magistrate will also be evaluated under these directions.

A global e-tender was floated by M/s. Diesel Locomotive Works in April 2019, to procure turbo wheel impeller balance assembly under the Make in India scheme. Bharat Forge Ltd., one of the bidders, had approached the Allahabad High Court, inter alia, assailing that neither the Notice Inviting Tender (‘NIT’) nor the bid documents mentioned the relevant Harmonised System of Nomenclature (‘HSN’), which is adopted by the GST Council to indicate the GST rates. It was contended that they had quoted the correct GST rate of 18%, whereas the top three tenderers quoted at 5%, accordingly their overall prices were lower in comparison. Due to the non-disclosure of the HSN Code in the bid document, the correct tax rate for all bidders was not disclosed, and thus the public tender violated Article 19(1)(g) of the Constitution. The High Court allowed the petition, and directed the Central Government to verify the HSN Code from taxing authorities and indicate the same on bid documents.

Aggrieved, the Central Government challenged the HC’s order before the Apex Court. The main contention argued was the maintainability of the writ of mandamus as there was no breach of statutory duty by the Government. Further, it was argued that the bid documents clearly stated that the Government would not be responsible for misclassification taxes and duties, therefore mandating the Government to seek HSN Code clarification was not feasible.

The Supreme Court upheld the writ, and consequently quashed the mandamus issued by the HC. The Apex Court ruled that the State is not duty bound to mention HSN Codes in public tender documents. The court was of view that there should be a 'public duty' for invoking mandamus, and not necessarily a statutory duty. It can be imposed by common charter, common law, custom or even contract. Referring to a catena of judgments, the Court noted that the writ of mandamus has a wide scope and should be invoked whenever a public duty is breached. It was further held that judicial review is limited for state contracts and they can only intervene when the state acts arbitrarily, or whimsically against public interest. The court noted that it was Bharat Forge’s duty to enquire about the HSN code and other tax rates. 

Union of India vs. Bharat Forge Limited and Anr. [2022-TIOL-67-SC-GST]

GLS Comments:

The HSN classi¬fication of railway products has been a perpetual issue right from the Excise days, which has re-ignited under the GST regime as well. Where inconsistencies and scope for multiple interpretations in the applicability of HSN codes to products sold in the same industry will exists, possibility of different price bids will remain. While the Allahabad HC had intended to provide a level playing field to the bidders, ensuring no misclassification, it would not have been feasible. The responsibility of classifying the goods and charging the tax correctly, always rests upon the seller. Shifting such grave responsibility on the shoulders of the buyers would have created a havoc in the industry.

Moreover, the Apex Court has rightly held that the State is not duty-bound to mention the HSN Codes on the tender. This would amount to shifting the responsibility of correct tariff classification on the State. Further, non-mentioning of HSN Codes does not amount to any action against the public interest at large.

The Petitioner had generated an E-Way Bill for inter-State transport of his goods. During the interception of the consignment, it was observed that the E-Way Bill had been expired while the vehicle was in transit. Consequently, the vehicle had been detained for the alleged violation of section 129 of the CGST Act r/w. Rule 68 of the CGST Rules. The entire proceedings, including the vehicle detention, show-cause notice, and the adjudication order, were passed on the same date. The Petitioner had paid the entire demand of tax along with interest and got the vehicle released on the same date. Thereafter, the Petitioner had preferred an appeal which came to be rejected. Aggrieved, the Petitioner preferred a Writ before the Jharkhand HC.

The Petitioner submitted that the entire proceedings was held ex parte and no proper opportunity of furnishing a reply or hearing was given to them. The Petitioner further stated that it was a bona fide error and there was no intention to evade tax. The Revenue on the other hand contented that the provisions of sec 129 does not contemplate the requirement of an intention to evade tax in order to impose tax liability, interest, and penalty hence, the order passed against the Petitioner did not suffer from any legal infirmity. The Revenue further contended that on the request of the Petitioner itself, the vehicle was released after the payment of tax and interest as they did not want to submit anything on the issue, therefore the case was adjudicated ex parte.

The HC observed, that the proceedings against the Petitioner were initiated and concluded on the same date. Therefore, the HC held that the adjudication order and the appellate order both suffered from procedural infirmities and deprived the Petitioner/Driver an adequate opportunity to defend themselves. Accordingly, the HC allowed the writ, dismissing the adjudication and the appellate orders.

AMI Enterprises Private Limited [W.P. (T) No. 2312 of 2022 dated 10 August 2022]

GLS Comments:

It would be pertinent to note that in a similar matter, the Apex Court in RE: Satyam Shivam Papers Private Limited [Special Leave to Appeal (C) No(s). 21132 of 2021] had affirmed the judgement of the Telangana HC holding that tax evasion cannot be presumed on mere non-extension of validity of e-way bill by the Assessee.

The Petitioner had filled a GST refund claim during July 2021, which had been granted in tranches in January and March 2022, without interest despite substantial delay. Aggrieved, the Petitioner preferred a Writ before the Delhi HC. The Revenue contended that delay in processing the refund owing to the COVID-19 outbreak. The Revenue further relied on the Supreme Court's Suo moto extension order and the judgement of the Madras HC in RE: GNC Infra LLP [2022-TIOL-55-HC-MAD-GST], wherein had been held that Suo moto extension order by the SC would apply to refund u/s. 54 of the CGST Act.

The HC observed that the statutory rate of interest is pegged at 6% u/s. 56 of the CGST Act. The said interest gets triggered after the expiry of 60 days from the date of receipt of application for refund, which is compensation for use of money. It was further observed that neither the SC’s limitation order, nor the Madras HC’s judgement in RE: GNC Infra [supra] concern the point in issue i.e., grant of interest on refund withheld beyond the period prescribed under the Act. Thus, the submissions of the Revenue are not sustainable.

In view of the above observations, the Delhi HC held that the Revenue could not have retained the money beyond the period stipulated under Section 56 of the CGST Act. The HC further directed the Revenue to grant the applicable interest on delayed refund.

Ankush Auto Deals [2022-TIOL-1098-HC-DEL-GST]