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The Petitioners were purchasers of goods and services. The Respondent refused to grant ITC on the said goods, basis the facts that the suppliers from whom the Petitioners claimed to had purchased the said goods was all fake and non-existing and the bank accounts opened by those suppliers was fake as well. Therefore, the documents submitted by the Petitioners were not accepted by the Respondent.

Basis the documents submitted by the Petitioners, the Calcutta HC observed that the at the time of the transaction, the suppliers were genuine and valid by relying upon all the supporting relevant documents required under law and the Petitioner with their due diligence had verified the genuineness and identity the names of the suppliers as registered taxable person. Further observed that the supplier was available at the Government portal showing their registrations as valid and existing at the time of transactions. 

In the view of the above observations, the Calcutta HC held that it cannot be said that there was any failure on the part of the Petitioners in compliance of any obligation required under the statute before entering the transactions in question or for verification of the genuineness of the suppliers in question. The case was disposed of by the Respondent concerned in accordance with law.

LGW Industries Limited & Ors. [2021-TIOL-2308-HC-KOL-GST]

Authors’ Notes:

As a matter of principle, credit cannot be denied to recipient on default of compliances by the supplier. It shall be noted that the Delhi HC in RE: Arise India Limited [TS-314-HC-2017-DEL-VAT] had held Section 9(2)(g) of Delhi VAT Act to the extent it disallows ITC to purchaser due to default of selling dealer in depositing tax, as violative of Articles 14 and 19(1)(g) of the Constitution of India. Thereafter, the Revenue had also preferred an SLP before the SC, against the Delhi HC judgement. The same came to be dismissed by the Apex Court in RE: 2018-TIOL-11-SC-VAT.

In a bid to lay down the foundation for the coming 25 years, the Hon’ble Finance Minister Smt. Nirmala Sitharaman has indeed announced an ambitious Budget. From proposing highway connectivity projects, to allocating resources for the ‘Nal Se Jal’ Scheme, and boosting infrastructure development in the North East, the Union Budget ’22 has undoubtedly laid down the stepping stone for the future.

Apart from the traditional sectors, the Government has also made strides to meet the objective of ‘Digital India’. The proposal to introduce the Digital Rupee, a currency backed by blockchain technology and setting-up of 75 digital banking units in 75 districts, stand testament to these developments. However, the digital sector takes a hit as the Government has also proposed to bring virtual currencies like cryptocurrency and NFTs under the tax net, despite ambiguity as to its legality.

Notably, on the direct tax front, the FM has urged the Revenue to defer filing of repetitive appeals against an assessee until the substantial question of law is decided by the jurisdictional High Court or the Supreme Court, which would considerably reduce the burden on the Judiciary.

As regards GST, it has been proposed to extend the final date for availment of credit from September to November, and to provide a mechanism to allow transfer of balance between electronic cash ledger of different states. However, certain underwhelming amendments have also been proposed which provides additional restrictions on ITC availment, basis the GST compliances of the suppliers.

On the Customs front, various laws have been proposed to be amended so as to essentially negate the Apex Court’s judgement in RE: Canon India, wherein, it had been held that the DRI is not a proper officer to issue Show Cause Notices.

Compiling all such developments, we are glad to bring you a detailed analysis on the Union Budget ’22 in association with TIOL. 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 Appellant, engaged in the business of supply of pumps, had received a purchase order from Bangladesh. Upon receipt of such purchase order, the parent Company of the Appellant, situated in Poland directly shipped the goods to the customer is Bangladesh. In view of the above, the Appellant had sought an advance ruling before the Gujarat AAR to ascertain whether the Appellant is liable to pay IGST on out and out transactions taking place beyond the Customs frontiers of India. The AAR had held that IGST will be leviable on such transactions prior to 01 February 2019. Aggrieved, the Appellant preferred an Appeal before the Gujarat AAAR.

The Gujarat AAAR observed that Entry 7 of the Schedule III covers supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. The AAR further observed that the supply of goods in the instant case takes place from Poland, which is a non-taxable territory, to Bangladesh, which also is non-taxable territory, without the said goods entering into India, the transactions are covered by said Entry 7 of Schedule – III. In view of the above, the AAAR held that no GST is leviable on such type of transactions which have taken place with e ect from 01 February 2019 and onwards. 

SPX Flow Technology India Private Limited Order No: 02/11/2021

Authors’ Note:

The CGST Act extends to the whole of India only and not beyond it. Therefore, any transaction which takes place beyond the territories if India cannot be made exigible to GST. Accordingly, irrespective of the date of insertion of Entry No. 7 in Schedule III of the CGST Act, GST cannot be levied on such transactions which are beyond its jurisdiction. This view has been upheld by Maharashtra AAR in RE: INA Bearing India Private Limited [2018-TIOL-286-AAR-GST]

The CBIC vide Circular No. 02/2022 – Customs dated 19 January 2022 has clarified that the provisions of Section 28DA of the Customs Act relating to claim of preferential rate of duty and the issuance of CAROTAR would prevail over the dispensation of extended vide certain circulars relating to AEO benefits. Thus, the relaxation in furnishing of Bank Guarantee extended to various categories of AEO/AEO (MSME), would not be applicable in cases where the Competent Authority orders furnishing of Bank Guarantee for provisional release of goods under section 18 of Customs Act.

The Petitioner had filed a GST refund application for the period July 2018 to September 2018 in August 2020. However, the same came to be on the ground of certain deficiencies. Thereafter, another refund application had been filed in September 2020, which was rejected for deficiencies. Thereafter, the Petitioner filed the refund application for the third time in September 2020 itself, which came to be rejected on the ground of limitation. Aggrieved by the refund rejection, the Petitioner preferred a Writ Petition before the Bombay HC praying for restoration of the third refund application.

The Bombay HC observed that the Apex Court in RE: Misc. Application No. 665 of 2021 in Suo Motu Writ Petition (Civil) No. 3 of 2020] had had extended limitation periods from 15 March 2020 till further orders. The said order was extended from time to time. However, since the lockdown had been lifted and almost all the Courts and Tribunals started functioning either physically or by virtual mode, the extension of limitation came to end on 15.03.2021.

It was further observed that subsequently, the Apex Court in its order [2021-TIOL-246-SC-MISC-LB] withdrew its earlier suo moto directions which provided extension from limitation period for court proceedings and held that the period of 15 March 2020, to 02 October 2021 shall stand excluded from limitation period of any suit, appeal, application, etc. The HC further observed that the period of third application fell between the limitation periods passed by the SC. In the view of the above, the Bombay HC quashed the third refund rejection order passed by the Respondent and restored the same.

Saiher Supply Chain Consulting Private Limited [Writ Petition (L.) No. 1275 OF 2021]

GLS Comments:

It would be pertinent to note that the Madras HC in a similar matter in GNC Infra LLP [W.P. No. 18165 and 18168 of 2021] had also extended the Apex Court’s limitation relief order to Refund Applications. However, it shall be noted that the CBIC vide Circular No. 157/13/2021 – GST dated 20 July 2021 had categorically clarifi¬ed that proceeding that need to be initiated or compliances that need to be done by the taxpayers would continue to be governed only by the statutory mechanism and time limit provided/ extensions granted under the statute itself. Therefore, the cases of late ¬ling of refund, being a proceeding to be initiated by the taxpayers may not be eligible for the SC’s limitation extension order.

The Hopes are high among the masses, coming into 2022 despite the surging COVID-19 cases. With the near completion of the biggest ever vaccination drive globally along with the ongoing booster vaccination drive, India seems to equipped for come what may. The 8.4% GDP growth Q2 compared to 7.4% contradiction a year ago, goes to speak volumes about the economic growth of the Nation even in the face of adversity. Such growth is possible only when the judicial and adjudicating authorities work in harmony, keeping in mind the difficulties faced by the taxpayers.

In line with such harmonious development, the CBDT has notified the Faceless Appeal Scheme, 2021 and provided one-time relaxation for verification of all ITRs e-filed for AY 2020-21. The CBIC has extended the due dates for filing Annual Return and Reconciliation Statement for the F.Y. 2020-21. Similarly, the CBDT vide Circular No. 01/2022 dated 11 January 2022 has extended the due dates for filing Tax Audit Report and Transfer Pricing Report till 15 February 2022 and extended the due date for filing IT Returns till 15 March 2022. It shall also be noted that the CBIC has notified various key amendments in the GST Law.

Compiling all such developments, we are glad to bring you the 17th 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. 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. 

In light of the spread of the new variant of the COVID-19 and the drastic surge in the number of COVID cases across the country,the Supreme Court Advocates on Record Association ('SCAORA') had sought restoration of the order in RE: Suo Motu Writ Petition (C) No. 3 of 2020. The Apex Court, taking cognizance of the same, passed the following order dated 10.01.2022:

• the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed in respect of all judicial or quasi-judicial proceedings;
• Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022;
• In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days  from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, the longer period shall apply;
• The period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under the Arbitration and Conciliation Act, Commercial Courts Act, Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.

The Applicant had purchased an industrial plot on which GST @18% had been charged by the seller for sale of transferring the rights of the industrial plot. The Applicant had sought an advance ruling before the Gujarat AAR to ascertain the eligibility of ITC of GST paid on input services of Lease Premium paid. The Applicant had submitted that obtaining land on lease cannot be considered to be a service used for construction of immovable property and thus, ITC cannot be disallowed u/s. 17(5)(d) of the CGST Act.

The AAR observed that the expression ‘plant and machinery’ excludes land. Accordingly, with the expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit provision u/s. 17(5) CGST Act, the legislature has expressed its intent that ITC shall not be available in respect of services pertaining to land received by a taxable person for construction of an immovable property including when such services are used in the course or furtherance of business. In view of the above, it was held that ITC shall not be available on lease premium.

JM Chemicals [2021-TIOL-276-AAR-GST]

Authors’ Notes:

In terms of Section 17(5) of the CGST Act, only those supplies, having direct nexus with construction activity are ineligible for credit and not any related activity. The industry is of the view that leasing of land, as a separate transaction, does not have any direct nexus with construction activity and corresponding ITC should be available. However, it is seen that Advance Ruling authorities often take a pro-Revenue approach in such matters. Similar view had been taken by the Tamil Nadu AAR in RE: Inox Air Products Private Limited [2021-TIOL-199-AAR-GST].

The GSTN vide its Update dated 03 January 2022 has informed that w.e.f. 01 January 2022, if a monthly filer has not filed the GSTR-3B for the preceding month, then such taxpayer will not be allowed to file the GSTR-1 for the subsequent month, till the GSTR-3B for the preceding month is filed. This functionality will be implemented on the GST Portal shortly, after which, the system will check the filing of preceding GSTR-3B before permitting to file GSTR-1 for the subsequent month.

The Petitioner had filed a refund application for the period June and August 2018 on 19 April 2021. The said application came to be rejected by the Revenue on the ground that limitation, being filed 2 years beyond the relevant date. Aggrieved, the Petitioner challenged the same before the Madras HC, contending that SC’s Suo Moto Order in [2021-TIOL-246-SC-MISC-LB] which extended the limitation period for various proceedings.

The Madras HC observed that the benefit of the SC’s suo moto order, extending various limitations due to COVID-19 pandemic and the consequential restrictions, would be available to the Petitioner. Basis the said observation, the HC directed the Revenue to consider the refund application afresh.

GNC Infra LLP [W.P.No.18165 and 18168 of 2021]

Authors’ Notes:

It shall be noted that the CBIC vide Circular No. 157/13/2021 – GST dated 20 July 2021 had categorically clarified that proceedings that need to be initiated or compliances that need to be done by the taxpayers would continue to be governed only by the statutory mechanism and time limit provided/ extensions granted under the statute itself. Thus, a view may be taken that the refund applications, being a proceeding to be initiated by the taxpayer is not eligible for the SC’s limitation extension order.