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The Petitioner’s refund of GST paid on the notice pay received from the erstwhile employee was rejected. Aggrieved the Petitioner preferred a Writ before the Kerala HC for seeking refund of GST paid on notice pay recovery.

The HC observed that Circular No. 178/10/2022-GST dated 03, July 2022, had expressly clarified that the notice pay from employees is not a taxable transaction. Further, the HC also noted that while the Circular was issued after the issuance of impugned order, the Revenue cannot deny the benefits entitled to the Petitioner, since the provisions of a Circular have to be deemed to apply retrospectively. Furthermore, as the Circular are binding on the Department, no officer can take a view contrary to stipulations contained in such Circulars. Accordingly, the impugned order was quashed.

Manappuram Finance Limited [2022-VIL-807-KER]

GLS Comments:

Vide the Circular dated 03 July 2022, the position had become amply clear that GST is not leviable on notice pay recovery. Moreover, it is a settled legal principle that the circulars are clarificatory in nature and therefore, such clarifications apply retrospectively. Thus, the Revenue ought to have granted the refund to the Petitioner in the instant case. Nonetheless, now that the HC has expressly held so, the taxpayers, who have paid GST on notice pay recoveries, may apply for refunds.

Coming to the end of the year 2022, we must take a moment to look at appreciate how far we have come. Given that the year had started as a ‘recovery year’, in the midst of the Russo-Ukraine war, which had slowed down the global economy, what we have collectively achieved this year, is rather commendable.

From domestic economic standpoint, the GST collections have continued its streak of increasing trend. Since January 2022 till November 2022 the GST collections have consistently been above INR 1,00,000 Crore per month with highest ever GST collection of INR 1,67,540 Crore in April 2022. The trends also show a consistently increasing year on year growth in the GST collection.

Apart from the growing revenue, there have also been ample judicial and legislative growth in the past month. The CBIC has now replaced the CCI as the national anti-profiteering watchdog, dissolving the NAA. In addition thereto, true to our view of bringing news which are beyond facts, we have covered all the judicial and regulatory developments in direct and indirect taxes with interesting insights. We have also covered developments of the erstwhile indirect tax laws, which can be helpful precedents for disposing the pending litigations. 

Compiling all such developments, we are glad to bring to you, the 27th 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 month of September 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 Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme has extended their export benefits under the tax refund scheme to the pharmaceuticals, chemicals and iron & steel sectors under chapters 28, 29, 30 and 73 of ITC (HS) schedule of items. The expanded list of items will be applicable for exports made from December 15, 2022 and shall be applicable till September 30, 2023.

[Press Release dated 07.12.2022]

GLS Comments:

Though the RoDTEP benefits for the newly introduced sectors remains seemingly narrow and limited, but still is capable of boosting the already growing export market of India. It also opens the immense possibilities for the left out sectors / industries to make formal representations to the Government and avail the benefits. Further, the rate changes in the existing tarrif of RoDTEP benefits does also provide and opportunity to increase the existing rates through formal justification/representation to the relevant authorities.

The Petitioner contented that certain observations and allegations about fake invoices and fake forms were made in the impugned order however, the SCN had no such allegations or any details. Aggrieved, the Petitioner preferred a Writ.

The HC emphasized that it was duty of the proper officer to provide all the details to the Petitioner. It was further held that every SCN should contain every detail required to be effectively responded mandatorily. Accordingly the impugned order and SCN was quashed and set aside.

Archana Textile Corporation [2022-VIL-661-BOM]

GLS Comments:

As a settled position of law, there is an implicit requirement of observance of the principles of natural justice that the notice must be expressed in such a manner that reasons can be spelt out from the same. Under the GST regime, it is often seen that the Revenue authorities issue summary notices without making concrete allegations and proceed to raise demands. In a recent judgement by the Gujarat HC in RE: Vinayak Metal [2022-VIL-759-JHR], it was held that notices and orders, which are not decipherable, are non-speaking and therefore, liable to be quashed.

The Assessee, being a non-resident corporate entity incorporated in Singapore had been subjected to limited scrutiny. Given the assessee’s international transactions, the AO had referred the matter to the TPO to investigate the arm's length nature of the transactions as they had made international transactions with affiliated firms. On scrutiny, the TPO accepted the value of the transactions. However, the AO reinstated the amount to the assessee by treating it as Fee for Technical Services. Aggrieved, the assessee approached the ITAT arguing that the AO has erred in examining issue which was beyond scope of limited scrutiny.

ITAT held that limited scrutiny was to check foreign transaction values in Form 3CEB. Once the TPO had recognised that assessee recorded transactions appropriately, the purpose of limited scrutiny gets sub-served and matter should be closed. It was further emphasized that without the prior approval of PCIT/CIT, the scope of limited scrutiny cannot be enlarged. Accordingly, the impugned order was held to be void ab initio as AO lacks jurisdiction.

Danone Asia PTE Limited [2022-VIL-1521-ITAT-DEL]

Recently the Apex Court vide its order in RE: Filco Trade Centre [TS-369-SC-2022-GST] had directed GSTN to open common portal for availing Transitional Credit through TRAN-1 and TRAN-2 for two months.

While availing the said benefit, the Petitioner inadvertently reported NIL in the column showing total outstanding credit inputs and the form immediately got frozen. Thereafter, the Petitioner tried for revising the same, however, the same was not permissible in the system. Pursuant to same, the Petitioner had filed an application seeking permission to revise Form TRAN-1 before the concerned authorities. Aggrieved, the Petitioner preferred a Writ before the Chhattisgarh HC.

In respect thereto, the Revenue submitted that the order of the Apex court was a onetime measure that was allowed and was to be considered strictly in accordance with the subsequent Circular No.180/12/2022-GST dated 09 September 2022. Further, the Circular itself restrained permission for revising the Form Tran-1/Tran-2 once submitted.

The Petitioner, referring to the transitional provisions contained in Rule 120A of CGST Rules, argued that in terms of the said provision, every registered person who has submitted a declaration electronically in the form GST TRAN-1 may revise such a declaration once, hence the statute itself provides for a permission to revise the declaration made by the party once.

In view of the above, the HC ruled that that even if for any reason circular is held applicable, it would have an overriding effect over the statute which otherwise may not be permissible under the law. The HC further observed that all circulars and instructions issued by Revenue can be only of clarificatory in nature and it cannot dilute the statutory. In view of the above, the HC directed the Revenue to open the portal so far as the Petitioner is concerned for once in terms of Rule 120A permitting it to revise the declaration and thereafter permit him to submit the same and complete the filing.

Jagdalpur Motors [Writ Petition (T) No.252 of 2022 dated 28 November 2022]

The Petitioner preferred a writ before the Bombay HC seeking relief in relation to the procedural difficulties faced with regards to distribution and eligibility of Input Service Distributor (ISD) credit to their respective units of Service Tax under GST regime.

The HC referred to the decisions in RE: Unichem Laboratories [2022-VIL-716-BOM] and RE: Apar Industries [Writ Petition No.11539 of 2019] wherein the Courts had granted appropriate reliefs where the assessees were facing similar issues. Further, relying on the Apex Court judgement in RE: Filco Trade Centre [2022-VIL-63-SC] and CBIC Circular No. 182/14/2022 – GST dated 10 November 2022, the HC directed the Petitioner through its respective units registered under CGST Act, to avail this open window and file/revise the TRAN-1 at the respective units in terms of the Apex Court decision in RE: Filco Trade (supra). The HC further directed that the TRAN-1/revised TRAN-1 filed by the respective units should be on the basis of manual ISD invoices to be issued by ISD of Petitioner subject to aggregate credit cumulatively not exceeding the ISD credit available with Petitioner.

Nuvoco Vistas Corporation Limited [WP No.437 of 2020 dated 17 November 2022]

The Petitioner being a registered in erstwhile tax regime had carry forwarded their CENVAT credit under GST regime by filing GST TRAN-1. The Adjudicating Officer issued a SCN asserting that the Petitioner cannot claim CENVAT credit in lieu of invoices raised by an entity in the erstwhile tax regime in contravention to the Excise Act, Finance Act, and CENVAT Credit Rules. Thereafter, the Department by adjudication proceedings initiated u/s 73 of the CGST act and disallowed the CENVAT credit in terms of sec 140 of the CGST Act by order. Aggrieved, the Petitioner preferred a Writ seeking relief on whether the GST Authorities can assess the admissibility of CENVAT credit availed under the pre-GST regime?

The HC observed that the assumption of jurisdiction by Department to determine whether the CENVAT Credit was admissible or not under the existing law by invoking provisions of sec 73 of the CGST Act was not proper in the eye of law. Therefore, initiation of proceedings u/s 73 (1) of the CGST Act for contravention of the Excise Act and the Finance Act was beyond the authorities’ jurisdiction. Accordingly, the High Court quashed the said order. 

Usha Martin Limited [TS-609-HC(JHAR)-2022-GST]

The Petitioner was engaged in the export of eggs and since eggs were chargeable to "Nil" GST, there was no tax liability for their exports. The Petitioner while filing refund application for accumulated ITC, had inadvertently erred by filing under the column 'with payment of tax’ instead of opting for exports 'without payment of tax'. Consequently, the refund was rejected on the ground that the refund was filed under the residuary category. Aggrieved, the Petitioner preferred a Writ before the Madras High Court seeking relief.

The HC observed that the Department never raised any dispute on the refund amount that was rightly entitled to the Petitioner. Further, the Department also conceded that the error was made bona fide and that the Petitioner was entitled to the refund claim as the exports made were zero-rated supply. Accordingly, as the refund was solely rejected due to the inadvertent error, the order was set aside.

Abi Egg Traders [2022-VIL-744-MAD]

GLS Comments:

It is now a settled principle of law that substantial claims cannot be denied merely on acount of procedural lapses or inadvertent errors. This principle was even upheld by the Apex Court in RE: Mangalore Chemical & Fertilizers Limited [1991 (55) E.L.T. 437 (S.C]. In a similar matter in RE: Phoenix Contact India Private Limited [2022 (64) GSTL 163 (Del.)], the Delhi HC had held that mere inadvertent selection of the wrong column for refund claim should not lead to denial of the refund claim.

The CBIC vide Notification No. 23/2022 - Central Tax dated 23 November 2022, has empowered the Competition Commission of India ('CCI') as the Anti-Profiteering Authority, replaing the National Anti-Profiteering Authority ('NAA') under GST, w.e.f. 01 December 2022. Thus, the CCI would be empowered to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. Further, vide Notification No. 24/2022 - Central Tax dated 23 November 2022, the CBIC has also made the corresponding amendments in the CGST Rules.