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The Input Tax Credit (‘ITC’) of the Petitioner had been restricted in Form W for the months of December 2013 to May 2014 for separate orders for every month. The restriction of the amount of ITC has been done predominantly on the head of (a) Prior sufferance of Taxes; (b) ITC on reversal on wastage; and (c) Ineligible claim of ITC on goods.

In respect of amount for prior sufferance of taxes, the Revenue had claimed that some of the sellers from whom the petitioner had purchased the goods had not paid tax to the Government. In this regard, the Madras HC observed that in the case of Infiniti Wholesale Limited [2017 (99) VST 341 (Mad)] had held that ITC cannot be disallowed on the ground that the seller had not paid tax to the Government, when the purchaser is able to prove that the seller has collected tax and issued invoices to the purchaser.

It was further observed that in the case of Shri Ranganathar Valves Private Limited [W.P. No. 41670 to 41670 of 2018] it had been held that the assessee would be entitled to avail ITC where such products had been used for the manufacture of export goods. In light of the said observations, the Madras HC set aside the issue with regard to restriction of the amount of ITC for prior sufferance of taxes is remanded back to the Assessing Officer for fresh consideration. It was further held that it is open for the assessing officer to issue a SCN to the petitioner calling for his objections with regard to ITC on reversal on wastage and Ineligible claim of ITC on goods.

Sri Ranganathar Valves Private Limited [W.P.Nos.38488 to 38493 of 2015]

The Petitioner had duly transitioned the credit of Service Tax and VAT under the GST Regime by filing Form TRAN-1. Subsequent to the filing of the Form, the Petitioner received confirmation of the same from GSTN portal, however, the said credit was not reflected in the Petitioner’s electronic credit ledger. In respect thereto, the Petitioner had filed a grievance on the GSTN Portal.

However, the Respondent did not allow the revision of TRAN-1 or manual application as there was no evidence of technical glitch as claimed by the Petitioner. Aggrieved, the Petitioner filed a Petition before the Bombay HC seeking a Writ of mandamus directing the Respondent’s to allow transitional credit.

The Bombay HC observed that despite the admitted successful filing of TRAN-1 by the Petitioner, the request for transitioning of credit had not been approved by the Respondent merely on the basis that there were no technical glitches on the GSTN side. It was further observed that there was no further explanation or clarification or evidence on the issue by the Respondents.

The Bombay HC also noted that the whole objective of digitization is to convenience the tax payers and not to harass them. Further, the GST system is still evolving in its implementation. Merely because there were no technical glitches in the GSTN with respect to the Petitioner’s TRAN-1 the claim of the Petitioner, if it was otherwise eligible in law, cannot be rejected for no apparent fault on the part of the Petitioner. It was observed that this cannot be the objective of the GST system or digitization. Such a situation cannot be countenanced as it would be wholly unfair and unjust.

Accordingly, the HC directed the Respondents to consider the case of the Petitioner on merits and take necessary action within 4 weeks.

BMW India Financial Services Private Limited [WP-LD-VC-85 of 2020]

The Petitioner had delayed in filing of some of their monthly GSTR-1 and GSTR-3B Returns. Therefore, the Petitioner remitted interest on such late filing of return on the net tax liability. However, the Respondent issued garnishee notices to the customers of the Petitioner and demanded interest the gross tax liability. Aggrieved, the Petitioner preferred a Writ before the Bombay HC.

The Bombay HC observed that Section 50 of the CGST Act was introduced by Finance (No. 2) Act, 2019 for charging interest on the net cash tax liability. The said amendment was made effective prospectively from 01 September 2020, although the GST Council in its 39th meeting had recommended to make the said amendment effective retrospectively w.e.f. 01 July 2017. Accordingly, in order to implement the decision of the GST Council in its true spirit within the present legal framework, field formations had been instructed to recover interest only on the net cash tax liability for the period 01 July 2017 to 31 August 2018 and the  keep those show cause notices in the call book till retrospective amendment in section 50 of the CGST is carried out.

In light of the above observations, the Bombay HC observed that no live issue survives for adjudication in the instant case as the question has already been answered by the Board. Accordingly, the Bombay HC quashed the garnishee notices issued by the Respondent to the customers of the Petitioner.

KLT Automotive and Tubular Products Limited [W.P. No. 983 of 2020]

GLS Comments:

Although the GST Council had firstly recommended levy of interest on net cash liability back in its 31st Council Meeting held on 22 December 2018, the same has been effectuated only recently in September 2020. The Telangana HC in the case of Megha Engineering and Infrastructure Limited [2019 (26) G.S.T.L. 183] on 18 April 2019 had held that the interest would be applicable on gross liability as the recommendations of the GST Council was only on paper.

However, subsequently, the Madras HC in the case of Refex Industries Limited [Writ Petition Nos.23360 and 23361 of 2019] had held that the amendment to Section 50 of the CGST Act clearly seeks to correct an anomaly in the law and therefore, should be read as clarificatory and to operate retrospectively. Subsequently, the CBIC had also cleared the air by issuing Press Release dated 26 August 2020 wherein it had been provided that although the amendment to Section 50 of the CGST Act has been made effective prospectively in view of technical limitations, no recoveries shall be made for the past period. Acordingly, as things stand today, there is no anomaly regarding interest on delayed filing of GST Returns.

The Central Government vide Notification S.O. 3874(E) dated 27 October 2020 had inter alia extended the due dates for filing declaration and making payment of tax dues thereof under the Vivad Se Vishwas Scheme. It had been notified that the declarant would be required to pay the amount within a period of 15 days from the date of receipt of certificate from the authority. 

It had been further provided that declarant who files declaration on or before 31 December 2020 can make payment without additional amount on or before 31 March 2021. Such requirement was contemplated to result into undue hardship for the declarant in whose case the period of 15 days expires before 31 March 2021.

In respect thereto, the CBDT vide Circular No. 18/2020 dated 28 October 2020 has clarified that when a declarant files a declaration on or before 31 December 2020, the Designated Authority shall allow the declarant to make payment without additional amount on or before 31 March 2021

The Government vide Notification dated 27 October 2020 has extended the due dates under the Direct Tax Vivad Se Vishwas Act, 2020 in the following manner:

• The due date for filing declaration under the Scheme has been extended to 31 December 2020;
• The due date for paying the amount under the Scheme has been extended to 31 March 2021; and
• After 01 April 2021, the declarants would be liable to pay the aggregate of the amount of disputed tax and 10% of the disputed tax

The CBDT had earlier extended the due date for all IT Returns for the FY 2019-20 to 30 November 2020. In order to provide more time to taxpayers for furnishing of IT Returns, it has been decided to further extend the due date for furnishing of IT Returns as under:

• The due date for furnishing of Income Tax Returns for the taxpayers (including their partners) who are required to get their accounts audited has been extended to 31 January 2021;
• The due date for furnishing of IT Returns for the taxpayers who are required to furnish report in respect of international / specified domestic transactions has been extended to 31 January 2021;
• The due date for furnishing of IT Returns for the other taxpayers has been extended to 31 December 2020.

Consequently, the date for furnishing of various audit reports under the IT Act including tax audit report and report in respect of international / specified domestic transaction has also been extended to 31 December 2020. Further, in order to provide relief to small and middle-class taxpayers, the CBDT has further extended the due date for payment of self-assessment tax for the taxpayers whose self-assessment tax liability is up to Rs. 1 lakh. 

Accordingly, the due date for payment of self-assessment tax for the taxpayers who are not required to get their accounts audited was extended from 31 July 2020 to 30 November 2020 and for the auditable cases, this due date was extended from 31 October 2020 to 30 November 2020. In order to provide further relief for small and middle-class taxpayers in the matter of payment of self-assessment tax, the due date for payment of self-assessment tax date has been extended in the following manner:

• Due date for payment of self-assessment tax has been extended to 31 January 2021 for taxpayers whose self-assessment tax liability is up to Rs. 1 lakh and whose IT Returns are due on 31 January 2021,;
• Due date for payment of self-assessment tax has been extended to 31 December 2020 for taxpayers whose IT Returns are due on 31 December 2020

CBIC vide Press Release dated 24 October 2020 has extended the due date for furnishing Annual Return in Form GSTR-9 and Reconciliation in Form GSTR-9C for the F.Y. 2018-19 till 31 December 2020

In another twist to the tale of transitional credit, the division bench of the Madras HC has reversed the single judge order in the case of Sutherland Global Services Private Limited [2019 (30) G.S.T.L. 628]. While the single judge had held in the favour of the Assessee by allowing carry forward of the accumulated credits of Education Cess, Secondary Higher Education Cess and Krishi Kalyan Cess (‘Cesses’) into GST, the division bench has held otherwise. The rationale of the division bench for arriving at the decision to disallow the credit of cesses into GST has been summarised hereunder:

Cess vs. Tax

• Even though the imposition and collection of Cess may be loosely termed as Tax or Duty, the collection of Cess remains distinct, inasmuch as Cess amount collected by the Government is liable to be spent for the avowed and dedicated purpose for which such imposition was made which is usually reflected in the name of the imposition itself like Education Cess, Secondary and Higher Education Cess etc.;
• Mere facility of taking credit of Input Cess paid on Input goods or services just to avoid the cascading effect on the multiple transactions in the series does not militate or alter the character of the imposition of Cess itself;
• Explanation 1 to Section 140 of the CGST Act confines the term ‘eligible duties’ to 7 specific duties. Only those specified the said explanation can be considered as eligible duties. As the cesses are absent from the seven categories in Explanation 1, the same cannot be considered as an eligible duty u/s. 140.
• Explanation 2 to Section 140 refers covers the ‘eligible duties and taxes.’ While the first seven duties are same as mention in Explanation 1, the eight one was added, being service tax to be set off and carry forward under the CGST Act;
• The only distinction between the two explanations are that while Explanation 1 covers eligible duties of goods held in stock as on 01 July 2017, Explanation 2 covered specified 8 duties and taxes in respect of inputs and services received on or after 01 July 2017. The addition of words ‘and Taxes’ with ‘Eligible Duties’ in Explanation 2 appears to be only on account of addition of ‘Service Tax’ in Explanation 2 which specifies eight duties and taxes for set off.
• The Legislature took further care by inserting Explanation 3 which clarified that eligible duties and taxes will exclude Cesses which have not been specified in Explanations 1 and 2.

Spoilt Fruit

• Merely because the Assessee had ‘taken’ the amount of education cesses, it does not entitle him to utilize the same against the Output GST Liability. The ‘taking’ of credit education cesses after 2015, after the levy of Cess itself ceased and stopped, therefore, it cannot be called an ‘input CENVAT Credit’ and accordingly, mere such accounting entry will not give any vested right to the Assessee to claim such transition and set off against such Output GST Liability;
• It is like Input Credit being a Fruit, which if found to be spoilt or unfit for consumption, it has to be thrown and if it is still fresh and worthy of being kept and used, it has to be so used. The Fruit of Input Credit of education cesses became a spoilt fruit in 2015 itself and was not fit to be carried forward and consumed (adjusted) after 01 July 2017.

Judicial Precedents

• The HC held that the judgement of SC in the case of Eicher Motors [1999 (106) ELT 3] is not applicable to the instant case as the same dealt with MODVAT Credit itself in the same enactment and not cess. In the instant case, the question is in relation to imposition of Cess under different enactments like Finance Acts which even ceased to operate before GST Regime which was enforced on 01 July 2017;

101st Constitutional Amendment Act

• During the introduction of GST Law, it did not include within its ambit six commodities which were left out and continued to be covered by the earlier existing laws of Excise Duty and VAT Law. For that purpose, Entry 54 of the State List and Entry 84 of the Union List were also suitably amended by 101st Constitutional Amendment Act. Except for those 16 taxes and duties specified in different enactments, no other tax or duty were subsumed under the new GST Regime with effect from 01 July 2017;
• The transition of unutilised ITC could be allowed only in respect of taxes and duties which were subsumed in the new GST Law. Admittedly, the cesses were not subsumed in the new GST Laws, either by the Parliament or by the States. Therefore, the question of transitioning them into the GST Regime and giving them credit under against Output GST Liability cannot arise.

In light of the above reasons, the Madras HC allowed the Appeal of the Revenue and set aside the judgement of the single judge and held that the Assessee was not entitled to carry forward and set off of unutilised cesses against the GST Output Liability with reference to Section 140 of the CGST Act.

Asst. Commissioner of CGST and C. Ex. vs. Sutherland Global Services Private Limited [WP No.53 of 2020]

The CBIC released a series of Notifications on 15 October 2020 inter alia notifying the due dates for filing Form GSTR-1 and GSTR-3B. said notifications have been summarized hereunder:

Notification No. 75/2020 – C.T. dated 15 October 2020

Time limit for filing Form GSTR-1 by registered persons having aggregate turnover of more than Rs. 1.5 crores, in the preceding F.Y. or the current F.Y., for each of the months from October 2020 to March 2021 till the 11th of the succeeding month.

Notification No. 76/2020 – C.T. dated 15 October 2020

Form GSTR-3B for each of the months from October 2020 to March 2021 shall be furnished electronically through the common portal, on or before the 20th day of the succeeding month. However, it has been provided that for taxpayers, having aggregate turnover of upto Rs. 5 crores, in the previous F.Y., whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman, and the Nicobar Islands or Lakshadweep, the due date for filing GSTR-3B shall be filed on or before 22nd of the succeeding month.

It has been further provided that for taxpayers having an aggregate turnover of up to Rs. 5 crore in the previous F.Y., whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi, the return in FORM GSTR-3B shall be furnished electronically through the common portal, on or before the 24th of the succeeding month.

Furthermore, registered persons filing Form GSTR-3B, shall discharge their liability towards tax by debiting the electronic cash ledger or electronic credit ledger, and the liability towards interest, penalty, fees or any other amount payable, by debiting the electronic cash ledger, not later than the last date on which Form GSTR-3B is due.

Notification No. 77/2020 – C.T. dated 15 October 2020

Notifies that filing of Annual Return in Form GSTR-9 and Reconciliation Statement in Form GSTR-9C shall be optional for F.Y. 2017-18 to F.Y. 2019-20 for taxpayers having aggregate turnover of less than Rs. 2 crores.

The DGFT vide Public Notice No. 25/2015-20 dated 13 October 2020 has laid down the procedure for application and issuance of scrips under Rebate of State and Central Taxes and Levies (‘RoSCTL’). The key highlights of the said notification have been summarized hereunder:

Procedural Aspects

• The RoSCTL scrips shall be issued only for such old Shipping Bills of Scheme for RoSCTL, for which RoSCTL amount could not be disbursed earlier due to budget limitations;
• The application for claiming RoSCTL is to be filed online in Form AND-4SL using digital signature. The applicant would be required to link the relevant EDI Shipping Bills and e-BRCs and submit the application through online mode only. Maximum of 50 Shipping Bills can be attached in the online application;
• The rebate would be admissible only for shipping bills for which Drawback has been disbursed and RoSCTL amount has not been disbursed. The applicant would be required to ensure that no application is filed against the Shipping Bill for which RoSCTL claim has been received from the Customs Authorities along with Drawback;
• The facility of split scrips shall be the same as applicable to MEIS and SEIS;
• The Applicants shall ensure that they are applying only to the concerned Jurisdictional RA, as per the prescribed provisions of the Handbook of Procedures for getting the scrip and shall submit a declaration to that effect while applying for the scrip online;
• While making an online application, the applicant may choose the Port of registration from any one of the EDI ports from where export has been made for the Shipping Bills in that online application. Duty Credit Scrip (including splits) shall be issued with that single EDI port of registration;
• Subsequent to the approval of the final rebate amount, the scrips shall be issued by RAs in a paperless mode;
• Duty credit scrip shall be registered at the port mentioned on the scrip, prior to allowing usage of duty credit;
• Duty Credit Scrip shall be valid for a period of 24 months from the date of issue and must be valid on the date on which actual debit of duty is made. Revalidation of Duty Credit Scrip shall not be permitted unless validity has expired while in custody of Customs Authority / RA;
• The Applications containing Shipping Bills with Let Export Order (LEO) date between 01 October 2017 and 06 March 2019 are required to be submitted separately. Similarly, separate application containing shipping bills with LEO date before 01 October 2017 needs to be submitted. Last date for submitting applications containing shipping bills with LEO date from 01 October 2017 to 06 March 2019 is 30 June 2021. Further, the last date for filing applications containing Shipping Bills with LEO date before 01 October 2017 would be notified at a later date;
• No application shall be allowed to be submitted post the deadlines. There is no provision for late fee under RoSCTL;
• All exporters are eligible for making a claim under the RoSCTL, except the entities / IEC which are in the Denied Entity List of the DGFT.

Recovery

• The record of Shipping Bills and other documents related to export on which RoCSTL is claimed, is required to be maintained by the Applicant for a period of 3 years from the date of issuance of scrip for post issue scrutiny and recovery purposes. The RA may call upon such details within a period of 3 years from the date of issuance of scrips. In case of failure to provide the requisite details, the Applicant shall be liable to refund the rebate granted along with the applicable interest;
• In case, excess payment is made due to error or miscalculation, the exporter shall be liable to refund the same within 30 days from the date of demand raised by the concerned RA of DGFT. The Applicant shall be liable to pay 15% interest or as prescribed under Section 28AA of Customs Act, whichever is higher. In case the exporter fails to refund the amount so demanded by RA within the prescribed time limit, recovery proceedings shall be initiated;
• In case, the rebate is claimed on the basis of mis-declaration or suppression of facts or by submitting fabricated export documents, the exporter shall be liable for penal action under the provisions of Foreign Trade (Development and Regulation) Act.