Tax Vista Your weekly tax recap Edn. 95 - 11th April 2022 By Dr. G. Gokul Kishore

E-way bill expiry - High Court orders release of goods and vehicle based on undertaking

Constitutional Courts are the saviours of all persons in the country. But for High Courts and the Supreme Court, arbitrary action by the State will ruin business and commerce. An eloquent evidence is a recent order by Tripura High Court. The Court itself says that instances of detention and seizure of goods and vehicles on expiry of e-way bill are not new. It framed the question - whether in such situations, seizure is correct or they should be released subject to undertaking by the seller or buyer. The Court has held that where genuineness of the documents is not in doubt, vehicles should be permitted to continue transit and assessing officer of buyer may be requested to insist on corrective steps.

The order reads -"We are of the considered view that balance has to be brought between transportation of goods as well as the taxing event i.e. the sale or purchase of goods of service. In a case where there is no doubt that a transaction is made between two registered dealers and is covered by the necessary documents including the e-way bill even if the e-way bill has expired just prior to the date of entry into the State, such goods ought not to be stopped and instead an undertaking should be taken from the buyer or the seller and intimation should be provided to the assessing officer of both the parties before whom the buyer or seller may appear to make necessary compliance. Any hindrance in the movement of goods or fray amounts to an obstacle of the development of the nation."

The order taking into account commercial realities of vehicles being stranded, contractual obligations of getting machinery not being fulfilled, etc., asks the government to reconsider whether prescribing time-limit for e-way bill is appropriate in such circumstances. The Court ordered release of goods and vehicles on submission of bond or undertaking [2022-VIL-234-TRI].

Two more orders have been reported last week on e-way bill related issue. Goods and vehicle were detained because goods were being transported to additional place of business by the taxpayer which was not included in GST registration. When consignor and consignee are head office and branch office of the same taxpayer, the High Court has held that there is only a technical breach without intention to evade tax. Goods and vehicle were ordered to be released [2022-VIL-242-MAD]. In another case, generator's name was mistakenly typed - in bill-to ship-to transaction, instead of consignor / shipper, the party who initiated the transaction entered his name in e-way bill. All consequences followed for a sum of around Rs. 89,000. The High Court allowed the petition by quashing the order [2022-VIL-246-MP].

Whenever a statutory power is misused by invoking such power frequently for even trivial issues, the same should either be taken out of rule book or amended to provide sufficient safeguards to taxpayers. The latter, even if provided, will remain on paper. The rule relating to e-way bill needs overhaul - time-limit, validity, power to seize, etc. Considering the number of cases occupying the time of High Courts, this is bound to happen sooner.

Amendments to GSTR-1 - High Court directs acceptance of physical form also

Though factual, an order of Gujarat High Court is mentioned in this column as taxpayers with similar issue may consider seeking remedy from jurisdictional High Court. While reporting deemed export supplies in GSTR-1, certain transactions were missed out inadvertently. Amendments were made subsequently but a few of the transactions could not be successfully amended. The taxpayer requested the department to allow but the same was refused. The High Court took note of the time-limit of filing of GSTR-3B for September in subsequent financial year or filing of annual return (whichever is earlier) but considering the peculiar issue, it directed the department to allow one more opportunity to amend the same. The Court further ordered GSTN to make arrangement to allow the same or permit the taxpayer to file amendments in physical form. The transactions pertained to the year 2019 [2022-VIL-236-GUJ].

The period involved in this case was when GST portal was under live trial with taxpayers struggling to file and get unlimited surprises. Benefits conferred by law cannot be taken away by non-legal hiccups most of which are not attributable to taxpayers. There has to be a statutory recognition of such issues faced by numerous taxpayers and appropriate remedial mechanism should be implemented instead of compelling them to enter into expensive litigation.

Can natural justice be conditional'

In tax laws, the most often cited and equally most often violated are the principles of natural justice. The first principle "audi alteram partem" as per which hearing opportunity should be provided is a grand showpiece in so far as adjudication and first appellate mechanism are concerned. Most of the quasi-judicial authorities are either ignorant or choose to ignore such principles aimed to ensure fairness in such proceedings before a person is fastened with liability or visited with penal consequences. Section 75(4) of CGST Act is a provision which hardly hides the reluctance of tax administration in following such principles. As per this provision, opportunity of hearing shall be granted if a request is received from the taxpayer or where any adverse decision is contemplated. The first situation flies on the face of the principles of natural justice as hearing is required to be given naturally and not when a person pleads or requests for it. Second situation is even worse - hearing should be provided if adverse decision is contemplated. Contemplation means the thought-process is already prejudiced or biased. If something against the taxpayer is planned, then hearing should be offered. The adjudicator cannot contemplate anything adversarial before hearing the taxpayer and examining the records and evidences.

Despite the flaws inherent in the above provision, Courts rely on the same to provide justice to taxpayers. VIL has reported one more case where hearing was not offered before passing orders and the taxpayer has relied on Section 75(4) which has been taken note of by the High Court to set aside the order and remand the case back to the authority [2022-VIL-240-AP].

Seizure not valid when tax invoice is not doubted

A brief order by Allahabad High Court lays down good jurisprudence on seizure of goods. Driver of the vehicle produced documents for part of the consignment but did not produce documents for another part initially. Goods were detained by the GST authorities. When the same was produced subsequently, department did not accept. In the adjudication proceedings, original tax invoices and other documents were produced which were not doubted. In this backdrop, the High Court has held that tax invoice once not doubted is the primary evidence as to genuineness of the transaction and in such a situation, seizure, confiscation, demand of tax and penalty, etc., are not based on any evidence and therefore, not valid. On burden of proof, the Court has held that the initial mistake claimed by petitioner (of not submitting documents for the entire consignment) gave rise to valid suspicion but such initial onus stood discharged on production of original tax invoices. It is for the GST authorities to conduct inquiry to substantiate the transaction as bogus. The Court noted that no inquiry was conducted in the case before it [2022-VIL-248-ALH].

While Courts are so particular about burden of proof, proper inquiry, evidentiary value of documents, etc., these are completely alien to most of the GST authorities. The greatest paradox in departmental proceedings is determination of liabilities applying law in the absence of any training in law, legal procedures and basic requirements of justice dispensation. When Courts are clogged, taxpayers have to bear with such sub-standard quasi-judicial system.

Non-release of vehicle despite order - High Court imposes costs

In Tax Vista dated 10th January, 2022, an order of Allahabad High Court was analysed [2022-VIL-04-ALH]. The petitioner was transporter whose vehicle was confiscated for alleged carrying undeclared goods. The High Court had earlier ordered release of the vehicle. Despite the order, the vehicle was not released and the transporter is once again pleading before the High Court. The Court was furious and imposed costs on the officer besides directing the Commissioner to quantify the loss suffered by the transporter and pay the same to him. Harassment and malicious conduct have been condemned in these words - "It is settled law that if a public functionary acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. Harassment by public authorities is socially abhorring and legally impermissible which causes more serious injury to society. In modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matters which require immediate attention for compliance of order of this Court, linger on leaving the petitioner to run from one end to other with no result. Therefore, award of compensation for unauthorised, arbitrary and illegal detention of the truck of the petitioner by the respondent authorities would not only compensate the petitioner for loss suffered by him but it would also help in improving work culture and public confidence in rule of law." [2022-VIL-249-ALH].

Imposing costs is becoming routine rather than exception. This means Courts are not at all convinced of the bona fides of the GST authorities while invoking extreme powers like seizure and confiscation. Confiscation deprives livelihood and brings business to standstill. Unless adequate compensation by way of damages or costs is awarded, the injury suffered by taxpayers cannot be ameliorated.

Renting to government department for social welfare purpose is exempted

In recent times, it appears there is a slight change in the trend where Appellate Authority for Advance Rulings (AAAR) has been adopting purposive interpretation of provisions and answering the issues in favour of taxpayers. Maharashtra AAAR has held that renting of immovable property to Social Welfare Department for the purpose of providing residential accommodation to under-privileged girls is exempted from GST. The same would be covered under municipal function as per the Constitution and the entry in the exemption Notification No. 12/2017-Central Tax (Rate) is comprehensive since the words "in relation to", "any" and "function" widen the scope. Consequent to exemption being available, TDS requirement under Section 51 of CGST Act will not be applicable [2022-VIL-31-AAAR].

Treated sewage water is exempted

In another ruling, the AAAR has set aside the advance ruling and has held that supply of treated sewage water is exempted. For municipal corporation, the appellant operates sewage treatment plant. As part of the arrangement, tertiary treated water is supplied to power generation company as it is useful for industrial purpose only. The issue revolves around interpretation of the term "purified water". The AAAR has noted that even potable water for human consumption is not purified water due to the presence of minerals and chlorine. Since "Other than purified water" is included in the relevant entry in the exemption Notification No. 2/2017-Central Tax (Rate) and since the treated water in this case is not purified water, the same has been held as covered under exemption. [2022-VIL-30-AAAR]. The AAAR has ruled that such exemption would be available in a similar situation also where such treated water is supplied for industrial use [2022-VIL-29-AAAR]. Considering the number of rulings on this issue, it is time for the CBIC to come out with a circular taking into account various types of water supplied for different purposes and clarify the entries in the notifications.

PLC is a separate service liable to GST of 18%

Preferential location charges is an item which is being litigated from service tax period. Liability to GST, rate appliable to it, etc., are being disputed and some of the real estate taxpayers are before AARs and AAARs. According to a ruling, construction service is "construction service simplicitor" and providing preferential location is not classifiable under construction service. PLC can be offered before completion certificate or later and therefore, even in cases where PLC is recovered along with consideration of completed property, the same would be a supply under GST. Being a separate service, concessional rates of GST are not applicable to PLC. Issues can hardly remain dormant when advance rulings are opted [2022-VIL-32-AAAR].

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He has edited R.K. Jain's GST Law Manual - 15th Edition - Feb., 2022. E-mail - gokulkishore@gmail.com)