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Tax Vista Your weekly tax recap Edn. 132 - 26th Dec 2022 By Dr. G. Gokul Kishore |
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Mid-night payment without acknowledgement by GST authority, is not voluntary
In a typical textbook case of search of the premises for two days and mid-night "voluntary" payments towards tax, the Delhi High Court has directed the department to return Rs. 1.80 crores deposited between 1.30 am and 7 am when search operation was underway on the ground that the circumstances showed lack of voluntariness and the department did not adhere to the procedure laid down. The amount was deposited through DRC-03 challans which should have been acknowledged by issuing DRC-04, as per the High Court. The Court ordered payment of interest as well. The department contended that the allegation of coercion raised after one week was an after-thought. The allegation was that goods were sold on behalf of third parties in cash without raising invoice etc., and commission was received.
The High Court held that the deposits were made when search was not completed means the same was not voluntary. It took note of CBIC's instructions dated 25-5-2022 on "the malaise of officials seeking to recover tax dues during search, inspection or investigation". It said that CBIC's instructions were based on Gujarat High Court's order in Bhumi Associate [2021-VIL-117-GUJ] but the instructions did not cover the direction that taxpayer should be told to make such voluntary payment after search is over and officers have left the premises. The order reads -"The violation of the safeguards put in place by the Act, Rules and by the Court, to ensure that unnecessary harassment is not caused to the assessee, required adherence by the official respondents/revenue, as otherwise, the collection of such amounts towards tax, interest and penalty would give it a colour of coercion, which is not backed by the authority of law." [2022-VIL-840-DEL].
There is no dearth of jurisprudence on this subject of payment during investigations. Plenty of departmental instructions are also available. However, at the ground level, the practices continue as before - threat of arrest, long hours of grilling, mid-night payments and summoning higher officials including MD / CFO repeatedly. As the tax administration is not able to distinguish or does not want to distinguish between the outright evaders and taxpayers entertaining a different view in so far as interpretation of provisions are concerned, all are subjected to the same treatment.
Inadvertent errors - High Court allows manual filing of refund claim
Intra-State supply was shown as inter-State and by the time the mistake was realised, time-limit for rectification was over. The taxpayer sought refund of the tax paid incorrectly but were told to follow CBIC circular. The circular insisted on filing of refund claim online but the taxpayer found it difficult to navigate. It appears the department was also of the view that the claim was hit by limitation. This was not accepted by the High Court and it held that the error was inadvertent and the department cannot retain such incorrectly paid amount. The Court noted that Rule 97A of CGST Rules permits manual filing and the Bombay High Court in Laxmi Organics [2021-VIL-833-BOM] had held that the said rule will become redundant if only electronic filing is held as permissible. The amount paid with incorrect details cannot be said as tax due and the Court also relied on the landmark judgment of Mafatlal Industries [1996-VIL-01-SC-CE] to highlight unjust enrichment. The petitioner was allowed to file the claim manually [2022-VIL-843-AP].
These are issues which should have standard solutions instead of forcing taxpayers to go to High Courts. Merely because GSTIN of the same customer in another State was entered by mistake, the taxpayer cannot be alleged as having committed one of the greatest blunders. If the law has provisions to search, seize and arrest besides provisionally attaching goods, such law should also have human face to allow refund when tax is paid by mistake.
Cancellation of registration - High frowns on instant order sans justice
VIL has reported yet another case of a small trader rushing to High Court when faced with cancellation of registration. The High Court granted relief noting its views over the officer resorting to the drastic step of cancellation of registration hampering business particularly when they should be assisting small traders in complying with a new law - GST. The facts of the case read like any other - inability to respond to notice, delay in filing of appeal which was dismissed by a computer generated order without any discussion or opportunity to the assessee. The order was issued on the same day as filing of appeal - cyclostyled order sans justice. Electronic filing and digitisation which is supposed to ease compliance is hardly aiding the taxpayer [2022-VIL-837-ALH]
Sale of independent part of business is exempt as slump sale
A fintech company transferring mobile application to facilitate short term personal loans along with rights, obligations, source codes, development specifications and end user manuals and instructions as also liabilities including employees gratuity was held to qualify as sale of going concern on slump sale basis. The transferor company sold part of its business and would continue to engage in business as lead generator and earn its revenue through outsourcing agreements. The applicant argued its case using all the relevant terms - continuation of business in foreseeable future, transfer of all liabilities to clear all hurdles which stymied earlier applicants. [2022-VIL-312-AAR]. Transfer of liabilities and ability to continue the business for sometime in future are key factors to avail such exemption. Business negotiations are tough and if the transferee hesitates to take all the liabilities then GST exemption becomes doubtful.
Mangrove plantation is not support service relating to agriculture
Planting of mangrove seeds and seedlings in coastal areas to protect them from cyclones and safeguard local population will be covered under environmental protection services and liable to 18% GST and not under 'support services to agriculture, forestry, etc.' to claim nil rate of tax. This was the advance ruling and the same has been affirmed by Appellate Authority for Advance Ruling (AAAR) now. The AAAR has relied on the entry in the notification which mentions the purposes as food, fibre, fuel, etc., and the activity undertaken is for improving eco-system and not related to cultivation of plants for food, fuel, etc. [2022-VIL-99-AAAR]. These are areas that the industry bodies should take up with the GST Council so that initiatives which help the coastal and local communities to survive against ravages of weather get GST relief.
Field visit by GST officers - Delhi makes use of mobile app mandatory
Delhi Government has issued instructions dated 23-12-2022 to its GST officers to use mobile app "GST Field Visit App" available in Google Play Store for reporting field visits. Physical filing of relevant form or submission through GST portal is being viewed seriously. It is not known whether all GST officers have been given smart phones by the government. Mandating officers to use gadgets which some of them may not own or some may not work at times is something which can hardly be implemented. Even otherwise, one can only wonder the purpose sought to be achieved by all these hi-tech methods when the implementation of law is pathetic and cancellation of registration is the order of the day.
(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 edits R.K. Jain's GST Law Manual. E-mail - gokulkishore@gmail.com)