Tax Vista Your weekly tax recap Edn. 129 - 5th Dec 2022 By Dr. G. Gokul Kishore

 

 

Lapsing of ITC in case of refund due to inverted tax structure - Goods in stock not covered

Notification No. 5/2017-Central Tax (Rate) was amended by Notification No. 20/2018-Central Tax (Rate) to effectively exclude certain textile articles like fabrics from the benefit of refund of accumulated credit due to inverted tax structure from 1-8-2018. The amending notification also provided for lapsing of credit lying in balance after utilization of the same for payment of dues of August, 2018. CBIC issued Circular No. 56 dated 24-8-2018 clarifying various issues after such amendment. In respect of closing stock of finished goods and inputs as on 31-7-2018, it was clarified that ITC in respect of such inputs contained in such stock should be excluded from calculation of Net ITC for applying the formula for refund. The department had clarified that ITC in respect of such inputs will also lapse and therefore, the matter was carried to the High Court. The Court agreed with the petitioner that such credit will not lapse and the notification / circular were not considered by the department in proper perspective. The Court directed the department to consider the matter afresh [2022-VIL-784-KAR].

 

Transitional credit - High Court permits revision of TRAN-1 form

In one of the editions of this column, it was remarked that credit is transitional but dispute is permanent. Even after the Supreme Court's ruling in Filco Trade case [2022-VIL-63-SC] providing for two months window for filing TRAN-1 / TRAN-2 form (which got over last month), certain issues linger. In a particular case, the taxpayer submitted the form apparently without entering the amount and the form got frozen. Revision of the form was sought and the High Court held that Rule 120A of CGST Rules provides for one time revision of such forms and the Supreme Court did not hold such rule as not applicable. Further, it held that CBIC Circular No. 180 emphasizing the point that no opportunity to file or revise TRAN-1 form will be allowed once the window is used now has been held to be clarificatory and it cannot override statutory provision [2022-VIL-783-CHG]. The judgment may not be applicable to many since it specifically addresses revision of TRAN-1 form within the time granted by the Apex Court.

 

Recovery without adjudication - High Court sets aside notice

The Madras High Court has allowed writ petition seeking to set aside notice issued by the GST authorities to bank of the petitioner to pay the tax dues on the ground that assessment order has not been passed to hold certain amount as due and proceedings under Section 73 or 74 were not initiated. The order mentions the word attachment order but the reproduction of the communication to the bank mentions Section 79 which relates to recovery. Further, Form DRC-13 is mentioned which relates to recovery notice issued to third parties who owe certain amount to the taxpayer. It appears that the proceedings under Section 83 to attach the bank account were not initiated [2022-VIL-786-MAD].

 

It is not clear why CGST Officers invoked Section 79 instead of Section 83. If it is due to ignorance, then capacity building initiatives are not sufficient and officers need to be trained more.

 

Jurisdiction, proper officer and writ remedy

In an order reported by VIL last week, Andhra High Court has held that issuance of show cause notice and passing of order by GST authorities in Andhra Pradesh in respect of a taxpayer in Telangana is not invalid. The facts are not clear. The order states that as per relevant notification, proper officer has been appointed and when the officer who conducted the proceedings are proper officers, no fault can be found. The order is not clear when it says that the case of the petitioner falls within the territorial jurisdiction of Andhra Pradesh GST authorities also and no prejudice would be caused to the petitioner if the case is assessed by any other officer. An obvious issue covered in this order pertains to non-mandatory nature of provisions relating to issuance of DRC-01A as the rule uses "may" giving discretion to the officer to issue the intimation of liability or otherwise. The High Court also held that the SGST officer is competent to issue order in respect of IGST also as the same is expressly covered under Section 4 of IGST Act.

The outcome of this case is that the writ petition filed by the taxpayer with host of such procedural objections has been rejected by the High Court. The conditions for being eligible for writ remedy are stringent and taxpayers may well take into account before deciding to go ahead [2022-VIL-791-AP]

 

Rebate of excise duty paid on exported goods - Time-limit under Section 11B applicable

The Supreme Court has held that time-limit prescribed in Section 11B of Central Excise Act is applicable to rebate claims filed under Rule 18 of Central Excise Rules in respect of duty paid on exported goods. The appellant argued that neither the rule nor the relevant notification provided for applicability of Section 11B of Central Excise Act till the year 2016 and only later, such amendment was made. However, the Apex Court noted that definition of refund included rebate also and relevant date for computing time limit has also been defined to cover exports where refund of duty is in respect of excise duty paid on such goods themselves and therefore, one year time-limit will be applicable for rebate claims also. It also emphasized the fact that Rule 18 or notification being part of subordinate legislation cannot override the provisions of the parent Act and such subordinate legislation cannot be interpreted to make parent statute redundant. It also rejected the argument that rebate claim can be filed within reasonable time. It held -"Merely because there is no reference of Section 11B of the Act either in Rule 18 or in the notification dated 6.9.2004 on the applicability of Section 11B of the Act, it cannot be said that the parent statute - Section 11B of the Act shall not be applicable at all, which otherwise as observed hereinabove shall be applicable with respect to rebate of duty claim."

 

In the above said judgment, the Court upheld the judgment of Bombay High Court in Everest Flavours [2021-VIL-133-BOM-CE] and overruled judgments of Madras High Court, Allahabad High Court, Punjab & Haryana High Court and Rajasthan High Court. Though the judgment is in relation to Central Excise, reiteration of the settled law that rules or notification cannot be interpreted against the statutory provisions but should be harmoniously interpreted and the parent statute will always prevail over delegated legislation, are always relevant including under the GST regime [2022-VIL-93-SC-CE].

 

Job work without job work agreement is not job work

If a particular activity is undertaken in principal's factory using the inputs supplied by the principal, then such activity will not amount to job work when there is no job work agreement, job charges are not claimed and the plant / machinery is not under the control and possession of the job worker. The job worker had leased the plant to the principal and this fact has been held as adverse to the appellant. The Appellate Authority for Advance Ruling has held that the activity being covered by simple lease agreement and not job work agreement cannot be job work [2022-VIL-91-AAAR].

 

Such rulings are erroneous as the definition of job work itself is not discussed. If an activity or treatment is performed on another registered person's goods, then it is job work. Recovery of job charges or requirement of job work agreement is not statutorily prescribed. It is one thing to rely on such agreement or invoices but to finally decide only based on such documents to the exclusion of the statutory provision, may not be legally tenable.

 

 

(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)