Tax Vista Your weekly tax recap Edn. 152 - 15th May 2023 By Dr. G. Gokul Kishore

 

 

Debit to assessee's bank account in violation of Court orders - Misuse of Section 79

GST regime has certainly contributed to making the litigant in the assessee more robust, without making a single change in the attitude/approach of the department. The assessee had assailed order of attachment and obtained relief from the High Court to unfreeze his bank account. It placed reliance on departmental instructions whereby officers were told not to use force or coercion against any taxpayer with the threat of strict disciplinary action in case of wrongdoing on the part of tax officer. However, the department is bound by its own process and proceeded to transfer the funds in the bank account to the electronic cash ledger and appropriated the same. The assessee did not receive any intimation of the debit either. The High Court reiterated that there was no legal sanction in Section 79 of CGST Act which provides for various modes of recovery to unilaterally deduct any amount from the account of the assessee and ordered that the amount be returned to the assessee within a period of two weeks. Such instances are being reported elsewhere also and it is not known how GST authorities can appropriate taxpayer's funds / money. Such acts should be dealt with severely and should not be allowed to proliferate [2023-VIL-282-BOM].

 

Transporter cannot seek release of goods - High Court reiterates    

A Single Judge Bench of Madras High Court has reiterated its earlier position that Section 129 of CGST Act provides the only option of payment of Rs. 1 lakh by the transporter for release of vehicle detained by GST authorities and such transporter cannot seek release of goods since payment of tax is within the realm of the owner. The provision on release of goods is applicable to owner or his agent only. The earlier order was in the case of TCI Freight [2022-VIL-618-MAD] which was eloquent on this issue and the Bench was emphatic in laying down this ratio. However, another Single Judge Bench in the case of Thiruannamalaiyar Transport [2022-VIL-825-MAD] had directed release of truck on payment of nominal penalty of Rs. 5000 based on departmental circulars and this order was passed with the caveat that it shall not serve as a precedent.

 

Jurisprudence on this issue would have got enriched but the Division Bench which heard the appeal in TCI Freight case could not pronounce order on merits since the consignee had obtained release of goods in the meantime on payment of penalty. The issue may come up again in a different case in future and till the time, an authoritative pronouncement from Division Bench of the High Court or the Supreme Court comes, divergent views are bound to prevail [2023-VIL-285-MAD].

 

Contradictory orders by officers - High Court declines to interfere

Rule 86A was invoked against the taxpayer and use of electronic credit ledger was blocked suspecting availment of input tax credit based on invoices issued by dealers who were alleged as non-existent. Such action was taken by one wing (intelligence / enforcement) of SGST and the same was lifted after verification and accepting the explanation offered by the taxpayer. Subsequently, the jurisdictional assessing authority issued notice, apparently under Section 73 or Section 74 of TNGST Act, and passed order blocking use of credit ledger again. The taxpayer was before the High Court assailing the order of the assessing authority when another officer had already granted relief. However, the department contended that movement / receipt of goods was not proved by the taxpayer.

 

The High Court held that power of assessing officer under Section 73 / Section 74 is wide and merely because order was passed under Rule 86A, power of assessing officer will not get curtailed. Receipt of goods being a fact, the Court declined to entertain writ petition but granted liberty to file appeal. It is not clear as to how officers of the same rank in the tax department can pass contradictory orders in respect of the same issue. If an officer has held that evidence has been produced and credit availed was correct, notice issued for the same issue i.e. credit availed was wrong, can hardly be sustained. The same department cannot speak in two different voices [2023-VIL-279-MAD].

 

Orders of appellate authority cannot be ignored on pretext of filing appeal

If refund is sought, the route has to be stormy. The petitioner was granted refund by the appellate authority who accepted the contention of the assessee-petitioner that one to one correlation between invoice for export of services and FIRC (Foreign Inward Remittance Certificate) cannot be insisted upon and a consolidated FIRC would be sufficient. However, the department asked the assessee to file fresh application and later issued SCN in respect of certain amount and issued deficiency memo for the rest. The reason advanced by the department for not giving effect to appellate authority's order was that it proposed to file appeal. The High Court held that fresh applications and the deficiency memos would be treated as non est since there was no necessity to file the same and the original application has culminated in the order of the appellate authority. It directed the department to disburse the petitioner's claim for refund along with interest as payable [2023-VIL-284-DEL].

 

Detention of goods cannot continue after (maximum) penalty is paid

GST is truly an integrated regime and the defaults of buyer/supplier continue to haunt each other. In the case before Madras High Court, the goods of the assessee were detained since it was alleged that the supplier had passed on credit which was not due through the invoice. The buyer paid 25% of the penalty (which was imposed at 100%) and filed appeal against the order. It was urged that the goods should no longer be detained. The High Court opined that no purpose was served by detaining the goods once there was a transaction of supply and in order to balance the interest of both petitioner and revenue, the petitioner was directed to pay the maximum penalty of 200% of tax on goods imposable under Section 129(c) or furnish bank guarantee for the sum i.e. after adjusting 25% paid already. It is not clear as to the ratio - whether any amount in excess of pre-deposit is required to be paid for release of goods when appeal has been filed or BG is sufficient or no further amount is payable [2023-VIL-290-MAD].

 

Online rummy is a game of skill and not exigible to GST since it is not supply

The Karnataka High Court has set aside show cause notice issued to an online gaming operator after examining the meaning of "betting, gambling", "games of skill" and "games of chance." The noticee contended that it was only an intermediary and supplied the platform on which two players could play against each other. The stakes placed by each player would be in the electronic wallet and the winner was paid the sum after deducting the commission/service charge of the assessee. The words "betting, gambling, games of skill, games of chance" were held to be nomen juris i.e., the understanding under previous enactments, judgment of the Supreme Court would be binding and a game of skill even if stakes were involved would continue to be a game of skill. Therefore, rummy in both physical and online form continue to be a game of skill and will not be taxable. This order is of limited relevance for industry as a whole but it is hyped due to the amount involved [2023-VIL-291-KAR].

 

Renting of room located in "precincts" of religious place does not include those outside the complex

While many a times readers are used to finding unreasoned orders and non-appreciation of facts, in an advance ruling application before Gujarat AAR, the applicant apparently did not state facts clearly but the AAR proceeded to decide the issue based on the statute and personal hearing. The applicant claimed that it let out rooms to pilgrims who visited the temple and that the rent was below RS.1000/- day and hence no GST was payable. However, interpreting Notification No. 11/2017-C.T. (Rate), the AAR found that the rooms were neither in the precincts of temple, nor under the same management and that it was not established that the rooms were being let out to pilgrims alone and hence held that applicant was not eligible for exemption. It also noted the condition of rent being less than Rs. 1000/- had been omitted by Notification No. 3/2022-CT (Rate) dated 13-7-2022 [2023-VIL-86-AAR].

 

 

(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)