Tax Vista Your weekly tax recap Edn. 158 - 26th June 2023 By Dr. G. Gokul Kishore

 

 

Pre-deposit of further amount is not required when entire tax amount deposited

Legal jargon will not remain jargon anymore in GST regime. The term "garnishee proceeding" has become part of common usage in GST as the department is sending letters to bank and others to either freeze the account or appropriate money from account or direct third parties to pay to the government instead of the supplier. As these letters are issued before, during or after proceedings relating to investigation or assessment / adjudication, the law in this regard has become somewhat hazy. The taxpayer paid the entire tax demanded and filed appeal but before expiry of period for filing appeal, garnishee notice to bank was issued to recover the amount lying in bank account. Single Judge Bench of High Court granted stay of such order but on the condition of deposit of 20% of interest liability. The Division Bench has set aside such order after taking note of payment of entire tax amount while only 10% of tax demanded is required as pre-deposit for filing appeal. The High Court directed the appellate authority to consider the appeal on merits and decide [2023-VIL-381-CAL].

 

Investigation in case of alleged fraud has to be specific and not generalised

The famed long arm of law extends to lawyers as well as per the GST officers in West Bengal. Pursuant to direction by a Single Judge to also look into fake writ petitions in respect of GST, the GST department misdirected itself and with full vigour issued notices to lawyers regularly appearing for tax matters. This meant that every taxpayer and lawyer was painted with the same brush as fraudsters and those aiding them. One of the lawyers sought leave to appeal against the order and the High Court held the communication between client and attorney was privileged could not be sought by the GST officer unless it fell within the four corners of law. As per Section 126 of the Evidence Act, attorney-client communication is protected from disclosure except when it is in furtherance of crime or a fact observed by the lawyer in course of his employment for the client. The High Court held that the method of issuing a general formal communication to all and sundry was not the proper way of conducting the investigation in GST matters [2023-VIL-394-CAL].

 

Condonation of delay in filing appeal cannot be sought relying on Limitation Act

The petitioner, whose registration was cancelled in August, 2022 for non-filing of returns sought relief of directing the appellate authority to hear his appeal. The appellate authority had dismissed the appeal as being time-barred as it was filed after 209 days from the last date. The petitioner submitted that the returns were not filed due to the Covid pandemic and the order dismissing his appeal was perfunctory. However, the High Court was not impressed and held that since GST is a special statute prescribing the period of limitation, condonation etc., the officer's action in rejecting the appeal was correct [2023-VIL-389-KER].

 

The argument placing reliance on Limitation Act has never been accepted by the judiciary as it is settled law - when special enactment like GST law provides for limitation, Limitation Act is not to be relied on. The taxpayer should consider himself fortunate as the notification granting limited amnesty to seek revocation of cancelled registration is available till 30^th June and remedy is available even now.

 

Insufficient details in SCN - High Court grants taxpayer time to defend himself

In yet another case of department seeking host of details in their own format, the taxpayer was directed to furnish details of ITC availed in a tabular form including categorisation, eligible and ineligible ITC and claimed that the assessee had not furnished full particulars. The taxpayer was aggrieved by order seeking reversal of ITC availed. The High Court held that the taxpayer ought to have been put to notice in the SCN itself as to the determination of ineligible ITC so that he could have defended himself. It opined the communication exchanged prior to passing of the order was in the nature of general notices calling for information and did not specify the infraction. It was ordered that the assessment order would be treated as an SCN and assessee should present the evidence in support of his claim in the next hearing [2023-VIL-391-MAD].

 

Training facilitator is not pure agent - AAAR finds fault with agreement

A ruling relating to GST implications on payment of stipend to trainees by facilitator as received from companies providing such training was discussed in Tax Vista dated 20^th June, 2022 which was in favour of the taxpayer. VIL has reported a ruling by Appellate AAR last week which is against the taxpayer on this issue. The AAAR has sought to apply the conditions for being considered as pure agent to exclude the stipend from taxable value. In this examination, it has been held that there is no authorization by the companies whereby the appellant (facilitator) has been authorized to pay stipend to trainees. The appellant has been held to be provider of service on own account. Further, there is no additional service provided by appellant except deployment of trainees and the invoices raised are for consolidated amount over which GST has been charged by the companies. The relevant regulations have been interpreted to conclude that the companies (trainers) are not required to pay stipend though it has been noted that the agreement does provide that stipend is to be used only for specified purpose. The appellant should have been happy when advance ruling was received - it was held that no ruling could be pronounced due to various reasons. Filing of appeal has backfired. It is not known why taxpayers keep filing applications for advance rulings and then further appeals as they are suicidal in most of the cases [2023-VIL-28-AAAR].

 

Absolute confiscation not called for when goods are not prohibited

The assessee imported industrial solvent for use in manufacture of paint but the department contended that the goods were kerosene which was a prohibited good and confiscated the same. The assessee furnished certificate from the overseas supplier and also questioned the testing done by the department. However, in order to avoid losses by not being able to use detained goods, the assessee waived SCN and was agreeable to redeem the goods. The department did not provide copies of the reports despite directions of the High Court. Instead an order was passed for absolute confiscation and goods were allowed to be redeemed for purpose of re-export. The assessee argued and the Tribunal agreed that the goods had not been proved to be prohibited, the assessee was not shown to have intentionally imported prohibited goods and since it was not imported in quantities which would constitute breach of the Import Policy, the assessee should be permitted to redeem the goods and use it in its factory [2023-VIL-560-CESTAT-BLR-CU].

 

Drawback claim - Valuation has to be as per Customs Valuation Rules

There is no provision in the statute to adopt valuation of goods as per Valuation Committee particularly when details of computation are not provided to the assessee. A recent case before the Tribunal had all the ingredients - mis-declaration, mis-classification, confiscation, redemption - wherein a simple mistake by the accountant of the exporter resulted in a long fight for duty drawback. The assessee furnished cost construction of the goods which was found to be reasonable and goods were released after provisional assessment. However the drawback claim was delayed and the department determined the value at nearly 50% of what the assessee had provided. The basis for the same was said to be report of Valuation Committee without any details as to the composition of the committee or the method used. The assessee contended that the department had to proceed sequentially and determine value as per Rule 5 of Customs Valuation Rules and it cannot straightway proceed to residual rule. The Tribunal upheld this contention and directed grant of drawback on basis of declared value. But since the goods had been classified incorrectly though without malafide, it upheld penalty and reduced the redemption fine [2023-VIL-566-CESTAT-CHE-CU].

 

 

(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)