|
Tax Vista Your weekly tax recap Edn. 185 - 1st Jan. 2024 By Dr. G. Gokul Kishore |
|
Pre-deposit for GST appeals to be paid in cash only - ITC cannot be used
Pre-deposit required to be made at the time of filing appeals under CGST Act can be only through debit to electronic cash ledger and for this purpose, electronic credit ledger cannot be used, according to Patna High Court. Out of the three petitioners, one had a demand of over Rs. 100 crores and this appears to be the major reason for using credit ledger which was not accepted by the appellate authority. The petitioner had relied on the half-hearted clarification contained CBIC Circular No. 172 dated 6-7-2022 and Bombay High Court ruling in Oasis Realty [2022-VIL-674-BOM] and Allahabad High Court order in Tulsi Ram and Company [2022-VIL-740-ALH]. The High Court held that Section 49(3) of CGST Act provides for payment of "any other amount" from cash ledger but Section 49(4) restricts use of credit ledger for payment of output tax and CBIC's clarification on the bar on use of credit ledger for making payment of interest or penalty or any other amount payable will be applicable. Even the instructions in Form APL-01 provide for two components - payment of admitted amount and the other being pre-deposit and the first can be paid by credit ledger while the second can be paid cash ledger only. To distinguish other judgments, the Patna HC states that use of the words "sum equal to" in Section 107(6) of CGST Act indicates that pre-deposit is not 10% of tax in dispute but an amount equivalent to 10% [2023-VIL-927-PAT].
In respect of the appeals for which limited amnesty has been granted by extending the time till 31-1-2024, it has been provided in Notification No. 53/2023-Central Tax dated 2-11-2023 that at least 20% of pre-deposit should have been paid by debiting cash ledger. This means that for the balance amount of pre-deposit, credit ledger can be used. The above judgment was rendered before issue of this notification. Even otherwise, considering the reasons adopted by the High Court, this might not have made any difference to the outcome. The issue continues to be fought though CBIC is well aware of this dispute. As HC orders affirming department's stand are more reasoned, CBIC may even issue clarification against the taxpayers.
Refund of Cenvat credit of tax paid after GST - CESTAT has jurisdiction to entertain appeal
Refund order passed under Section 142 of CGST Act is appealable before CESTAT - this is the ruling of CESTAT Larger Bench. The doubt for the referring bench arose on the ground that the Tribunal being constituted under Customs Act can dispose matters relating to refund under CGST Act where independent appellate mechanism has been provided. The factual matrix related to refund of Cenvat credit of service tax claimed after payment during GST regime for the past period based on audit objection. Such refund was rejected holding that Cenvat Credit Rules ceased to exist after introduction of GST and they were not covered under "existing law' and service tax was paid in GST regime.
Section 142(3) of CGST Act provides for disposal of refund claim as per Central Excise / Service Tax provisions if it relates to refund of Cenvat credit, duty, interest or any other amount paid under such law and if refund is allowed, it shall be paid in cash. The taxpayer argued that refund is routed though Section 142(3) of CGST Act but the claim being related to Cenvat credit, appeal shall lie before CESTAT. The CESTAT first answered by stating that GST Appellate Tribunal will not have jurisdiction in such cases. It held that an appeal before GST Appellate Tribunal would lie against order passed under Section 107 or Section 108 of CGST Act and an order passed under Section 142(3) of CGST Act is not covered for filing appeal before GST Tribunal. Every claim after 1-7-2017 has to be disposed of as per Service Tax / Excise provisions which means the appellate authorities would continue to remain the same, as per the LB ruling. The legislative intent could not be to deprive the parties of any appellate remedy [2023-VIL-1352-CESTAT-CHE-ST].
The issue cannot be said to have attained finality though the above is the ruling of Larger Bench. The dispute may again be agitated before GST Appellate Tribunal as and when it is constituted. It remains to be seen whether GST Tribunal adopts the same stand as that of CESTAT. If there is divergence, then the matter has to be resolved by higher judiciary only. Even before GST Tribunal is constituted, disputes are on jurisdiction are waiting to be resolved.
Refund cannot be denied on account of delay due to technical glitches
Though the judgement states "in the peculiar facts of the case" the Delhi High Court stepped in to provide relief to the taxpayer who was denied refund on the ground that refund application had been filed after the period of two years from relevant date. The taxpayer contended that he faced technical glitches and on enquiry was advised by the officer to file the same after filing annual return. Reliance was placed on Lenovo India Pvt. Ltd. v. The Joint Commissioner of GST (Appeals-1) [2023-VIL-799-MAD] wherein it was held that time limit in Section 54(1) of CGST Act is directory and not mandatory, Ezzy Electricals v. State of Gujarat, 2022-VIL-134-GUJ - wherein it was held that refund cannot be denied on account of technical glitch even if assessee was partly to blame for delay by using wrong tool and that refund was a vested right. The High Court held that when the fact of technical glitches, the taxpayer's attempt to raise complaint and file the application was not disputed, delay in filing cannot be a ground to deny refund. Another interesting aspect is that the High Court accepted the contention regarind the advice by officer though there was no written evidence stating that given the technical troubles in GST regime "is not difficult to accept that a taxpayer would have sought advice from the jurisdictional officers" and that he had acted in a bonafide manner. After the judgment in Lenovo, this judgment would also help taxpayers [2023-VIL-913-DEL].
GST appeal - Pre-deposit of 10% tax does not include fee, fine, penalty or interest
The question was whether the expression "tax in dispute" provided under Section 107(6) of CGST Act includes interest, penalty, fine and fee since the appeal of the petitioner had been rejected on the ground that mandatory pre-deposit of 10% as computed on tax portion was not sufficient. The petitioner relied inter alia on precedents to contend that 10% of the disputed tax amount means only tax amount and not entire composite amount comprising tax, fine, penalty and fee. The High Court held that pre-deposit of 10% of tax and not the entire disputed amount including penalty and interest was required in case the taxpayer contested the demand. It opined that such interpretation aligns with the legal principle that penalties are consequential to the determination of the underlining tax liability. It held that the intentional exclusion of disputed interest, fine, fee, and penalty from sub-clause (b) of Section 107(6) of CGST Act signifies a crucial legislative distinction and deposit of tax, interest, penalty, fine, fee etc., was required only in respect of accepted demand. The High Court set aside the order passed by the appellate authority seeking pre-deposit of 10% of entire disputed amount [2023-VIL-923-KAR]. Such officers should not be assigned quasi-judicial responsibilities. Even when the law is clear, interpretational ambiguities are created and taxpayers are harassed.
Refund - Endless litigation guaranteed
It appears that neither statutory provisions nor court orders can assure justice in the matter of refunds. In a recent case before the Gujarat High Court, the petitioner had to approach the High Court many times before obtaining an order to abide by the earlier order of the court. Given the track record, the cause title may yet again come up. The petitioner claimed higher drawback on export due to the mistake of the C&F agent because though IGST was paid, the option of export without payment of duty was chosen. The petitioner sought refund of IGST and requested that the differential drawback claimed may be adjusted. The High Court permitted the same and ordered refund of IGST paid after adjusting excess drawback and also directed interest to be paid at 7%. The officer "applied his mind" and computed the refund, granting interest at 6% and deducting interest @15% on the differential drawback. The High Court set aside the order of refund passed contrary to its directions since the officer was bound to follow directions of the High Court and had no reason to take a different view. Adjudicating authorities have either contempt for higher judiciary or blissfully ignorant about binding precedents [2023-VIL-916-GUJ].
Provisional attachment of bank account of person benefitting from alleged infraction is valid
The petitioner's bank account in Kolkata was attached by officer in Guwahati pursuant to investigation carried out there in respect of a firm wherein the petitioner was a partner. As per facts, investigations were undertaken in respect of taxpayer in Guwahati and the petitioner registered in West Bengal was a partner/director in other entities investigated. The investigation was in respect of alleged availment of ITC based on fake invoices and passing on the same. It was contended that the order does not disclose pendency of any proceeding under Chapters- XII, XIV and XV of the CGST Act and was not issued in the prescribed Form GST DRC-22. The jurisdiction of the officers to attach bank account of the petitioner in a different State was also questioned. The department argued and the High Court agreed that the Commissioner for the purposes of exercising power under Section 83 read with Section 122 (1A) of the CGST Act would have a power to take action against "any person" as Section 122 (1A) which mandates that even if such a person is outside his jurisdiction. As regards the non-pendency or initiation of any proceeding against the petitioner, it was held that on conjoint reading of Section 1(2), Section 6(1), Section 83, Section 122(1) and Section 122 (1A), Clause (i), (ii), (vii) and (ix) thereunder, the CGST Guwahati authority's action of attaching the bank account of the petitioner provisionally was valid [2023-VIL-918-CAL].
Vague show cause notice - High Court quashes
There are many instances of mechanical issue of show cause notice without clear allegations, grounds, but writ courts are generally not in favour of quashing the notice since assessment, recovery, appeal etc., have a separate framework within a statute. However, where the SCN was so vague lacking necessary information, source and the materials on the basis of which the authority concerned found the necessity for issuance of such notice, the High Court set aside the same. It reasoned that the initial words of Section 73 of CGST Act "where it appears to be for the authority concerned" means that some material, information or even sort of a complaint available with them as regards the suspicious transactions or the alleged evasion of tax made by the taxpayer. In the facts of the case, non-payment of tax at 28% was alleged though the rate was not applicable to the petitioner since no product attracted rate above 18% and the SCN was also issued beyond period of limitation. Such SCN does not safeguard revenue but only burdens the taxpayers with avoidable litigation [2023-VIL-919-TEL].
Registration cancellation - Taxpayers continue to suffer
Numerous orders on cancellation of registration without following the procedures and High Courts directing authorities to restore the same are being reported by VIL every week. Considering the routine nature of such orders, they are not discussed in this column. Last week also, Delhi High Court has issued similar direction where registration was cancelled based on letter received from higher authority. The Court held that proper officer is required to independently exercise discretion and he cannot act mechanically on the instructions of another authority. GST is like newly laid road which becomes Mars with craters after every rain - same poor quality law and poorer implementation with disastrous results for taxpayers [2023-VIL-920-DEL].
(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)