|
Tax Vista Your weekly tax recap Edn. 186 - 8th Jan. 2024 By Dr. G. Gokul Kishore |
|
Refund of ITC not deniable only for submission of non-authenticated document
Refund of input tax credit cannot be rejected only because the document submitted was not authenticated and if refund is admissible, department is required to call for clarification or documents. This is the ruling of Delhi High Court. The adjudicating authority had rejected the refund claim on various grounds including non-uploading of documents. The taxpayer argued that documents were uploaded but due to technical glitches, the same were not registered / found in the system. The appellate authority ignored a particular document on the ground that it was not signed or authenticated. The High Court said it was a curable defect and the taxpayer could have been called to certify or otherwise authenticate. The claim was directed to be re-adjudicated considering the documents filed by the taxpayer [2024-VIL-12-DEL]. The reasons as those adduced in this case for rejection of refund are quite common. In fact, one of the first steps to somehow reject the claim is to find fault with the documents. Generally, it is the sufficiency of documents which is questioned but in the above case, quality of the documents has been suspected. Getting a writ petition drafted, filing the same in High Court, attending the hearing before High Court and then based on High Court order, following up the claim with the authorities again - no tax reform can reform the mindset and methods of working.
DGGI officers are empowered to exercise powers of CGST Officers - High Court rejects ultra vires plea
Sometimes, it appears certain taxpayers are ambitious and engage in litigation where outcome can hardly be in their favour. In a recent case, DGGI was conducting investigation, issued summons and also recovered certain amount which the taxpayer contended as not voluntary. The primary challenge laid by the taxpayer before the High Court pertains to powers of officers of DGGI. Notification No. 14/2017-Central Tax has been issued appointing various classes of officers of DGGI as Central Tax Officer of corresponding rank and power. The taxpayer contended that Section 3 of CGST Act confers power on government to appoint class of officers but does not confer the authority to give them any power. The authority to delegate has been vested in Commissioner in CBIC and not on the Central Government and therefore, the said notification is ultra vires Section 5 of CGST Act. Another argument was on parallel proceedings since anti-evasion wing of GST had also initiated investigations and issued summons. The High Court noted that a corrigendum was issued and therefore, government is empowered to appoint various classes of officers and Circular No. 3/3/2017-GST along with the above notification indicate assigning of powers to DGGI officers by CBIC. It observed - "The jurisprudence on the implications of invocation of a wrong provision suggests that as long as an authority has power, which is traceable to a source, the mere fact that source of power is not indicated or wrongly indicated in an instrument does not render the instrument invalid." Based on this reasoning, it rejected the plea on ultra vires as advanced by the taxpayer. On parallel proceedings, the Court did not see any overlapping.
The question of payment during investigation being coercive or voluntary was considered by highlighting the fact that in the DRC-03 challan or later, the fact of coercive payment was not brought out. This clearly points to the measure that taxpayers may have to take if such payment is made - even if DRC-01 challan does not mention anything, a subsequent letter should be sent to the authorities pointing out the fact that the payment was made under duress or at least it was not voluntary [2024-VIL-16-ALH].
E-way bill expiry - Supreme Court reduces penalty
An order by the Supreme Court should be placed at the beginning of this column. But the Apex Court itself in the order has said that the same has been passed under Article 142 of the Constitution of India and shall not be treated as a precedent and therefore, it is being mentioned in this column at this place. The issue relates to imposition of penalty for transportation of goods after expiry of e-way bill validity. The amounts were huge and therefore, the taxpayer carried the matter upto the Apex Court. The Court noted that the appellant was transporting the consignment in connection with contractual obligations from one State to another and there was no sale of such goods. Taking into account the facts including generation of e-way bill, penalty was reduced. It specifically said that the appellant cannot shirk from its responsibility of generating fresh e-way bill [2024-VIL-01-SC].
Considering such rulings, it would be prudent to accord importance to e-way bill related compliances by taxpayers. Detention of vehicle and goods apart, the time spent in litigation is also expensive as in the above case, the transaction took place in 2019.
SEZ unit not exempt from GST compensation cess on coal
The petitioner who had an SEZ unit had sought clarification from SEZ authority as to whether exemption was available on cess on imported coal under GST Compensation Act since as an SEZ unit, it was exempted from various taxes and duties. The SEZ authority held that cess cannot be considered as exempted unless CBIC issues notification exempting the said cess or the First Schedule under Section 7 of SEZ Act is amended. The petitioner agreed that Goods and Services Tax (Compensation to States) Act, 2017 is not specified in the First Schedule of SEZ Act which is sine qua non for claiming exemption. However, by virtue of Section 26 of the SEZ Act providing for exemption from any duty of customs, the Compensation Cess leviable under Section 3(9) of the Customs Tariff Act, 1975 was argued as exempted. But the High Court held that on a conjunctive study of Section 26(1)(a) and 2(zd) of SEZ Act, 2005 and Section 2(15) of Customs Act, 1962 it was clear that the phrase 'duty of customs' used in Section 26(1)(a) of SEZ Act only refers to duty leviable under Customs Act, 1962 and does not include cess under GST compensation Act. It reiterated that a cess being a levy for specific purpose like education etc., is different from tax and duty [2024-VIL-04-AP].
Filing of Nil return - GST registration cannot be cancelled
In a case of non-application of mind (which is perhaps not new) and non-application of law, the registration of the petitioner who had filed Nil return for a continuous period of more than six months was cancelled. The adjudicating authority's order stated that petitioner's reply to SCN had been received but in the next line stated no reply had been received. The petitioner is rather fortunate since he admittedly did file the reply stated to be received. The registration was cancelled on the ground of filing of nil returns which was mentioned in the SCN. The petitioner argued that this was not one of the reasons enumerated in Section 29 of CGST Act. On filing appeal, the same was rejected stating that there was no power to condone delay. The High Court held that filing of nil return was not a valid reason to cancel registration and the order was issued without jurisdiction. There was no allegation that the Nil return was incorrect. The order rejecting appeal was also held as not sustainable even if it was on a different ground [2024-VIL-10-AP].
Cancellation of registration with retrospective effect without any reason is not valid
The registration cancellation and restoration medley is indeed painful. While on one hand registration of a running business are cancelled for no good reason, in the instant case, the tax payer's application for cancellation was rejected. The business of the taxpayer had been closed and cancellation had been sought and return were not filed thereafter. The tax department finally rose to the issue and show cause notice was issued, a personal hearing without specifying time and date was offered. The registration was cancelled with retrospective effect, i.e., even for the period when returns were validly filed. The High Court came to the aid of the petitioner and directed that cancellation of the petitioner's GST registration shall take effect from 17-1-2020, being the date of the application filed by the petitioner seeking cancellation of her GST registration. Despite the massive infrastructure of common portal and electronic filing etc., the simple matching of facts, records is eternally elusive [2024-VIL-01-DEL].
Minor error in E-way bill not to be penalised
By way of circulars, GST authorities have been instructed to refrain from intercepting and detaining vehicles in case of minor errors in documents accompanying the goods. According to such instructions, error of one or two digits/characters of the vehicle number was condonable and only minimum penalty may be imposed. The petitioner had recorded the vehicle number as 3552 instead of 5332. The vehicle was intercepted and penalty was imposed under Section 129 of the CGST Act. The petitioner relied on Varun Beverages Limited v. State of U.P. - 2023-VIL-939-ALH and Assistant Commissioner (ST) v. Satyam Shivam Papers Pvt. Ltd. - 2022-VIL-06-SC and argued that so long as there was no intent to evade tax, penalty was not warranted and that the minor error due to typographical error was condonable. Interestingly it was also said that the impugned order itself records the number wrongly. The High Court held that for such minor errors, penalty was not imposable and set aside the order [2024-VIL-08-ALH].
Conversion of shipping bill after five years is not admissible
Conversion of shipping bill from free to one under any of the export promotion scheme is quite common. Section 149 of Customs Act providing for amendment does not prescribe time-limit and this is highlighted by importers. However, jurisprudence on this issue follows the settled principle - if no time-limit is prescribed in law, reasonable time is to be taken into account. In the case before CESTAT, the importer was assailing rejection of conversion request on the ground that it was made after five years i.e. delay. The Tribunal held that merely because no time-limit has been prescribed, it does not mean request could be made after passage of any length of time (based on Delhi HC precedent judgment). The request requires examination of records by the department and it may not be fair to expect it to undertake such exercise after five long years. In this case, the reason for delay was not properly explained or there was no reason at all and this became the nemesis for the importer [2024-VIL-23-CESTAT-BLR-CU].
Capacitors used as component of power supply equipment - BIS norms not applicable
Confiscation and other action being taken for alleged non-compliance with prescribed standards of BIS have become common. When electrical capacitors stated as dry type were imported, Customs authorities confiscated the same for not following BIS norms. The importer argued that the standards were applicable only to those normally filled with oil and not in their case and the goods being parts of power supply equipment, were not covered under BIS norms. The Tribunal held that the description in invoices and bill of entry match and therefore, the charge of misdeclaration in respect of description of goods is not correct. It went into the BIS literature on power capacitors of self-healing type (which are within the scope of BIS standards) and pointed out that capacitors intended to be used in electrical equipment and power electronic circuits are excluded. The goods being used as component of power supply equipment, were held as not covered under the applicable standards and therefore, confiscation and penalty were set aside. There should be CBIC circular on detention of consignment and initiation of proceedings when Customs authorities without having sufficient knowledge of BIS requirements undertake such adventure. Considering the fact that such requirement of other applicable statutes plays a major role, Customs authorities should be trained in allied laws from time to time [2024-VIL-21-CESTAT-MUM-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)