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Tax Vista Your weekly tax recap Edn. 194 - 4th March 2024 By Dr. G. Gokul Kishore |
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ITC not availed in GSTR-3B but in GSTR-9 - High Court directs re-examination
Annual return in GSTR-9 can be used for making good tax short paid through GSTR-3B but the same cannot be used to claim input tax credit (ITC) not claimed in GSTR-3B. This is the position of the GST authorities, even if the annual return is filed before the due date for availing ITC. An unfortunate taxpayer had to go to High Court arguing that the credits were all reflected in GSTR-2A which is considered sacred by the department but inadvertently credit was not taken in GSTR-3B. The High Court held that the ITC claim was rejected solely on such ground (non-reflection in GSTR-3B) without calling for documents and examining whether ITC is eligible. The Court directed the department to consider the issue afresh after taking into account the documents. The department should reward the taxpayer in this case as SCNs are generally issued alleging ITC claimed in GSTR-3B is more than the figure in GSTR-2A / GSTR-2B whereas in this case, the taxpayer did not even avail the credit reflected in GSTR-2A [2024-VIL-180-MAD].
Interest on delayed refund is automatic
Taxpayers and professionals are well conversant with the concept of interest being automatic and regardless of nature as penal or compensatory, interest travels along with demand of tax. The jurisprudence on this issue is fairly well-settled - there is no need for any separate notice or demand for charging interest on tax not paid or short-paid. However, when it comes to interest on delayed refund the department argued that unless the taxpayer makes a claim for the same, interest cannot be granted. This is despite the clear wording of Section 56 of CGST Act which states that if any tax ordered to be refunded is not refunded within 60 days of the date of receipt of application, interest at the rate of 6 per cent is payable. The High Court held that payment of interest under Section 56 of the Act being statutory is automatically payable without any claim if amount had not been refunded within 60 days from date of application [2024-VIL-190-DEL].
GST appeal filed before wrong forum - Time excludible as per Limitation Act
The time-limit for filing appeal before the First Appellate Authority is 3 months as per Section 107(1) of CGST Act. Sub-section (2) and sub-section (3) of Section 107 deals with appeals filed by department providing for 6 months' time. Sub-section (4) mentions both "three months or six months" and provides for condonation of delay of one month. This effectively means, for the taxpayer, the maximum time available for filing appeal is 4 months while the same is 7 months for the department. In a typical case of cancellation of GST registration, the appellate authority rejected the appeal on limitation. The Jharkhand High Court, reading sub-sections (3) and (4) together has held that the appellate authority can extend the time by 3 months and by one more month. The time available for the department i.e., 7 months has been held as applicable to taxpayer as well and therefore, rejection of the appeal which was filed within such time, was held as not sustainable. Further, it held that applicability of Limitation Act has not been excluded in GST and therefore, time spent in prosecuting the appeal in wrong forum was also liable to be excluded. The Court directed the taxpayer to file application seeking revocation of cancellation. It is likely that the department will file appeal for obvious reasons [2024-VIL-186-JHR].
Toilet / floor cleaner is disinfectant or cleaning preparation - High Court remands
Do cleaners achieve sparkling results by scouring, scrubbing or merely gentle application and disinfecting the surface? The battle over classification of toilet/floor cleaners being disinfectants classifiable under item no 87 of Third Schedule relatable to tariff item 38089400 or cleaning preparations under item no 29, 30, 31 of Fourth Schedule of Notification No. 1/2017-Central Tax (Rate) relatable to headings 3307, 3401, 3402 subject to 28% GST just made it to GST regime and may see many more rounds. The assessment order of determining the classification not as disinfectant as claimed by the taxpayer but as cleaning/washing preparation was based on show cause notice issued as per proposal of the enforcement wing. The Madras High Court found that many of the contentions of the taxpayer had not been dealt with and that since only in the impugned order of assessment, it was disclosed for the first time about the fact that proposal had been received from the enforcement wing authorities, the taxpayer had been denied opportunity to pose its objections. The order was set aside for the vice of non-application of mind to the objection and also non-disclosure of the fact of receipt of the proposal from the enforcement wing with liberty to pass fresh order [2024-VIL-182-MAD].
Inadvertent double payment of tax under cancelled registration liable to be refunded
The application for refund is a unique case by itself wherein the taxpayer's chartered accountant filed returns and paid GST under the cancelled as well as fresh registration. It appears that no technical glitches were thrown up by the portal though as evidence the payment of tax and filing of return under cancelled registration are not valid. Understandably the department had no claim to the same since the tax due was also paid under valid new registration. Yet, it was left to the Bombay High Court to grant relief to the taxpayer with applicable interest.
This case saw another important ruling by the Court. Though the petitioner filed appeal against the order of rejection of refund online within period of limitation, the same was rejected stating that certain documents were not uploaded and physical copies were not provided. The High Court held that procedural compliances can never defeat the substantive remedy/right to pursue any proceedings when filed within limitation. It opined that any deficiency in filing the appeal / application like failure to file physical documents, cannot make the appeal, which was registered on the online portal within the prescribed period of limitation, to be labelled and/or held to be barred by limitation. [2024-VIL-187-BOM].
Customs valuation - Use of contemporaneous import without proving similarity of goods not sustainable
Despite the relatively settled interpretation of Customs Valuation Rules, importers have to travel upto the Tribunal to set aside enhancement in value. The importer's goods were held to be undervalued and liable for confiscation since as per the department contemporaneous imports were valued higher. The importer assailed the order of adjudication stating that no reason or evidence had been put forth for rejection of transaction value like relationship influencing price nor was sequential application of rules followed. Also, even for application of Rule 5 of Customs Valuation Rules, 2007 no analysis of the nature, characteristics, and quantity of the goods was made and the said contemporaneous imports were not shown to be similar to the importer's goods. However, the appellate authority upheld enhancement in value as well as confiscation, penalty etc. Penalty was also held imposable for mis-declaration of value though there was no dispute as to quantity or nature of goods. The Tribunal set aside the orders holding that since no other material has been relied upon to enhance value of the said goods other than the NIDB data, suppression of value was not proved [2024-VIL-192-CESTAT-AHM-CU].
Social Welfare Surcharge is not payable when BCD is exempted
The issue of requirement to pay surcharge when the main levy is exempted continues to be fought at various levels despite abundance of jurisprudence and even CBIC Circulars. The primary reason is the litigation-minded approach of the tax authorities. In a recent case, goods were imported under MEIS and SEIS and the question was whether Social Welfare Surcharge (SWS) is leviable when Basic Customs Duty (BCD) is exempted. SWS levied as per Finance Act, 2018 at the rate of 10% on the aggregate of duties, taxes and cesses which are levied and collected under Section 12 of Customs Act and any other sum collected as customs duty. However, safeguard duty, anti-dumping duty, CVD and SWS are excluded (to avoid SWS on SWS). While the appellant argued that such payment is not required, payment of such surcharge by cash was as per law, according to the department.
Though lot of precedent decisions were relied on by both sides and CBIC circular on this issue was contended by the department as not applicable, the Tribunal held that BCD being nil (debited to scrips), "SWS will be nil as anything multiplied with zero is also zero". It further said that there is no statutory provision for considering notional BCD on which SWS can be calculated. Debit to scrip is an alternative mode of payment and not an exemption as such - this was the argument of the department but not accepted by the Tribunal as the same was not in line with "collection" used in the provision which means physical realization of tax. No BCD ultimately goes to the exchequer when debit to scrip is made. An important finding in this order relates to the discussion to distinguish Unicorn judgment of the Apex Court [2019-VIL-42-SC-CE]. Refund of SWS with interest was ordered by the Tribunal [2024-VIL-203-CESTAT-HYD-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)