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Tax Vista Your weekly tax recap Edn. 197 - 25th March 2024 By Dr. G. Gokul Kishore |
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Pre-deposit for GST appeal can be paid from electronic credit ledger
The Gujarat High Court has held that balance in electronic credit ledger may be used to pay the mandatory pre-deposit of 10% for appeal under sub-section (6) of Section 107 of the CGST Act. This means ITC balance can be used to pay pre-deposit and cash payment is not required. While arriving at this decision, it has opted to follow the judgement of Bombay High Court in Oasis Realty v. UOI - 2022-VIL-674-BOM. It has also referred to CBIC Circular dated 6th July 2022. It agreed that the electronic credit ledger (ITC ledger) can be used to make payment of taxes whether self-assessed or otherwise. The CBIC had also clarified the same in its Circular dated 6-7-2022. It has been repeatedly pointed out in this column that the said circular is useless in setting the controversy at rest. High Courts are divided on this issue. It is for the GST Council to recommend appropriate clarification in clear terms that pre-deposit for filing GST appeals can be made by debiting electronic credit ledger. Indirect reference by using the words "proceedings" or "output tax" as adopted in the said circular do not serve any useful purpose [2024-VIL-245-GUJ].
No excess availment of ITC when GSTR-2A data is more than GSTR-3 B figure
Adding a new shade to the issue of electronic record vs law vs understanding of the GST officer, the petitioner was assessed to tax and bank account was attached. The ground was excess availment of input tax credit (ITC) though the amount reflected in the auto-populated GSTR 2A was twice more than the ITC availed. The taxpayer had also paid interest for belated filing. However, the bank account of the petitioner was attached and amount appropriated as part of recovery of demand determined against him. The High Court quashed the order of assessment and remanded the matter. It held that the amount appropriated has to be subject to demand determined in the remand proceedings. It is not clear from the order how far the petitioner was able to get relief since it appears amount was appropriated though the ground of excess availment appears untenable [2024-VIL-242-MAD].
Order without hearing, placing notice in a different tab - High Court rescues
The season of mismatch in ITC between GSTR-2A and GSTR-3B is not yet over and it will be litigated for a long time though non-statutory GSTR-2A has been replaced with statutory GSTR-2B now. In a case of discrepancy between GSTR-3B and GSTR-2A, GSTR-7 and GSTR-2A, though notices were served electronically, the taxpayer pleaded that being computer illiterate, he could not respond to the notices but was willing to do so on remand. As is the usual practice now, these were placed in the tab "Additional notices and orders". The High Court held that if the taxpayer was provided opportunity of hearing he might have been able to present his case. Mere issue of notices was not sufficient in this case since the order was issued without considering any material/documents put up by the taxpayer. This ruling is useful especially to smaller assessees who may not be equipped to access the portal and respond. As noted in this column before, the purpose of creating the tab "Additional notices and orders" is not known and the reason for uploading even the first notice and order in this tab can only be out of sheer incapacity of officers [2024-VIL-241-MAD]
High Court condones delay in filing appeal with higher pre-deposit
Though the ruling may appear to be based more on facts and natural justice, it would be very helpful for taxpayers who are still struggling with the electronic regime in GST as well as those who have not migrated from physical books and letters to the web portals. The petitioner-assessee's bank account was attached post adjudication of show cause notice issued for excess e-way bills issued (6 in number) for the same invoices and value to same consignee. The taxpayer explained that there had been a change of accountant, person who filed e-way bills was new and he could substantiate that only 6 consignments were supplied on which GST had been paid. It urged that mere technical mistakes in filing e-way bill was not a case of supply without payment of GST. However, due to its business issues, it came to know about the order only later and could not file appeal in time. The High Court held that in the factual matrix which appeared to be reasonable, the taxpayer may be given an opportunity to defend himself. It directed the appeal may be filed with a pre-deposit of 15% of disputed tax. While every case of e-way bill is suspected by the GST authorities, High Courts see the reason behind and provide much-needed relief to taxpayers [2024-VIL-259-MAD].
Unconditional withdrawal of petition without liberty negates another opportunity to file with same prayer
The petitioner sought refund of ITC reversed during search proceedings and which had been subject of show cause notice. The petitioner had already approached the High Court at the time of search alleging that the reversal was illegal but withdrew his petition stating that he would seek refund after the completion of investigation. The High Court permitted the same but without liberty to file afresh. The adjudication proceedings were underway and the petitioner filed a new petition seeking refund of tax paid/reversed. The High Court held that the second attempt seeking exercise of writ jurisdiction was perceived as a case of bench hunting by the High Court. As per the Court, from the facts it was apparent that the directors did not cooperate with the tax department and since the SCN was issued showing some culpability, the High Court refused to be drawn into the matter again [2024-VIL-254-DEL].
Summons issued to office in Maharashtra by officer in such State - Writ petition cannot be filed in a different State where HO is located
The High Court of Telangana has held that when place of business and GST officer were both in Maharashtra, no writ can lie against the summon proceedings in Telangana. The petitioner whose registered office was in Telangana argued that the summons pertained to examination of pan-India issues and sought to challenge the summons stating that the officer in Maharashtra would be adjudicating the same. It was held that territorial jurisdiction of the High Court will be where both address at which summons were served and officer issuing the same were situated. The High Court refused to entertain the petition on this ground of jurisdiction [2024-VIL-251-TEL].
Travelling together or misrepresentation in visiting card do not make persons related
Customs valuation or rather undervaluation under Customs is a difficult nut to crack. While the DRI / Customs book cases even when evidence is not sufficient, dislodging their story is not an easy task for importers. In a recent case which went in favour of the importer, adjudicating Commissioner had held in favour of the importer rejecting the theory of undervaluation of nutritional supplements and directed return of cash seized and release bond and bank guarantee. The department argued that transaction value of comparable identical goods was much higher and evidence was not considered or properly appreciated by the Commissioner and quantity declared in documents was found to be not tallying when physically checked. However, the Tribunal agreed with the Commissioner who had held that the charge of parties being related was not sustainable only based on certain doubts over travelling together by parties, misrepresentation made in visiting cards, etc., and the parties involved did not fit into the definition of related persons as per Customs Valuation Rules.
Though the department had alleged invoices were fabricated, the case was actually on re-determination of value based on contemporaneous imports. On the evidence produced by the department, the Tribunal said that questioning the transaction value would arise only when the parties are related because it was the basis of the case built by the department. Absence of comparable goods being similar in so far as brand, ingredients and country of origin are concerned also went against the department. An interesting observation of the Tribunal pertains to release of cash from the person concerned who was not made as respondent in the appeal though he was a co-noticee [2024-VIL-277-CESTAT-HYD-CU].
COO cannot be rejected without checking veracity with issuing authority
It is strange that even in Customs, penalty is seen as a source of revenue generation. When no differential customs duty is demanded and value and duty payment by importer are accepted, yet penalty is being imposed and that too, for huge amounts. The ground for such penalty is the Country of Origin Certificates were forged / fabricated. When FTA benefit itself was not availed, it is not known why the importer produced such certificates which became the tormentor taking them upto CESTAT not to mention seizure of goods and release after fulling onerous conditions. The Tribunal noted that the COO was stamped by relevant authority in the country of origin but the Customs authorities did not check with such other authority to check the veracity. It held that communication with the foreign authority was the first logical step in this process if the COO was doubted. As there was no proof that such COO was cancelled or not authentic, the charge of the department was rejected.
As in many cases booked by DRI these days, in this case too, all the documents were alleged as forged / fabricated and everyone connived with one another, etc., but the Tribunal found they were all not supported by any evidence. Statements of various persons were also held as misinterpreted. While the department sought to rely on inspection of goods in a different country, the Tribunal held that this cannot establish that the goods originated from such country in the absence of any confirmation from the entities in such country. Penalties were set aside after a good amount of discussion on both Section 112(a) and 114AA of Customs Act. This order will be useful to many importers whose goods have been seized, provisional release is being rejected, COO and all documents are alleged as fake and the business is made to kneel down [2024-VIL-264-CESTAT-AHM-CU].
Nutritional supplements - Classification for IGST decided by CESTAT
Nutrition / dietary supplements were classified under tariff item 21069099 and IGST of 18% was paid on imports as per S. No. 453 and 23 of Schedule - III of Notification No. 1/2017-Integrated Tax (Rate). The Customs authorities took the view that the goods are covered by S. No. 9 of Schedule - IV of the said notification and therefore, 28% is the IGST rate applicable. As per the adjudicating Commissioner, the goods are not instant food mixes and they fall under the entry in Schedule-IV with the description "Food preparations not elsewhere specified or included i.e.,...". The CESTAT noted that "i.e." is suffixed and it means only the food preparations not elsewhere specified are covered under such entry on higher rate of tax. The order provides some discussion on classification under relevant entries after taking note of precedent order also. While GST Appellate Tribunal is yet be established, at least for importers, CESTAT is filling the void even when the issue as to whether IGST is the nature of customs duty or GST is yet to see some light [2024-VIL-256-CESTAT-AHM-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)