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Tax Vista Your weekly tax recap Edn. 233 - 9th December 2024 By Dr. G. Gokul Kishore |
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No taxable supply without receipt of consideration
Emphasising on the satisfaction of various ingredients of supply - consideration, transaction made in the course of business, etc., the Kerala High Court quashed the order of assessment with directions to consider the essential question of whether the activity amounted to taxable supply. The petitioner was a special purpose vehicle (SPV) for the purpose of implementing a specific project of the Government of Kerala. It procured hardware required for the purposes of IT education in Government schools by floating competitive tenders and thereafter supplied the hardware to various schools on the basis of requirements and directives issued by the General Education Department (GED). It was funded by Kerala Infrastructure Investment Fund Board (KIIFB). The department held that since the goods were purchased by utilising the funds of KIIFB, the same cannot be treated as a grant in terms of Notification No.2/2017-Central Tax (Rate). The department was also of the view that there was a transfer of property in goods from the petitioner to GED and this was a supply.
The petitioner contended that it had not effected any taxable supply and only received grants for meeting day to day expenses and not consideration for supply of goods or services. The High Court accepted the same and issued directions to consider whether in the absence of consideration, there could be any supply of goods or services and why the amounts obtained through the KIIFB for the implementation of the project which was entrusted to the petitioner should not be treated as grant from the Government. The Court also noted the glaring contradictions in the adjudication order wherein at one place, it was held that the SPV was the owner of goods and in another place, Education Department was mentioned as the owner. This kind of contradictions and blunders overflow in adjudication orders these days and most of the authorities do not have any idea of drafting a quality order [2024-VIL-1308-KER].
Works contract spread in two States - High Court rules on place of supply
An order with fair analysis of place of supply provision in IGST Act in respect of works contract has been passed by Telangana High Court. The order is of particular interest since the Court has noted that when construction of barrage (dam / irrigation related) was undertaken in two States, the same being related to immovable property, location of such immovable property will be the place of supply under Section 12(3)(a) of IGST Act. In this case, the default provision of Section 12(2)(a) treating location of recipient as place of supply will not be applicable. The supply was held to be intra-State supply as well.
The dispute arose when the recipient in Telangana deducted tax under TDS provision of CGST Act on the entire bill amount pertaining to work executed in Telangana and Maharashtra. This resulted in excess amount lying in electronic cash ledger in Telangana and the taxpayer sought refund which was rejected on the ground of value of supply reported being far less. This was held as not correct by the Court. The Court also noted that tax liability will be in proportion to the value of work executed in the two States. On facts, it appears that one of the JV partners was not registered in Maharashtra and this led to the Court finding it difficult to answer the question of tax liability in proportion to work executed. The Court granted liberty to approach the adjudicating authority to consider the refund matter afresh [2024-VIL-1307-TEL].
Challenging SCN as based on CAG audit is not correct - High Court imposes costs on taxpayer
The High Court refused interfere with the show cause notice which was assailed as having been issued solely based on the observations of the Central Excise Revenue / Receipts Audit ("CERA") audit conducted by the Director General of Audit (Central), Mumbai, functioning under the control of Comptroller and Auditor General ("CAG"). The department argued that neither an audit notice nor an audit by the CERA/CAG was issued to the petitioner and the issues raised in such audit on the department were part of the show cause notice. It also stated that petitioner had been provided with the adverse material and their submissions had been considered.
The High Court held that returns filed by the petitioner before the department may have been examined in the context of an audit of the department and this by itself does not call for quashing of the show cause notice. It opined based on various case laws that there was no need to exclude relevant evidence merely because it was obtained by search or seizure, through CAG audit etc., and the department could raise the issues in a show cause notice. The High Court imposed costs of the petitioner stating that petitioner was attempting to take a chance to see that the adjudication proceedings pursuant to the impugned SCN are either stalled or delayed. The much relied on judgment in Kiran Gems v. UOI [2021-VIL-58-BOM] was held as not applicable in this case after elaborate analysis. It appears that the taxpayer felt compelled to challenge the SCN as the demand was around Rs. 231 crores. Any adverse adjudication order would have meant an appeal with pre-deposit of huge sum [2024-VIL-1314-BOM].
Self-assessed liability cannot be discharged in instalments
The taxpayer sought relief in terms of Section 80 of the CGST Act to pay the tax amount demanded in instalments. However, he the request was turned down stating that any liability declared under GSTR 1 return filed under Section 37 but not included in the GSTR 3B return filed in terms of Section 39 was not eligible for such relief. The taxpayer had filed GSTR 1 but did not pay tax liability as per the same while filing GSTR-3B. The High Court held that the order of the department was correct and also stated that the petitioner could have paid the amount during the pendency of the present writ petition. It held that there was no scope for exercising discretion by extending the period for payment of tax particularly when there was self-assessment made by filing GSTR-1. The Court was of the view that in this case, the taxpayer ought to have filed GSTR-3B and paid the tax. The provisions excluding various benefits by using "self-assessed liability" need a re-visit. Recovery provisions can also be invoked in such cases which is draconian. It is not clear as to the policy objective sought to be achieved by excluding certain categories of cases from otherwise benevolent provisions [2024-VIL-1291-MAD].
Due date for orders and orders passed beyond such date
Time-limit for filing GST annual return for 2017-18 was extended multiple times and later, time-limit for passing order under Section 73 of CGST Act was extended a few times. An order of Allahabad High Court has been reported by VIL last week. The notifications discussed do not contain the number but only the dates which are not matching with the available notifications. The crux of the matter is that by a notification dated 24-4-2023, the time-limit for passing orders was extended till 5-2-2023. Later, by another notification it was further extended till 31-12-2023. However, the notification dated 24-4-2023 was made applicable retrospectively from 31-3-2023 only. If the time-limit of three years had expired by 31-3-2023, then the latter notification would not be applicable. Based on such reasoning, orders were quashed. GST law seems to be simpler when compared to the frequently amended due dates for various years and for various compliances [2024-VIL-1292-ALH].
Unsigned orders carrying neither digital signature nor manual are not valid
There have been many issues with the all-digital era of orders, notices being uploaded without any intimation to the taxpayer, etc. In this case, the department went one step further to upload orders which did not bear any signature. The taxpayer raised the question of whether orders issued under Section 73 of the CGST Act must carry the digital or manual signature of the officer passing the order in order to treat the order to be a valid order. The High Court held, following various precedents that orders have to be signed affixing digital signatures or manual signature and quashed the impugned orders. It directed fresh orders to be passed after affording fresh opportunity of hearing and stated that fresh orders will relate back to the date on which the original orders were passed. The High Court relied on a precedent wherein applicability of Section 160 of CGST Act was also ruled out in such cases. In this case, the taxpayer was able to go to High Court on this issue while there are numerous others who silently accept such unsigned orders [2024-VIL-1311-KER].
EOUs can avail exemption under notifications other than EOU-specific one
EOUs are governed by exemption under Notification No. 52/2003-Cus., and therefore, the department was of the view that availing exemption under Notification Nos. 50/2017-Cus., and 46/2011-Cus., by the EOU was not correct. The appellant-EOU argued that EOU-specific notification was merely an option and any other notification can also be used since there is no law or condition placing such bar. Two clarifications - one by DGEP and another by TRU (CBIC) were relied on. These two provided that EOUs can well avail benefit under different notifications. The CESTAT noted that the department itself has allowed such benefit through clarifications and the stand of the Commissionerate contrary to the clarification issued by CBIC was not correct and field formations cannot deny the concession clarified as available by CBIC. Impugned order was set aside granting relief to the EOU. When the issue stood clarified by CBIC itself, it is not clear how permission was granted to file an appeal before the Tribunal in this case. The entire litigation appears to be frivolous as the order does not reveal any major challenge from the department side [2024-VIL-1613-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. E-mail - advgokulsubha@gmail.com)