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Tax Vista Your weekly tax recap Edn. 207 - 3rd June 2024 By Dr. G. Gokul Kishore |
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Recovery of GST dues before expiry of appeal period - CBIC issues instructions
Section 78 of CGST Act empowers the GST authorities to initiate recovery proceedings of dues confirmed in any order even before expiry of the period provided for filing appeal. Section 79 provides various modes for recovery like recovery from third parties, etc., commonly referred as garnishee proceedings. These provisions were largely unknown among taxpayers except a very few in the pre-GST period. In GST regime, indiscriminate use of these powers has resulted in taxpayers not only being aware, but has also compelled them to invoke writ jurisdiction of High Courts to keep arbitrary actions at bay. CBIC has issued Instruction No. 01/2024-GST dated 30-5-2024 to its officers whereby certain guidelines have been provided on exercise of such powers.
As per these instructions, in these exceptional cases of recovery even before expiry of appeal period, jurisdictional Deputy / Assistant Commissioner should place the matter before Principal Commissioner / Commissioner along with justification and the latter should provide specific reasons in writing for seeking to recover the amount within such period (less than 3 months). The reasons could be high risk to government revenue, possibility of winding up of business by the taxpayer, poor financial condition, likely initiation of insolvency proceedings under IBC, etc. Specific apprehension should exist and the power should not be used in a mechanical manner. Similar instructions to SGST officers by State Commissioners can be expected. Officers are generally used to ignoring such instructions and in this case also, different response cannot be expected. However, when writ petitions are filed, the High Courts can call for records and see whether the power has been exercised as per such instructions. Arbitrariness and harassment cannot be prevented when the provision itself is draconian. The permanent solution is to delete proviso in Section 78 empowering recovery even before lapse of 3 months' time for filing appeal.
Defective document for transportation - High Court confirms penalty
Excavator (JCB) taken on hire for road laying work was detained at the time of return on the ground of absence of valid documents. In the first round of litigation, goods were released on furnishing bond and BG but penalty was imposed and appeal against such order was rejected. In the second round of litigation, High Court had directed the authority to revisit the issue. In the third round, the petitioner argued before the High Court that the order passed for the second time was not as per the directions of the Court and though delivery challan used for generation of e-way bill could not be produced at the time of interception, the same was produced subsequently.
The High Court noted that the delivery challan was issued as a letter from writing pad and information given did not match with that of the e-way bill and documents like rental income being shown in books were not produced. The High Court held - "In Revenue jurisprudence, it is well-settled that the assessee/registered person is required to provide documents in case of any issue raised by the Revenue for necessary clarification. It was therefore, incumbent upon the petitioner to produce documents as discussed hereinabove to clarify the situation. Having not done so, the petitioner cannot fall back and say that the order impugned is bad in law or without jurisdiction. On the contrary, the bona fide of the petitioner is in doubt and the presumption of withholding relevant documents by the petitioner is also substantiated." The petition was dismissed after noting that the petitioner was not entitled to reduction in penalty either. Though the order may be seen as a routine one on e-way bill related issue, it has been analysed in this column to highlight that after 6 years of GST, documentation by taxpayers is still not proper. This gives room and jurisdiction to authorities to frustrate the entire transaction [2024-VIL-542-CAL].
Prohibited goods can be allowed to be re-exported
Goods were held as imported violating IPR, without BIS certification, resorting to under-valuation, restricted goods were imported without license, pharma products and cosmetics were imported without license under Drugs and Cosmetics Ac, prohibited goods (e-cigarettes) were imported. The adjudicating authority ordered destruction of confiscated goods but the Tribunal held that only Central Government under Section 126 can do so and Customs officer is not empowered in this regard. It further held that such goods also stand on par with goods where redemption is possible. While in the impugned order, re-export was not allowed as the goods were held to be prohibited for import, the Tribunal held that in respect of goods which are prohibited like e-cigarettes or those violating IPR, re-export is permissible. Holding public interest should predominate over punitive agenda, goods which were absolutely confiscated in the impugned order were held as liable to confiscation and since there was no request for redemption, they were also allowed to be reexported. Manner of fastening penal liability was held as not clear, particularly personal penalties vis-à-vis role of individuals and therefore, penalties have been set aside [2024-VIL-555-CESTAT-MUM-CU].
Order cannot be reviewed without new material being brought on record
In most cases, it is seen that the department's zest for litigation and recovery is not matched by documents or proper examination of records. However, in an application for review of order before Allahabad High Court, the assessee was wrong on all counts. An order had been passed holding that based on the finding of Special Investigation Branch, the assessee had availed ITC without actual receipt of goods (purportedly from bogus firms). The assessee sought review of this order stating that the order had been made by "blindly believing the stand of the revenue" and produced an affidavit from the transporter. However, none of the finding (facts) - wrong mobile number in bilty, invalid GSTIN were refuted or established as correct and the so-called affidavit which was produced as new evidence did not bear stamp of notary. Most of the caselaw relied upon did not have citations. Of course, the High Court as not impressed, and held that there was no case for review after expressing strong displeasure over the choice of words used in the review petition [2024-VIL-530-ALH]
Rejection of appeal without giving opportunity to correct defect is arbitrary
One comment about the flaw pointed out by the department before discussing the case. Non-filing of certified copy was held to be a defect which led to rejection of appeal. Despite all the e-processing and uploading of order etc., department still seeks certified copy, physical copy of appeal and so on. The prescription that if the order appealed against is not available in GST portal, then certified copy is required should be done away with as even in High Courts, petition to dispense with production of original copy is filed and downloaded copy is accepted. In this case, the department took 11 months to find out that the appeal was defective without certified copy and without any communication or hearing rejected the appeal. The High Court held that the action was absolutely arbitrary, unreasonable and contrary to the provisions of law and in violation of the principles of natural justice. The department was directed to give an opportunity to rectify the defect and admit the appeal [2024-VIL-535-ORI].
Non-mention of one item of sample - Penalty not imposable
The apparent may not be real. Perhaps guided by the adage that all that glitters is not gold, GST authorities held that the delivery challan which accompanied gold jewellery sent as sample was in fact a sale which was disguised. It was found that certain stones in relation to the jewellery were not mentioned in the challan. The department concluded that the delivery challan was wrong, it did not contain name of prospective buyer and levied penalty of about INR 14 lakhs which was paid by the assessee. The High Court held that mere non-mention of the stones in the samples transported did not violate Rule 55 of CGST Rules and that since the authorities could not prove that the transaction was actually sale, no penalty was imposable. It ordered refund of the penalty paid [2024-VIL-549-KAR].
Goods moved from FTWZ to MOOWR unit is not supply under GST
The applicant was engaged in trading of Portable Lithium System Batteries and imported by the applicant from abroad to a third-party Free Trade Warehousing Zone ("FTWZ") and later sold to the OEM's MOOWR unit. The goods were cleared from the OEM's MOOWR unit on need basis. The applicant submitted that the movement from within the FTWZ fell within Para 7 and 8 and Explanation 2 to Schedule III of CGST Act and that the said supply was not taxable since it was neither supply of goods nor services. In essence, it was supply from one non-taxable territory to another since the goods were warehoused in an FTWZ (SEZ), the said goods have not entered home consumption as the goods are stored in an area which is beyond the customs frontiers of India. The applicant drew attention to Section 53 and Section 2(za) of the SEZ Act in terms of which FTWZ is deemed to be a territory outside the customs territory of India. The AAR held that GST is not leviable on the sale of goods warehoused in FTWZ on "as is where is" basis to customer who clear the same to bonded warehouse under the MOOWR Scheme [2024-VIL-71-AAR].
Rotary car parking system is a civil structure and ITC cannot be availed
According to the applicant, the rotary car parking system which was desired to be installed (rather than built!) in the space which was used for commercial renting did not fall within the ambit of blocked credits since it was plant; it was movable and not immovable property which cannot be dismantled and unlike a lift it was not part of the building. Of course, the department is fixated on credit denial and once any part, even a nail perhaps is embedded in earth, Section 17(5)(d) would apply in full. The AAR held that the rotary car park was capable being moved/dismantled but not on "as is" basis and that it was not intended to be moved. The parking was a civil structure- facility for permanent beneficial enjoyment of the space and no different from a lift. The parking could not be termed plant and machinery since being a parking facility, the car parking system is associated with the provision of space resulting out of the beneficial enjoyment of the ground and the underlying foundation, the car parking system does not fall under the category of apparatus, equipment and machinery. These days, in Tax Vista, advance rulings are not discussed but a few of them sometimes contain persuasive arguments and innovative counter to reject the same [2024-VIL-70-AAR].
(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)