|
Tax Vista Your weekly tax recap Edn. 214 - 22nd July 2024 By Dr. G. Gokul Kishore |
|
Scrutiny and issuance of ASMT-10 not mandatory for adjudication under Section 73
Section 61 of CGST Act on scrutiny of returns is not a mandatory provision since scrutiny of every return is not contemplated and Rule 99 of CGST Rules also speaks about scenario where any return is selected for scrutiny. Section 61(1) indicates the obligation to issue notice to the taxpayer not because return has been selected for scrutiny but on discovery of discrepancies. Based on such reasoning, the Madras High Court held that issuance of notice in ASMT-10 form is mandatory if the two conditions are met - return is selected for scrutiny and discovery of discrepancies. The Court minutely analysed Section 61 to point out that neither adjudication nor reassessment is undertaken unlike provisions on best judgment assessment under Section 62 or Section 64 on summary assessment and therefore, not issuing notice in ADMT-10 will vitiate the scrutiny process and if the quantification of any liability, if the same has been made.
In the case before it, the Court observed that while proceedings were undertaken under Section 73, records did not indicate that returns were selected for scrutiny. In another petition decided in the same proceedings, the High Court noted that scrutiny was referred to but adjudication was not solely based on scrutiny under Section 61. It said - "On closely examining both Sections 61 and Section 73, I find no indication in either provision that scrutiny of returns and the issuance of notice in Form ASMT-10 constitute a mandatory pre-requisite for adjudication even in cases where returns were scrutinized." The order demonstrates that interpretation and jurisprudence are emerging in GST and it will take years if not decades to get reasonable clarity [2024-VIL-721-MAD].
Refund in cash of VAT ITC not transitioned - High Court rejects
Sometimes being good causes more harm as real life experiences show. A taxpayer did not transition entire amount of VAT ITC to GST through TRAN-1 form and a portion was left out due to absence of documents. Later, in GST regime, assessment was completed and the officer held that full ITC was admissible under VAT. As ITC of such amount pertaining to VAT cannot be claimed at this stage in GST, refund of the same was sought which was, as usual, denied. The High Court analysed Section 142(8) of CGST Act and found the argument of the department that it covers only ITC which was not carried forward as fallacious. The Court held that ITC was allowed in entirety in the assessment order (under VAT) and the same enabled the taxpayer to carry it forward but since the same differential amount was not carried forward in TRAN-1, refund in cash or set-off as ITC is not permissible. This reasoning in the order is not clear. The provision mentioned above has been drafted to cater to this specific situation.
The High Court after taking note of the facts that the petitioner did not revise TRAN-1 form in 2017 and did not avail the benefit of the window provided as per Supreme Court's order, declined to extend refund benefit. It concluded saying that petition can claim ITC as set-off only against output tax. While not taking the benefit of the window provided is plausible, it is not clear as to why refund in cash is stated as not admissible [2024-VIL-718-PAT].
Transfer of transitioned credit from one State to another - High Court allows in case of centralized registration
The tremors of transition of credit are felt even today. A multi-national bank had centralized registration in service tax with registered office in Maharashtra. Around Rs. 141 crores was the amount of credit balance when GST was introduced. As the portal was not working in Maharashtra (technical glitch), considering the fact that their branch was in Telangana, TRAN-1 form was filed in Telangana and credit from pre-GST period was transitioned to GST. Such credit was then transferred to their office in Maharashtra. The department felt this is outrageous because the bank was not registered in Telangana and therefore, credit could not have been carried forward by them. The High Court analyzed Section 140(8) of CGST Act and held that persons who had centralized registration under pre-GST law, are allowed to take Cenvat credit carried forward in a return in the electronic credit ledger under GST. The last proviso was highlighted as it specifically provided for transfer of credit to any person having same PAN and covered under centralized registration. The department could not point to any express bar in the provisions where such transfer is not permitted. The issue of technical glitch was also taken into consideration by the High Court. Punishing taxpayers for system issues continues even today [2024-VIL-699-TEL].
Refund claim filed under Rule 96 by mistake - High Court directs authority to consider under Rule 89
Refund of IGST paid on export goods was claimed using Rule 96 of CGST Rules even while availing benefits under specific notifications, non-availment of which is a condition for refund in such cases. The petitioner accepted it was a mistake but pointed out there was no machinery to reverse the same and . The High Court held that the exporter-petitioner is entitled to benefit under Rule 89 and procedural irregularity should not come in the way of legitimate grant of export benefits since exports were made and refund claims were based on shipping bills. The GST authority was directed to pass fresh order for grant of refund under Rule 89. The amount involved is around Rs. 22 crores. The taxpayer should itself fortunate as the two provisions operate in completely different spheres. Rule 89 essentially provides for refund of unutilized ITC when exports are made without payment of tax. Regularising a claim filed under Rule 96 as a claim under Rule 89 may not be perceived as procedural issue by the department and it may file appeal before Division Bench [2024-VIL-702-MAD].
Bonafide mistake in not raising e-invoice - Section 129 not invokable
The Allahabad High Court held that in the absence of men rea and any allegation of the same in the order, Section 129(3) of the CGST Act, 2017 cannot be invoked. The assessee's turnover threshold had been less than INR 20 crores and he generated e-way bill and tax invoice but did not generate e-invoice owing to ignorance of reduction the threshold of annual turnover to Rs. 10 crores by notification dated 1st August, 2022. The department detained the goods since e-invoicing was not complied with as required under Rule 48 of the CGST Rules and also imposed penalty. The High Court however granted relief also in view of the fact that there was no discrepancy between the documents and goods [2024-VIL-695-ALH].
Order should be in language with which assessee is conversant
There have been a number of cases where computer language (technical glitches) pushed assessees to High Court in addition to non-speaking orders, extraneous provisions none of which are comprehensible. In the case before Andhra Pradesh High Court, the plea of the petitioner was simple. Since both his counsel and petitioner could not understand Hindi, he sought a copy of the order in English to enable him to prepare appeal. His handwritten appeal in Hindi had earlier been dismissed by the Commissioner. The High Court held that the petitioner was entitled to a certified copy of the order in English to enable him to take further steps in the matter and that non-furnishing of such an order copy would gravely prejudice his rights under the provisions of the CGST Act. The order of dismissal was suspended till the said certified copy of the order, in English was served on the petitioner [2024-VIL-701-AP].
Repeated approach to writ court without complying with directions - HC imposes costs
The petitioner's appeal was rejected for having been filed beyond period of limitation. The main contention of the petitioner was that the delay was attributable to the period in which writ remedy was being availed. In round one the petitioner received directions to deposit 50% of tax component of demand and matter was remanded to extend opportunity of personal hearing. Subsequently petitioner approached the Supreme Court which directed seeking clarification from High Court since the petitioner submitted that more than half the demand had already been paid. The petitioner then sought relaxation of the condition of deposit of 50%. The High Court held that repeated approach to writ court without complying with directions and attempting to bypass statutory appeal was an abuse of process of the Court. It also pointed out that the said 50% demand paid by the petitioner was prior to its order and 50% of the unpaid balance on date of its earlier order was payable. It also imposed costs on the petitioner. It also held that exclusion of time period was different from condonation of delay and in the instant case where the petitioner's writ petition had been entertained, he could not take recourse the judgement providing for exclusion of time period which were on a different footing [2024-VIL-719-AP].
Royalty with some nexus to imported goods but not condition of sale not includible in AV
The case before CESTAT qualified as a classic case of valuation. As per the department royalty paid in any form may warrant inclusion in assessable value for customs purposes. The importer of control units for various machines had received order by SVB accepting declared price. At time of renewal of the order, the department opined that landed cost of imported components was not deducted from the Net Sales Value on which royalty is payable, there was a nexus between imported goods and royalty and the same was includible. At the Tribunal the importer again contended based on various rulings that even if royalty is calculated including the value of imported raw materials, the same is not addable to the transaction value of imported goods as there is no such condition in Licence and Technical Assistance Agreement mandating payment of royalty as a pre-condition for sale of imported materials.
The CESTAT held that for inclusion of royalty in terms of Rule 10(1)(c) of Customs Valuation Rules, 2007, all three conditions of nexus with imported goods, requiring payment by the buyer and being condition of sale must be satisfied for inclusion of royalty in assessable value. Hence, though inclusion of cost of the raw-materials indicated a nexus direct or indirect, since payment of royalty was not a condition of sale, it was not includible. One question may arise as to how when cost of goods is deducted and royalty is paid on net sales value, there can be a view that royalty is related to goods since it does not actually increase the value in the manner it would if the same was not excluded in computation [2024-VIL-781-CESTAT-CHE-CU].
Erection, supervision charges and royalty related to post import activity not includible in assessable value
Relying on Rule 10(1) (e) and Rule 10(1)(c) of the Customs Valuation Rules, 2007, the department sought to add the value of erection, commissioning and supervision charges as also license fee for process know-how of production of Spandex yarn for textile in the assessable value. The CESTAT reiterated that in order to be includible the sum - royalty or supervision, erection charges etc. must not relate to post import activity. Also it held that as per the agreement, there was no clause which made the payment a condition of sale of the imported goods and since all charges were related to post import activity, they were not includible in assessable value [2024-VIL-794-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)