Tax Vista Your weekly tax recap Edn. 219 - 27th August 2024 By Dr. G. Gokul Kishore

 

 

E-way bill issue involving Rs. 3 lakhs - SGST authorities go upto Apex Court

It is often said that the government is the biggest litigator. This is despite the National Litigation Policy and numerous measures like specific statutory provisions, circulars and instructions on reduction in filing of appeals based on specified criteria. For the past several years (or decades), monetary limits for filing appeals have been prescribed in all tax laws whereby if the amount involved is below the threshold, then appeal shall not be filed. Section 120 of the CGST Act specifically empowers the government to prescribe such monetary limits in respect of disputes under GST. Recently, CBIC issued Circular No. 207/1/2024-GST dated 26-6-2024 specifying such limits - higher the forum, higher will be the limit. This recent circular was applied by the Supreme Court to dispose special leave petition (SLP) filed by the SGST authorities against the order passed by Division Bench of Calcutta High Court [2022-VIL-480-CAL]. The department had filed appeal before the DB of High Court against the order of Single Judge Bench [2022-VIL-161-CAL]. The issue has not been decided on merits by the Supreme Court considering the latest circular since the amount (penalty imposed) involved was Rs. 3.25 lakhs only.

 

The above shows that the SGST authorities pursued appeal in three stages despite the issue being related to e-way bill and the amount being only around Rs. 3 lakhs. The resources wasted in using the time and efforts of High Court twice and the Supreme Court once should be quantified and recovered from the officers concerned. As pointed out in this column often, Section 129 on detention should be omitted or thoroughly amended and in any case, e-way bill should be abolished [2024-VIL-30-SC].

 

Rejecting refund by relying on Section 34 - High Court quashes order

SGST authorities have SGST Acts in their States which appear to be different from the CGST Act though it cannot be in reality. The understanding of law and application of the same are something which make audit, assessment, etc., a punishment in itself for the taxpayers. In a recent case before Bombay High Court., an MNC has to file writ petition for a meagre amount of refund only because of the incorrect application of law. Invoice was raised but payment was not made by the buyer since the supply was not as per the agreement terms. The buyer did not take input tax credit either. Subsequently credit note was issued by the petitioner but time-limit for issuance / adjustment through credit note has lapsed. Refund of the tax paid was sought under Section 54 of CGST Act / MGST Act but the same was rejected on the ground that credit notes were not issued within the prescribed time period as Section 34. Appellate authority passed the usual order of rejecting the appeal without any reason. The Court noted that Section 34 has no relevance in this case since refund was claimed under Section 54. It directed the authority to consider the claim afresh and grant the same with interest.

 

SGST authorities find it difficult to reconcile with Section 34 in general. Credit notes are not generally accepted in several orders. In most such cases, the standard observation is that documents were not produced or proof was not provided without stating the documentary requirement for adjudicating the case. However, credit notes are exceptions since most of the issues on which taxpayer's reply is not accepted are based on such sweeping and templated statements [2024-VIL-887-BOM]

 

No double taxation under Section 129 prior to 1-1-2022

The petitioner assailed CBIC Circular No.41/15/2018-GST dated 13-4-2018 on the ground that the burden of tax fell twice under proceedings under Section 129 of the CGST Act - once at time of detention and another at time of filing of regular return (GSTR-3B). The material period was prior 1-1-2022. The High Court held that as per the provisions at that time, the purpose of Section 129 was to recover tax on such goods in transit, where removal of such goods fell short of any of the statutory compliance required for removal of goods and there was no case of levy of tax twice. It also stated that as per provisions refund of any excess tax paid by the assessee could be claimed at time of filing returns and dismissed the petitions. After amendment, such issue may not arise since the amended provisions seek to impose only penalty and not tax. But this issue has not been highlighted in the order may be because the period involved was before the amendment [2024-VIL-867-MAD]

 

Delay in filing appeal - No condonation beyond one month

The Andhra Pradesh High Court has held that condonation of delay in filing appeal before the first appellate authority cannot be beyond the one month provided in Section 107 of the CGST Act. It followed the ratio of various judgements including that of the Supreme Court that by implied exclusion, a special statute can bar the application of Limitation Act, 1963. The text of the judgment does not mention the reasons put forth by the petitioner and therefore perhaps there is no discussion on invocation of writ jurisdiction of High Court in special circumstances. Except Calcutta High Court, it seems all other High Courts have expressed the view that Limitation Act is not relevant when CGST Act expressly provides for condonation of delay upto one month. The question is always related to the scope of powers of the High Court while exercising writ jurisdiction and such question cannot have one correct answer [2024-VIL-885-AP]

 

Charge of tax department on property also extinguished on approval of acquisition plan by NCLT

The argument of crown debt being supreme did not help the department which assailed the auction by the Liquidator, of property on which a charge had been created. The High Court, following Ghanshyam Mishra and sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited, 2021-VIL-55-SC held that once the acquisition plan had been approved by the NCLT, the legislative intent was to extinguish all debts owed to the Central Government or any State Government or any Local Authority including the tax authorities. After initiation of the Corporate Insolvency Resolution Process (CIRP) process, the company was acquired as a going concern by a successful bidder. The tax department in the meanwhile created a charge for tax dues, by marking red entries in the land revenue records without any notice to the Liquidator. Post the acquisition, the department challenged the sale of properties. The petitioner contended that in view of Section 238 of the IBC, the provisions of the IBC override the provisions of the HPGST Act, 2017 and the department was bound to delete the red entry/charge of the property.

 

The High Court held that the department was already ranked as an operational creditor and since it had also not objected to acquisition plan, it could not raise any objection at this stage. The department's action to collect dues recoverable from erstwhile management by holding on to the properties was held as illegal and arbitrary. This issue has been doing the rounds in courts frequently and a categorial clarification should be recommended by GST Council so that resolution or liquidation process is smooth and is not frustrated by ghostly claims of tax dues [2024-VIL-876-HP].

 

 

(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)