Tax Vista

Your weekly tax recap

Edn. 248 - 24th March 2025

Dr. G. Gokul Kishore

Rectification of error - High Court adopts wider meaning of "record"

Sometimes the travails of the assessee seem incredible - fighting with technical issue in portal, mechanical orders, the list is endless. The assessee, on noticing incorrect availment of ITC, filed an intimation in as DRC-03. Amount of about INR 3 crore was reversed / paid but the financial year was, by mistake, mentioned as 2019-20, instead of 2018-19. On filing a rectification application, the officer rejected the same and the assessee was served an order Section 73 of CGST Act demanding tax, interest and penalty. The assessee argued that as per Rule 142(2) of the CGST Rules, DRC-03 is only a mode of intimation and the officer was bound to issue an acknowledgment accepting the payment in Form DRC-04 and that it was apparent from the records - the portal, assessee's letter and record of assessee's liability in various years as available to the officer that the amount paid by the assessee could only pertain to the wrong availment of ITC in 2018-19.

The High Court held that proper officer had merely proceeded to dismiss the rectification application (filed under Section 161) without considering the nature of error that was pointed out and set aside the rejection of rectification application with directions to re-consider the matter. The wider meaning to be accorded to the word "record" was emphasised as extending to records available in the portal. The High Court referred to the judgement in Gammon India Limited v. Commissioner of Income Tax [(1995) 214 ITR 50 (Bom)] holding that 'record' would mean records of the case including documents and materials produced by the parties and taken on record by the authorities which were available at the time of passing of the order. The Court said - "When mistakes are found to be bonafide, and the taxpayer has taken immediate steps to rectify such errors, they should not be penalised or imposed with an exorbitant amount, which is otherwise not liable to be paid. Such imposition will not have the backing of Article 265 of the Constitution of India." Rectification applications are routinely rejected and even if accepted, a very minor change is made without accepting the errors. Even to get an order corrected when the mistake by the taxpayer was bona fide, one has to use writ remedy [2025-VIL-259-KER].

Lack of physical intimation of SCN & order - High Court condones 210 days delay

These are days when precious time of writ courts are used to decide procedural issues instead of interpretation of provisions. One such issue pertains to mode of service of notices and orders and this was highlighted in last week's Tax Vista also. Typically, the GST department sends notices and orders through the portal and that too, by placing in an incorrect tab. In a case of this nature, the taxpayer pleaded that delay of 210 days in filing appeal occurred due to lack of intimation of SCN or order through physical mode. The taxpayer's appeal was rejected on account of delay since it was filed after 210 days from date of communication of order. The taxpayer contended that there was lack of proper intimation/information since show cause notice was only uploaded in the GST Portal and no physical intimation was made and impugned order was uploaded in the "View additional notices" tab / column. The High Court held that the reason for delay appeared to be genuine and directed the appeal to be accepted with additional 15% pre-deposit [2025-VIL-256-MAD].

Refund claim rectified after deficiency memo - Limitation to be reckoned from date of initial filing

Refund claims were filed online in the GST portal in respect of unutilized input tax credit accumulated due to exports. Subsequently, such claims were filed manually. Deficiency memos were issued and therefore, the claims were presented again after removing such defects. Show cause notices were issued proposing to reject the claim on the ground of time-bar since the time-limit should be reckoned from the date of presentation of the claims after defects. The taxpayer sought High Court's intervention to exclude the period from the date of filing refund claim to the date of deficiency memo for computation of time-limit. The High Court took note of the amendments in the relevant explanation to Section 54 of CGST Act on relevant date for refund of unutilized ITC. It took note of CBIC Circulars issued in 2018 and 2019 on such issue whereby physical copies and documents were to be submitted after filing refund claim online and held that in this case, refund claims were filed within two years from the relevant date as it stood during the period involved. The orders of the appellate authority upholding adjudication orders rejecting refund were held as not sustainable. Legitimate export benefits should be granted as long as there is a substantial compliance with the provision, as per the order.

The period involved is 2018 and the writ petitions were filed in 2022. The taxpayer had to wait for 7 years to get a legitimate refund particularly the one intended to encourage exports. Taxpayers still do business in this country [2025-VIL-247-MAD].

Best judgment assessment - Delay in filing return condonable

Return for the month of February, 2022 could not be filed and the GST authority using best judgment assessment under Section 62 of CGST Act, demanded tax. The taxpayer paid the tax with interest in November 2024. The taxpayer pleaded that it was because of ill-health, return could not be filed. The High Court posed the question as to the consequence of not filing the return within 60 days prescribed in Section 62 - whether the taxpayer would lose the opportunity to file return or he would be entitled to file if there is sufficient cause for not filing earlier. Taking note of Section 62 providing for time of 5 years to make such assessment, it said that such period would lapse in the present case in the year 2028. If the order is passed at that time, the taxpayer would be able to file return within 60 days i.e., on or before 28-2-2029. The Court held - "When such being the case, since the best judgment assessment order has been made by the second respondent at the earliest point of time, the legal right of the petitioner to file the returns, which is available under Section 62 of the Act, cannot be taken away. If the best judgment assessment order has not been passed on the earlier date, the petitioner can file her returns even without paying any interest or penalty."

The Court further held that if returns could not be filed within 60 days for reasons beyond control, such delay can be condoned subject to sufficient cause being shown. It also held that the 60 days period appeared to be directory and therefore, delay is condonable. The Court directed the taxpayer to seek condonation of delay and the GST authority to consider the same. This is an order adopting purposive interpretation of the provisions in a logical manner so that the taxpayer is not left without any remedy and this is precisely the role, writ courts are expected to perform and are respected for [2025-VIL-261-MAD].

Minor error in invoice cannot bar ITC

In another case of buyer being denied credit for supplier's fault (not "default"), the petitioner assailed the order denying him Input Tax Credit (ITC) stated as wrongly availed. The invoices issued by the supplier inadvertently reflected the Mumbai address and GSTIN of the petitioner, instead of the Delhi GSTIN number. The petitioner was a Delhi based entity. However, even the department conceded that no other entity had claimed at the ITC on these purchases and other than the mention of wrong GSTIN, there was no ground to deny ITC as ineligible. The petitioner pleaded that he may be allowed to correct the invoice and avail ITC since non-availment was too heavy a penalty for a minor error, that too by the supplier. The High Court granted relief to the petitioner setting aside the order and permitted availment of ITC.

Seamless ITC is full of hurdles and disputes and the litigation on these issues may surpass even Modvat / Cenvat era cases. GST authorities are openly against ITC as at the time of writing this column, being March, they are pressurizing taxpayers either not to use ITC or simply reverse ITC so that revenue targets can be met. The most self-defeating exercise is revenue target for tax officers which has been subject of big debate in the past also [2025-VIL-242-DEL].

Filing of GST appeals manually and through online mode - Instructions required

Appeal filed offline i.e., physically was rejected on the ground the pre-deposit was not paid and the appeal filed online (same appeal) was also rejected on the ground of time-bar. The taxpayer, it appears, had paid the pre-deposit amount in electronic cash ledger but did not debit the same towards pre-deposit though this aspect is not clear from the High Court order. The High Court noted that the adjudication order was uploaded in the GST portal later but at that time pre-deposit could not be paid. For this observation also, the reasoning is not clear in the order. The Court also observed that there was nothing to show that manual filing of appeal was prohibited and since the order was not available online initially, filing of appeal by manual mode was correct. It held that there was no failure on the part of the taxpayer in submitting the appeal on time and also complying with condition of pre-deposit. It said appeal should not be dismissed only for procedural delay when the taxpayer had taken all efforts. The Court condoned the delay as well and directed the appellate authority to decide the appeal afresh.

The time and efforts wasted in several processes in GST need to be cut down as online filing of appeal is always followed by physical copies being submitted in Appellate Authority's office. This has no statutory sanction but without physical copy, the appeal is not accepted. It is not known how CBIC cannot remain without having knowledge of such practices not backed by law [2025-VIL-244-MP].

E-Bike in CKD condition without battery pack is not complete vehicle

The imported consignment fell into two categories Electric bike in CKD without battery pack and spare parts. The importer classified the goods under tariff item (TI / CTH) 87116090 and spare parts under TI 87142090. Battery packs for the e-bikes were imported by appellant in a different consignment. The importer sought benefit in terms of Notification No. 50/2017-Cus. dated 30.06.2017 as per entry at S. No. 531A(1)(b) but was denied the same. The department opined that the consignment was only parts of e-bike as the goods were not containing battery / battery pack and electric compressor, which is necessary to be called as e-bikes in CKD-Kit. The importer sought to rely on explanation in S. No. 531A in terms of which even if one or more one or more of the components, parts or sub-assemblies required for assembling a complete vehicle are not imported in the kit, provided that the kit as presented, is classifiable under the heading 8711 of the Customs Tariff Act, 1975, exemption would be available.

The CESTAT held that goods as imported - without battery pack, charger etc., would not qualify as complete vehicles and they were not eligible for the exemption. The alternate plea of the appellant was that the goods being parts would merit classification under CTH 87141090 and concessional duty of 15% could be paid as against the tariff rate of 50%. The CESTAT remanded the matter for a specific finding to examine the entitlement/eligibility of the appellant for the exemption and classification under CTH 87141090. E-mobility space is going through lot of churning and tax controversies also play their part. This issue has been witnessing various orders from the Tribunal and the space is interesting to watch though the pain will be felt by importers [2025-VIL-391-CESTAT-DEL-CU].

Enhanced value accepted cannot be challenged, but no penalty in provisional assessment

Accepting the enhanced value, the importer paid customs duty voluntarily and requested to drop proceedings. The department determined the value of the next consignment on the same basis and order was passed by Commissioner (Appeals) confirming duty, penalty and interest was challenged by the assessee. The CESTAT held that though enhancement of value and consequent duty demand was not to be disturbed, no penalty was imposable in provisional assessment and remanded the matter for finalization of assessment. It is not clear how transaction value of a particular consignment can be imposed as TV for another consignment even if the goods are identical. Such an exercise should have reasons but the order does not mention any such reason from the impugned order. Acceptance of loading of value cannot be held as a permanent bar from questioning rejection of declared value forever [2025-VIL-384-CESTAT-BLR-CU].

Previous edition, dated 17th Mar, 2025

(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)