Tax Vista Edn. 253 - 5th May 2025 Dr. G. Gokul Kishore

 

 

Uploading of notices & orders in GST portal is sufficient but not effective service

Two elaborate orders have been passed by Madras High Court on the issue of service of notices and orders or rather validity of service when such notice or order is uploaded in the GST portal. The submissions of the petitioners in both the cases were similar - they were not aware of such uploading and therefore, they could not participate in the proceedings resulting ex parte orders in certain cases. In the first case (order dated 9-4-2025), the petitioner argued that service would be complete as per Section 169 of CGST Act when the notice or order or other communication is retrieved by the taxable person. Reliance was also placed on Information Technology Act and the term "designated computer resource". The department pointed out that the modes prescribed in Section 169 are alternatives and uploading is a valid mode of service. By referring to "any one of the following modes" used in Section 169, the High Court said the various modes are alternative modes of service.

 

The Bench disagreed with earlier order holding that only when the first three modes are not possible, uploading can be resorted to and for such purpose, words would have to be inserted in Section 169 which is impermissible. It also rejected the ground of hardship. Common portal is notified under Section 146 and uploading in the same would constitute valid service. It also held that the GST portal is a designated computer resource for both the department and the taxpayer. Though the impugned orders were set aside and the authority was directed to consider the matter afresh, it came with the condition of 25% deposit of tax amount involved. Pre-deposit before first appellate authority is 10% and taxpayers may be wondering about the outcome of writ petitions [2025-VIL-386-MAD].

 

In the second order, one of the grounds raised was uploading of SCNs in "View Additional Notices and Orders" tab in the GST portal and cancellation of registration where such orders were uploaded in the portal. Another ground was receipt of such notices and orders by the consultants and therefore, taxable persons were not aware of the proceedings. The Court noted that "or" has been used immediately after each clause which means each clause is alternative to each other and if any one of the modes is adopted by the department to send notices, the same would be considered as a sufficient service. The terms "tendering" and "affixing" were also considered and it was further noted that Section 169 does not provide for time and place of despatch or receipt of electronic records.

 

It was held that once the notices, orders and other communication are uploaded in the GST portal, the receipt would occur immediately when the electronic records enter the portal, whether or not the same is designated as computer resource by the taxpayer and based on such reasoning, it held that uploading in the portal would amount to sufficient service under Section 169 but not an effective service. A very pragmatic solution suggested by the Court is that the department should send subsequent reminders by RPAD if the taxpayer failed to notice uploaded in the portal. In this column, several such orders on service of orders have been discussed before. Instead of using everyone's time and resources on such a trivial procedural issue, it may be advisable to amend Section 169 appropriately so that besides uploading, sending the notice / order by e-mail and / or RPAD is also made mandatory [2025-VIL-396-MAD].

 

Cross-examination is not a matter of right - HC upholds denial when statements were only corroborative of documentary evidence

Cross-examination is something adjudicating authorities are not familiar with in most cases and the request for the same is generally rejected. In a similar case, the taxpayer approached writ court but the High Court did not allow such prayer. The issue apparently related to evasion per se and the adjudication order was detailed and the reasons for rejection of request for cross-examination were found to be acceptable by the Court. Cross-examination of persons who had tendered statements was sought and the authority had rejected on the ground that the statements were only corroborative of undisputed documentary evidence already on record and therefore, further cross-examination was not required. After referring to precedent judgments, the Court held that cross-examination need not be granted as a matter of right in all cases and it would depend on facts of each case and it can be extended only if the party proves prejudice in case of denial of such request. It also held that by seeking cross-examination, show cause notice proceedings cannot be converted into mini-trials.

 

The order reads - "Persons seeking cross-examination ought to give specific reasons why cross-examination is needed in a particular situation and that too of specific witnesses. A blanket request to cross-examine all persons whose statements have been recorded by the Department, many of whom are typically employees, sellers, purchasers, or other persons connected to the entity under investigation, cannot be sustained. If a prayer for cross-examination is made, the Authority has to consider the same fairly and if the need is so felt in respect of a particular person, the same ought to be permitted. If not, the Authority can record the reasons and proceed in the case. Moreover, cross examination need not also be of all persons whose statements are recorded. It could be permitted by the Authority in case of some persons and not all." It directed the taxpayer to avail appellate remedy [Vallabh Textiles v. Additional Commissioner - 2025-VIL-377-DEL].

 

SCN not mandatory when case clearly spelt out in audit report

Generally, writ courts are known to lean towards violation of principles of natural justice, particularly in cases where no proper show cause notice is issued before confirming the demand. In a recent case, audit report and summary of SCN were issued but detailed SCN was not issued. The issue related to availment of input tax credit of IGST as cess credit and vice versa. Department initiated proceedings to recover excess cess credit availed. Though the issue is otherwise one of clerical mistake, before the High Court the taxpayer raised the issue of non-issue of SCN.

 

The High Court went through the detailed audit report (reproduced in the order) and held that the petitioner was fully aware of the case that is required to be defended and the argument is being used only to stall the proceedings. It further said that the petitioner was required to show non-furnishing of SCN caused prejudice and prevented them from effectively defending themselves. It said no prejudice has been caused due to non-issuance of notice and the petition was dismissed. Even the precedents on adopting the course as prescribed by law and as known to law were relied on by the taxpayer but the Court did not accept. Audit report is not a show cause notice and failure to issue SCN is a fundamental flaw and the order of the Court seems to be not on sound footing [2025-VIL-382-HP].

 

Excise dues cannot be recovered from Directors of company under liquidation under GST law

The company was liquidated but the GST authorities went after the Directors for recovery of tax arrears. The dues were under Central Excise Act, 1944 and the petitioner argued that as per Section 88 of CGST Act read with Section 174, recovery of taxes only in relation to those levied or assessed by GST law can be made and dues of CEA, 1944 should be recovered using the machinery available under that Act only. The petitioner also pointed out that appeals have been filed before CESTAT against the orders. The High Court held that as per Section 88(3) of CGST Act, tax, interest or penalty of a private company, in case of winding-up, can be recovered from the directors of the company if such amounts are determined under the CGST Act alone. It further held that Section 174 of CGST Act, provides for institution or continuation of the proceedings to recovery of dues arising out of CEA, 1944, by utilizing the provisions of such Act. The Court set aside the recovery notices.

 

Section 142(7) of CGST Act provides for recovery of dues of pre-GST laws as arrears of GST if the same is not recovered under the pre-GST law. However, it does not cover liability of directors of the company, particularly in the event of liquidation. A discussion on this provision in the order based on department's argument would have made the issue clear. However, since the appeal is pending with CESTAT, recovery action could not have been taken even otherwise [2025-VIL-406-AP].

 

Refund of ITC of cess not deniable when exports made on payment of IGST

Coal as input was purchased on payment of compensation cess and manufactured goods were exported on payment of IGST. Refund of such tax paid was granted but it appears SCN was subsequently issued rejecting refund of unutilized ITC arising out of cess relying on CBIC Circular No. 125 and 45 holding that refund of unutilized ITC will be available only if export is made without payment of tax and since IGST was paid in this case, refund of cess would be inadmissible. The High Court held that the circulars have been misinterpreted by the department since as per the provisions, refund of unutilized ITC of cess can be claimed when exports are made but when tax was paid on exports, compensation cess was not payable and therefore, the petitioner was entitled to refund of ITC of cess paid on purchase of coal used in the manufacture of goods which are exported on payment of IGST. It clarified that the circular provides that compensation cess ITC cannot be used for payment of IGST at the time of export since ITC of cess can be used only for payment of such cess. When IGST has been paid on exports, ITC of cess cannot be utilized and therefore, refund of cess as claimed would be admissible, as per the order. When it comes to compensation cess and refund, GST authorities develop cold feet and CBIC Circulars come handy as they tend to confuse more than providing clarity on the issues involved [2025-VIL-403-GUJ].

 

Rejection of appeal filed manually when order was not available online - High Court expresses displeasure

GST regime goes overboard in implementation with the tax administration adopting every method to ensure registrations are cancelled en-masse, ITC is always denied, trucks are seized indiscriminately, equivalent penalty is imposed even in bona fide cases and the list is endless. The appellate authorities are also equally zealous in ensuring that nobody does business in the country. If the order against which appeal is filed is not available in the GST portal and therefore, appeal which ought to be filed online - electronically is filed manually, then such appeal shall be taken into account as per Rule 108 of CGST Rules. However, one of the first appellate authorities simply rejected the appeal filed in offline / manual mode without even bothering to check whether the impugned order was available in the GST portal or not.

 

The High Court had certain strong words - "the Appellate Authority has failed to comply with the provisions of Rule 108(1) of the GST Rules and ignoring the fact that the order-in-original was not available on GST portal so as to enable the petitioner to file the appeal electronically, the Appellate Authority ought to have considered the appeal filed by the petitioner manually and could not have rejected the same on technical ground, that the appeal was not filed electronically. In fact, the petitioner has followed the procedure prescribed under the GST Rules by filing an appeal manually due to non-availability of order-in-original on GST portal. The Appellate Authority has not even bothered to look into GST portal as to whether the order-in-original was uploaded and in spite of the order being available on GST portal, the petitioners did not file the appeal electronically. The Appellate Authority, without arriving at such attitude, mechanically and without application of mind....."

 

Appeal filing system needs to be revamped. When appeals are filed online, GST authorities insist on submission of print copies and in certain cases, hold that only when such copies are given physically, the appeal will be considered as filed. Unless the bureaucracy is made to realize that procedures are meant to serve purpose for which provision has been made, such shoddy implementation will continue and the downward slide of GST cannot be arrested [2025-VIL-424-GUJ].

 

Refund relating to exports after 7 years - GST regime is really taxpayer-friendly

It appears exports were made in the year 2018 as refund of unutilized input tax credit was claimed were filed in April and May, 2018. As the GST portal was trying to find its feet at that time, the taxpayer could not file the claim online and therefore, submitted them manually / physically. Such manual application was filed in May 2022 taking into account extension of limitation granted by the Supreme Court due to pandemic. Being a refund claim, it has to be rejected and therefore, it was rejected citing CBIC Circular No. 125 which emphasized filing of refund claim electronically. Reference to electronic filing includes manual filing also as per Rule 97A of CGST Rules and the High Court said both electronic applications as well as manual applications are permitted to be filed and if electronic application for refund is the only mode contemplated, then Rule 97A would become redundant and such interpretation cannot be adopted. The order rejecting refund only on this ground was held as perverse and legally erroneous.

 

The writ petition was filed in 2022 and the High Court is dated 21-3-2025. The taxpayer has got relief as the Court has directed the authority to process the refund application and pass orders. The order does not mention interest. When sky-high claims are made on GST revenue collections every month, the government should also disclose the quantum of refund amounts which are blocked and denied. For exports made in the year 2018, refund is still awaited in 2025. This is not the kind of GST one wishes for [2025-VIL-397-KER].

 

Tampering with records by Asst. Commissioner of GST - High Court admonishes

In a case of inspection and seizure, everything went against the department before Patna High Court. The Assistant Commissioner was held as guilty of inserting and interpolating words "As per physical verification" in the order of seizure subsequently and she has admitted to such tampering when the matter was sub-judice. After going through the apology, the High Court admonished her and said that if such misconduct is committed in future, disciplinary proceeding should be initiated. The case reveals glaringly the incapacity of the SGST officers in executing several tasks under the GST law. The Court set aside the adjudication order as the same was based on investigations where two independent witnesses did not sign the inspection report (panchanama) and the signatures were that of employees of the taxpayer's entity. The order of seizure showed two witnesses which was held to be a cover-up exercise and after-thought. It also doubted whether the seizure order was prepared on the same date and it appeared it was not prepared on the spot but later to cover-up serious lacunae. It held that the report was not as per Section 67 of CGST Act and Section 100 of Cr. P. C. [2025-VIL-408-PAT].

 

Amendment to Rule 89(5) clarificatory - High Court reiterates

Refund of ITC accumulated due to inverted tax structure was partly sanctioned as the GST authority was of the view that "Net ITC" used in the formula would not include ITC in respect of input services. The taxpayer argued that the formula was found to be anomalous by the Supreme Court in VKC Footwear [2021-VIL-81-SC] and subsequently, Rule 89(5) of CGST Rules was amended from 5-7-2022 and such amendment was applicable to refund claims filed earlier also. CBIC Circular No. 181 clarifying the prospective nature of such amendment was struck down by the High Court in Ascent Meditech [2025-VIL-213-GUJ] was also pointed out. Notification No. 14/2022-Central Tax amending the said rule was held as clarificatory in the said judgment and SLP against such judgment was rejected by the Supreme Court. Based on such facts, the High Court held that the benefit of the amended Rule 89(5) would be applicable to all refund claims filed before or after 5-7-2022 and denial of the same would amount to unjust enrichment of the government. The only issue to be seen is limitation and the adjudicating authority was directed to consider the claim again besides the claim for interest [2025-VIL-405-GUJ].

 

Engineering and technical services fee includible in AV for customs purpose

The Supreme Court has held that engineering and technical service fees paid to the distributor in India as per terms of purchase with the foreign supplier / exporter are includible in the assessable value for customs purpose. The Indian distributor was responsible for providing various product support services and therefore, 8% of FOB value was payable to them but such amount was not to be deduced from the amount payable to the foreign exporter. The appellant was unsuccessful throughout - from adjudication order till the Apex Court. The CESTAT had earlier held that payment made by the appellant to the Indian distributor had no nexus but was a condition of sale and therefore, had nexus with the value of imported goods. Before the Supreme Court, the appellant argued that the amount paid to Indian distributor was only for services rendered by it and the same was not related to the value of imported goods.

 

The Apex Court held that the services rendered were not post-importation activities but were directly relatable to import of goods. It took note of the facts in the adjudication order that product support services i.e. engineering and technical services provided by the Indian distributor were primarily related to the type and quantum of spare parts required to be supplied by the foreign supplier and services were also related to procurement and for smooth sale / export of spares by the supplier. The provision involved was Rule 9(1)(e) of Customs Valuation Rules, 1988 - now Rule 10(1)(e) of CV Rules, 2007 which pertains to inclusion of payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable [2025-VIL-26-SC-CU].

 

Voluntary payment - CESTAT quashes order refusing to close proceedings

Section 28(6) of Customs Act provides for closure of proceedings if duty is paid with interest and penalty of 15% within 30 days of show cause notice. This is in respect of cases where suppression clause is invoked under Section 28(4). An importer paid most of the differential duty during the course of the proceedings and after issue of SCN but before 30 days, paid rest of the amounts including balance interest and 15% penalty. Request for closure of proceedings was rejected by the adjudicating authority on the ground that an amount of Rs. 3249 was pending payment as per corrigendum issued. Such corrigendum was issued after more than one year from SCN. The adjudication order was passed after more than one year from the SCN even though hearing was conducted much before.

 

The Tribunal was quite surprised over the conduct of the adjudicating authority as he expected payment of such amount within 30 days of SCN when the said amount was mentioned in the corrigendum issued much later. It was a case of non-application of mind, as per CESTAT and the order was contrary to Section 28(6). It remarked that such orders lead unnecessary litigation and discourage voluntary compliance. The amounts paid voluntarily were in crores and the proceedings were deliberately conducted for measly amount of Rs. 3000 based on illegal corrigendum. In this column, certain remarks have been made about the way GST is being implemented but Customs is no different as such orders show [2025-VIL-587-CESTAT-DEL-CU].

 

Delay of 10 years in adjudication - CESTAT sets aside order

Delay in adjudication has been fatal to the Customs department in respect of both the periods - before amendment and post-amendment of Section 28(9) of Customs Act. CESTAT in a recent case dealt with the pre-amendment period when the phrase "where it is possible to do so" was present in the provision prescribing time-limit for adjudication and discussed various judgments on this issue. Based on such precedents, it held that deviation from prescribed time-limit can be permitted only when circumstances or insurmountable exigencies make it impracticable or not possible for adjudication within the stipulated period and such time-limit cannot be extended endlessly. It said that indifference of the adjudicating authority to complete the adjudicating process within the statutory time limit cannot be condoned to the detriment of the assessee or to the interest of the exchequer. It reiterated that even if no time limit is prescribed for adjudication, then also adjudication has to be completed within a reasonable period. In the case before it, the Tribunal was of the view that there was no justifiable reason for the department to place the show cause notice in the call book and therefore, considering the delay of 10 years in adjudication, the order was set aside [2025-VIL-597-CESTAT-DEL-CU].

 

Previous edition, dated 21st Apr, 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)