Tax Vista Your weekly tax recap Edn. 297 - 9th November 2026 Dr. G. Gokul Kishore

 

 

GSTAT imposing costs - Is it empowered'

GSTAT Bhopal Bench has imposed costs on the GST department and directed the same to be paid to the taxpayer. In this case, department had filed appeal, taxpayer (Respondent) filed written submissions, both attended hearings on multiple dates and in the final hearing, the department wanted to withdraw the appeal. The reason cited was CBIC Circular No. 207 fixing monetary limit for filing appeal by the GST department before the GSTAT. As per this circular, orders involving disputed amount of Rs. 20 lakhs or less are not to be appealed against. The Tribunal was rather furious as it said - "Thus, on the one hand, the appellant has wasted the valuable time of this tribunal, on the other hand, the respondent had to unnecessarily incur the expense of this litigation, which is in no way justified." The appeal was dismissed as withdrawn.

 

Courts are empowered to impose costs as per Civil Procedure Code. But Tribunals being creature of statute do not possess such inherent powers unless the respective statute expressly confers such power as in the case of NCLT. Rule 120 of GSTAT Procedure Rules reads "Award of costs in the proceedings. - (1) Whenever the Appellate Tribunal deems fit, it may award cost for meeting the legal expenses of the respondent of defaulting party." The order discussed in this column is perhaps the first of its kind by the GSTAT imposing costs though the provision has not been cited. While courts are reluctant to impose costs, GSTAT undertaking such exercise should be welcome. The department may file appeal against such order in the High Court to get the costs deleted but the stigma will remain. Imposition of costs should become more frequent so as to deter callousness and highhandedness in dealing with disputes -whether by quasi-judicial authorities or by the jurisdictional officers [Re: 2026-VIL-300-GSTAT-BHP].

 

Defective SCN, bogus orders, specious contentions - GSTAT is appalled

Credit note was not issued on sales return. The appellant submitted sample copies and informed that complete set will be produced for verification. Adjudicating Authority cannot lose time by giving hearing or conducting verification and hence, passed order confirming the demand. As such authorities are innovative, the order proceeded on grounds like difference in value between credit notes and invoices which were not raised in the SCN. GSTAT noted that the adjudicating authority has held that credit notes were issued on the same day as invoices and therefore, the SCN was held to be factually incorrect. This, as per the Tribunal, goes to the root and proceedings are vitiated. Contravention of Section 34 of CGST Act was not alleged in the SCN and the order trying to change course was held as not correct. It seems no personal hearing was offered in this case as the Tribunal notes. The order of the Appellate Authority was actually laughable as it reasoned about taxpayer's business model, industry practice, customer behaviour, etc. The Tribunal said -"It is not based on legal principles, but on certain theories on the economics of the jewellery trade and behavioral psychology of consumers; however, these theories cannot supplant evidence and legal principles which alone can be the touch stone of a tax appeal proceeding."

 

The GST department performed the grand finale before the GSTAT by stating that hearing is anyway offered before the Tribunal and the taxpayer has opportunity now. The Tribunal was amazed by such stand of providing opportunity in Tribunal compensates for the lack of opportunities before. The order speaks for the pain of the Members - "We are amazed by these contentions which seem to imply that the fact that the appellant is provided full opportunity at the Tribunal somehow compensates for the lack of such opportunities at the lower fora. In our view, it is the vested legal right of the appellant to be provided full opportunity to present his case at every stage of the adjudication proceedings and any contention to the effect that any lack of opportunity at the lower level can be condoned on the ground that "in any case Tribunal hears the matter on facts and law" is foreign to all known principles of jurisprudence and cannot be countenanced even to the slightest degree. We are disappointed that the Revenue even thought it fit to raise such a contention in the first place and reject the same with the disdain it deserves."

 

One cannot say anything more. [Re: 2026-VIL-310-GSTAT-TVP].

 

Lessons never learnt by quasi-judicial authorities

As late as May this year, there is an Appellate Authority who computes limitation in days when the provision - Section 107 of CGST Act reckons the same in months. Appeal is required to be filed within 3 months from date of communication of order and 1 more month is provided for condonation of delay. The "Learned" Appellate Authority read it as 120 days and held the appeal filed before him was delayed by 2 days and hence, time-barred. There is no change in the script - taxpayer rushes to High Court - High Court holds months means months and not days and the Appellate Authority got it wrong and quashes the order directing him to decide the appeal afresh.

 

A brief order on a settled issue need not be discussed in this column. But the appalling ignorance of not only law but also the settled jurisprudence of such quasi-judicial authorities needs to be highlighted. A related reason for adopting such stand could be the urge to dispose the appeal "somehow". This somehow syndrome is all-pervasive in the quasi-judicial sphere where almost every authority confirms the demand somehow, almost every appellate authority upholds such mindless confirmation somehow and the revenue figures are all cooked up by such "somehows". In Tamil Nadu, some of the appellate authorities seek submissions in the form of summary on the ground that they cannot be expected to go through the appeal papers and relied upon documents. If this is the behaviour of tax administration, no progressive law can bring any kind of progress [Re: 2026-VIL-1240-BOM].

 

Section 77 - Benevolent provision with a little malice

Section 77 of CGST Act is a benevolent provision drafted with a little malice. It provides for refund of CGST and SGST paid in respect of a transaction which was considered as intra-State supply by the taxpayer which is held to be inter-State supply warranting payment of IGST. IGST Act has similar provision to provide for the vice versa. Interest is not payable in such cases as the taxpayer is required to pay the right type of tax even while being entitled to refund of wrong type of tax. "Held to be" was clarified by CBIC as both determined by an authority or by the taxpayer himself. However, the provision does not cover the scenario of adjustment by the government itself instead of compelling the taxpayer to seek refund and then pay tax again.

 

The taxpayer paid CGST and SGST on the amount received from foreign group companies for providing warranty support services. The period involved is not clear and must have been out of bounds for Section 73. Therefore, Section 74 was invoked alleging the taxpayer being in the habit of paying wrong type of tax. The High Court was not moved. It held that Section 74 could not have been invoked in this case the amount could have been transferred by the government internally from one head to another. Ruling of the Supreme Court in Tata Steel [2026-VIL-87-SC] has been a blessing now in suppression cases and the High Court has relied on it hold that the case is not one of deliberate attempt to evade tax.

 

Section 77 should be amended to provide for adjustment by the government internally as it is essentially an exercise of transfer of funds from one head to another. The taxpayer has nothing to do with such exercise except reporting of intra-State supply as inter-State supply and heavens will not fall by such incorrect reporting once transfer of funds is made. While the provision is taxpayer-friendly, absence of the command for internal transfer has converted it into a tool of harassment [Re: 2026-VIL-1241-BOM].

 

Secondment - Issue set for long haul

The case involves secondment of personnel from Japan. GST was not paid (but under protest as per order) as they were considered as own employees. The department is consistent in all cases involving secondment that this is import of manpower supply service and GST is required to be paid under reverse charge. Though certain High Courts have granted some relief on this issue, Rajasthan High Court said that it is mixed question rooted in facts as methodology adopted for deployment of human resources, actual conduct of parties, etc., are to be seen and a single clause or contract does not decide. The High Court listed the contentious issues like who is the employer, who bears the salary, control test, etc., and said all of them are factual / matter of evidence and not mere interpretation alone. The Court referring to taxpayer's affidavit / submissions says - "An affidavit filed by a party in support of its own case is, by its nature, self-serving. It tells us what the deponent says the documents mean. It does not prove that they mean it." A detailed order but not in favour of any of the parties as the petition was not allowed but time was granted to pursue statutory appeal.

 

The department takes the Apex Court ruling in Northern Operating Systems as the scripture and piously follows it everywhere on this issue. That ruling emphasized looking into the arrangement by examining the substance over form. GST department treats it as carte blanche and without reading any clause or examining the arrangement, sees this issue as a windfall in terms of revenue. Cross-border movement of personnel is something which cannot be left to such uncertainty in terms of tax treatment. It is time for the GST Council to step in so that the issue is stemmed at this juncture instead of pushing every other taxpayer to the Supreme Court [Re: 2026-VIL-1245-RAJ].

 

Transit State has no jurisdiction to invoke Section 129

Inter-State stock transfer from Haryana unit / Delhi unit to Karnataka - invoice was dated next day after despatch of goods - Transit State was UP and GST authorities in UP initiated proceedings under Section 129 of CGST Act - GSTAT, Agra Bench noted that Allahabad High Court in Maruti Enterprises [2026-VIL-515-ALH] held that transit State has limited power of inspection and it cannot exercise penal jurisdiction under Section 129 as no incidence of tax accrues or payable in such transit State. Following this precedent, the Tribunal held that Section 129 proceedings initiated in transit State were not valid. Recently GST Council has recommended amendment to this effect and this is welcome.

 

Section 129 is intended to deal with deliberate tax evasion during transit and is not meant for dealing with date related issues while in this case, goods were moving with valid tax invoices and e-way bill and the date difference between internal stock transfer invoice and outward supply invoices is revenue neutral, as per the order [Re: 2026-VIL-286-GSTAT-AGR].

 

There are other orders reported by VIL on e-way bill / Section 129 invocation issues most of which are in favour of taxpayer like the one holding issuance of invoices with non-consecutive serial numbers does not warrant penalty under Section 129. This reminds one of denial of Modvat / Cenvat credit based on colour / copy of invoice in the Central Excise regime. These are absolutely futile exercises draining taxpayer's resources even while justifying the existence of bloated bureaucracy [Re: 2026-VIL-304-GSTAT-AGR].

 

[Read previous edition dated 03.11.2026]

 

[The author is an Advocate. The views expressed are strictly personal.]