2026-VIL-1219-GUJ
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SGST High Court Cases

GST - Invocation of Section 74 of the CGST Act, 2017 for demand based on the 70:30 split of goods and services for Solar Power Generating System in respect of a period prior to introduction of the Explanation to entry no. 234 of Notification no. 24/2018-Central Tax (Rate) dated 31.12.2018 - Petitioner, engaged in supply and installation of Solar Power Generating System under composite contracts, discharged tax at the rate applicable to goods under Serial No. 234 for the financial year 2018-19 - Respondent issued SCN alleging that the value of supply was required to be apportioned in the ratio of 70:30 towards goods and services - Petitioner contended that the Explanation was introduced only with effect from 01.01.2019, that the invoices showed goods and services separately in line with the binding Circular dated 08.06.2018 - Whether the SCN and order invoking Section 74 for the financial year 2018-19 on the basis of the 70:30 ratio can be sustained - HELD - The 70:30 splitting of tax on composite supply of goods and services for Solar Power projects was introduced for the first time by the Notification no. 24/2018-CT(Rate) dated 31.12.2018 with effect from 01.01.2019. When the Petitioner raised the invoices and paid the taxes for the financial year 2018-19, there was no suggestion in the form of an Explanation to pay tax in the 70:30 ratio - The Respondent did not allege in the SCN or the order that the Petitioner violated the tax payable as prescribed at the introduction of GST and as clarified in the earlier notification - The ingredients of Section 74, namely fraud, misrepresentation or suppression of facts invocable in the extended period of limitation, are not attracted to a tax liability which existed prior to the introduction of the Explanation - The retrospective application of the 70:30 ratio through the Explanation and the Circular dated 06.10.2021 does not by itself establish fraud, suppression or deliberate intention to evade tax. These attributes must be evaluated on the regulatory framework in place at the relevant time and cannot be inferred from a subsequent levy imposed with retrospective effect - The action of the Respondent in invoking Section 74 demands interference, the impugned SCN and order are quashed and set aside – The petition is allowed
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