Facts The appellant availed Input Tax Credit on purchases made from a supplier and paid the tax amount along with the value of goods/services. The department issued notices alleging mismatch between GSTR-2A and GSTR-3B and non-reflection of supplier invoices in GSTR-1. A demand order under Section 73(10) was passed reversing ITC along with interest and penalty. The writ petition was disposed of directing the appellant to file a statutory appeal, which led to the present intra-court appeal. Court Decision:The High Court set aside the demand order and held that reversal of ITC was not justified without first taking action against the selling dealer. The Court held that when the purchasing dealer has fulfilled conditions under Section 16(2), including possession of invoice, receipt of goods/services, and payment of tax, ITC cannot be denied merely due to non-reflection in GSTR forms. It was further held that proceedings against the purchaser can arise only in exceptional circumstances such as fraud, collusion, or where the supplier is non-existent or without assets. Cases Referred by Court:•    Union of India v. Bharti Airtel Ltd. •    Arise India Limited v. Commissioner of Trade and Taxes, Delhi •    Commissioner of Trade and Taxes v. Arise India Limited (SLP dismissed)   

BackgroundThe writ applicant, a practicing advocate, entered into an agreement dated 29th September 2020 with Navratna Organisers & Developers Pvt. Ltd. for purchase of a plot of land admeasuring 1021 sq. mtrs. at "Kalhar Blues and Greens", Ahmedabad, along with construction of a bungalow thereon. Separate and distinct consideration was fixed for (i) sale of land and (ii) construction of bungalow. The developer, relying on Entry 3(if) of Notification No. 11/2017-Central Tax (Rate) read with Paragraph 2 thereof, demanded GST @ 9% CGST + 9% SGST on the entire consideration (land + construction) after deducting only 1/3rd of total value towards land, instead of deducting the entire actual land consideration. Tax was collected from the petitioner under protest. In the companion writ applications, developers had filed advance ruling applications; the authority held only 1/3rd deduction admissible. Those orders were affirmed by the Appellate Authority for Advance Ruling. All three petitions were heard together, with SCA No. 1350 of 2021 treated as the lead matter.Court Observations (Verbatim — Crucial Paragraphs)Para 87:"Thus the legislative intent is to impose tax on construction activity undertaken by a supplier at the behest of or pursuant to contract with the recipient. There is no intention to impose tax on supply of land in any form and it is for this reason that it is provided in the Schedule III to the GST Acts that the supply of land will be neither supply of goods nor supply of services."Para 88:"If the statutory provisions are interpreted from this perspective then the difference sought to be drawn by the learned A.S.G. between developed and undeveloped land pales into insignificance. As such, when the entry in the Schedule III says 'sale of land' then it can be land in any form."Para 90:"However, in the present case what is sought to be argued by the revenue is that the exclusion of sale of land will not be available since the land is a developed piece of land. It is difficult for us to accept such argument as at the point of time when the buyer entered into the picture, the land was already developed. Thus, even without going to Schedule III, the only service which is supplied by the supplier to the recipient is the construction undertaken for the buyer and it is such supply alone which can be taxed. Hence the fact that the land is not a plain parcel of land but a developed land cannot be a ground for imposing tax on the sale of such land."Para 96:"The answer has to be in the negative. When the statutory provision requires valuation in accordance with the actual price paid and payable for the service and where such actual price is available, then tax has to be imposed on such actual value. Deeming fiction can be applied only where actual value is not ascertainable."Para 100:"Thus, mandatory application of deeming fiction of 1/3rd of total agreement value towards land even though the actual value of land is ascertainable is clearly contrary to the provisions and scheme of the CGST Act and therefore ultra-vires the statutory provisions."Para 105:"Such deeming fiction which leads to arbitrary and discriminatory consequences could be clearly said to be violative of Article 14 of the Constitution of India which guarantees equality to all and also frowns upon arbitrariness in law."Para 109:"Thus, the prescription under Section 15(5) of the CGST Act has to be by rules and not by notification. Be that as it may, wherever a delegated legislation is challenged as being ultra-vires the provisions of the CGST Act as well as violating Article 14 of the Constitution of India, the same cannot be defended merely on the ground that the Government had competence to issue such delegated piece of legislation. Even if it is presumed that the Government had the competence to fix a deemed value for supplies, if the deeming fiction is found to be arbitrary and contrary to the scheme of the statute, then it can be definitely held to be ultra-vires."Para 122:"In the result, the impugned Paragraph 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 and identical notification under the Gujarat Goods and Services Tax Act, 2017, which provide for a mandatory fixed rate of deduction of 1/3rd of total consideration towards the value of land is ultra-vires the provisions as well as the scheme of the GST Acts. Application of such mandatory uniform rate of deduction is discriminatory, arbitrary and violative of Article 14 of the Constitution of India."Para 123–124:"While we so conclude, the question is whether the impugned paragraph 2 needs to be struck down or the same can be saved by reading it down. In our considered view, while maintaining the mandatory deduction of 1/3rd for value of land is not sustainable in cases where the value of land is clearly ascertainable or where the value of construction service can be derived with the aid of valuation rules, such deduction can be permitted at the option of a taxable person particularly in cases where the value of land or undivided share of land is not ascertainable. The impugned paragraph 2 of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 and the parallel State tax Notification is read down to the effect that the deeming fiction of 1/3rd will not be mandatory in nature. It will only be available at the option of the taxable person in cases where the actual value of land or undivided share in land is not ascertainable."Final VerdictParagraph 2 of Notification No. 11/2017-Central Tax (Rate) read down — mandatory 1/3rd deemed deduction for land value held ultra-vires and violative of Article 14; it shall operate only as an option for the taxable person where actual land value is not ascertainable. Refund of excess tax directed to petitioner with 6% interest within 12 weeks. Advance ruling appellate orders in companion petitions quashed.  

BackgroundThe assessee is a registered dealer under the Karnataka Value Added Tax Act, 2003, engaged in the business of sale of textiles and readymade garments. The assessee purchased goods from registered dealers within the State, paid tax through account payee cheques, and issued tax invoices to buyers as required under Section 29 of the KVAT Act. The Audit Authority, upon audit of the books of accounts, rejected the returns and by order dated December 26, 2014 under Section 39(1) of the Act, disallowed the Input Tax Credit claimed by the assessee for the tax period September 2012 to March 2013, on the ground that certain selling dealers — namely M/s. Taksons, M/s. Jasky Exporters Pvt. Ltd., and M/s. Venus Printers — were suspected to be bogus dealers and had not remitted the tax to the Department. FactsThe assessee challenged the order of the Audit Authority before the Joint Commissioner of Commercial Taxes (Appeals), who dismissed the appeal by order dated October 30, 2015, upholding the re-assessment and penalty order. The assessee thereafter appealed to the Karnataka Appellate Tribunal (KAT), which by judgment dated August 21, 2017 allowed the appeal, set aside the orders of the authorities below, and restored the ITC claim of the assessee. The State of Karnataka filed the present revision petition before the High Court challenging the order of the KAT. The State contended that the Tribunal failed to appreciate that under the KVAT Act, only tax actually collected and discharged by the selling dealer is eligible to be availed as ITC by the purchasing dealer, and that the assessee failed to prove the genuineness of the transactions and that the selling dealers were not bogus. The assessee, on the other hand, maintained that it had made purchases supported by proper documentation including account payee cheques reflected in the invoices themselves, thereby fully discharging its burden under Section 71 of the Act, and that it cannot be made responsible for the failure of the selling dealer to remit tax. Court Observations (Verbatim — Crucial Extracts)"From perusal of these documents, it can safely be concluded that the transaction is not a bogus transaction or make believe transaction. Since M/s. Tallam Apparels is not a bogus dealer, as is evident from the documents produced by the assessee, dis-allowing of input tax is incorrect. There cannot be any dispute, that burden is cast on the assessee to establish the transaction to lay a claim for deduction of input tax by production of necessary documents. This Court is of the considered opinion that the assessee has discharged this burden by placing necessary documents referred to supra. The details of the account payee cheques mentioned in the invoice itself demonstrates that the amount is transferred from the assessee to the dealer through the Bank which fact establishes that the transaction is not a bogus transaction." — Para 12"In the case on hand, if M/s. Tallam Apparels has not remitted the tax to the Department, for which assessee cannot be penalized." — Para 13"Under the scheme of the Act, there is no power vested in the authority to proceed against the assessee for non-remittance of tax by his purchaser. This aspect of the matter has been rightly considered by the Karnataka Appellate Tribunal in the right perspective." — Para 14 Final VerdictThe High Court of Karnataka dismissed the State's revision petition and upheld the order of the Karnataka Appellate Tribunal. It was held that once the assessee had established the genuineness of purchases through proper documentation including account payee cheques, ITC could not be denied merely on the ground that the selling dealer had not remitted tax to the Department, as the assessee cannot be penalized for the default of the selling dealer.  

Facts :The petitioner’s goods were detained during transit through a detention order (Form GST MOV-06) on the ground that the invoice value was lower than the MRP and HSN code was wrongly mentioned. The petitioner challenged the detention contending that these grounds do not justify detention under Sections 129 or 130 of the GST Act. It was also contended that there was no discrepancy in tax rate or supporting documents accompanying the goods. The issue arose from detention at a parcel godown during movement of goods.Court Decision:The Court held that undervaluation with reference to MRP is not a valid ground for detention of goods under the GST Act. There is no statutory provision prohibiting sale of goods below MRP, and such comparison cannot justify detention. The Court further held that incorrect HSN classification, without impact on tax rate, does not warrant detention. The detention order was quashed and authorities were directed to release the goods forthwith. Directions were also issued to the Commissioner to ensure such unwarranted detentions are not repeated.

Facts :The petitioners, registered dealers under the DVAT Act, claimed Input Tax Credit on purchases supported by valid tax invoices from registered selling dealers. The tax authorities denied ITC on the ground that the selling dealers had not deposited the tax with the Government or had not properly disclosed the transactions. The denial was based on Section 9(2)(g) of the DVAT Act. Petitioners contended that they had complied with all statutory requirements and could not control the conduct of selling dealers.  Court Decision:The High Court held Section 9(2)(g) unconstitutional to the extent it denies ITC to bona fide purchasing dealers. The Court held that the provision fails to distinguish between genuine purchasers and those involved in fraud or collusion, thereby violating Article 14 of the Constitution. It was held that a purchasing dealer who has taken all reasonable steps, such as verifying registration and obtaining valid tax invoices, cannot be denied ITC due to default of the selling dealer. However, ITC can be denied where fraud, collusion, or lack of genuineness is established. Cases Referred by Court:•    K.T. Moopil Nair v. State of Kerala •    State of Kerala v. Haji and Haji •    Shri Ram Krishna Dalmia v. Justice S.R. Tendolkar •    Budhan Choudhry v. State of Bihar •    Gheru Lal Bal Chand v. State of Haryana •    Shanti Kiran India Pvt. Ltd. v. Commissioner, Trade and Tax Department •    Rajbala v. State of Haryana •    Binoy Viswam v. Union of India •    Shayara Bano v. Union of India •    Mahalaxmi Cotton Ginning Pressing & Oil Industries v. State of Maharashtra •    Jayam & Co. v. Assistant Commissioner