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Latest GST Case Law and Judgements
S.No Name Date of Order Subject Actions
181Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors.02-08-2023forms under GST (Sections involved: Section 16(2) and Section 73 of the West Bengal Goods and Services Tax Act, 2017) View Download

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)   

Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors. 02-08-2023
forms under GST (Sections involved: Section 16(2) and Section 73 of the West Bengal Goods and Services Tax Act, 2017)

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)   

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182Pepsico India Holdings Pvt. Ltd. vs. Union of India & 3 Ors.13-02-2023Whether issuance of a Demand-cum-Show Cause Notice under Section 73(1) of the CGST Act, 2017 without prior issuance of Form GST ASMT-10 under Section 61 read with Rule 99 of CGST Rules, 2017 is legally valid and jurisdictionally competent. View Download

BACKGROUND The Department issued a Demand-cum-Show Cause Notice under Section 73(1) of the CGST Act alleging wrongly availed Input Tax Credit amounting to Rs. 19.51 crores for Financial Year 2017-18. The alleged discrepancy was that the petitioner-assessee had not submitted information in Table 14 of Form GSTR-9C, resulting in a mismatch with details in Form GSTR-9. The assessee challenged the notice before the High Court contending that Table 14 of GSTR-9C had been made optional for FY 2017-18 onwards by a series of Government Notifications, and more crucially, that the mandatory pre-condition of issuing Form GST ASMT-10 under Section 61 read with Rule 99 was never complied with before jumping directly to the SCN under Section 73(1). The Department admitted non-issuance of Form GST ASMT-10 but argued that CAG letters had been sent to the assessee and that natural justice was not violated since the SCN itself provided an opportunity of hearing. CRUCIAL COURT OBSERVATIONS (Verbatim)"Prior to issuance of a show cause notice under Section 73[1] of the CGST Act, 2017, it is mere discrepancy. At that stage, the alleged discrepancy would only be a discrepancy simplicitor but at the stage of issuance of Demand-cum-Show Cause Notice under Section 73[1] of the CGST Act, 2017, there is formation of a prima facie opinion on the part of the Proper Officer that there is an act, which is in violation of the statutory obligation cast on the noticee.""The issues raised in the present writ petition, prima facie, are not relatable to any disputed questions of fact. The petitioner has raised a contention that the statutory prescriptions contained in Section 61 and Section 73 of CGST Act, 2017 r/w Rule 99 of the CGST Rules, 2017 have not been adhered to and without adherence to the conditions precedent, that is, issuance of notice to the registered person in Form GST ASMT-10 to provide the noticee either to accept or not to accept the discrepancy or to furnish an explanation for the discrepancy in Form GST ASMT-11 or not to furnish any explanation, at a period of time anterior to the impugned Demand-cum-Show Cause Notice, the Proper Officer could not have assumed jurisdiction to issue the Demand-cum-Show Cause Notice under sub-section [1] of Section 73 of the CGST Act, 2017.""Prima facie, this Court finds force in the above contentions advanced by the petitioner that an act of issuance of the impugned Demand-cum-Show Cause Notice dated 05.09.2023 under Section 73[1] of the CGST Act, 2017 by the Proper Officer was without compliance of the mandatory conditions precedent, prescribed under the CGST Act, 2017 and the CGST Rules, 2017, more particularly, the provisions of Section 61 of the CGST Act, 2017 r/w Rule 99 of the CGST Rules, 2017, to derive jurisdiction to issue such a Demand-cum-Show Cause Notice under Section 73[1] of the CGST Act, 2017." FINAL VERDICT The High Court stayed the operation of the impugned Demand-cum-Show Cause Notice, finding prima facie force in the petitioner's contention that issuance of Form GST ASMT-10 is a mandatory condition precedent before invoking Section 73(1) and its non-compliance goes to the root of jurisdiction. 👍

Pepsico India Holdings Pvt. Ltd. vs. Union of India & 3 Ors. 13-02-2023
Whether issuance of a Demand-cum-Show Cause Notice under Section 73(1) of the CGST Act, 2017 without prior issuance of Form GST ASMT-10 under Section 61 read with Rule 99 of CGST Rules, 2017 is legally valid and jurisdictionally competent.

BACKGROUND The Department issued a Demand-cum-Show Cause Notice under Section 73(1) of the CGST Act alleging wrongly availed Input Tax Credit amounting to Rs. 19.51 crores for Financial Year 2017-18. The alleged discrepancy was that the petitioner-assessee had not submitted information in Table 14 of Form GSTR-9C, resulting in a mismatch with details in Form GSTR-9. The assessee challenged the notice before the High Court contending that Table 14 of GSTR-9C had been made optional for FY 2017-18 onwards by a series of Government Notifications, and more crucially, that the mandatory pre-condition of issuing Form GST ASMT-10 under Section 61 read with Rule 99 was never complied with before jumping directly to the SCN under Section 73(1). The Department admitted non-issuance of Form GST ASMT-10 but argued that CAG letters had been sent to the assessee and that natural justice was not violated since the SCN itself provided an opportunity of hearing. CRUCIAL COURT OBSERVATIONS (Verbatim)"Prior to issuance of a show cause notice under Section 73[1] of the CGST Act, 2017, it is mere discrepancy. At that stage, the alleged discrepancy would only be a discrepancy simplicitor but at the stage of issuance of Demand-cum-Show Cause Notice under Section 73[1] of the CGST Act, 2017, there is formation of a prima facie opinion on the part of the Proper Officer that there is an act, which is in violation of the statutory obligation cast on the noticee.""The issues raised in the present writ petition, prima facie, are not relatable to any disputed questions of fact. The petitioner has raised a contention that the statutory prescriptions contained in Section 61 and Section 73 of CGST Act, 2017 r/w Rule 99 of the CGST Rules, 2017 have not been adhered to and without adherence to the conditions precedent, that is, issuance of notice to the registered person in Form GST ASMT-10 to provide the noticee either to accept or not to accept the discrepancy or to furnish an explanation for the discrepancy in Form GST ASMT-11 or not to furnish any explanation, at a period of time anterior to the impugned Demand-cum-Show Cause Notice, the Proper Officer could not have assumed jurisdiction to issue the Demand-cum-Show Cause Notice under sub-section [1] of Section 73 of the CGST Act, 2017.""Prima facie, this Court finds force in the above contentions advanced by the petitioner that an act of issuance of the impugned Demand-cum-Show Cause Notice dated 05.09.2023 under Section 73[1] of the CGST Act, 2017 by the Proper Officer was without compliance of the mandatory conditions precedent, prescribed under the CGST Act, 2017 and the CGST Rules, 2017, more particularly, the provisions of Section 61 of the CGST Act, 2017 r/w Rule 99 of the CGST Rules, 2017, to derive jurisdiction to issue such a Demand-cum-Show Cause Notice under Section 73[1] of the CGST Act, 2017." FINAL VERDICT The High Court stayed the operation of the impugned Demand-cum-Show Cause Notice, finding prima facie force in the petitioner's contention that issuance of Form GST ASMT-10 is a mandatory condition precedent before invoking Section 73(1) and its non-compliance goes to the root of jurisdiction. 👍

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183Ram Prakash Chauhan v. Commissioner of Delhi (GST) & Anr.19-01-2023Validity of detention order and demand of tax and penalty under Section 129 of the CGST Act, 2017 for alleged defective documents accompanying goods in transit — whether payment of tax and penalty for release of detained goods amounts to voluntary payme View Download

BACKGROUNDThe petitioner, a sole proprietor trading in steel/iron bars, purchased a consignment of steel and sold it onward. An e-way bill was generated for transporting the goods directly from the seller's premises to the buyer's premises. The e-way bill reflected the petitioner's GSTIN, while the address mentioned was that of the buyer, since the goods had already been sold. RELEVANT FACTSThe truck carrying the goods was intercepted by GST authorities on 19-10-2020 at 11:00 p.m. and detained on the ground that the documents accompanying the goods were found defective. A detention order dated 23-10-2020 was passed, followed on the same date by a show-cause notice under Section 129(3) of the CGST Act stating the reason as "prima facie, the documents tendered are found to be defective" — without specifying any particular defect. Simultaneously, an order of demand of tax and penalty of Rs. 2,78,129 each was raised. Since the petitioner urgently required the goods, he paid the demanded tax and penalty to secure release of the goods. Thereafter, the petitioner filed an appeal, which was dismissed by the appellate authority on 31-12-2021, which also failed to disclose the specific discrepancy alleged between the e-way bill and the goods. The petitioner then filed the present writ petition before the Delhi High Court challenging both orders. COURT OBSERVATIONS (Verbatim)Para 20: "We are unable to accept that the order of demand and penalty is a consent order and the petitioner was precluded from challenging the same. The goods had been detained and it is not disputed that the same would not have been released unless the tax and penalty was paid. We are persuaded to accept that the petitioner had paid the tax and penalty for release of the goods and the said payment was not voluntary."Para 21: "As stated above, it is apparent that neither the show-cause notice nor the order of demand clearly sets out the reason for imposing the tax liability as well as penalty."Para 22: "In the given facts, we are of the view that it would be apposite to remand the matter to the GST officer concerned to decide afresh after giving the petitioner full opportunity to address the allegation against him." FINAL VERDICT 👍Both the order dated 23-10-2020 raising demand of tax and penalty, and the appellate order dated 31-12-2021, were set aside. The matter was remanded to the GST officer concerned, who was directed to issue a fresh show-cause notice within two weeks and pass a fresh order after affording the petitioner a reasonable opportunity of hearing. 

Ram Prakash Chauhan v. Commissioner of Delhi (GST) & Anr. 19-01-2023
Validity of detention order and demand of tax and penalty under Section 129 of the CGST Act, 2017 for alleged defective documents accompanying goods in transit — whether payment of tax and penalty for release of detained goods amounts to voluntary payme

BACKGROUNDThe petitioner, a sole proprietor trading in steel/iron bars, purchased a consignment of steel and sold it onward. An e-way bill was generated for transporting the goods directly from the seller's premises to the buyer's premises. The e-way bill reflected the petitioner's GSTIN, while the address mentioned was that of the buyer, since the goods had already been sold. RELEVANT FACTSThe truck carrying the goods was intercepted by GST authorities on 19-10-2020 at 11:00 p.m. and detained on the ground that the documents accompanying the goods were found defective. A detention order dated 23-10-2020 was passed, followed on the same date by a show-cause notice under Section 129(3) of the CGST Act stating the reason as "prima facie, the documents tendered are found to be defective" — without specifying any particular defect. Simultaneously, an order of demand of tax and penalty of Rs. 2,78,129 each was raised. Since the petitioner urgently required the goods, he paid the demanded tax and penalty to secure release of the goods. Thereafter, the petitioner filed an appeal, which was dismissed by the appellate authority on 31-12-2021, which also failed to disclose the specific discrepancy alleged between the e-way bill and the goods. The petitioner then filed the present writ petition before the Delhi High Court challenging both orders. COURT OBSERVATIONS (Verbatim)Para 20: "We are unable to accept that the order of demand and penalty is a consent order and the petitioner was precluded from challenging the same. The goods had been detained and it is not disputed that the same would not have been released unless the tax and penalty was paid. We are persuaded to accept that the petitioner had paid the tax and penalty for release of the goods and the said payment was not voluntary."Para 21: "As stated above, it is apparent that neither the show-cause notice nor the order of demand clearly sets out the reason for imposing the tax liability as well as penalty."Para 22: "In the given facts, we are of the view that it would be apposite to remand the matter to the GST officer concerned to decide afresh after giving the petitioner full opportunity to address the allegation against him." FINAL VERDICT 👍Both the order dated 23-10-2020 raising demand of tax and penalty, and the appellate order dated 31-12-2021, were set aside. The matter was remanded to the GST officer concerned, who was directed to issue a fresh show-cause notice within two weeks and pass a fresh order after affording the petitioner a reasonable opportunity of hearing. 

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184Genpact India Pvt. Ltd. vs. Union of India and Others11-11-2022Whether BPO services provided by an Indian company (Genpact India) to its overseas group entity (Genpact International Inc., USA) under a Master Services Sub-Contracting Agreement constitute View Download

Background & Relevant FactsThe petitioner, Genpact India Pvt. Ltd., is a BPO service provider registered under Haryana GST, employing approximately 50,000 employees. It is engaged in providing a host of BPO and IT-enabled services including maintaining vendor/customer master data, processing vendor invoices, book-keeping, software development, technical IT support, data analysis, supply chain management support etc. — all rendered from India remotely through telecommunication/internet links using its own infrastructure.The petitioner entered into a Master Services Sub-Contracting Agreement (MSA) dated 01.01.2013 with Genpact International Inc. (GI), a US entity. Under the MSA, the petitioner was sub-contracted by GI to actually perform and deliver BPO/IT services directly to GI's overseas customers, on a principal-to-principal basis. The petitioner raised invoices on GI and received payment in convertible foreign exchange. There was no separate agreement between the petitioner and GI's customers.For the period July 2017 to March 2018, the petitioner filed a refund application on 18.10.2018 claiming refund of unutilised ITC of Rs. 27,26,27,276/- under Section 16 of the IGST Act read with Section 54 of the CGST Act. The Deputy Commissioner by Order-in-Original dated 14.03.2019 sanctioned Rs. 26,34,61,625/- accepting the services as export of services.However, the Principal Commissioner exercised revision powers under Section 107(2) of the CGST Act and filed an appeal contending that the petitioner's services were "intermediary services" — relying on a Circular dated 18.07.2019 which was subsequently withdrawn on 04.12.2019. The Joint Commissioner (Appeals) by order dated 27.05.2020 held the services to be intermediary services and ordered recovery of the entire refund of Rs. 26,34,61,625/-.In an earlier round of litigation (CWP No. 10302/2020), this Court set aside the order dated 27.05.2020 and remanded the matter for fresh decision. The Appellate Authority on remand again passed order dated 15.02.2021 holding the petitioner to be an intermediary and denying the refund, additionally denying a further claim of Rs. 82,15,102/-. Refund applications for subsequent periods (April 2018–March 2019) were also rejected on identical grounds. Aggrieved by the order dated 15.02.2021, the present writ petition was filed. Court Observations (Verbatim)"A bare perusal of the recitals and relevant clauses of the MSA...do not in any manner indicate that petitioner is acting as an 'intermediary' so as to fall within the scope and ambit of the definition of 'intermediary' under Section 2(13) of the IGST Act. Such clauses cannot also be interpreted to conclude that the petitioner has facilitated the services. The said clauses are in relation to the modalities of how the actual work would be carried out and do not in any manner establish that the petitioner was required to arrange/facilitate a 3rd party to render the main service which has actually been rendered by the petitioner.""As per definition of 'intermediary' under Section 2(13) of the IGST Act the following three conditions must be satisfied for a person to qualify as an 'intermediary'; First, the relationship between the parties must be that of a principal-agency relationship. Second, the person must be involved in arrangement or facilitation of provisions of the service provided to the principal by a 3rd party. Third, the person must not actually perform the main service intended to be received by the service recipient itself.""There is no change in the legal position i.e. with regard to the scope and ambit of 'intermediary' services under the service tax regime vis-a-vis the GST regime and there being no change of facts as it is the MSA of 2013 (Annexure P-1) which continues to operate, the department cannot take a different view for different periods.""The finding recorded by the respondents-department to hold the petitioner to be in a principal agent relationship with the GI to be without any basis and to be clearly erroneous. The impugned order proceeds oblivious of Clause 21.6 of the MSA... Nothing in this Agreement shall constitute or be deemed to constitute a relationship of employer and employee, agency, joint venture or partnership between the parties hereto...""Even as per the afore-noticed circular dated 20.09.2021 and in reference to para 3.5 it stands clarified that sub-contracting for a service is not an 'intermediary' service.""The written statement seeks to justify the impugned order on grounds which are not even part of the impugned order and which is clearly impermissible in law." [Relying on Mohinder Singh Gill vs. Chief Election Commissioner]"The principle of consistency as such ought to apply in the present matter as well and we find merit in the stand taken on behalf of the petitioner that the view taken in the order in original dated 25.01.2018...holding the petitioner to be not an 'intermediary' under the MSA, should prevail even under the GST regime."Final VerdictWrit petition allowed. Impugned order dated 15.02.2021 quashed. Order-in-Original dated 14.03.2019 granting refund of Rs. 26,34,61,625/- restored. Directed that the benefit of this order shall enure to the petitioner for subsequent refunds as well. 👍 In favour of Assessee.   

Genpact India Pvt. Ltd. vs. Union of India and Others 11-11-2022
Whether BPO services provided by an Indian company (Genpact India) to its overseas group entity (Genpact International Inc., USA) under a Master Services Sub-Contracting Agreement constitute

Background & Relevant FactsThe petitioner, Genpact India Pvt. Ltd., is a BPO service provider registered under Haryana GST, employing approximately 50,000 employees. It is engaged in providing a host of BPO and IT-enabled services including maintaining vendor/customer master data, processing vendor invoices, book-keeping, software development, technical IT support, data analysis, supply chain management support etc. — all rendered from India remotely through telecommunication/internet links using its own infrastructure.The petitioner entered into a Master Services Sub-Contracting Agreement (MSA) dated 01.01.2013 with Genpact International Inc. (GI), a US entity. Under the MSA, the petitioner was sub-contracted by GI to actually perform and deliver BPO/IT services directly to GI's overseas customers, on a principal-to-principal basis. The petitioner raised invoices on GI and received payment in convertible foreign exchange. There was no separate agreement between the petitioner and GI's customers.For the period July 2017 to March 2018, the petitioner filed a refund application on 18.10.2018 claiming refund of unutilised ITC of Rs. 27,26,27,276/- under Section 16 of the IGST Act read with Section 54 of the CGST Act. The Deputy Commissioner by Order-in-Original dated 14.03.2019 sanctioned Rs. 26,34,61,625/- accepting the services as export of services.However, the Principal Commissioner exercised revision powers under Section 107(2) of the CGST Act and filed an appeal contending that the petitioner's services were "intermediary services" — relying on a Circular dated 18.07.2019 which was subsequently withdrawn on 04.12.2019. The Joint Commissioner (Appeals) by order dated 27.05.2020 held the services to be intermediary services and ordered recovery of the entire refund of Rs. 26,34,61,625/-.In an earlier round of litigation (CWP No. 10302/2020), this Court set aside the order dated 27.05.2020 and remanded the matter for fresh decision. The Appellate Authority on remand again passed order dated 15.02.2021 holding the petitioner to be an intermediary and denying the refund, additionally denying a further claim of Rs. 82,15,102/-. Refund applications for subsequent periods (April 2018–March 2019) were also rejected on identical grounds. Aggrieved by the order dated 15.02.2021, the present writ petition was filed. Court Observations (Verbatim)"A bare perusal of the recitals and relevant clauses of the MSA...do not in any manner indicate that petitioner is acting as an 'intermediary' so as to fall within the scope and ambit of the definition of 'intermediary' under Section 2(13) of the IGST Act. Such clauses cannot also be interpreted to conclude that the petitioner has facilitated the services. The said clauses are in relation to the modalities of how the actual work would be carried out and do not in any manner establish that the petitioner was required to arrange/facilitate a 3rd party to render the main service which has actually been rendered by the petitioner.""As per definition of 'intermediary' under Section 2(13) of the IGST Act the following three conditions must be satisfied for a person to qualify as an 'intermediary'; First, the relationship between the parties must be that of a principal-agency relationship. Second, the person must be involved in arrangement or facilitation of provisions of the service provided to the principal by a 3rd party. Third, the person must not actually perform the main service intended to be received by the service recipient itself.""There is no change in the legal position i.e. with regard to the scope and ambit of 'intermediary' services under the service tax regime vis-a-vis the GST regime and there being no change of facts as it is the MSA of 2013 (Annexure P-1) which continues to operate, the department cannot take a different view for different periods.""The finding recorded by the respondents-department to hold the petitioner to be in a principal agent relationship with the GI to be without any basis and to be clearly erroneous. The impugned order proceeds oblivious of Clause 21.6 of the MSA... Nothing in this Agreement shall constitute or be deemed to constitute a relationship of employer and employee, agency, joint venture or partnership between the parties hereto...""Even as per the afore-noticed circular dated 20.09.2021 and in reference to para 3.5 it stands clarified that sub-contracting for a service is not an 'intermediary' service.""The written statement seeks to justify the impugned order on grounds which are not even part of the impugned order and which is clearly impermissible in law." [Relying on Mohinder Singh Gill vs. Chief Election Commissioner]"The principle of consistency as such ought to apply in the present matter as well and we find merit in the stand taken on behalf of the petitioner that the view taken in the order in original dated 25.01.2018...holding the petitioner to be not an 'intermediary' under the MSA, should prevail even under the GST regime."Final VerdictWrit petition allowed. Impugned order dated 15.02.2021 quashed. Order-in-Original dated 14.03.2019 granting refund of Rs. 26,34,61,625/- restored. Directed that the benefit of this order shall enure to the petitioner for subsequent refunds as well. 👍 In favour of Assessee.   

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185Munjaal Manishbhai Bhatt v. Union of India06-05-2022Validity of mandatory 1/3rd deemed deduction towards land value under Paragraph 2 of Notification No. 11/2017-Central Tax (Rate) for computing GST on construction services involving transfer of land. View Download

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.  

Munjaal Manishbhai Bhatt v. Union of India 06-05-2022
Validity of mandatory 1/3rd deemed deduction towards land value under Paragraph 2 of Notification No. 11/2017-Central Tax (Rate) for computing GST on construction services involving transfer of land.

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.  

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186Tvl. Suguna Cutpiece Center & Batch vs. Appellate Deputy Commissioner (ST)(GST) & Others31-01-2022Whether GST registrations cancelled under Section 29(2)(c) of CGST/TNGST Acts for non-filing of returns for a continuous period of six months can be restored by the High Court under Article 226 of the Constitution, even where the statutory period of limit View Download

BACKGROUNDA batch of 27 Writ Petitions was filed by various small traders and businesspersons whose GST registrations were cancelled under Section 29(2)(c) of the CGST/TNGST Acts for non-filing of returns for a continuous period of six months. Show Cause Notices in prescribed form were issued to all petitioners and cancellation orders were passed after personal hearing opportunities. The cancellation orders ranged from the year 2018 to 2019. Some petitioners directly challenged the cancellation orders, while others challenged orders of Appellate Commissioners rejecting their appeals as time-barred, and a few challenged rejection of revocation applications. The Government had provided multiple amnesty opportunities through Order No.01/2020-Central Tax dated 25.06.2020 (for cancellations up to 12.06.2020) and Notification No.34/2021-Central Tax dated 29.08.2021 (extending deadline to 30.09.2021), but none of the petitioners availed these in time. The Appellate Commissioners correctly rejected all belated appeals as beyond the condonable period under Section 107 of the respective GST Acts. FACTSAll the petitioners had failed to file their GST returns for a continuous period of six months, resulting in cancellation of their registrations. After cancellation, they neither filed applications for revocation under Section 30 of the Act within 30 days, nor did they avail the extended amnesty opportunities granted by the Government on the recommendations of the GST Council to revive their registrations. When some of them filed appeals before Appellate Commissioners under Section 107 of the CGST/TNGST Acts, those appeals were rejected as beyond the condonable period of limitation — the delays ranging from 11 months to over 2 years. The Appellate Commissioners, being statutory authorities, had no jurisdiction to condone delay beyond the maximum period prescribed under Section 107. Several petitioners also pointed to the Supreme Court's COVID-19 limitation extension orders, CBIC Circular No.157/13/2021-GST dated 20.07.2021, Circular No.158/14/2021-GST dated 06.09.2021, and Notification No.34/2021-Central Tax dated 29.08.2021. One petitioner specifically raised an issue about the GST portal architecture not permitting filing of revocation applications despite dues being paid. The Court noted that while the Appellate Authorities rightly rejected the petitions under the statute, there was an overwhelming case for restoring the registrations in exercise of the extraordinary writ jurisdiction under Article 226. COURT OBSERVATIONS (Verbatim)"The law on the limitation has been well settled by the Hon'ble Supreme Court. In this connection, a reference is invited to the decision of the Hon'ble Supreme Court in M/s. Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur and Others, (2008) 3 SCC 70, wherein, it has been held that statutory appeal filed beyond the statutory period for condonation of delay under Section 35 of the Central Excise Act, 1944 cannot be condoned. This position of law applies to the facts of these cases.""As original or as appellate authority exercising power under the respective enactments, quasi judicial officers were bound by the provisions of the Act and the limitation under it, they have acted in accordance with law. They cannot look beyond the limitations prescribed under provisions of the Act. Therefore, no fault can be attributed to their action.""the provisions of the Goods and Services Tax Act, 2017 cannot be interpreted in such a manner, so as to debar an assessee, either from obtaining registration or reviving the lapsed/cancelled registration as such an interpretation would be not only contrary to the Article 19(1)(g) of the Constitution of India but also in violation of Article 14 and Article 21 of the Constitution of India.""In my view, no useful purpose will be served by keeping these petitioners out of the bounds of GST regime under the respective GST enactments other than to allow further leakage of the revenue and to isolate these petitioners from the main stream contrary to the objects of the respective GST enactments.""The purpose of GST registration is only to ensure just tax gets collected on supplies of goods or service or both and is paid to the exchequer. Keeping these petitioners outside the bounds of the GST regime is a self defeating move as no tax will get paid on the supplies of these petitioners.""The provisions of the GST enactments cannot be interpreted so as to deny the right to carry on Trade and Commerce to a citizen and subjects. The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of the defect in the scheme of the GST enactments. The right to carry on trade or profession also cannot be curtailed. Only reasonable restriction can be imposed. To deny such rights would militate against their rights under Article 14, read with Article 19(1)(g) and Article 21 of the Constitution of India.""This is a fit case for exercising the power under Article 226 of the Constitution of India in favour of the petitioners by quashing the impugned orders and to grant consequential relief to the petitioners. By doing so, the Court is effectuating the object under the GST enactment of levying and collecting just tax from every assessee who either supplies goods or service. Legitimate Trade and Commerce by every supplier should be allowed to be carried on subject to payment of tax and statutory compliance.""These petitioners deserve a chance and therefore should be allowed to revive their registration so that they can proceed to regularize the defaults."  FINAL VERDICTAll 27 Writ Petitions were allowed subject to conditions. The petitioners were directed to file all pending returns and pay the defaulted tax, interest, fine and fee within 45 days from receipt of the order, without adjusting from ITC. On compliance, the GST registrations shall stand revived forthwith. The respondents were directed to instruct GSTN to make necessary changes in the portal architecture within 30 days to enable filings. ITC, if any, to be utilized only after scrutiny and approval by competent authorities.👍 IN FAVOUR OF ASSESSEE CASES REFERRED BY THE COURTSingh Enterprises v. Commissioner of Central Excise, Jamshedpur & Others — (2008) P.R. Mani Electronics v. Union of India & Others — 2020 Tvl. Sunpenta Mining Service Pvt. Ltd. v. Assistant Commissioner (ST), Salem Suresh Trading Corporation v. Assistant Commissioner (Circle) of SGST, Coimbatore II —Mafatlal Industries Ltd. v. Union of India — (1997) In Re: Cognizance for Extension of Limitation — 2021  

Tvl. Suguna Cutpiece Center & Batch vs. Appellate Deputy Commissioner (ST)(GST) & Others 31-01-2022
Whether GST registrations cancelled under Section 29(2)(c) of CGST/TNGST Acts for non-filing of returns for a continuous period of six months can be restored by the High Court under Article 226 of the Constitution, even where the statutory period of limit

BACKGROUNDA batch of 27 Writ Petitions was filed by various small traders and businesspersons whose GST registrations were cancelled under Section 29(2)(c) of the CGST/TNGST Acts for non-filing of returns for a continuous period of six months. Show Cause Notices in prescribed form were issued to all petitioners and cancellation orders were passed after personal hearing opportunities. The cancellation orders ranged from the year 2018 to 2019. Some petitioners directly challenged the cancellation orders, while others challenged orders of Appellate Commissioners rejecting their appeals as time-barred, and a few challenged rejection of revocation applications. The Government had provided multiple amnesty opportunities through Order No.01/2020-Central Tax dated 25.06.2020 (for cancellations up to 12.06.2020) and Notification No.34/2021-Central Tax dated 29.08.2021 (extending deadline to 30.09.2021), but none of the petitioners availed these in time. The Appellate Commissioners correctly rejected all belated appeals as beyond the condonable period under Section 107 of the respective GST Acts. FACTSAll the petitioners had failed to file their GST returns for a continuous period of six months, resulting in cancellation of their registrations. After cancellation, they neither filed applications for revocation under Section 30 of the Act within 30 days, nor did they avail the extended amnesty opportunities granted by the Government on the recommendations of the GST Council to revive their registrations. When some of them filed appeals before Appellate Commissioners under Section 107 of the CGST/TNGST Acts, those appeals were rejected as beyond the condonable period of limitation — the delays ranging from 11 months to over 2 years. The Appellate Commissioners, being statutory authorities, had no jurisdiction to condone delay beyond the maximum period prescribed under Section 107. Several petitioners also pointed to the Supreme Court's COVID-19 limitation extension orders, CBIC Circular No.157/13/2021-GST dated 20.07.2021, Circular No.158/14/2021-GST dated 06.09.2021, and Notification No.34/2021-Central Tax dated 29.08.2021. One petitioner specifically raised an issue about the GST portal architecture not permitting filing of revocation applications despite dues being paid. The Court noted that while the Appellate Authorities rightly rejected the petitions under the statute, there was an overwhelming case for restoring the registrations in exercise of the extraordinary writ jurisdiction under Article 226. COURT OBSERVATIONS (Verbatim)"The law on the limitation has been well settled by the Hon'ble Supreme Court. In this connection, a reference is invited to the decision of the Hon'ble Supreme Court in M/s. Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur and Others, (2008) 3 SCC 70, wherein, it has been held that statutory appeal filed beyond the statutory period for condonation of delay under Section 35 of the Central Excise Act, 1944 cannot be condoned. This position of law applies to the facts of these cases.""As original or as appellate authority exercising power under the respective enactments, quasi judicial officers were bound by the provisions of the Act and the limitation under it, they have acted in accordance with law. They cannot look beyond the limitations prescribed under provisions of the Act. Therefore, no fault can be attributed to their action.""the provisions of the Goods and Services Tax Act, 2017 cannot be interpreted in such a manner, so as to debar an assessee, either from obtaining registration or reviving the lapsed/cancelled registration as such an interpretation would be not only contrary to the Article 19(1)(g) of the Constitution of India but also in violation of Article 14 and Article 21 of the Constitution of India.""In my view, no useful purpose will be served by keeping these petitioners out of the bounds of GST regime under the respective GST enactments other than to allow further leakage of the revenue and to isolate these petitioners from the main stream contrary to the objects of the respective GST enactments.""The purpose of GST registration is only to ensure just tax gets collected on supplies of goods or service or both and is paid to the exchequer. Keeping these petitioners outside the bounds of the GST regime is a self defeating move as no tax will get paid on the supplies of these petitioners.""The provisions of the GST enactments cannot be interpreted so as to deny the right to carry on Trade and Commerce to a citizen and subjects. The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of the defect in the scheme of the GST enactments. The right to carry on trade or profession also cannot be curtailed. Only reasonable restriction can be imposed. To deny such rights would militate against their rights under Article 14, read with Article 19(1)(g) and Article 21 of the Constitution of India.""This is a fit case for exercising the power under Article 226 of the Constitution of India in favour of the petitioners by quashing the impugned orders and to grant consequential relief to the petitioners. By doing so, the Court is effectuating the object under the GST enactment of levying and collecting just tax from every assessee who either supplies goods or service. Legitimate Trade and Commerce by every supplier should be allowed to be carried on subject to payment of tax and statutory compliance.""These petitioners deserve a chance and therefore should be allowed to revive their registration so that they can proceed to regularize the defaults."  FINAL VERDICTAll 27 Writ Petitions were allowed subject to conditions. The petitioners were directed to file all pending returns and pay the defaulted tax, interest, fine and fee within 45 days from receipt of the order, without adjusting from ITC. On compliance, the GST registrations shall stand revived forthwith. The respondents were directed to instruct GSTN to make necessary changes in the portal architecture within 30 days to enable filings. ITC, if any, to be utilized only after scrutiny and approval by competent authorities.👍 IN FAVOUR OF ASSESSEE CASES REFERRED BY THE COURTSingh Enterprises v. Commissioner of Central Excise, Jamshedpur & Others — (2008) P.R. Mani Electronics v. Union of India & Others — 2020 Tvl. Sunpenta Mining Service Pvt. Ltd. v. Assistant Commissioner (ST), Salem Suresh Trading Corporation v. Assistant Commissioner (Circle) of SGST, Coimbatore II —Mafatlal Industries Ltd. v. Union of India — (1997) In Re: Cognizance for Extension of Limitation — 2021  

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187LGW Industries Limited & Ors. v. Union of India & Ors. 13-12-2021ITC Eligibility from Fake Suppliers and Validity of Section 16(2)(c) CGST/WBGST Act. View Download

BackgroundThe petitioners challenged notices denying ITC on purchases and demanding penalty and interest. The GST authorities alleged that the suppliers were fake and non-existing, their bank accounts had been opened using fake documents, the petitioners had not verified their genuineness and identity, and the suppliers' registrations had subsequently been cancelled retrospectively covering the relevant transaction period.The petitioners contended that the transactions were genuine and supported by the required documents. They stated that the suppliers' registrations were shown as valid on the Government portal at the time of the transactions, payments including GST were made through banking channels, and the invoices were reflected on the GST portal in GSTR-2A. They argued that they could not be penalised merely because the suppliers were subsequently found to be fake unless the department established concrete material showing collusion between the purchasers and suppliers.Court ObservationThe Court observed, subject to further verification, that it could not be said that the petitioners had failed to comply with any statutory obligation before entering into the transactions or in verifying the genuineness of the suppliers.The Court directed that the genuineness of the transactions, actual payment of purchase consideration and GST, timing of the transactions vis-à-vis cancellation of the suppliers' registrations, and compliance with the statutory obligation to verify the identity of the suppliers should be examined. The Court also required consideration of the judgments relied upon by both sides.Final VerdictThe writ petitions were disposed of by remanding the matters to the concerned respondents for fresh consideration of the petitioners' entitlement to ITC. If the documents establish that the purchases were genuine, supported by valid documents and made before cancellation of the suppliers' registrations, the petitioners were to be granted the benefit of ITC.The authorities were directed to pass a reasoned and speaking order after giving an effective opportunity of hearing, considering the judgments relied upon by the petitioners, within eight weeks from communication of the order. 

LGW Industries Limited & Ors. v. Union of India & Ors. 13-12-2021
ITC Eligibility from Fake Suppliers and Validity of Section 16(2)(c) CGST/WBGST Act.

BackgroundThe petitioners challenged notices denying ITC on purchases and demanding penalty and interest. The GST authorities alleged that the suppliers were fake and non-existing, their bank accounts had been opened using fake documents, the petitioners had not verified their genuineness and identity, and the suppliers' registrations had subsequently been cancelled retrospectively covering the relevant transaction period.The petitioners contended that the transactions were genuine and supported by the required documents. They stated that the suppliers' registrations were shown as valid on the Government portal at the time of the transactions, payments including GST were made through banking channels, and the invoices were reflected on the GST portal in GSTR-2A. They argued that they could not be penalised merely because the suppliers were subsequently found to be fake unless the department established concrete material showing collusion between the purchasers and suppliers.Court ObservationThe Court observed, subject to further verification, that it could not be said that the petitioners had failed to comply with any statutory obligation before entering into the transactions or in verifying the genuineness of the suppliers.The Court directed that the genuineness of the transactions, actual payment of purchase consideration and GST, timing of the transactions vis-à-vis cancellation of the suppliers' registrations, and compliance with the statutory obligation to verify the identity of the suppliers should be examined. The Court also required consideration of the judgments relied upon by both sides.Final VerdictThe writ petitions were disposed of by remanding the matters to the concerned respondents for fresh consideration of the petitioners' entitlement to ITC. If the documents establish that the purchases were genuine, supported by valid documents and made before cancellation of the suppliers' registrations, the petitioners were to be granted the benefit of ITC.The authorities were directed to pass a reasoned and speaking order after giving an effective opportunity of hearing, considering the judgments relied upon by the petitioners, within eight weeks from communication of the order. 

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188Biharilal Chhaterpal vs. State of U.P. & Ors.16-11-2021Seizure of goods and penalty for absence of e-way bill in inter-State movement – Sections 129 and 68 of the CGST Act, 2017 read with Section 20(xv) of the IGST Act, 2017 and Rule 138 of the CGST Rules, 2017. View Download

Facts:The petitioner’s goods (barbed wire) being transported from Raipur (Chhattisgarh) to Sitapur (U.P.) were intercepted on 19.02.2018. The authorities seized the goods and imposed tax of ₹2,08,800 and equal penalty under Section 129(3) of the U.P. GST Act on the ground that the petitioner was not carrying a U.P. State e-way bill during transportation. The petitioner challenged the seizure and penalty orders before the High Court. Court Decision:The High Court held that the transaction involved inter-State movement of goods and therefore the provisions of the IGST Act and CGST Act would apply. At the relevant time (19.02.2018) the e-way bill system under the CGST Rules had not yet been implemented and the requirement of carrying a U.P. State e-way bill was not applicable to inter-State trade.The Court further observed that the petitioner was carrying valid documents such as tax invoice, consignment note and national e-way bill and IGST had already been paid. As the transportation was bona fide and the requirement of State e-way bill was not applicable, the seizure and penalty orders passed under Section 129(3) of the U.P. GST Act were held to be unsustainable. The impugned orders were quashed and the authorities were directed to refund the amount deposited as tax and penalty. Cases Referred by Court:•    Satyendra Goods Transport Corp. vs. State of U.P. & Ors.•    ASCICS Trading Company vs. Assistant State Tax Officer & Anr.•    Godrej & Boyce Manufacturing Co. Ltd. vs. State of U.P.•    Shaurya Enterprises vs. State of U.P. & Ors. 

Biharilal Chhaterpal vs. State of U.P. & Ors. 16-11-2021
Seizure of goods and penalty for absence of e-way bill in inter-State movement – Sections 129 and 68 of the CGST Act, 2017 read with Section 20(xv) of the IGST Act, 2017 and Rule 138 of the CGST Rules, 2017.

Facts:The petitioner’s goods (barbed wire) being transported from Raipur (Chhattisgarh) to Sitapur (U.P.) were intercepted on 19.02.2018. The authorities seized the goods and imposed tax of ₹2,08,800 and equal penalty under Section 129(3) of the U.P. GST Act on the ground that the petitioner was not carrying a U.P. State e-way bill during transportation. The petitioner challenged the seizure and penalty orders before the High Court. Court Decision:The High Court held that the transaction involved inter-State movement of goods and therefore the provisions of the IGST Act and CGST Act would apply. At the relevant time (19.02.2018) the e-way bill system under the CGST Rules had not yet been implemented and the requirement of carrying a U.P. State e-way bill was not applicable to inter-State trade.The Court further observed that the petitioner was carrying valid documents such as tax invoice, consignment note and national e-way bill and IGST had already been paid. As the transportation was bona fide and the requirement of State e-way bill was not applicable, the seizure and penalty orders passed under Section 129(3) of the U.P. GST Act were held to be unsustainable. The impugned orders were quashed and the authorities were directed to refund the amount deposited as tax and penalty. Cases Referred by Court:•    Satyendra Goods Transport Corp. vs. State of U.P. & Ors.•    ASCICS Trading Company vs. Assistant State Tax Officer & Anr.•    Godrej & Boyce Manufacturing Co. Ltd. vs. State of U.P.•    Shaurya Enterprises vs. State of U.P. & Ors. 

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189The State of Karnataka v. Tallam Apparels26-02-2021Whether a purchasing dealer can be denied Input Tax Credit (ITC) on the ground that the selling dealer has failed to remit the tax collected to the Government, despite the purchasing dealer having made genuine purchases supported by proper tax invoices an View Download

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.  

The State of Karnataka v. Tallam Apparels 26-02-2021
Whether a purchasing dealer can be denied Input Tax Credit (ITC) on the ground that the selling dealer has failed to remit the tax collected to the Government, despite the purchasing dealer having made genuine purchases supported by proper tax invoices an

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.  

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190State of Karnataka v. Tallam Apparels26-02-2021Disallowance of Input Tax Credit on allegation of non-genuine transactions and non-payment of tax by selling dealer under VAT (Sections involved: Section 70(1), Section 39(1), and relevant provisions of the Karnataka Value Added Tax Act, 2003) View Download

Facts :The assessee, a registered dealer dealing in garments, claimed input tax credit on purchases supported by invoices. The audit authority disallowed ITC under Section 39(1) alleging that transactions with certain dealers were not genuine and that the burden under Section 70 was not discharged. The First Appellate Authority upheld the disallowance, but the Karnataka Appellate Tribunal allowed the assessee’s appeal. The State filed a revision petition before the High Court challenging the Tribunal’s order. Court Decision:The High Court upheld the Tribunal’s order and dismissed the revision petition. It held that the assessee had discharged the burden under Section 70 by producing invoices and proof of payment through banking channels, establishing genuineness of transactions. The Court further held that once transactions are proved genuine, input tax credit cannot be denied merely because the selling dealer failed to remit tax. It was also held that the statute does not permit action against the purchasing dealer for default of the selling dealer. Cases Referred by Court:•    Microqual Techno Pvt. Ltd. v. Additional Commissioner of Commercial Taxes •    Packwell Industries v. State of Karnataka  

State of Karnataka v. Tallam Apparels 26-02-2021
Disallowance of Input Tax Credit on allegation of non-genuine transactions and non-payment of tax by selling dealer under VAT (Sections involved: Section 70(1), Section 39(1), and relevant provisions of the Karnataka Value Added Tax Act, 2003)

Facts :The assessee, a registered dealer dealing in garments, claimed input tax credit on purchases supported by invoices. The audit authority disallowed ITC under Section 39(1) alleging that transactions with certain dealers were not genuine and that the burden under Section 70 was not discharged. The First Appellate Authority upheld the disallowance, but the Karnataka Appellate Tribunal allowed the assessee’s appeal. The State filed a revision petition before the High Court challenging the Tribunal’s order. Court Decision:The High Court upheld the Tribunal’s order and dismissed the revision petition. It held that the assessee had discharged the burden under Section 70 by producing invoices and proof of payment through banking channels, establishing genuineness of transactions. The Court further held that once transactions are proved genuine, input tax credit cannot be denied merely because the selling dealer failed to remit tax. It was also held that the statute does not permit action against the purchasing dealer for default of the selling dealer. Cases Referred by Court:•    Microqual Techno Pvt. Ltd. v. Additional Commissioner of Commercial Taxes •    Packwell Industries v. State of Karnataka  

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