| S.No | Name | Date of Order | Subject | Actions |
|---|---|---|---|---|
| 101 | Veremax Technologie Services Limited vs Assistant Commissioner of Central Tax | 04-09-2024 | Show Cause Notice – Clubbing of multiple financial years in a single show cause notice under Section 73 of the CGST Act, 2017 – validity of consolidated show cause notice. | View Download |
Facts:The petitioner challenged the show cause notice dated 03.05.2024 and the Order-in-Original dated 21.11.2023 issued under Section 73 of the CGST/IGST/SGST Acts for the financial years 2017-18 (July 2017 to March 2018), 2018-19, 2019-20 and 2020-21. The petitioner contended that the department issued a single consolidated show cause notice covering multiple tax periods instead of issuing separate notices for each financial year.Court Decision:The Court held that under Section 73 of the CGST Act, the limitation period of three years for passing an order is calculated separately from the due date of furnishing the annual return for each financial year. Consequently, actions relating to different financial years must be treated independently.Relying on the principles laid down by the Supreme Court and the Madras High Court, the Court held that issuance of a single consolidated show cause notice for multiple financial years is contrary to the statutory scheme of the CGST Act.Accordingly, the Court allowed the writ petition and quashed the show cause notice dated 03.05.2024 issued for the tax periods 2017-18 to 2020-21. The Court clarified that the respondent is at liberty to issue separate show cause notices for each assessment year in accordance with Section 73 of the CGST Act.Cases Referred by Court:· Titan Company Ltd. v. Joint Commissioner of GST, W.P. No.33164 of 2023 (Madras High Court)· State of Jammu and Kashmir and Others v. Caltex (India) Ltd., AIR 1966 SC 1350 | ||||
| Veremax Technologie Services Limited vs Assistant Commissioner of Central Tax 04-09-2024 Show Cause Notice – Clubbing of multiple financial years in a single show cause notice under Section 73 of the CGST Act, 2017 – validity of consolidated show cause notice.Facts:The petitioner challenged the show cause notice dated 03.05.2024 and the Order-in-Original dated 21.11.2023 issued under Section 73 of the CGST/IGST/SGST Acts for the financial years 2017-18 (July 2017 to March 2018), 2018-19, 2019-20 and 2020-21. The petitioner contended that the department issued a single consolidated show cause notice covering multiple tax periods instead of issuing separate notices for each financial year.Court Decision:The Court held that under Section 73 of the CGST Act, the limitation period of three years for passing an order is calculated separately from the due date of furnishing the annual return for each financial year. Consequently, actions relating to different financial years must be treated independently.Relying on the principles laid down by the Supreme Court and the Madras High Court, the Court held that issuance of a single consolidated show cause notice for multiple financial years is contrary to the statutory scheme of the CGST Act.Accordingly, the Court allowed the writ petition and quashed the show cause notice dated 03.05.2024 issued for the tax periods 2017-18 to 2020-21. The Court clarified that the respondent is at liberty to issue separate show cause notices for each assessment year in accordance with Section 73 of the CGST Act.Cases Referred by Court:· Titan Company Ltd. v. Joint Commissioner of GST, W.P. No.33164 of 2023 (Madras High Court)· State of Jammu and Kashmir and Others v. Caltex (India) Ltd., AIR 1966 SC 1350 | ||||
| 102 | Anil Kumar Hajelay & Ors. v. Hon’ble High Court of Delhi, | 13-08-2024 | Urgency of Integration of Section 105 BNSS | View Download |
Facts of the CaseThe present proceedings arose out of an application filed by the Government of National Capital Territory of Delhi (GNCTD) seeking modification of paragraph 9 of an earlier order dated 18 July 2024 passed by the High Court. The earlier order had directed the Chief Secretary, GNCTD, to proceed with grant of “financial sanction” and to float a comprehensive tender for establishing hybrid court infrastructure in all 691 courts, including 14 pilot courts.The GNCTD submitted that the overall project involved expenditure exceeding Rs. 100 crore and, as per prevailing financial rules, required approval from the Expenditure Finance Committee. It was therefore requested that the expression “financial sanction” be replaced with “administrative sanction.” The GNCTD further sought permission to float tenders initially only for 14 pilot courts instead of all 691 courts, with eligibility conditions requiring bidders to have technical and financial competence to execute the entire project. It was also contended that floating a comprehensive tender at once might make it difficult to revise ICT specifications after testing the pilot courts.The matter thus came before the Court to determine:Whether paragraph 9 of the earlier order required modification regarding the nature of sanction.Whether the tender process should be limited to 14 pilot courts at the initial stage.Court Observations and DecisionThe Court held that mere substitution of the term “financial sanction” with “administrative sanction” was not appropriate. Instead, it directed that the expression be replaced with “administrative and financial sanction and all other necessary sanctions/approvals,” in accordance with applicable financial rules.On the request to limit the tender process to 14 pilot courts, the Court rejected the proposal. It observed that restricting the tender to pilot courts while imposing eligibility conditions related to all 691 courts could lead to complications and delay, thereby undermining comprehensive and timely execution of the project.The Court emphasized the urgent need for adequate hybrid court infrastructure in Delhi District Courts, particularly in light of the enactment and enforcement of new criminal laws, including Section 105 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which mandates audio-video recording of certain procedural acts. It held that expeditious implementation of infrastructure was essential.Accordingly, the Court directed the Chief Secretary, GNCTD, to proceed simultaneously and expedite the grant of administrative and financial sanction and all other necessary approvals for all 691 courts, as per the preliminary estimate dated 19 April 2024 amounting to Rs. 387,03,19,388/-, based on the configuration approved by the National Informatics Centre (NIC).The Court further directed that a comprehensive tender for all 691 courts, including 14 pilot courts, shall be floated. It clarified that the successful bidder must initially set up 14 hybrid courts on a pilot basis within one month from the date of award, and after approval by competent authorities, proceed with setting up the remaining courts with necessary modifications, if any. | ||||
| Anil Kumar Hajelay & Ors. v. Hon’ble High Court of Delhi, 13-08-2024 Urgency of Integration of Section 105 BNSSFacts of the CaseThe present proceedings arose out of an application filed by the Government of National Capital Territory of Delhi (GNCTD) seeking modification of paragraph 9 of an earlier order dated 18 July 2024 passed by the High Court. The earlier order had directed the Chief Secretary, GNCTD, to proceed with grant of “financial sanction” and to float a comprehensive tender for establishing hybrid court infrastructure in all 691 courts, including 14 pilot courts.The GNCTD submitted that the overall project involved expenditure exceeding Rs. 100 crore and, as per prevailing financial rules, required approval from the Expenditure Finance Committee. It was therefore requested that the expression “financial sanction” be replaced with “administrative sanction.” The GNCTD further sought permission to float tenders initially only for 14 pilot courts instead of all 691 courts, with eligibility conditions requiring bidders to have technical and financial competence to execute the entire project. It was also contended that floating a comprehensive tender at once might make it difficult to revise ICT specifications after testing the pilot courts.The matter thus came before the Court to determine:Whether paragraph 9 of the earlier order required modification regarding the nature of sanction.Whether the tender process should be limited to 14 pilot courts at the initial stage.Court Observations and DecisionThe Court held that mere substitution of the term “financial sanction” with “administrative sanction” was not appropriate. Instead, it directed that the expression be replaced with “administrative and financial sanction and all other necessary sanctions/approvals,” in accordance with applicable financial rules.On the request to limit the tender process to 14 pilot courts, the Court rejected the proposal. It observed that restricting the tender to pilot courts while imposing eligibility conditions related to all 691 courts could lead to complications and delay, thereby undermining comprehensive and timely execution of the project.The Court emphasized the urgent need for adequate hybrid court infrastructure in Delhi District Courts, particularly in light of the enactment and enforcement of new criminal laws, including Section 105 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which mandates audio-video recording of certain procedural acts. It held that expeditious implementation of infrastructure was essential.Accordingly, the Court directed the Chief Secretary, GNCTD, to proceed simultaneously and expedite the grant of administrative and financial sanction and all other necessary approvals for all 691 courts, as per the preliminary estimate dated 19 April 2024 amounting to Rs. 387,03,19,388/-, based on the configuration approved by the National Informatics Centre (NIC).The Court further directed that a comprehensive tender for all 691 courts, including 14 pilot courts, shall be floated. It clarified that the successful bidder must initially set up 14 hybrid courts on a pilot basis within one month from the date of award, and after approval by competent authorities, proceed with setting up the remaining courts with necessary modifications, if any. | ||||
| 103 | National Plasto Moulding The State of Assam & Ors. | 05-08-2024 | Constitutional validity of Sections 16(2)(c) and 16(2)(d) of the Central Goods and Services Tax Act, 2017 and the Assam Goods and Services Tax Act, 2017 — whether Input Tax Credit (ITC) can be denied to a bona fide purchasing dealer on account of the fa | View Download |
BackgroundA batch of writ petitions was filed by multiple registered dealers before the Gauhati High Court challenging the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, along with show cause notices issued to the petitioners. The core grievance in all the petitions was common — the Department sought to deny ITC to purchasing dealers on the ground that their respective selling dealers had failed to deposit the tax collected from them into the Government Treasury, despite the purchasing dealers having entered into genuine and bona fide transactions supported by valid tax invoices issued by validly registered selling dealers. FactsThe petitioners, being registered dealers, had purchased goods from registered selling dealers who had issued tax invoices in accordance with the provisions of the GST law. The purchasing dealers had duly paid the tax component to the selling dealers as part of their purchase transactions. However, the selling dealers failed to deposit the said tax into the Government Treasury. On this basis, the Department issued show cause notices to the purchasing dealers proposing to deny ITC claimed by them. The petitioners challenged both the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, as well as the show cause notices and consequential orders issued thereunder. The senior counsel for the petitioners submitted that the controversy was squarely covered by the judgment of the Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (2017 SCC OnLine Del 11286), wherein it was held that a purchasing dealer cannot be punished for the act of the selling dealer who failed to deposit tax collected. The respondents' counsel could not dispute that the controversy was covered by the said Delhi High Court judgment. Court Observations (Verbatim — Crucial Extracts)Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (as quoted and adopted by the Gauhati High Court):"Applying the law explained in the above decisions, it can be safely concluded in the present case that there is a singular failure by the Legislature to make a distinction between purchasing dealers who have bona fide transacted with the selling dealer by taking all precautions as required by the DVAT Act and those that have not. Therefore, there was need to restrict the denial of ITC only to the selling dealers who had failed to deposit the tax collected by them and not punish bona fide purchasing dealers. The latter cannot be expected to do the impossible. It is trite that a law that is not capable of honest compliance will fail in achieving its objective. If it seeks to visit disobedience with disproportionate consequences to a bona fide purchasing dealer, it will become vulnerable to invalidation on the touchstone of Article 14 of the Constitution." — Para 39"The court respectfully concurs with the above analysis and holds that in the present case, the purchasing dealer is being asked to do the impossible, i.e., to anticipate the selling dealer who will not deposit with the Government the tax collected by him from those purchasing dealers and therefore avoid transacting with such selling dealers. Alternatively, what section 9(2)(g) of the DVAT Act requires the purchasing dealer to do is that after transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed section 9(2)(g) of the DVAT Act places an onerous burden on a bona fide purchasing dealer." — Para 41"The court hereby holds that the expression 'dealer or class of dealers' occurring in section 9(2)(g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression 'dealer or class of dealers' in section 9(2)(g) is 'read down' in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution." — Para 53"The result of such reading down would be that the Department is precluded from invoking section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under section 40A of the DVAT Act." — Para 54Supreme Court Order on SLP (as quoted by the Gauhati High Court):"On hearing learned Additional Solicitor General appearing for the petitioner, we are not inclined to interfere with the impugned order. The special leave petition is dismissed."Gauhati High Court's Own Conclusion:"Having gone through the above referred judgments, we are of the view that the controversy raised in this batch of writ petitions is squarely covered by the decision of the Delhi High Court in the case of On Quest Merchandising India Private Limited (supra). Hence, the show cause notices impugned in the present writ petitions and the consequential orders are set aside. However, the Department is free to act in those cases, where the purchase transactions are not bona fide, in accordance with law." Final VerdictThe Gauhati High Court disposed of the batch of writ petitions by setting aside all show cause notices and consequential orders issued to the purchasing dealers. It was held that the controversy was squarely covered by the Delhi High Court judgment in On Quest Merchandising (supra) affirmed by the Supreme Court, and that ITC cannot be denied to bona fide purchasing dealers for the default of the selling dealer in depositing tax. However, the Department was expressly granted liberty to proceed against those purchasing dealers where the purchase transactions are found to be not bona fide. | ||||
| National Plasto Moulding The State of Assam & Ors. 05-08-2024 Constitutional validity of Sections 16(2)(c) and 16(2)(d) of the Central Goods and Services Tax Act, 2017 and the Assam Goods and Services Tax Act, 2017 — whether Input Tax Credit (ITC) can be denied to a bona fide purchasing dealer on account of the faBackgroundA batch of writ petitions was filed by multiple registered dealers before the Gauhati High Court challenging the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, along with show cause notices issued to the petitioners. The core grievance in all the petitions was common — the Department sought to deny ITC to purchasing dealers on the ground that their respective selling dealers had failed to deposit the tax collected from them into the Government Treasury, despite the purchasing dealers having entered into genuine and bona fide transactions supported by valid tax invoices issued by validly registered selling dealers. FactsThe petitioners, being registered dealers, had purchased goods from registered selling dealers who had issued tax invoices in accordance with the provisions of the GST law. The purchasing dealers had duly paid the tax component to the selling dealers as part of their purchase transactions. However, the selling dealers failed to deposit the said tax into the Government Treasury. On this basis, the Department issued show cause notices to the purchasing dealers proposing to deny ITC claimed by them. The petitioners challenged both the constitutional validity of Sections 16(2)(c) and 16(2)(d) of the CGST Act, 2017 and the Assam GST Act, 2017, as well as the show cause notices and consequential orders issued thereunder. The senior counsel for the petitioners submitted that the controversy was squarely covered by the judgment of the Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (2017 SCC OnLine Del 11286), wherein it was held that a purchasing dealer cannot be punished for the act of the selling dealer who failed to deposit tax collected. The respondents' counsel could not dispute that the controversy was covered by the said Delhi High Court judgment. Court Observations (Verbatim — Crucial Extracts)Delhi High Court in On Quest Merchandising India Private Limited v. Government of NCT of Delhi & Ors. (as quoted and adopted by the Gauhati High Court):"Applying the law explained in the above decisions, it can be safely concluded in the present case that there is a singular failure by the Legislature to make a distinction between purchasing dealers who have bona fide transacted with the selling dealer by taking all precautions as required by the DVAT Act and those that have not. Therefore, there was need to restrict the denial of ITC only to the selling dealers who had failed to deposit the tax collected by them and not punish bona fide purchasing dealers. The latter cannot be expected to do the impossible. It is trite that a law that is not capable of honest compliance will fail in achieving its objective. If it seeks to visit disobedience with disproportionate consequences to a bona fide purchasing dealer, it will become vulnerable to invalidation on the touchstone of Article 14 of the Constitution." — Para 39"The court respectfully concurs with the above analysis and holds that in the present case, the purchasing dealer is being asked to do the impossible, i.e., to anticipate the selling dealer who will not deposit with the Government the tax collected by him from those purchasing dealers and therefore avoid transacting with such selling dealers. Alternatively, what section 9(2)(g) of the DVAT Act requires the purchasing dealer to do is that after transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed section 9(2)(g) of the DVAT Act places an onerous burden on a bona fide purchasing dealer." — Para 41"The court hereby holds that the expression 'dealer or class of dealers' occurring in section 9(2)(g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression 'dealer or class of dealers' in section 9(2)(g) is 'read down' in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution." — Para 53"The result of such reading down would be that the Department is precluded from invoking section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under section 40A of the DVAT Act." — Para 54Supreme Court Order on SLP (as quoted by the Gauhati High Court):"On hearing learned Additional Solicitor General appearing for the petitioner, we are not inclined to interfere with the impugned order. The special leave petition is dismissed."Gauhati High Court's Own Conclusion:"Having gone through the above referred judgments, we are of the view that the controversy raised in this batch of writ petitions is squarely covered by the decision of the Delhi High Court in the case of On Quest Merchandising India Private Limited (supra). Hence, the show cause notices impugned in the present writ petitions and the consequential orders are set aside. However, the Department is free to act in those cases, where the purchase transactions are not bona fide, in accordance with law." Final VerdictThe Gauhati High Court disposed of the batch of writ petitions by setting aside all show cause notices and consequential orders issued to the purchasing dealers. It was held that the controversy was squarely covered by the Delhi High Court judgment in On Quest Merchandising (supra) affirmed by the Supreme Court, and that ITC cannot be denied to bona fide purchasing dealers for the default of the selling dealer in depositing tax. However, the Department was expressly granted liberty to proceed against those purchasing dealers where the purchase transactions are found to be not bona fide. | ||||
| 104 | Sunil Kumar K v. State Tax Officer & Ors. | 08-07-2024 | Validity of service of GST assessment order through common portal under Sections 169 and 146 | View Download |
Facts :The appellant challenged an assessment order on the ground that it was only uploaded on the GST portal and not otherwise communicated. It was contended that the portal was not notified for uploading orders and therefore service was invalid. The appellant claimed lack of knowledge due to delayed access to the portal. The Single Judge dismissed the writ petition directing the appellant to avail alternate remedy.Court Decision:The Division Bench held that Section 169 expressly permits service of orders by making them available on the common portal. It ruled that once a portal is notified under Section 146, it can be used for all statutory functions including communication of orders. The Court found that the appellant had in fact accessed and downloaded the order, and delay was attributable to the appellant. The appeal was dismissed and the order of the Single Judge was upheld. | ||||
| Sunil Kumar K v. State Tax Officer & Ors. 08-07-2024 Validity of service of GST assessment order through common portal under Sections 169 and 146Facts :The appellant challenged an assessment order on the ground that it was only uploaded on the GST portal and not otherwise communicated. It was contended that the portal was not notified for uploading orders and therefore service was invalid. The appellant claimed lack of knowledge due to delayed access to the portal. The Single Judge dismissed the writ petition directing the appellant to avail alternate remedy.Court Decision:The Division Bench held that Section 169 expressly permits service of orders by making them available on the common portal. It ruled that once a portal is notified under Section 146, it can be used for all statutory functions including communication of orders. The Court found that the appellant had in fact accessed and downloaded the order, and delay was attributable to the appellant. The appeal was dismissed and the order of the Single Judge was upheld. | ||||
| 105 | M. Trade Links v. Union of India & Ors. | 04-06-2024 | Challenge to validity and application of Input Tax Credit provisions under GST; denial of ITC due to supplier default and time limitation (Sections involved: Section 16(2)(c) and Section 16(4) of CGST Act, 2017 & SGST Act) | View Download |
Facts:The petitioners, registered dealers under GST, were denied Input Tax Credit despite possessing valid invoices, proof of payment, and receipt of goods/services. In several cases, suppliers either failed to remit tax or failed to reflect transactions in returns, leading to denial of ITC under Section 16(2)(c). The petitioners challenged the provisions as imposing an impossible burden on recipients and also contested the time limitation under Section 16(4). Multiple writ petitions raising similar issues were heard together. Court Decision:The High Court upheld the validity of Sections 16(2)(c) and 16(4) of the GST Act. The Court held that Input Tax Credit is not an absolute right but a statutory entitlement subject to conditions prescribed under the Act. It was held that fulfillment of all conditions under Section 16(2), including actual payment of tax to the Government, is mandatory for availing ITC. The Court further held that the time limit prescribed under Section 16(4) is valid and enforceable, and ITC cannot be claimed beyond the stipulated period. Cases Referred by Court:• On Quest Merchandising India Pvt. Ltd. v. Union of India • Commissioner of Trade and Taxes v. Arise India Ltd. • Jayam & Co. v. Assistant Commissioner • ALD Automotive Pvt. Ltd. v. Commercial Tax Officer | ||||
| M. Trade Links v. Union of India & Ors. 04-06-2024 Challenge to validity and application of Input Tax Credit provisions under GST; denial of ITC due to supplier default and time limitation (Sections involved: Section 16(2)(c) and Section 16(4) of CGST Act, 2017 & SGST Act)Facts:The petitioners, registered dealers under GST, were denied Input Tax Credit despite possessing valid invoices, proof of payment, and receipt of goods/services. In several cases, suppliers either failed to remit tax or failed to reflect transactions in returns, leading to denial of ITC under Section 16(2)(c). The petitioners challenged the provisions as imposing an impossible burden on recipients and also contested the time limitation under Section 16(4). Multiple writ petitions raising similar issues were heard together. Court Decision:The High Court upheld the validity of Sections 16(2)(c) and 16(4) of the GST Act. The Court held that Input Tax Credit is not an absolute right but a statutory entitlement subject to conditions prescribed under the Act. It was held that fulfillment of all conditions under Section 16(2), including actual payment of tax to the Government, is mandatory for availing ITC. The Court further held that the time limit prescribed under Section 16(4) is valid and enforceable, and ITC cannot be claimed beyond the stipulated period. Cases Referred by Court:• On Quest Merchandising India Pvt. Ltd. v. Union of India • Commissioner of Trade and Taxes v. Arise India Ltd. • Jayam & Co. v. Assistant Commissioner • ALD Automotive Pvt. Ltd. v. Commercial Tax Officer | ||||
| 106 | K-9 Enterprises vs. State of Karnataka | 02-04-2024 | Legality of blocking of Electronic Credit Ledger (ECL) under Rule 86A of CGST Rules, 2017 without pre-decisional hearing and without independent application of mind. | View Download |
BackgroundThe appellants — GST-registered businesses dealing in lead, lead scrap and allied goods — had availed Input Tax Credit (ITC) on purchases from GST-registered suppliers, which stood credited in their Electronic Credit Ledgers (ECL). The tax authorities, acting on a field visit report of the Assistant State Tax Officer, Vasco-da-Gama, Goa (an officer from another jurisdiction), which found certain suppliers to be non-existent or not conducting business from their registered place, issued orders dated 27.06.2023 blocking the ECL of the appellants by invoking Rule 86A of the CGST Rules, 2017. No pre-decisional hearing was granted to the appellants before blocking the ECL. The appellants challenged these orders before the Single Judge by way of writ petitions, which were disposed of rejecting the appellants' contentions. Aggrieved, the appellants filed the present intra-court writ appeals before the Division Bench. Court Observations (Verbatim / Near-Verbatim)On Pre-Decisional Hearing (Point No. 1):"Though Rule 86A does not expressly/specifically provide for adherence to principles of natural justice, the same would necessarily have to be read into Rule 86A and complied with while invoking the said provision.""When the ECL of the appellants was sought to be blocked and such credit cannot be utilised for upto 1 year, the said blocking would entail and result in serious civil consequences for the appellants warranting compliance with the principles of natural justice and providing an opportunity of hearing to the appellants.""Ordinarily, a post-decisional hearing is not a substitute for pre-decisional hearing and that pre-decisional hearing is important especially when the respondents-revenue passed the impugned orders which would entail and visit the appellants with serious civil consequences.""It was not physically possible for the appellants to immediately/forthwith encash/withdraw the ITC available in its ECL so as to warrant emergent/urgent blocking of the ECL without providing a pre-decisional hearing to the appellants.""Respondents-revenue committed a grave and serious error/illegality/infirmity in not providing/granting a pre-decisional hearing to the Appellant before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules."On 'Reasons to Believe' and Independent Application of Mind (Point No. 2):"Rule 86A, which in effect is the power to block ECL is drastic in nature which creates a disability for the taxpayer to avail of the credit in ECL for discharge of his tax liability which he is otherwise entitled to avail and therefore, all the requirements of Rule 86A would have to be fully complied with before the power thereunder is exercised; when this Rule requires arriving at a subjective satisfaction which is evident from the use of words, 'must have reasons to believe', the satisfaction must be reached on the basis of some objective material available before the authority and cannot be made on the flights of ones fancies or whims or caprices.""The electronic credit ledgers have been blocked solely on the basis of communication from another officer [Field visit report by the Asst. State Tax Officer, Vasco-D-Gama, (Goa)]. There was no tangible material to form any belief that the ITC lying in the appellants' ECL was on account of any fake invoice; it had proceeded to take action solely on the basis of a direction issued by another authority.""The impugned orders have been passed based on the communication received from other officers, without any independent application of mind. This shows that exercise of power under Rule 86A was not because he was independently satisfied about the need for blocking the ECL but, was due to the fact that he felt compelled to obey the command of another officer.""The impugned order discloses that the same has been passed mechanically and is based on borrowed satisfaction and does not meet the test of formation of an opinion... the impugned orders are bald, vague, cryptic, laconic, unreasoned and non-speaking and deserve to be set aside.""It is quite possible that the transaction, when entered into in 2017 or 2018 could be genuine and when the officer visits in 2020 or 2021, the business could have been closed and therefore the mere closure of business in 2020 or 2021 cannot be a basis for denying credit availed earlier.""A bonafide purchaser cannot be denied ITC on account of a supplier's default and the recipient cannot be made to suffer denial of ITC for the wrong doings of the supplier." Final VerdictAll six writ appeals were allowed. The common order of the Single Judge dated 27.07.2023 and all the ECL blocking orders dated 27.06.2023 / 02.06.2023 were set aside and quashed. 👍 | ||||
| K-9 Enterprises vs. State of Karnataka 02-04-2024 Legality of blocking of Electronic Credit Ledger (ECL) under Rule 86A of CGST Rules, 2017 without pre-decisional hearing and without independent application of mind.BackgroundThe appellants — GST-registered businesses dealing in lead, lead scrap and allied goods — had availed Input Tax Credit (ITC) on purchases from GST-registered suppliers, which stood credited in their Electronic Credit Ledgers (ECL). The tax authorities, acting on a field visit report of the Assistant State Tax Officer, Vasco-da-Gama, Goa (an officer from another jurisdiction), which found certain suppliers to be non-existent or not conducting business from their registered place, issued orders dated 27.06.2023 blocking the ECL of the appellants by invoking Rule 86A of the CGST Rules, 2017. No pre-decisional hearing was granted to the appellants before blocking the ECL. The appellants challenged these orders before the Single Judge by way of writ petitions, which were disposed of rejecting the appellants' contentions. Aggrieved, the appellants filed the present intra-court writ appeals before the Division Bench. Court Observations (Verbatim / Near-Verbatim)On Pre-Decisional Hearing (Point No. 1):"Though Rule 86A does not expressly/specifically provide for adherence to principles of natural justice, the same would necessarily have to be read into Rule 86A and complied with while invoking the said provision.""When the ECL of the appellants was sought to be blocked and such credit cannot be utilised for upto 1 year, the said blocking would entail and result in serious civil consequences for the appellants warranting compliance with the principles of natural justice and providing an opportunity of hearing to the appellants.""Ordinarily, a post-decisional hearing is not a substitute for pre-decisional hearing and that pre-decisional hearing is important especially when the respondents-revenue passed the impugned orders which would entail and visit the appellants with serious civil consequences.""It was not physically possible for the appellants to immediately/forthwith encash/withdraw the ITC available in its ECL so as to warrant emergent/urgent blocking of the ECL without providing a pre-decisional hearing to the appellants.""Respondents-revenue committed a grave and serious error/illegality/infirmity in not providing/granting a pre-decisional hearing to the Appellant before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules."On 'Reasons to Believe' and Independent Application of Mind (Point No. 2):"Rule 86A, which in effect is the power to block ECL is drastic in nature which creates a disability for the taxpayer to avail of the credit in ECL for discharge of his tax liability which he is otherwise entitled to avail and therefore, all the requirements of Rule 86A would have to be fully complied with before the power thereunder is exercised; when this Rule requires arriving at a subjective satisfaction which is evident from the use of words, 'must have reasons to believe', the satisfaction must be reached on the basis of some objective material available before the authority and cannot be made on the flights of ones fancies or whims or caprices.""The electronic credit ledgers have been blocked solely on the basis of communication from another officer [Field visit report by the Asst. State Tax Officer, Vasco-D-Gama, (Goa)]. There was no tangible material to form any belief that the ITC lying in the appellants' ECL was on account of any fake invoice; it had proceeded to take action solely on the basis of a direction issued by another authority.""The impugned orders have been passed based on the communication received from other officers, without any independent application of mind. This shows that exercise of power under Rule 86A was not because he was independently satisfied about the need for blocking the ECL but, was due to the fact that he felt compelled to obey the command of another officer.""The impugned order discloses that the same has been passed mechanically and is based on borrowed satisfaction and does not meet the test of formation of an opinion... the impugned orders are bald, vague, cryptic, laconic, unreasoned and non-speaking and deserve to be set aside.""It is quite possible that the transaction, when entered into in 2017 or 2018 could be genuine and when the officer visits in 2020 or 2021, the business could have been closed and therefore the mere closure of business in 2020 or 2021 cannot be a basis for denying credit availed earlier.""A bonafide purchaser cannot be denied ITC on account of a supplier's default and the recipient cannot be made to suffer denial of ITC for the wrong doings of the supplier." Final VerdictAll six writ appeals were allowed. The common order of the Single Judge dated 27.07.2023 and all the ECL blocking orders dated 27.06.2023 / 02.06.2023 were set aside and quashed. 👍 | ||||
| 107 | Shantanu Sanjay Hundekari vs. Union of India & Ors. | 18-03-2024 | Validity of show cause notice imposing penalty under Section 122(1A) and invoking Section 137 of the CGST Act against an employee of a company for alleged GST evasion by the company. | View Download |
Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning. | ||||
| Shantanu Sanjay Hundekari vs. Union of India & Ors. 18-03-2024 Validity of show cause notice imposing penalty under Section 122(1A) and invoking Section 137 of the CGST Act against an employee of a company for alleged GST evasion by the company.Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning. | ||||
| 108 | Prahitha Construction — GST on Transfer of Development Rights under JDA | 09-02-2024 | Whether transfer of Development Rights (TDR) by a landowner to a developer under a Joint Development Agreement (JDA) amounts to sale of land exempt under Entry 5 of Schedule III of the CGST Act, 2017, or constitutes a taxable supply of service under GST � | View Download |
BackgroundPrahitha Construction Pvt. Ltd., a commercial real estate developer, entered into a JDA dated 28.12.2017 with two landowners — M/s. Jitvan Land Limited and M/s. Janina Marine Properties Pvt. Ltd. — for development of land admeasuring 8.30 acres and 1.82 acres at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana into an IT/ITES and commercial office project. Under the JDA, the landowners granted permissive possession to the developer, who agreed to construct three towers. The developer was to receive the Developer's Undivided Share (UDS) of land and the built-up area as consideration, but only after handing over the Landowner's Share upon project completion. The JDA expressly stated that permissive possession shall not be construed as delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882. The petitioner challenged Notification No. 4/2018 as amended by Notification No. 23/2019-CT(Rate) dated 30.09.2019, which imposed GST on transfer of development rights under a JDA, seeking its declaration as ultra vires Articles 14, 246A and 265 of the Constitution and the CGST/TGST Act, 2017. Court Observations (Verbatim)"Reading of the aforesaid clause further gives a clear picture of the fact that mere execution of JDA by itself would not mean that the right, title and ownership of the property or a portion of that property stands transferred in the name of the petitioner/developer. There are certain conditions/milestones/stages which have to be crossed before which the petitioner would be entitled to have a certain element of right over the completed constructed area which has been agreed to be left at the disposal of the petitioner. But that does not mean that mere execution of the JDA would amount to transfer of right to the petitioner.""The transfer of development rights is hence a service under GST Law which the landowner is offering to the developer and that too for a consideration. Thus, the transfer of development rights is a service and not an outright sale of an immovable property.""From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the landowner selling his land and the JDA does not lead to sale of land by itself.""The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST.""On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4...it will clearly indicate that there is no automatic transfer of ownership given to the petitioner at the time of execution of the JDA...In the absence of any cogent and substantial material to establish right, title and ownership being created in favour of the petitioner/developer, the transfer of development rights as it stands is amenable to GST and cannot be brought within the purview of Entry 5 of Schedule-III of the GST Act.""The Notification No. 4 of 2018 dated 25.01.2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019, on its plain reading would reveal that it is not with which there is a charge created on the transfer of development rights, but in fact only provide for the time when the tax need to be paid.""Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits." Final VerdictThe Writ Petition was dismissed. The Court held that transfer of development rights under a JDA is a taxable supply of service under GST and does not amount to sale of land under Entry 5 of Schedule III of the CGST Act. The impugned Notification No. 23/2019-CT(Rate) dated 30.09.2019 was upheld as valid. | ||||
| Prahitha Construction — GST on Transfer of Development Rights under JDA 09-02-2024 Whether transfer of Development Rights (TDR) by a landowner to a developer under a Joint Development Agreement (JDA) amounts to sale of land exempt under Entry 5 of Schedule III of the CGST Act, 2017, or constitutes a taxable supply of service under GST �BackgroundPrahitha Construction Pvt. Ltd., a commercial real estate developer, entered into a JDA dated 28.12.2017 with two landowners — M/s. Jitvan Land Limited and M/s. Janina Marine Properties Pvt. Ltd. — for development of land admeasuring 8.30 acres and 1.82 acres at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana into an IT/ITES and commercial office project. Under the JDA, the landowners granted permissive possession to the developer, who agreed to construct three towers. The developer was to receive the Developer's Undivided Share (UDS) of land and the built-up area as consideration, but only after handing over the Landowner's Share upon project completion. The JDA expressly stated that permissive possession shall not be construed as delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882. The petitioner challenged Notification No. 4/2018 as amended by Notification No. 23/2019-CT(Rate) dated 30.09.2019, which imposed GST on transfer of development rights under a JDA, seeking its declaration as ultra vires Articles 14, 246A and 265 of the Constitution and the CGST/TGST Act, 2017. Court Observations (Verbatim)"Reading of the aforesaid clause further gives a clear picture of the fact that mere execution of JDA by itself would not mean that the right, title and ownership of the property or a portion of that property stands transferred in the name of the petitioner/developer. There are certain conditions/milestones/stages which have to be crossed before which the petitioner would be entitled to have a certain element of right over the completed constructed area which has been agreed to be left at the disposal of the petitioner. But that does not mean that mere execution of the JDA would amount to transfer of right to the petitioner.""The transfer of development rights is hence a service under GST Law which the landowner is offering to the developer and that too for a consideration. Thus, the transfer of development rights is a service and not an outright sale of an immovable property.""From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the landowner selling his land and the JDA does not lead to sale of land by itself.""The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST.""On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4...it will clearly indicate that there is no automatic transfer of ownership given to the petitioner at the time of execution of the JDA...In the absence of any cogent and substantial material to establish right, title and ownership being created in favour of the petitioner/developer, the transfer of development rights as it stands is amenable to GST and cannot be brought within the purview of Entry 5 of Schedule-III of the GST Act.""The Notification No. 4 of 2018 dated 25.01.2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019, on its plain reading would reveal that it is not with which there is a charge created on the transfer of development rights, but in fact only provide for the time when the tax need to be paid.""Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits." Final VerdictThe Writ Petition was dismissed. The Court held that transfer of development rights under a JDA is a taxable supply of service under GST and does not amount to sale of land under Entry 5 of Schedule III of the CGST Act. The impugned Notification No. 23/2019-CT(Rate) dated 30.09.2019 was upheld as valid. | ||||
| 109 | Shamhu Saran Agarwal and Company v. Additional Commissioner Grade-2 & Ors. | 31-01-2024 | Legality of detention and penalty under Section 129 GST on ground of undervaluation of goods | View Download |
Facts :The petitioner challenged a penalty order dated 20.12.2020 and appellate order dated 17.09.2021 passed under GST law. The goods were detained during transit solely on the ground of alleged undervaluation. All documents including invoice and e-way bill were available and there was no discrepancy in description of goods. The detention and penalty were confirmed by the authorities on the same ground.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129. It observed that when documents are proper and there is no mismatch, detention cannot be justified merely on valuation issues. The Court held that in cases of undervaluation, proceedings must be initiated under Sections 73 or 74 and not by detention and penalty during transit. Accordingly, the impugned penalty and appellate orders were quashed and set aside, with direction to refund any deposited amount.Cases Referred:Hindustan Coca Cola Pvt. Ltd. v. Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther caseJ.K. Synthetics Ltd. v. Commercial Taxes Officer | ||||
| Shamhu Saran Agarwal and Company v. Additional Commissioner Grade-2 & Ors. 31-01-2024 Legality of detention and penalty under Section 129 GST on ground of undervaluation of goodsFacts :The petitioner challenged a penalty order dated 20.12.2020 and appellate order dated 17.09.2021 passed under GST law. The goods were detained during transit solely on the ground of alleged undervaluation. All documents including invoice and e-way bill were available and there was no discrepancy in description of goods. The detention and penalty were confirmed by the authorities on the same ground.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129. It observed that when documents are proper and there is no mismatch, detention cannot be justified merely on valuation issues. The Court held that in cases of undervaluation, proceedings must be initiated under Sections 73 or 74 and not by detention and penalty during transit. Accordingly, the impugned penalty and appellate orders were quashed and set aside, with direction to refund any deposited amount.Cases Referred:Hindustan Coca Cola Pvt. Ltd. v. Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther caseJ.K. Synthetics Ltd. v. Commercial Taxes Officer | ||||
| 110 | Shamhu Saran Agarwal and Company vs Additional Commissioner Grade-2 & Others | 31-01-2024 | Whether goods can be detained and penalty imposed under Section 129 GST Act on the ground of undervaluation. | View Download |
Facts :The petitioner challenged penalty order dated 20.12.2020 and appellate order dated 17.09.2021 arising from detention of goods in transit. The goods were detained solely on the allegation of undervaluation despite accompanying invoice, e-way bill, and proper documents. The appellate authority affirmed the penalty on the same ground of undervaluation. The petitioner relied on departmental circular stating that goods should not be detained merely on valuation disputes.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129 of the Act. Where all documents are proper and there is no discrepancy, detention cannot be justified on valuation issues. Issues of undervaluation must be examined through proceedings under Sections 73 or 74 of the GST Act and not through detention proceedings. Penalty imposed under Section 129 on mere suspicion of undervaluation was held unsustainable and set aside. The impugned orders were quashed and consequential relief including refund was directed.Cases Referred:Hindustan Coca Cola Pvt. Ltd. vs Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther’s caseJ.K. Synthetics Ltd. vs Commercial Taxes Officer | ||||
| Shamhu Saran Agarwal and Company vs Additional Commissioner Grade-2 & Others 31-01-2024 Whether goods can be detained and penalty imposed under Section 129 GST Act on the ground of undervaluation.Facts :The petitioner challenged penalty order dated 20.12.2020 and appellate order dated 17.09.2021 arising from detention of goods in transit. The goods were detained solely on the allegation of undervaluation despite accompanying invoice, e-way bill, and proper documents. The appellate authority affirmed the penalty on the same ground of undervaluation. The petitioner relied on departmental circular stating that goods should not be detained merely on valuation disputes.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129 of the Act. Where all documents are proper and there is no discrepancy, detention cannot be justified on valuation issues. Issues of undervaluation must be examined through proceedings under Sections 73 or 74 of the GST Act and not through detention proceedings. Penalty imposed under Section 129 on mere suspicion of undervaluation was held unsustainable and set aside. The impugned orders were quashed and consequential relief including refund was directed.Cases Referred:Hindustan Coca Cola Pvt. Ltd. vs Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther’s caseJ.K. Synthetics Ltd. vs Commercial Taxes Officer | ||||
