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Supreme Court issues notices on challenge to anti-profiteering rules

editor — Sat, 20 Apr 2024 10:25:32 +0000

The Supreme Court has issued notices to the central government, the Central Board of Indirect Taxes and Customs (CBIC), the Goods and Services (GST) Council, and the National Anti-Profiteering Authority (NAA), which is now under the purview of the Competition Commission of India. These notices come in response to a petition filed by Swati Realty, challenging a Delhi High Court decision that upheld the constitutional validity of anti-profiteering provisions related to the GST system. Swati Realty argues that the High Court failed to recognize that these provisions are unconstitutional.

Earlier in February, the Supreme Court had also issued a notice to the Union government on a similar matter. The advocate representing the real estate player in the Supreme Court highlighted that the Delhi High Court agreed with the real estate companies’ assertion that the methodology employed by the NAA is flawed, especially in the real estate sector where there is no direct link between turnover and input tax credit (ITC) for a specific period.

The NAA was established in November 2017 to ensure that companies pass on the benefits of ITC and GST reductions to consumers by reducing prices. Since December 2022, the Competition Commission of India has been addressing complaints of profiteering by companies.

In January, the Delhi High Court upheld the constitutional validity of anti-profiteering provisions, stating that they aim to ensure a proportional reduction in prices when GST rates are lowered or due to ITC. The court ruled that these provisions are in the public interest and are consistent with the legislative authority granted under the Constitution.

Over 100 companies, including Hindustan Unilever, Patanjali, Jubilant Foodworks, and Phillips, had filed petitions against the anti-profiteering provisions in the High Court.

Source: https://www.business-standard.com/india-news/sc-issues-notice-to-centre-others-on-anti-profiteering-provisions-124041900719_1.html

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Calcutta High Court’s Verdict on GST Pre-Deposit Requirements

editor — Fri, 12 Apr 2024 10:29:32 +0000

Introduction:

In a recent ruling, the Calcutta High Court addressed the clarification of GST pre-deposit requirements, specifically focusing on the interpretation discrepancy between the GST Department and the GST Law.

Facts of the Case:

Issue:

Petitioner’s Argument:

Respondent’s Argument:

Held:

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High Court of Madras sets aside GST penalty, emphasizes fair hearing and pre-assessment payments in tax disputes.

editor — Tue, 09 Apr 2024 07:10:27 +0000

Introduction

The High Court of Madras recently ruled on a case involving a works contractor for government departments, addressing penalties imposed under the Tamil Nadu Goods and Services Tax Act, 2017. The court emphasized the importance of fair hearings and pre-assessment payments in tax disputes.

Facts of the Case

The petitioner, a works contractor, received an assessment order on April 19, 2023, due to discrepancies in their GSTR 1 and GSTR 3B returns.
A show cause notice was issued in February 2023.
On April 12, 2023, before the assessment order was issued, the petitioner paid Rs. 3,00,000/- towards their tax liability, citing delayed payments from government departments as the reason for the discrepancies and delayed payment.
The petitioner contested the imposition of a 100% penalty on the dues under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017.

Issue

The core issue revolves around the justification of imposing a 100% penalty on the petitioner, considering the pre-order payment and the circumstances leading to the discrepancies.

Petitioner’s Argument

Held

The court set aside the impugned order and directed the respondent to remit an additional Rs. 3,00,000/-. Moreover:

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Employees get ₹3,731 crore GST penalty demand; Bombay HC strikes it down

editor — Thu, 04 Apr 2024 05:43:47 +0000

Should an employee of a company be held responsible for forking out penalties related to tax demands raised on the company by revenue authorities? Goods and Services Tax (GST) enforcement officials believed so when they slapped a demand last September for a ₹3,731 crore penalty on a taxation manager and other employees of global logistics major Maersk for alleged tax evasion of the same amount by the company.

In a judgment that could bring relief to other employees at firms in the midst of GST disputes, the Bombay High Court last week struck down the demand and show cause notices issued by the Directorate General of Goods and Service Tax Intelligence in the case, terming them bad and illegal.

Terming it “highly unconscionable and disproportionate” for revenue officers to hold employees responsible for liabilities of the company, a division bench of Justice GS Kulkarni and Justice Firdosh P Pooniwalla held it would not be incorrect to contend that the purpose of issuing the show cause notice to the petitioner who is merely an employee, was designed to threaten and pressurize them.

GST officials had alleged that a sum of ₹1561 crore was wrongly utilized as Input Tax Credit by Maersk and those credits were wrongfully distributed. While Maersk is a foreign company which does not have any employee or fixed establishment in India, solely for the purpose of representing and acting on its behalf before the Indian tax authorities, the firm had given the power of attorney to some employees of its steamer agent in India, incorporated as Maersk Line India Pvt. Ltd.

“This ruling is significant for employees of large-sized businesses, where potentially interpretative GST positions are adopted by employees without any malafide intention. Such imposition of substantial penalties in recent investigations had caused lot of unrest amongst such employees,” an expert said.

Source: https://www.thehindu.com/business/employee-gets-3731-crore-gst-penalty-demand-bombay-hc-strikes-it-down/article68025394.ece

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High Court of Gujarat Rules on GST Case

editor — Thu, 04 Apr 2024 04:44:00 +0000

In a significant legal development, the High Court of Gujarat has recently issued a noteworthy ruling in the case of OTSUKA PHARMACEUTICAL INDIA PVT LTD versus UNION OF INDIA. This ruling addresses a crucial aspect pertaining to the Goods and Services Tax (GST) regime, particularly focusing on the retrospective application of amendments to Rule 108 of the CGST Rules, 2017. The case, denoted as R/SPECIAL CIVIL APPLICATION NO. 13209/210/212/213/215 of 2023, reached its culmination on 27th March 2024.

Facts of the Case:

The petitioner, OTSUKA PHARMACEUTICAL INDIA PVT LTD, contested against the UNION OF INDIA, asserting that Rule 108(3) of the CGST Rules should not be applicable in their situation. They contended that their online appeals were based on the Order-in-Original made available by the adjudicating authority.
The crux of the issue revolved around the requirement for the petitioner to submit the decision or order being appealed against within seven days of filing the appeal under sub-rule (1) of Rule 108, and the subsequent issuance of a final acknowledgment by the appellate authority indicating the appeal number.

Held:

The High Court determined that the petitioner was indeed obligated to adhere to the stipulated timeline for submitting the decision or order appealed against, as outlined in Rule 108.
While acknowledging the justifiability of the appellate authority's rejection of appeals due to delays, the Court referenced the Minutes of the 48th Meeting of the GST Council. This documented the Council's acceptance of recommendations put forth by the Law Committee.
According to these recommendations, when an order subject to appeal is issued or uploaded on the common portal and is accessible to the appellate authority, the necessity for the appellant to furnish a certified copy of such an uploaded order becomes inconsequential due to its online availability.
Consequently, the retrospective effect of the amendment to Rule 108, effective from 26th December 2022, was affirmed by the Court as being clarificatory in nature.
In light of this clarification, the impugned order passed by the appellate authority rejecting the appeal on grounds of delay was deemed untenable. Therefore, the High Court proceeded to quash and set aside the impugned order.

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