CA in Jaipur | CA. Yogesh Jangid |ITR Filing 2023 | Company Registration | NGO Registration | Income Tax Raid Cases | Audit | Inc Incroporation | CPA in India | Subsidy | Project Funding | GST | GST Raid Cases | Income Tax Notice Faceless | DRI Cases |

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:

category

Extension of Appeal Filing Time by the Appellate Authority

editor — Fri, 12 Apr 2024 05:00:41 +0000

Introduction:

The authority of the Appellate Authority to extend the period for filing an appeal was deliberated upon in the case of Jyanata Ghosh v. State of West Bengal by the Hon’ble Calcutta High Court.

Facts of the Case:

Mr. Jyanata Ghosh, referred to as the Petitioner, received a Show Cause Notice (SCN) which lacked essential details regarding personal hearing.
Following the SCN, an Order was issued on August 11, 2023, under Section 74 of the Central Goods and Services Tax Act, 2017, demanding a significant sum from the Petitioner for a specified period.
The issuance of this order violated principles of natural justice as it did not grant the Petitioner an opportunity for personal hearing.
Challenging this order, the Petitioner appealed before the Appellate Authority under Section 107 of the CGST Act, only to have the appeal dismissed on the grounds of limitation.

Issue:

Whether the Appellate Authority possesses the jurisdiction to extend the period for filing an appeal.

Held:

The Hon’ble Calcutta High Court directed that the Appellate Authority should have granted the Petitioner a personal hearing and decided the appeal on its merits, emphasizing the violation of the principle of natural justice.
The court cited precedents such as Murtaza B Kaukawala v. State of West Bengal and S.K. Chakraborty & Sons v. Union of India, highlighting that delay can be condoned if the principles of natural justice are violated.
It was further noted that the prescribed period for filing an appeal, initially set at 30 days, can be extended by the Appellate Authority, as mandated by Section 5 of the Limitation Act, 1963.
Consequently, the court condoned the delay in filing the appeal and allowed the writ petition by setting aside the impugned order dated January 17, 2024. Additionally, it ordered a stay on the recovery proceedings pending the disposal of the appeal case, upon the Petitioner’s deposit of the pre-deposit amount, thereby disposing of the writ petition in favor of the Petitioner.

category

Tax Authorities cannot retain the tax deposited under the cancelled GST registration

editor — Wed, 10 Apr 2024 05:38:08 +0000

Introduction:

In the case of Yogesh Rajendra Mehra v. Principal Commissioner of Central Goods and Services Tax [Writ Petition No. 1632 of 2024 dated February 20, 2024], the Hon’ble Bombay High Court addressed the issue of whether tax authorities can retain tax deposited under a cancelled GST registration. The court provided significant observations and rulings on this matter.

Facts of the Case:

Mr. Yogesh Rajendra Mehra, a scriptwriter, obtained GST registration on July 19, 2018. However, his registration was cancelled on January 01, 2019, due to non-filing of subsequent returns. Subsequently, Mr. Mehra applied for and obtained a fresh GST registration on March 26, 2022. During the first quarter of 2022, his chartered accountant mistakenly deposited Rs. 1,22,220/- as tax under the cancelled registration instead of the new one. Mr. Mehra then applied for a refund of the erroneously deposited tax.

Issue:

The central issue revolves around whether tax authorities can retain tax deposited under a cancelled GST registration.

Held:

The Bombay High Court held that tax authorities cannot retain tax deposited under a cancelled GST registration. The court emphasized that taxpayers cannot be expected to file returns and deposit tax under an invalid registration number. It was noted that the tax deposited under the cancelled registration was not valid as the registration itself was non-existent. The court also criticized the tax authorities’ rejection of the refund application on technical grounds, ruling that any deficiency in filing an appeal within the prescribed limitation period does not render the appeal barred by limitation. Therefore, the court ordered the refund of the erroneously deposited tax amount of Rs. 1,22,220/- along with permissible interest to Mr. Mehra within four weeks.

category

High Court Advocates Direct Communication, Urges Tax Department to Inform Taxpayers Prior to Action

editor — Wed, 10 Apr 2024 05:01:01 +0000

Introduction:

Certain demographics, including senior citizens, technologically hesitant individuals, Non-Resident Indians (NRIs), and those prone to forgetfulness, might be unaware of the Income Tax Department’s actions against them. The department initiates proceedings by uploading show-cause notices or summons to its online portal, without directly notifying these taxpayers via email or letter. Consequently, individuals who infrequently check the tax portal, as is common, may face unforeseen penalties and complications. This operational method by the tax authorities has raised concerns about its fairness.

High Court’s Critique:

Recently, the High Court criticized the tax authorities’ approach, highlighting the unreasonableness of expecting taxpayers to constantly monitor the e-portal for updates. In a case concerning the Munjal BCU Centre of Innovation and Entrepreneurship, the Punjab and Haryana High Court quashed a show-cause notice from November 2022. The court emphasized that legal provisions dictate the manner in which notices and orders must be served, rejecting the notion of notices being “presumed” received solely by placement on the e-portal.

Importance of Natural Justice:

An expert underscored the significance of natural justice in legal proceedings, emphasizing the principle of “audi alteram partem,” which requires both parties to be heard. Lack of communication regarding assessments, penalties, or other actions could result in hardships for taxpayers, missed deadlines, and ignorance of their right to respond, thereby increasing burdens for all parties involved.

Case Example: Munjal BCU:

Munjal BCU, dedicated to fostering innovation and startups in Ludhiana, received initial notices and reminders solely through the online tax portal. The court deemed this insufficient opportunity for the organization to present its case.

Historical Context:

Before 2009, the tax department primarily relied on physical mail for communication, transitioning to electronic means later. Placing communications solely on the income tax portal can pose tracking challenges, especially for certain demographics uncomfortable with technology. While portal accessibility is convenient, supplementary notifications via email and/or physical mail are necessary.

Expected Changes:

The court’s decision is expected to prompt the department to communicate through emails for various matters, including notices and summons.

Practitioners’ Concerns:

Tax practitioners have noted issues with recent proceedings, including notices not being visible on the portal and unreasonable response timeframes.

category

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:

category

GST Implications on Lump Sum Transfer Charges for Leasehold Rights

editor — Sat, 06 Apr 2024 04:51:43 +0000

In a recent ruling by the Uttar Pradesh Authority for Advance Rulings (AAR), Remarkable Industries (P.) Ltd. sought clarification regarding the GST implications on lump sum upfront premium paid as transfer charges for leasehold rights. The case, identified as Advance Ruling No. UP/ADRG/41/2023, offers significant insights into the classification and applicable GST rate concerning the transfer of leasehold rights.

Facts of the Case:

Remarkable Industries (P.) Ltd. ("the Applicant") operates in the manufacturing and selling of various products.
The Applicant acquired an industrial plot from the Noida Authority under a lease deed for a 99-year period.
The lease involved the payment of a lump sum upfront premium and subsequent annual lease charges.
After utilizing the plot for manufacturing purposes, the Applicant decided to transfer its leasehold rights to M/s S K Industries ("the Assignee") for consideration.
The transfer process required permission from the Noida Authority, payment of transfer charges by the buyer, and the execution of a fresh lease deed with the Assignee.
Notably, the transfer did not entail sub-leasing or creation of fresh benefits from the land; it solely involved the transfer of existing leasehold rights for consideration.

Issue:

Whether the activity of transferring leasehold rights by the Applicant constitutes sub-leasing and, if not, what is the appropriate classification and applicable GST rate for the said activity?

Held:

The Uttar Pradesh, AAR in Advance Ruling No. UP/ADRG/41/2023 held as follows:

The activity of the Applicant is akin to agreeing to transfer one's leasehold rights and does not amount to sub-leasing.
The transfer represents compensation for agreeing to transfer the leasehold rights to the Assignee without creating additional benefits from the land.
As per the CGST Act and Schedule II, the transaction is classified as a service rather than a transfer of immovable property.
The Applicant's right under the lease deed is extinguished after assignment, and there is no creation of fresh benefits from the land.
The transaction falls under "Other miscellaneous service" (SAC 999792) and is taxable at an 18% GST rate as per Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017.

category

Delhi High Court Invalidates Demand Order Due to Lack of Recorded Personal Hearing

editor — Fri, 05 Apr 2024 06:05:12 +0000

The Delhi High Court recently ruled on a GST case involving Electra Power Transmission Systems and the Commissioner of Delhi Goods and Service Tax.

Facts of the Case

Held

The main issue was whether the demand was justified given the petitioner's claim of appearance and attempted compliance, marred by administrative errors.
The petitioner argued that they did attend the hearing and submitted a reply, but due to an office error, crucial documents weren't uploaded. They sought another chance to present their case fully, with all necessary documentation.
The respondent maintained that the petitioner's response was unsatisfactory and noted their absence at the hearing, justifying the demand based on procedural defaults.
The Delhi High Court set aside the impugned order and remitted the case for re-adjudication. The court instructed the petitioner to submit all relevant documents and be given another hearing. No comment was made on the merits of the arguments, preserving all rights.

category

Madras High Court Strikes Down Excessive GST Demand on Trade Payables

editor — Sat, 30 Mar 2024 04:41:27 +0000

Introduction:

The Madras High Court invalidated the order demanding payment concerning all trade payables, asserting that it exceeded the boundaries outlined in the original show cause notice. This ruling is significant in the realm of audit cases and is poised to have widespread benefits.

Facts of the case:

The petitioner contested an order dated 31.12.2023, arguing its overreach beyond the purview of a preceding show cause notice by subjecting all trade payables to GST.
Following an audit report on 26.09.2023, the petitioner received a notice on 30.09.2023 proposing a tax of Rs. 43,66,708.14. However, the final order imposed a tax exceeding Rs. 90 crores, markedly surpassing the initial estimate.
Despite compliance with statutory Input Tax Credit (ITC) requirements, the petitioner faced penalties.
The crux of the matter lies in the imposition of GST on the entirety of the petitioner's trade payables, a move perceived by the petitioner as beyond the notice's scope and contrary to legal provisions.

Petitioner’s Argument:

The petitioner contends that the order unjustly expanded the taxable amount well beyond the initial estimation, unfairly taxing trade payables as a taxable supply despite adhering to ITC regulations.

Held:

The Madras High Court deemed the imposition of GST on trade payables, as reflected in financial statements, prima facie unsustainable.

The court nullified the order, instructing the petitioner to remit 10% of the disputed amount, excluding trade payables, and mandated a fresh review with adequate opportunity for the petitioner to present their case.

category

Discretion of Appellate Authority in Admitting Appeals Beyond Limitation Period

editor — Tue, 26 Mar 2024 04:48:21 +0000

In the case of Arvind Gupta v. Assistant Commissioner of Revenue State Taxes [Writ Petition Application No. 2904 of 2023 dated January 04, 2024], the esteemed Calcutta High Court determined that the Appellate Authority possesses the discretion to permit the submission of an appeal within one month after the expiration of the prescribed limitation period from the date of order communication, provided sufficient cause is demonstrated, as per Section 107(4) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Facts of the case:

The Appellate Authority retains discretion to accept appeals submitted after the limitation period.
The Calcutta High Court, in Arvind Gupta v. Assistant Commissioner of Revenue State Taxes [Writ Petition Application No. 2904 of 2023 dated January 04, 2024], affirmed that the Appellate Authority possesses discretion to entertain appeals within one month after the expiration of the limitation period as per Section 107(4) of the Central Goods and Services Tax Act, 2017 ("CGST Act").
Arvind Gupta, the petitioner, appealed before the Senior Joint Commissioner of Revenue, mentioned in the annexure to FORM GST APL-01 the period of delay and reasons for the delay:

Issue:

Whether the Appellate Authority may exercise discretion to admit appeals submitted within one month after the limitation period?

Held:

Relied on, the Hon’ble Division Bench in the matter of S.K. Chakraborty v. Union of India & Ors. (MAT 82 of 2022) where the Bench held that the provisions of Section 5 of the Limitation Act, 1963 have not been expressly or impliedly excluded by Section 107 of the CGST Act under Section 29(2) of the CGST Act. Therefore, Section 5 of the Limitation Act, 1963 stands attracted. Hence, the Respondent has the discretion to allow an appeal to be presented within one month after the expiry of the period of limitation stipulated from the date of communication of the order upon sufficient cause being shown as per Section 107 (4) of the CGST Act. Paraphrase
Observed that, it was well within the power of the Respondent to consider the prayer of the Petitioner for condonation of delay. The Impugned Order passed by the Respondent that there is no scope to condone the delay beyond four months suffers from infirmity.
Noted that, the delay was evident from the annexure to FORM GST APL-01 and the Petitioner was prevented by sufficient cause for not preferring the appeal within the statutory period.
Held that, the Respondent failed to exercise its jurisdiction. The delay in presenting the appeal before the Respondent was condoned. The Respondent was directed to consider the appeal on merit and decide the same in accordance with law upon giving an opportunity of hearing to the Petitioner.

category