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Understanding the Implications of the Kerala High Court’s Decision on Extension of Limitation for Issuance of Show Cause Notice

editor — Wed, 12 Jun 2024 07:15:06 +0000

Introduction:

In a recent landmark case, Faizal Traders Private Limited v. Deputy Commissioner, Central Tax and Central Excise, Palakkad, the Hon’ble Kerala High Court deliberated on the validity of Notifications extending the period of limitation for the issuance of Show Cause Notices under Section 168A of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). This article aims to dissect the facts of the case, explore the pertinent issue, and analyze the court’s decision.

Facts of the Case:

Faizal Traders Private Limited, operating in the IHK Service to the southern railway and supplying Top-up Coupon and Recharge Coupon of M/s. BSNL as a Franchisee, contested an assessment order-in-original dated June 21, 2023 (“the Impugned Order”). The Petitioner argued that the Impugned Order was barred by limitation and challenged Notification No. 13/2022-Central Tax dated July 05, 2022, and Notification No. 09/2023-Central Tax dated March 31, 2023 (“the Impugned Notifications”), which extended the time limit for the Revenue Department to issue Show Cause Notices.

Issue:

The central issue before the court was whether the Revenue Department had the authority to issue Notifications for extending the period of limitation under Section 168A of the CGST Act due to COVID-19 for the issuance of Show Cause Notices.

Held:

The Hon’ble Kerala High Court, in WP (C) No. 24810 of 2023, upheld the validity of the Impugned Notifications and dismissed the writ petition challenging them. The court observed that the Notifications were issued by the Central Government based on the recommendations of the GST Council, considering the impact of the COVID-19 pandemic on the Department’s operations. Noting the recommendation, the court highlighted that the limitation under Section 73 of the CGST Act was extended for the FY 2017-2018 until September 30, 2023, pursuant to the powers envisaged under Section 168A of the CGST Act, 2017. The court opined that the government had the authority to extend the limitation period for conducting proceedings under Section 73 of the CGST Act through the issuance of the Impugned Notifications, considering COVID-19 as a force majeure event.

Conclusion:

The Kerala High Court’s decision in Faizal Traders Private Limited v. Deputy Commissioner, Central Tax and Central Excise, Palakkad, sets a significant precedent regarding the extension of limitation for the issuance of Show Cause Notices under the CGST Act. By upholding the validity of the Impugned Notifications, the court recognizes the exceptional circumstances posed by the COVID-19 pandemic and affirms the government’s authority to address such situations through regulatory measures.

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Delhi High Court Orders Refund of ₹35 Lakh to GST Petitioner, Emphasizing Voluntary Compliance and Due Process

editor — Fri, 12 Apr 2024 06:45:30 +0000

Introduction:

The Delhi High Court’s decision mandates a refund of ₹35 lakh to a GST petitioner, underscoring the significance of voluntary compliance and adherence to due process.

Facts of the Case:

Issue:

Held:

Petitioner's Argument: Citing precedent cases, the petitioner argued that the deposit was made involuntarily under coercion, warranting a refund with interest.
Respondent's Argument: The respondent contended that the deposit was voluntary and proceeded with recovery under Section 73 of the GST Act through a Show Cause Notice.
Court Judgment: The Delhi High Court ruled in favor of the petitioner, directing the refund of ₹35,00,000 with 6% interest per annum from the date of deposit. The court deemed the deposit as non-voluntary and contrary to guidelines issued by the CBIC.

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GST Penalty Overturned by Calcutta High Court Due to Emergency Vehicle Substitution, Showcasing Compliance Flexibility

editor — Fri, 12 Apr 2024 06:23:41 +0000

Introduction:

The Calcutta High Court’s decision to quash a GST penalty related to an emergency vehicle change highlights the court’s recognition of flexibility in enforcing compliance.

Facts of the Case:

The petitioner lodged an appeal against the dismissal of their writ petition by the Calcutta HC, which was filed 20 months following an adverse order on June 14, 2022. The delay was attributed to non-receipt of the original order and the demise of the petitioner's first lawyer.
The controversy arose from a tax and penalty imposition concerning the transportation of goods without a valid e-way bill on November 20, 2021. This was due to an emergency vehicle change, preventing the timely amendment of the e-way bill.

Issue:

The central issue revolved around the justification for imposing tax and penalty for the absence of a valid e-way bill during the transportation of goods.

Held:

Petitioner's Argument: The petitioner contended that the delay in filing the writ was genuine and challenged the penalty, citing an emergency vehicle change that hindered the timely amendment of the e-way bill.
Respondent's Argument: The respondent upheld the penalty, highlighting the lack of a valid e-way bill as a compliance failure.
Court Judgment: The High Court ruled in favor of the petitioner, acknowledging the absence of intent to evade tax and the genuine circumstances causing the appeal's delay. Consequently, the tax and penalty were ordered to be revoked.
Non-resident taxpayers
Persons subject to TDS under section 51 of the CGST Act.

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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.

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