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Audit wing of SGST Authority shall keep all proceedings in abeyance if the subject matter is pending before the CGST Authority

editor — Thu, 04 Apr 2024 10:57:29 +0000

The Audit division of the State Goods and Services Tax (SGST) Authority is mandated to suspend all actions if a matter is pending before the Central Goods and Services Tax (CGST) Authority, according to a ruling by the Calcutta High Court in the case of Mahabir Prasad Kedia v. Assistant Commissioner of State Tax [MAT No. 2388 of 2023 dated January 9, 2024].

Facts:

Mr. Mahabir Prasad Kedia, the Appellant, received an audit memo highlighting several discrepancies.
Upon receiving the audit notice, the Appellant informed the SGST Authority about a show cause notice (SCN) issued by the anti-evasion wing of the CGST Department on March 28, 2023, addressing the same issues for the financial years 2017-2018 to 2021-2022.
The Appellant responded to the Impugned SCN on May 04, 2023, and the matter was pending adjudication.
Despite the Appellant's submission, the audit wing of the SGST Authority overlooked it and proceeded with the matter.
The subject was pending adjudication by the CGST Authority, to whom the Appellant had submitted a reply on May 02, 2023.

Held:

The Calcutta High Court ruled that the SGST Authority's audit division should suspend proceedings concerning the discrepancy noted, as the matter was under consideration by the CGST Authority.
Following this decision, the SGST Authority issued an SCN on December 29, 2023, clarifying that the audit wing should not proceed with the matter.
Consequently, the appeal, along with related applications and writ petitions, was disposed of.
The SGST Authority was directed to halt all proceedings regarding the noted discrepancy, including the show cause notice issued on December 29, 2023, and adhere to the adjudication order from the CGST Authority regarding the Impugned SCN.

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Consolidation of Adjournment in GST Proceedings

editor — Wed, 27 Mar 2024 08:49:50 +0000

In the legal matter of Pioneer Co-Operative Car Parking Servicing and Constructions Society Ltd. against Senior Joint Commissioner [WPA No. 3092 of 2024 dated March 1, 2024] at the Calcutta High Court, the petition was resolved, establishing that an adjournment granted for Show Cause Notice (SCN) proceedings under Section 73 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) cannot be merged with an adjournment granted for other proceedings under GST.

Facts of the case:

Pioneer Co-Operative Car Parking Servicing and Constructions Society Ltd. (“the Petitioner”) is a cooperative society registered under the West Bengal Cooperative Societies Act, 1973. It operates in collecting parking fees. The Petitioner received an SCN on September 12, 2023, from the Revenue Department (“the Respondent”) under Section 73(1) of the CGST Act. The Petitioner responded to the notice. Subsequently, a Final Order dated November 6, 2023 (“the Impugned Order”) was issued, determining the tax liability under Section 73(9) of the CGST Act.

The Petitioner, dissatisfied with the Impugned Order, filed a writ petition alleging inadequate opportunity for a hearing.

Issue:

Whether adjournment granted for Show Cause Notice proceedings under Section 73 of the CGST Act can be clubbed together with adjournment granted for other proceedings under GST?

Held:

The Calcutta High Court, in the case of WPA No. 3092 of 2024, made the following determinations:

It was observed that under sub-section (5) of Section 75 of the CGST Act, the proper officer may grant adjournment upon sufficient cause shown, with written reasons. However, such adjournments should not exceed three times during the proceedings.
It was reasoned that adjournments granted to the Petitioner concerning proceedings under Section 61 of the CGST Act should not be combined with SCN proceedings. Thus, the Petitioner had adequate opportunities to respond to the SCN issued under Section 73(1) of the CGST Act.
The communication dated February 15, 2024, regarding tax recovery was deemed unsustainable and subject to annulment.
It was directed that the Petitioner must submit a response to the SCN, and the Respondent should schedule a personal hearing accordingly.

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Validity of Assessment Orders in Light of Assessee’s Response

editor — Wed, 27 Mar 2024 07:01:20 +0000

The Delhi High Court, in the case of Emco Cables Pvt. Ltd. v. Union of India [W.P. 1622 of 2024, February 27, 2024], addressed the issue of the validity of an assessment order when the Assessee’s response hadn’t been duly considered. The court emphasized the importance of taking into account the Assessee’s reply before issuing an assessment order. It was highlighted that if further details were needed, it was the responsibility of the Revenue Department to request them from the Assessee.

Facts of the case:

The case stemmed from a Show Cause Notice (SCN) dated September 24, 2023, issued by the Revenue Department against Emco Cables Pvt. Ltd. The notice accused the Assessee of under-declaring output tax, claiming excessive Input Tax Credit (ITC), and claiming ITC from canceled dealers and non-taxpayers. The Assessee responded to the notice with a detailed reply. However, the subsequent order dated December 29, 2023 (Impugned Order), found the Assessee’s reply unsatisfactory and directed further action without adequately considering the response.

Issue:

The central issue revolved around whether an assessment order lacking consideration of the Assessee’s response could be deemed valid.

Held:

The Delhi High Court’s ruling in W.P. 1622 of 2024 outlined the following key points:

Emphasized the obligation of the Proper Officer to thoroughly assess the Assessee's reply before forming an opinion on its sufficiency.
Noted the failure of the Proper Officer to seek additional details from the Assessee if deemed necessary, rather than dismissing the response outright.
Criticized the lack of evidence suggesting that the Proper Officer had indeed reviewed the Assessee's submission.
Set aside the Impugned Order and remanded the case back to the Proper Officer for reconsideration.

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Registration not to be cancelled retrospectively when vague SCN is issued and no reasonable opportunity granted to file reply

editor — Tue, 19 Mar 2024 12:25:25 +0000

The Delhi High Court, in the case of M/s. Friends Media Add Company vs. Principal Commissioner of Goods and Service Tax [W.P.(C) No. 1260 of 2024 dated February 12, 2024], altered the GST cancellation ruling to apply prospectively from the date of the show cause notice (SCN). The court held that GST registration should not be revoked retroactively if the SCN lacks clarity and no opportunity was given to contest the retrospective cancellation.

Facts of the case:

The Revenue Department (referred to as “the Respondent”) issued an SCN on August 25, 2023, to M/s. Friends Media Add Company (referred to as “the Petitioner”), alleging issuance of invoices or bills without actual supply of goods or services, resulting in improper claim of input tax credit or tax refund. Subsequently, the GST registration of the Petitioner was cancelled retroactively via an order dated December 12, 2023 (referred to as “the Impugned Order”).

The Petitioner challenged the Impugned Order through a writ petition before the High Court, arguing that the SCN lacked specificity as it did not cite any instances of invoices or bills issued without actual supply of goods or services, which formed the basis of the SCN issuance.

Issue:

Whether GST registration should be cancelled retrospectively when the SCN issued is vague in nature and no opportunity was granted to file objection against retrospective cancellation?

Held:

The Hon’ble Delhi High Court in Writ Petition (C) No. 1260 of 2024 held as under:

Section 29(2) of the Central Goods and Services Act, 2017, empowers the Proper Officer to cancel GST registration retrospectively, but this should not be done mechanically and must be based on objective criteria.
The mere failure to file returns for a certain period should not automatically lead to retrospective cancellation, especially if returns have been filed and taxes paid for other periods.
The Proper Officer must consider that retrospective cancellation could deny credit to the petitioner's customers for supplies made during the affected period.
The SCN did not adequately notify the petitioner of the possibility of retrospective cancellation.
The petitioner was not given an opportunity to object to the retrospective cancellation of GST registration.
Therefore, the court ordered that the cancellation be modified to operate prospectively from the date of issuance of the SCN.

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