IMPACT OF NON CONSTITUTION OF GST APPELLATE TRIBUNAL

[Mr. M. GOVINDARAJAN]

Appeal before Appellate Authority

Section 107 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides for filing appeal against the order of Adjudicating Authority before the Appellate Authority within 3 months from the date of communication of the order.  The Revenue may also file appeal against the order of the lower authority if it considers necessary to file appeal.  Such appeal shall be filed within six months from the date of communication of the decision of the Commissioner to file appeal.

Appeal before Appellate Tribunal

Section 109 of the Act provides for the constitution of Appellate Tribunal called as Goods and Services Tax Appellate Tribunal by the Central Government.  The Act provides for the constitution of National Bench and its other benches called Regional Bench.  Similarly State Benches are also to be established with its branches called as ‘Area Benches’.

Any person aggrieved by an order passed against him under section 107 of this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act may appeal to the Appellate Tribunal against such order within 3 months from the date of communication of order against which appeal is filed before the Appellate Tribunal.  The Revenue may also file appeal before the Appellate Tribunal if it  is aggrieved by the order of the Appellate Authority.

Validity of the constitution of Appellate Tribunal

The  constitution of the Goods and Services Tax Appellate Tribunal and the qualification and appointment of members has been challenged before Madras High Court by  Revenue Bar Association before Madras High Court in ‘Revenue Bar Association v. Union of India, GST Council’ – 2019 (9) TMI 983 – Madras High Court.  The Madras High Court held as below-

• Section 110(1)(b)(iii) of the CGST Act which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in GSTAT, is struck down.
• Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that the tribunal shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State), is struck down.

Due to the above decision of Madras High Court, the Centre could not constitute Appellate Tribunals.   Therefore the appeal could not be filed against the order of the Appellate Authority before Appellate Tribunal within the limitation period.  

Government’s clarifications

In order to remove difficulty arising in giving effect to the above provision of the Act, the Government, on the recommendations of the Council, has issued the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019.   It has been provided through the said Order that the appeal to tribunal can be made within 3 months (6 months in case of appeals by the Government) from the date of communication of order or date on which the President or the State President, as the case may be, of the Appellate Tribunal enters office, whichever is later.

In ‘A.B. Enterprises v.  The  State of UP through its Principal Secretary, Institutional Finance, Government of UP and 2 others’ – 2020 (6) TMI 215 – Allahabad High Court, the petitioner has preferred the instant petition under Article 226 of the Constitution challenging the seizure orders MOV 06 dated 31.7.2018 and consequential order MOV 09 dated 2.8.2018, passed by respondent no. 3 and also order dated 27.11.2019, passed by respondent no. 2 under Section 107(11) of the GST Act and has also prayed for a direction to the respondent authorities to refund the deposited amount to the petitioner.  The impugned orders are appealable under Section 112 of the C.G.S.T. Act, 2017. The appeal is to be filed within 90 days from the date on which the order sought to be appealed is communicated to the person preferring the appeal.  The instant petition has been filed by-passing the remedy of appeal under Section 112 of the Act on the ground that the appellate tribunal has not been constituted till date.

It has been pointed out by learned standing counsel that the Government, having regard to the difficulty faced by the assessees in filing appeal on account of non-constitution of the Tribunal and its Benches in various States and Union Territories, has issued Central Goods and Service Tax (Ninth Removal of Difficulties) Order, 2019 notified in the Gazette of India dated 3^rd  December, 2019 stipulating that in such a situation, the three months' period shall be considered to be the date on which the President or the State President, as the case may be, of the Appellate Tribunal after its constitution under Section 109, enters office.

The instant petition is disposed of by providing that the petitioner can invoke the remedy of filing appeal before the Tribunal in terms of the provisions of the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019.

Assessees’ problem

If the assessee is aggrieved against the order of the Appellate Authority he can file appeal to the Appellate Tribunal.  But in the present situation, due to non constitution of Appellate Tribunal appeal could not be filed by the assessee.  For that purpose he may communicate the jurisdictional officer that he proposes to file appeal before the Appellate Authority against the order of the Appellate Authority and the limitation for filing appeal may not be expired due to non constitutional of Appellate Tribunal.

If the assessee is satisfied with the orders of Appellate Authority and he wants to implement the order of the Appellate Authority.  In this case Revenue may decide to file appeal before the Appellate Tribunal and therefore it may not implement the order of Adjudicating Authority in favor of the assessee.

The Delhi High Court gave a remedy in such a situation in ‘Zones Corporate Solutions Private Limited v. Commissioner of GST and another’ – 2020 (7) TMI 287 – Delhi High Court, decided on 10.07.2020.   In this case the writ petition has been filed by the writ petitioner seeking a direction to the respondents to refund ₹ 1,40,99,149/- due to the petitioner along with interest which the respondents have failed to release despite two orders dated 23.07.2019 passed by the Commissioner (Appeals)-I, Delhi, which have attained finality.

 It has been averred that refund is due to the petitioner under the provisions of the Integrated Goods and Service Tax Act, 2017 and Delhi Goods and Services Act, 2017 on account of exports made by the petitioner and supplies of computer hardware goods made to SEZ units – which are termed as ‘zero rated supplies’ in GST.  The petitioner submitted that withholding of refund due to the petitioner is violative of Section 16 of IGST Act as well as Sections 54 and 56 of the Central Goods and Services Tax, Act, 2017.

The Revenue submitted that-

• The competent authority in pursuance to the opinion of the review branch has directed filing of an appeal before the Appellate Tribunal challenging the order in appeal passed by the Commissioner (Appeals).
• Inaction on the part of the Revenue of not disbursing the refund amount was owing to the non-functioning of the GST Appellate Tribunal which is beyond the control of the Revenue. 
• The petitioner had not provided the clear description and nature of service alleged to have been exported by it.
• As per the agreement entered into between the petitioner and its overseas client, the services to be provided were Business Processing services whereas as per the letter dated 19.7.2018 filed by the petitioner with the office of the respondent, the services stated to have been exported were I.T. related services. In fact, on the export invoices issued by the petitioner, there was no description or nature of services exported and in turn, the export invoices mentioned services such as rent, maintenance expenses, cab services, pantry and offices expenses on which there is no IGST involved.
• A claimant of refund, in respect of supply to SEZ unit, is required to produce the documents/evidence to substantiate the claim as prescribed under provisions of CGST laws. However, in the instant case, while the Adjudicating Authority asked the petitioner to submit the declaration from the SEZ unit as per Rule 89(2) f of CGST Rule, it failed to submit the same. Further, the learned Commissioner (Appeal) has also remained silent on this aspect of the matter while allowing the appeal of the petitioner and therefore, the same is flawed.

The Revenue prayed that the Revenue may be given some time to take recourse to an appropriate legal action against the appellate authority’s order and till then, the refund amount as sanctioned by the appellate authority may not be allowed to be disbursed to the petitioner.

The High Court observed that the petitioner has succeeded in appeal vide order dated 23.07.2019. Though nearly a year has passed, yet no proceeding has been filed challenging the said order till date.  The High Court opined that the petitioner cannot be asked to wait endlessly for the respondents to challenge the order dated 23.07.2019.  The High Court directed the Revenue to refund the amount as directed by the Commissioner (Appeals) vide order dated 23.07.2019 within four weeks.

Conclusion

There may be many cases like that of the petitioner who is entitled to claim refund or other benefits on the basis of the orders of Appellate Authority.  The same could not be availed if the Revenue is intended to file appeal before Appellate Tribunal which has not yet been constituted.  The Central Government is to put an end to this problem and solve the problems of the assessees.