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GIST OF RECENT SUPREME COURT JUDGMENTS ON GST

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GIST OF RECENT SUPREME COURT JUDGMENTS ON GST
Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
September 27, 2022
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Supreme Court of India has been pronouncing judgments on various petitions and appeals on Goods and Services Tax (GST). Obliviously, these are important judgments deciding the issues or settling the relief in larger public interest. Some of the judgments like reopening of transitional credit window is indeed a land-mark decision realising that the problem was so huge that a large number of cases were being litigated throughout the country. There pronouncements have far reaching impact and bearing on GST administration and powers of field formations, besides directly impacting the taxpayer.

Some of the recent judgments are covered in this piece for wider reach to taxpayers and professionals. 

SCN for recovery of refund granted by duly adjudicated order

  • The Apex Court has held that a show cause notice under section 74(1) of CGST Act, 2017 can be issued against a refund order granted as per duly adjudicated order.
  • The petitioner in SLP before Supreme Court and High Court contended that it was not open to the Revenue Authorities to reopen refund granted pursuant to an adjudication on refund application but it can only file an appeal.
  • High Court held that the provisions of section 74 does not make any distinction between refund orders passed with or without adjudication and that the said provision does not provide that an order of refund after adjudication cannot be reopened.
  • Supreme Court declined to interfere and held that petitioner may urge before the Authorities that the show cause notice travels beyond the reasons stipulated in section 74 of the CGST Act, 2017.

[Source: GANESH ORES PVT. LTD. VERSUS THE STATE OF ODISHA & ORS. - 2022 (4) TMI 755 - SC ORDER]

Legislative Powers v. GST Council’s Powers

Supreme court of India has held as follows in land mark judgment dated 18.05.2022 in Union of India v. Mohit Minerals :

  • GST Council’s recommendations are only recommendatory and are not binding on centre and states.
  • Both centre and states can legislate on GST
  • According to article 246A of Constitution of India, both Parliament and state legislature have simultaneous or equal power to legislate on matters of taxation.
  • Constitution does not envisage a repugnancy provisions and GST Council must work in a harmonious manner to achieve a workable solution
  • Indian federalism is a dialogue in which state and centre always engages in a dialogue.
  • GST Council is an area of political contestations. It impacts federalism. Article 246 treats states and centre as equal. Article 279 provides that state and centre cannot act independent of each other. This also points towards competitive federalism.
  • GST is not leviable on ocean freight
  • Union SLP against Gujarat High Court order which stuck-down levy of GST on dismissed and SLP decided in favour of assessee.

[Source: In UNION OF INDIA & ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR - 2022 (5) TMI 968 - SUPREME COURT]

Use of DIN by States

  • Supreme Court has directed the Union of India and GST Council to issue an advisory to all the States for implementation of Document Identification Number (DIN) in respect of all the notices and communications being sent or issued by State GST offices.
  • It has also directed that use of DIN in all GST related documents be implemented at the earliest possible.
  • Electronic generation DIN is already in use by the CGST officers which provides authenticity to the documents / communications issued by the Department.
  • States like Kerala and Karnataka already use DIN.

[Source: PRADEEP GOYAL VERSUS UNION OF INDIA & ORS. - 2022 (8) TMI 216 - SUPREME COURT ]

CBIC directed to open portal for two months for transitional credit

  • Supreme Court has directed CBIC to open GST portal for two months for claiming transitional credit under GST law for taxpayers.
  • Availing transitional credit via TRAN-1 and TRAN-2 form shall open from 1.9.2022 to 31.10.2022 for two months.
  • Any aggrieved registered assessee can file the relevant form or revise the already filed form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC).
  • GSTN has to ensure that there are no technical glitch during the said time.
  • The concerned officers are given 90 days thereafter to verify the veracity of the claim/transitional credit and pass appropriate orders thereon on merits after granting appropriate reasonable opportunity to the parties concerned.
  • Thereafter, the allowed Transitional credit is to be reflected in the Electronic Credit Ledger.
  • Union of India has approached the Supreme Court for thirty days extension for opening special window for transitional credit claims under GST. This extension would ensure that GSTN gets sufficient time to make changes in the common portal to facilitate filing. The miscellaneous application filed by Union of India has sought the extended time between 01.10.2022 and 31.12.2022 instead of September, 2022 to October, 2022. Moreover, the portal avoids IT changes between 07th to 24th of every month in view of the peak filing period.
  • The Supreme Court bench has accepted the request of Government vide order dated 02.09.2022 and has granted extension of 30 days to Ministry of Finance for opening of the GST common portal. It has directed the GSTN to open the portal from 1st October, 2022 to 31st December, 2022 to give full effect to its order dated 22.07.2022. The portal shall therefore, be open for 92 days from 1st October, 2022.

[Source: UNION OF INDIA & ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. & ANR. - 2022 (7) TMI 1232 - SC ORDER ]

GST on Tour Operators in relation to services Haj & Umrah

  • It observed that to enable Haj pilgrims of India to undertake Haj pilgrimage, there is a bilateral agreement executed every year between the Kingdom of Saudi Arabia and the Government of India. As per the bilateral agreement, a quota of number of pilgrims is assigned to India. Out of the said quota, normally only 30% is allocated to HGOs. The rest of the quota is made available to the Haj Committee.
  • The place of provision of service is the location of the service receiver in accordance with clause (i) of Rule 2 of place of provision rules, which will be in taxable territory. As per Item (iv) of sub-clause (b) of Clause (i) of Rule 2 of the place of provision of service  Rules of 2012, the location of the service receiver will be the usual place of residence of the Haj pilgrim in India. Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package.
  • It must be noted here that Clause 5A of the Mega Exemption Notification (Notification No. 25/2012-ST dated 20.06.2012) grants exemption to the service rendered by Haj Committees in respect of a religious pilgrimage. Thus, the same Mega Exemption Notification makes a clear distinction between ‘religious ceremony’ and ‘religious pilgrimage’. As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage. The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia.
  • The Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State. Apart from arranging visits of Haj pilgrims for the purposes of Haj pilgrimage, there are important statutory duties assigned to the Haj Committee - the Central Government has all pervasive control over the Haj Committee. The State Governments have the same control over the State Committee. On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the Government has no control over HGOs.
  • The Exemption Notifications under the IGST and the GST Acts so far as the Haj pilgrimage is concerned, are pari materia with the Mega Exemption Notification.
  • The petition was dismissed.

[Source: ALL INDIA HAJ UMRAH TOUR ORGANIZER ASSOCIATION MUMBAI VERSUS UNION OF INDIA & ORS. - 2022 (7) TMI 1233 - SUPREME COURT]

Responsibility of HSN Code in Tenders

  • In the impugned Allahabad High Court judgment, direction was issued to Railways (General Manager Diesel Locomotive Works, Varanasi) that if the GST value is to be added in the base price to arrive at the total price of offer for the procurement of products in a tender and is used to determine Interse ranking in the selection process, he would be required to clarify the Issue, If any, with the GST authorities relating to the applicability of correct HSN Code of the procurement product and mention the same in the NIT (Notice inviting tender) tender/ bid document, so as 'to ensure uniform bidding from all participants and to provide all tenderers/bidders a 'Level Playing Field'.
  • On appeal, Apex Court held that providing HSN Code is the responsibility of the bidder and not the tendering authority.
  • In order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, it is considered necessary to direct that, in all cases, where a contract is awarded by the appellants, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer.
  • Apex court allowed the appeal.

[Source: UNION OF INDIA & OTHERS VERSUS BHARAT FORGE LTD. & ANOTHER - 2022 (8) TMI 690 - SUPREME COURT ]

Indirect Taxes Recovery under IBC Cases

  • Supreme Court has held that Insolvency and Bankruptcy Code, 2016 (IBC) shall override the Customs Act, 1962 in case of any conflict between the IBC and Customs Act, 1962.
  • The corporate debtor imported various materials for the purpose of constructing ships and some of these goods were stored in Custom Bonded Warehouses. The appellant (Insolvency Professional) was granted custody of those warehoused goods by National Company Law Tribunal (NCLT).
  • On Revenue appeal, NCLAT held that the Corporate Debtor had abandoned the goods much before the insolvency process was initiated, and as such the title of the goods had passed to the Customs Authorities.
  • The appellant (Resolution Professional) filed civil appeal before the Supreme Court against grant of custody of warehoused goods to Customs Authorities.
  • It was held that the IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC, as the case may be, the respondent authority only has a limited jurisdiction to assess/ determine the quantum of customs duty and other levies. The Customs Authority does not have power to initiate recovery of dues by means of sale / confiscation, as provided under the Customs Act.
  • Further, tax authorities does not have the power to initiate recovery of dues by means of sale / confiscation, as provided under the Customs Act.

[Source: SUNDARESH BHATT, LIQUIDATOR OF ABG SHIPYARD VERSUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS - 2022 (8) TMI 1161 - SUPREME COURT ]

Judicial Discipline: Larger Bench Judgment to prevail

  • Constitution bench of Apex Court has ruled that larger bench judgment shall prevail irrespective of number of judges in majority or constituting the majority.
  • For example, a judgment of seven judge bench with 4-3 majority would prevail over a five member bench with unanimous (5-0) decision.
  • In view of Article 145(5) of the Constitution of India, concurrence of a majority of the judges at the hearing will be considered as a judgment or opinion of the Court.
  • The majority decision of a Bench of larger strength would prevail over the decision of a Bench of lesser strength, irrespective of the number of Judges constituting the majority.

[Source: M/S TRIMURTHI FRAGRANCES (P) LTD. THROUGH ITS DIRECTOR SHRI PRADEEP KUMAR AGRAWAL VERSUS GOVERNMENT OF N.C.T. OF DELHI THROUGH ITS PRINCIPAL SECRETARY (FINANCE) & ORS. - 2022 (9) TMI 895 - SUPREME COURT]

It would be desirable for the stakeholders to go through the order / judgment before taking any action based on the gists captured from the same.

 

By: Dr. Sanjiv Agarwal - September 27, 2022

 

Discussions to this article

 

Sir, what are your takes on issuance of SCN having an oppurtunity to file appeal with department. If this is correct, department in case where time limit to file appeal has expired may issue a SCN

Dr. Sanjiv Agarwal By: SARTHAK MITTAL
Dated: 27/09/2022

Dear Sir,

Your query is not clear.

Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
Dated: 28/09/2022

Let me re-frame the query.

Ideally department should prefer an appeal if an erraneous refund has been granted. If it is held that a SCN for erraneous refund can also be issued, department even if the time limit to file an appeal has expired resort to this methodoly.

Dr. Sanjiv Agarwal By: SARTHAK MITTAL
Dated: 29/09/2022

I agree. We have seen cases where, both, appeal is filed and SCN is also issued. The same needs to be aggressively contested.

Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
Dated: 29/09/2022

 

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