CASE LAWS IN ‘GST’

[Mr. M. GOVINDARAJAN]

The litigation on GST has already started.   In this article, the decided cases on GST by the High Courts are discussed.

Challenging the implementation of GST

In ‘Dr. Kanagasabapathy Sundaram Pillai V. Union of India’ – 2017 (9) TMI 389 – Bombay High Court, a public interest litigation was filed by the petitioner challenging the decision of the Government to implement GST with effect from 01.07.2017 on the following grounds-

• That implementation is without Parliamentary sanction and implementation in the midst of the financial year is not valid;
• That the preparations are not well to adopt the new system as the rates of CGST done just a week back for which many representation from the public are not yet replied/rectified;
• That the States/Union territories are not yet decided, not made laws and not declared their proposed rate, not prepared well for smooth implementations;
• That the compensation for the first quarter of the financial year not paid apart from the arrears of many aids/schemes/sharing and the States and Union territories will become financially critical and unstable

The petitioner prayed that implementation of GST be deferred till all legal flaws are removed and/or till full decision of final rates for all items including  State surcharge items preparation is done by all India States and Union Territories.

On hearing both the sides, the High Court held that the petitioner cannot urge and/or seek directions to the respondents to postpone the decision to implement GST with effect from 01.07.2017, for simple reason that herein levy and collection taxes on goods and services has sanction of law.  It is much evident that all such necessary steps are taken by the respondents to ensure implementation of the GST as it appears-

• over 65 lakhs tax payers have already migrated to GST network and obtained registrations;
• the rates and taxes have been notified;
• rules have been framed and notified;
• wide publicity is given in public domain;
• entire machinery has been geared up not only to accept new challenge but to ensure GST is implemented effectively.

The High Court was not inclined to entertain PIL and the same was dismissed by the High Court.

Additional levy of IGST

In ‘Narendra Plastic Private Limited V. Union of India & Others’ – 2017 (9) TMI 674 – Delhi High Court, the grievance of the petitioner is that it holds export orders placed on it prior to 1^st July 2017 for the fulfillment of which it has to undertake imports of inputs.   The petitioner seeks to explain that, with the change brought about by the GST regime, the petitioner would have no option but to pay IGST out of its sources causing a working capital blockage.  The High Court held that the petitioner is not questioning the legislative competence to levy the additional IGST.   It is only questioning the applicability of such levy even to imports that are made for fulfillment of export orders that have been placed on and accepted by the petitioner prior to 1^st July, 2017.  The petitioner is also seeking to only avail the credit outstanding in respect of advance authorizations issued to the petitioner prior to 1^st July 2017.

The High Court is of the view that the petitioner has made out a prima facie case for grant of prayer in the writ petition.   The High Court directed that-

• the petitioner will be permitted to clear the consignments of imports constituting inputs for the fulfillment of its export orders placed on it prior to 1^st July, 2017 without any additional levies, and subject to the quantity and value as specified in the advance authorization licenses issued to it prior to 1^st July, 2017;
• the above clearance would be subject to-

• verification by the customs department that it is in conformity with the quantity and value as mentioned in the Advance Authorization licence; and
• ensuring that the extent of credit is available vis-à-vis such Advance Authorization licenses issued prior to 1^st July, 2017;
• this interim direction is further subject to the petitioner furnishing an undertaking by way of an affidavit filed in this Court within one week to the effect that in the case the petitioner ultimately not succeeding in this writ petition, or failing to fulfill its export obligations, it is liable to pay the entire IGST as was leviable, together with interest as the Court may determine at the time final disposal of the writ petition;
• the petitioner will furnish to the Customs Department the entire list of its Advance Authorizations that are valid as on 1^st July, 2017 and a list of the export orders placed on the petition prior to 1^st July, 2017;
• the above direction will only apply to those imports which are made by the petitioner for fulfillment of its export orders placed with it prior to 1^st July, 2017 and not to any export order thereafter.

Detention of goods

In ‘The Commercial Tax Officer and the Intelligence Inspector V. Madhu M.B.’ – 2017 (9) TMI 1044 – Kerala High Court,  the respondent a dealer registered under Kerala VAT and migrated to CGST had purchased a consignment of plywood from a manufacturer at Perumbavoor and was transporting the same.  The same detained by the appellants and notice was issued.  The notice contained the irregularities which led to the detention.  The irregularity, in substance, is that there were no nexus between the documents accompanied and the actual goods under transport.  The respondent filed a writ petition before the High Court which was allowed.  Against this the Revenue filed writ appeal. 

The High Court found that section 129 of the CGST Act and SGST ordinance provides for detention, seizure and release of goods and conveyances in transit.  The amount payable on the passing of the final order are as specified in section 5(1), provides that payment of the amount, all proceedings in respect of the notice shall be deemed to be concluded.  The Statute also provides for the release of the goods pending passing of the order.  The goods seizure shall be released, on a provisional basis, under execution of a bond and furnishing or a security.   The provisions also provide for adjudication following detention of goods including the provisional release of pending adjudication.  When the statute itself provides for such a mechanism, a deviation there from cannot be ordered.   The Government pleader himself agreed that the adjudication will be completed within one week.  The High Court set aside the judgment under appeal and directs the respondent to issue necessary notice and conduct physical verification in the presence of the respondent and complete adjudication.  The High Court gave also liberty to the Revenue to comply with Rule 140(1) and get provisional release on that basis.

Rate of GST on old and scrap buses

In ‘M/s M.J.S. Enterprises and others V. The controller of Stores & Purchase and others’ – 2017 (9) TMI 1301 – Karnataka High Court, the petitioners filed the writ petition with the prayer to quash e-auction notification of the first respondent.  The further prayer is to declare that the rate of tax applicable on the sale of scrap buses is 18% falling under either heading 7204 of 3^rd Schedule or Entry No. 453 of 3^rd Schedule of the KGST Act.  The High Court held that the writ petition is pre mature and misconceived and do not require any interference by the High Court.  The GST rates as indicated in the E-Tender notice do not give the fixed rate of GST at 28% as submitted by the petitioners.   It only stipulated the rate of GST as applicable/28.0. The High Court further held that it is not certain even with the respondents –KSRTC, as to what rate of GST, they are going to charge when such auctions are finalized upon the bidding process undertaken in pursuance of E-Tender notice.  Therefore leaving it free for the parties to get such questions decided either at the hands of the respondents or the concerned authorities of the Commercial Tax Department.  The High Court dismissed the petition as premature.

Composition levy

In ‘Rajasthan Tax Consultants Association V. Union of India and others’ – 2017 (10) TMI 254 – Rajasthan High Court, the main grievance is that GST network system is not working up to the level and the same is required to be correct and updated to meet the requirements.  The High Court held that the problem occurring in system must be immediately report.  No coercive action against any of the client of the petitioner members who are referred in the petition and are informing by email, will be protected.  The composition scheme is extended up to 30.09.2017, therefore, desirous assessee can apply.  Those who could not apply under composition scheme up to 16.08.2017, their applications will be accepted and if their cases does not fall under composition log-in they will send it by email and their applications will be accepted with effect from 01.07.2017.

Advance Authorization Scheme

In ‘Jindal Dyechem Industries (P) Limited V. Union of India and others’ – 2017 (10) TMI 693 – Delhi High Court, the High Court held that in view of the press release dated 06.10.2017, which prima facie makes no distinction as regard the Advance Authorizations issued prior to or after 1^st July, 2017, the petitioner will not be required to pay IGST in respect of the imports of gold bars made by the petitioner in terms of the Advance Authorizations issued to it.  The interim relief granted by the High Court is subject to the petitioner furnishing to the Revenue a letter of undertaking that the clearance of the imported goods in terms of the Advance Authorization will be subject to the final result of the present writ petition.

Tax on works contract

In ‘Coimbatore Corporation Contractors Welfare Association V. State of Tamil Nadu and others’ – 2017 (10) TMI 783 – Madras High Court, the case of the petitioner is that the works for which the agreements were executed prior to 01.07.2017, GST cannot be imposed and 2% VAT alone is applicable.  The High Court held that there will be a direction to the Commissioner of Commercial taxes to consider the representation given by the petitioner/association and pass orders on merits and in accordance with law, within a period of four weeks from the date of receipt of a copy of the High Court.  The writ petition is allowed by way of remand.

Issuing of password

In ‘M/s Metro Institutes of Medical Sciences Private Limited V. State of UP and five others’ – 2017 (10) TMI 784 – Allahabad High Court, the case of the petitioner is that since the password has not been issued to the petitioner, the petitioner is unable to complete the process of migration as provided under section 139 of the CGST Act read with Rule 24(1) of CGST Rules 2017.  The High Court held that on inquiry made by the petition, the petitioner has been informed on the GST portal that the petitioner will not be allowed to deposit tax and further to file returns unless the late filing penalty and interest are also to be deposited.  The contention of the petitioner is that there is no fault of the petitioner but on account of laches at the hands of the competent authority, the petitioner company may suffer adverse financial consequences which may be arbitrary.   The High Court directed the authority to immediately issue a password to the petitioner company for completing migration process on the GST portal for upload its returns and to deposit the due tax.  The authority will allow the petition to complete migration to GST upon the receipt of such password as such issued to the petitioner company, in accordance with law.