Goods and Services Tax (GST), introduced from July 1, 2017 is more than one year old now but has resulted in operational and implementation disruptions affecting all stakeholders. GST law, as drafted and legislated, is not free from the interpretational hassles. GST Council his however, making regular changes to fix the anomalies and hardships faced by taxpayers.
Taxpayers have already challenged various provisions of GST laws and rules framed thereunder with about 200 writs being filed in different courts. High courts and Supreme court have taken a liberal stand so far in view of the fact that law is new and is yet evolving. However, CBIC may move to Supreme court where the verdict is against the Government. Recently, CBIC has issued directions to be officers to defend the writs. Further, we have now rulings from Authority for Advance Ruling and Anti-profiteering Authority also. Even the orders from Appellate Authority for Advance Ruling have also started pouring in.
Here are few more judicial pronouncements for information and guidance of various stakeholders. It is expected that the litigation by way of writs is bound to go up as time passes by unless the Government comes out with proactive approach and solutions.
- In Teesta Distributors v. State of Kerala (2018) 4 TMI 1009 (Kerala), where on interpretation of Kerala GST Rules, 2017, Court observed and held that the Rules are not intended to regulate the activities of lottery and it cannot also be so. The Rules cannot be interpreted in such a way to regulate the sale of lottery. If the Rules accorded interpretation to regulate lottery, certainly, it will amount to encroachment of the power of the Parliament to legislate. The Rules thus, can be interpreted only in such a way to sub-serve its object under the GST Act and Rules. It is nothing but determination and collection of tax. Chapter VIII of Kerala State CST Act refers to maintenance of accounts and other records. Chapter IX refers to returns. The very purpose of these provisions is to ensure a complete assessment, as required under Chapter XII. The powers conferred upon the officials under Chapter XIV for inspection, search, seizure and arrest is to detect and prevent evasion of tax under the Kerala State CST Act. The Rules insisted to be complied will have to be interpreted keeping in mind the purpose for which it were formulated. Chapter VII of Kerala State CST Rules refers to maintenance of accounts by registered persons. Rules as above are framed under Chapter VII under the head "Accounts and Records". The Rules refers to the maintenance of records by a registered person. Thus, it can be seen that rules are framed for a fair and complete assessment of the goods or services provided by the assessee. In regard to Rule 56(19) of the Kerala State CST Rules, in the writ petition itself, the petitioners expressed their willingness to comply the rules in a manner referred therein except to Rule 56(19)(g) & (i). The petitioners also challenge sub-rule 20A to Rule 56 and annexure to the above sub-rule. The petitioners point out that in the annexure to sub-rule 20A of Rule 56, they have been asked to maintain records regarding percentage of distribution of face value for price and commission, tax administration expenses etc.
Chapter VII of the Kerala State CST Rules only refers about maintenance of accounts by registered persons. The very object of such records is to complete assessment.
Noncompliance would not amount to contravention unless there is breach. Every non-compliance is not a breach. There must be a breach that is to say, violation of legal obligation. If rules itself are determinative of such violation, no doubt an action can be initiated on noting such violation. If such Rules postulate an enquiry, no action can be initiated without holding an enquiry. In such cases, breach would come into existence only after the enquiry.
Non-compliance of maintaining records as referred in sub-rule 19(9) & (i) of Rule 56 of the Kerala State CST Rules can be subject matter of enquiry in assessment proceedings or in other proceedings and cannot be a reason to prevent the petitioners from engaging sale of lotteries in the State. The petitioners also cannot be prevented from engaging in the sale of lottery for not furnishing details regarding unsold ticket particulars within 48 hours. Explanation of the petitioners in each of such occasions, have to be considered by the officials. Similarly, the petitioners also cannot directed to file information in return to Annexure in regard to the percentage commission they receive. The petitioners are having every right to withhold such information. No action can be initiated for non-furnishing of such details regarding percentage of commission received. Percentage of commission has no nexus to the levy of tax to be collected from the petitioners.
- In Padmavati Enterprises v. Union of India (2018) 3 TMI 480 (Bombay),where the order was a common order in two writ petitions, i.e., WP(L) No. 424 of 2018 and WP(ST) No. 2230 of 2018. There was a meeting held on 1st March, 2018 between representatives of GST Practitioners Association of Maharashtra and GST Central & State level Commissioners in respect of operation of systems strictly in terms of Act and Rules. On the other hand, Union of India through Additional Solicitor General (ASG) objected to these minutes and filed a one-page note about part compliances done and remaining grievances pending. The court hoped that such grievances would be addressed and system would operate strictly is terms of Act/ Rules soon. The Court took on record the Additional Solicitor General (ASG)’s statement that insofar as the grievances of returns without late fees, the petitioner may file their GSTR-3B returns with the late fees first. If that is paid and proof of such payment is produced, that will also be auto-credited/refunded in their cash ledger by the CSTN within a period of one week from the date the payment is made. The ASG was advised to appraise the Commissioners of these grievances and, thereafter, ensure that they are followed up either with the Council or with the appropriate Authority in the Ministry. The court further observed that it expected the competent authority in the Ministry, particularly at the State and the Central level, to coordinate and resolve the issues which are raised in this petition on or before 24th April, 2018.
- In Anguvilas M.V. Muthaiah Pillai Firm v. CCE, Trichy 2018 (2) TMI 1659 (Cestat, Chennai), where an appeal of 2006 was pending in Cestat, Chennai and there was a stay in operation granted by the Madras High Court to the effect that appeal not to be proceeded with till disposal of writ petition. Ahead of the transition of indirect taxes to GST, Tribunal was given mandate by Ministry of Finance to dispose of all old cases at least prior to 2007. Cestat therefore, considered it appropriate to close the appeal file for the purpose of statistics. However, it was made clear that the appeal along with other matters including stay in operation would continue before the Cestat and that the matter stands closed only for the purpose of statistics. It was further directed to both the parties that they were at liberty to file an application before the Tribunal to reopen the file / matter as and when the writ petition is disposed of by the high court or there being any change in circumstances.
(Some more cases to follow)
