Case BriefsHigh Courts

Uttaranchal High Court: A Division Bench of Ramesh Ranganathan, CJ and Alok Kumar Verma, J. entertained a special appeal filed against the order of Single Judge in a writ petition where the petition was dismissed on the ground of alternative remedy.

Factual matrix of the case was that the appellant purchased timber from Uttarakhand Forest Development Corporation, under Section 3 of the U.P. Forest Development Corporation Act, 1974. It was contended by the appellant that the Corporation issued an invoice where both CGST and SGST were charged on the sale price of goods. It was further contended that the appellant paid the amount to the Corporation even before the goods were transported.

It was the appellant’s case that the Corporation should have raised two separate e-way bills for two separate consignments but had raised one e-way bill for the total amount on both the consignments. Further, the goods of the appellant were in transit, they were seized and, on the ground that only one e-way bill was issued instead of two, a penalty of Rs 1,70,688 was sought to be levied on the appellant-writ petitioner. Hence, it was contended that the penalty, if at all, should have been paid by the Corporation since the error in issuing one e-way bill instead of two was on their part and not on the part of the appellant. The Single Judge, however, dismissed the writ petition at the stage of admission relegating the appellant-writ petitioner to the remedy under Section 107 of the Central Goods and Services Tax Act, 2017. Hence the appellant found the special appeal appropriate for proper adjudication of the case.

The counsel for the appellant Piyush Garg, submitted that the proceedings under challenge was an order of detention of goods under Section 129 of the CGST Act; it was against the demand raised on detention of the goods, for payment of tax and penalty, that the writ jurisdiction of Court was invoked; tax had already been paid to the Corporation before the goods were even transported by the appellant; the remedy, under Section 107 of the CGST Act, was not efficacious since sub-section (6) of Section 107, which required 10% of the disputed amount to be paid, only provided for stay of payment of the remaining amount, and nothing more; the appellant was not able to take delivery of the seized goods from the second respondent since Section 107 of the CGST Act does not provide for such an eventuality; and the appellant had perforce to avail the remedy of invoking the jurisdiction of this Court under Article 226 of the Constitution of India.

The Law point discussed by the Court was that, Section 107 of the CGST Act related to Appeals to the Appellate Authority and, under sub-section (1) thereof, any person, aggrieved by any decision or order passed, under the CGST Act or the State Goods and Services Tax Act, by an adjudicating authority may appeal to such Appellate Authority. While an appeal, under Section 107 of the CGST Act, would lie to the Appellate Authority against any decision or order passed by an adjudicating authority, Section 2(4) of the CGST Act defines “adjudicating authority” in very broad terms. Under Section 2(4) of the CGST Act, an “adjudicating authority” has been defined to mean any authority, appointed or authorised to pass any order or decision under the Act, but not to include the authorities specified therein. Admittedly the Appellate Authority, under Section 107(1) of the CGST Act, was not one such. Since an appeal would lie against any order passed or decision taken by any authority appointed or authorized to pass any order or decision under the Act, it does appear that an order of detention can also be appealed against under Section 7(1) of the CGST Act.

Hence, the Court observed that there was no dispute regarding tax and it was the appellant’s case that the tax in its entirety had been paid to the Corporation which, in turn, was obligated to remit the said amount to the State Tax Department. Since the appellant-writ petitioner disputed levy of penalty in its entirety, they would, in terms of Section 107(6) of the CGST Act, were only required to deposit 10% of such penalty. That did not, however, solved the problem which the appellant faced i.e. for release of the goods detained by the respondent-authorities. If, on the other hand, he were to comply with the demand notice issued under Section 129(1) of the CGST Act then, in terms of Section 129(5) of the CGST Act, on payment of the amount referred to in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded, in which event the goods were to be released. Hence, the Court ordered the amount to be refunded to the appellant.[Agarwal Timber Suppliers v. State of Uttarakhand, 2019 SCC OnLine Utt 730, decided on 06-08-2109]

Case BriefsHigh Courts

Allahabad High Court: A Division Bench of Pankaj Kumar Jaiswal and Rajnish Kumar, JJ. dismissed a PIL seeking to ensure that the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act), Uttar Pradesh Goods and Services Tax Act, 2017 (UP GST Act) and Integrated Goods and Services Tax Act, 2017 (IGST Act) were implemented in proper manner qua the duty free shops.

The contention of the petitioner was that the respondent 3 was liable to pay IGST on the goods imported into the territory of India, which it was not doing. Though the Duty-Free Shops (DFS) operated by respondent 3 were in the State of Uttar Pradesh, the goods were sold to international passengers without charging the applicable taxes under CGST and SGST Acts. The petitioner further contended that the respondent was incorrectly permitted to claim a refund of an accumulated input tax credit of GST paid on service of renting of immovable property by AAI (Airports Authority of India) and procurement of domestic goods and services.

The petitioner submitted that a transaction must suffer GST the moment the supply of goods crossed the territorial waters of India. Therefore, the supply of imported goods to respondent 3 needed to be subjected to tax under Section 5 of the IGST Act. The petitioner further submitted that from the standpoint of Section 8 (1) of the IGST Act, the sale made to International passengers at the arrival terminal DFS of the respondent should have been considered as intra-state supply of goods and such sale should have attracted applicable CGST and SGST under Section 9(1) of the CGST Act and SGST Act and that the activity undertaken from the departure terminal DFS operated by the respondent was not an export of goods under GST Act as the essential ingredients to qualify for export were not being satisfied by the respondent.

The learned counsel for the respondent, Sheeran Mohiuddin Alavi, submitted that supply of goods to and from the DFS was before the clearance of imported goods for home consumption/export and the supply of goods from DFS at International Airports were considered as export of goods. He contended that as per Section 7(2) of the IGST Act, the supply of goods imported into the territory of India was considered as Inter-State Supply till they cross customs frontiers.

The Court held that the supply of imported goods to and from the DFS did not cross the customs frontier and hence these supplies were an inter-state supply in accordance to Section 7 (2) of the IGST Act. Consequently, the supply wasn’t liable to CGST and SGST under Section 9 of the CGST and SGST Act. It further observed that Section 7(2) read with proviso to Section 5(1) of the IGST Act stated that integrated tax on “goods imported into India” would be levied “at the point” when the duties of customs were levied on the said goods under Section 12 of the Customs Act, 1962 and at no other point. According to Section 12 of the Customs Act, duties of customs were levied on imported goods only when such goods were cleared for home consumption.

The Court relied on Kiran Spinning Mills v. Collector of Customs, (2000) 10 SCC 228 in which the Supreme Court had held, the taxable event occurs when the customs barriers are crossed. In the case of goods which are in the warehouse, the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country.”

It was held that when the goods were imported from outside India and kept in a customs warehouse and exported therefrom, the stage for payment of customs duty under Customs Act, 1962 did not arise. Hence neither Custom duty nor IGST was payable.

In view of the above, the petition was dismissed and it was held that the exemption under GST on goods supplied to and from the DFS was rightly conferred and the claims of any accumulated unutilized ITC were refundable to respondent 3.[Atin Krishna v. Union of India, PIL Civil No. 12929 of 2019, decided on 03-05-2019]

Case BriefsHigh Courts

Gujarat High Court: The Court  heard a petition filed by two Chartered Accountants, challenging the constitutionality of the National and State/ Regional Goods and Services Tax (GST) Appellate Tribunals, which are to be established as per guidelines in Section 109 of the Central GST Act. It was argued by the petitioners that the section in question and the constitution of the Tribunals the section seeks to create infringe upon the independence of the judiciary and are hence unconstitutional.

Section 109 (3) of the CGST Act reads:

“The National Bench of the Appellate Tribunal shall be situated at New Delhi which shall be presided over by the President and shall consist of one Technical Member (Centre) and one Technical Member (State).”

The following sub-section makes a similar provision for regional Benches of the Tribunal. Further, Section 109 (11) of the same Act states:

“If the Members of the National Bench, Regional Benches, State Bench or Area Benches differ in opinion on any point or points, it shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President or as the case may be, State President for hearing on such point or points to one or more of the other Members of the National Bench, Regional Benches, State Bench or Area Benches and such point or points shall be decided according to the opinion.”

It was the contention of the petitioners that owing to the majority rule for taking decisions, and the outnumbering of the judicial member by the technical members at all levels, is an attempt to encroach upon the judiciary’s domain, and hence the section be declared ultra vires Articles 13, 14, 19, and 50 of the Constitution and hence void. The petition made reference to the case of Union of India v. R. Gandhi, (2010) 11 SCC 1), where a 5-Judge Bench of the Apex Court held,

“Two member Benches of the Tribunal should always have a Judicial Member. Whenever any larger or special benches are constituted, the number of Technical Members shall not exceed the Judicial Members.”

This was a departure from the constitution of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which, before the introduction of GST, served as an appellate authority in matters relating to indirect taxes. The CESTAT consisted of one judicial and one technical member each. The petitioners also brought to the Court’s notice that over ten months have passed since the implementation of the GST regime but no such Appellate Tribunals had been constituted yet. To this effect, the Court issued a notice to the Union Government, Gujarat Government, and the GST Council. [Pratik Satayanarayan Gattani v. Union of India, 2018 SCC OnLine Guj 922, order dated 05-05-2018]