Case BriefsTribunals/Commissions/Regulatory Bodies

Authority for Advanced Ruling, Madhya Pradesh: The Bench comprising of Manoj Choubey (Joint Commissioner) and Virendra Jain (Joint Commissioner), ruled evenly in the matter brought by Atriwal Amusement Park under Section 98(4) of Central Good and Services Tax, 2017.

Atriwal Amusement Park was incorporated on 13th March, 2018. Applicant proposed activity of construction of water park for which various components and services would be used that are taxable under GST. Thus, applicant has approached the Tribunal for admissibility of input tax credit of tax paid or deemed to have been paid.

There were four major issues before the court, which dealt with instances of where input tax credit may be paid. First, whether applicant was eligible for credit on input tax of water slides. Second, whether steel and civil structure which is a support structure for slides, will be available for credit. Third, whether input tax be available on development and preparation land where slides are constructed. Fourth, whether applicant will get credit for construction of swimming pools as water slides directly run into pool.

Bench addressed each point individually, and initially dwelled specifically into the definition of ‘Plant & Machinery’. It included support structure and foundation as part of plant & machinery, and excluded buildings and civil structure from the definition. The bench found the applicant to be eligible for Input tax credit on water slides as they were included under the term ‘plant & machinery’ due to them being foundation and structural support.  For the second issue, bench found steel and civil structure to be a part of ‘plant & machinery’, therefore, they found it eligible for credit. For the third issue, bench found land to be excluded from the definition of ‘plant & machinery’ and hence, ousted the applicability for credit on land. For the final issue, bench decided swimming pool is a ‘civil structure’ and cannot be called a ‘support structure’, hence, credit was not available for swimming pool. [Atriwal Amusement Park, In re, Case No. 29 of 2019, decided on 09-06-2020]

Case BriefsHigh Courts

Interest under Section 50 of the CGST Act can be levied on belated cash component of tax and not on Input Tax Credit.

Madras High Court: Dr Anita Sumanth, J., while allowing the present petitions and setting aside the impugned notices, and referring to the decision of Telangana High Court in Megha Engineeering and Infrastructures Ltd. v. Commr. Of Central Tax, (2019-TIOL-893), with regard to the interpretation of Section 50 of CGST Act, wherein it was stated that,

“Amendment to Section 50(1), was only at the stage of press release by Ministry of Finance at the time when division bench passed its order and thus stated that ‘unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in light of the proposed amendment’.”

Bench, however, stated that now the amendment stands incorporated into the Statute and comes to the aid of assessee.

In the present case, petitioners had filed Returns of Income belatedly for the period of 2017-18. Respondent 2 had issued the delay in filing of returns and consequently the interest to be remitted on the tax accompanying returns. Further, the demand notices were issued seeking to recover arrears of interest.

Petitioners had objected to the above submitting that they had sufficient Input Tax Credit (ITC) available with the Department and thus interest could be demanded, if at all, only on the cash component of the tax remitted belatedly.

Thus proceedings for coercive recovery of the interest are impugned in the present writ petitions.

Only issue agitated was the legal issue as to whether interest would at all be payable on the component of ITC that was, admittedly, available with the Department throughout and that has been adjusted towards the tax demands for period of August, 2017 to March, 2018.

Analysis & Decision of the Court

Bench noted that, according to the petitioners, Section 50 of CGST Act provides for levy of interest on belated payments would apply to payments of tax by cash, belatedly, and would not stand triggered in the case of available ITC, since such ITC represents credit due to an assessee by the Department held as such.

Court considered it important to understand what Section 50 talks about in order to decide the legal issue raised by the petitioners. Thus, the said Section provides for interest on belated payment of tax and such levy is ‘automatic’ and is intended to compensate the revenue for the remittance of tax belatedly and beyond the time frames permitted under law.

Proceeding to conclude its decision, the bench stated that the word ‘delayed’ connotes a situation of deprival, where the State has been deprived of the funds representing tax component till such time the Return is filed accompanied by remittance of tax. Availability of ITC runs counter to this, as it connotes enrichment of the State, to this extent.

Thus, Section 50 which is specifically intended to apply to a state of deprival cannot apply in a situation where the State is possessed of sufficient funds to the credit of the assessee.

Hence in Court’s view,

Proper application of Section 50 is one where interest is levied on a belated cash payment but not on ITC available all the while with the Department to the credit of the assessee. The latter being available with the Department is, neither belated nor delayed.

Court also added that availment and utilization of ITC are two separate events as both are subject to satisfaction of statutory conditions and it is always possible for an officer to reverse the claim if they are found to be untenable or not in line with the statutory prescription. Credit will be valid till such time it is invalidated by recourse to the mechanisms provided under the Statute and Rules.

Hence, proviso inserted to Section 50(1) which states that interest shall be levied only on that part of the tax which is paid in cash, was inserted with effect from 01-08-2019 but that seeks to correct an anomaly in the provision as it existed prior to such insertion. [Refex Industries Ltd. v. Sherisha Technologies (P) Ltd., Writ Petition Nos. 23360 and 23361 of 2019 & WMP Nos. 23106 and 23108 of 2019, decided on 06-02-2020]

Legislation UpdatesNotifications

The Government has decided to extend the due dates of filing of Form GSTR-9 (Annual Return) and Form GSTR-9C (Reconciliation Statement) for Financial Year 2017-18 to 31-12-2019 and for Financial Year 2018-19 to 31-03-2020. The Government has also decided to simplify these forms by making various fields of these forms as optional.

Central Board of Indirect Taxes & Customs (CBIC) today notified the amendments regarding the simplification of GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) which inter-alia allow the taxpayers to not to provide split of input tax credit availed on inputs, input services and capital goods and to not to provide HSN level information of outputs or inputs, etc. for the financial year 2017-18 and 2018-19.

CBIC expects that with these changes and the extension of deadlines, all the GST taxpayers would be able to file their Annual Returns along with Reconciliation Statement for the financial years 2017-18 and 2018-19 in time. Various representations regarding challenges faced by taxpayers in filing of GSTR-9 and GSTR-9C were received on which by the Government has acted in a very responsive manner.

It may be noted that earlier the last date for filing of GSTR-9 and GSTR-9C for Financial Year 2017-18 was 30-11-2019 while that for Financial Year 2018-19 was 31-12-2019.


Ministry of Finance

[Press Release dt. 14-11-2019]

[Source: PIB]

Hot Off The PressNews

Directorate General of GST Intelligence (DGGI), Gurugram Zonal Unit (GZU), Haryana has arrested two persons who were found involved in fake invoices racket having a taxable value of Rs 931 crore and fraudulently passing/ availing Input Tax Credit (ITC) amounting to Rs 127 crore through a complex web chain of various entities.

Many of these entities were under their control and they also formed separate entities in the name of their employees/ dummy persons and generated fake invoices without actual movement of goods, namely ferrous/ non-ferrous scrap, ingots, nickel cathode, etc., thereby causing loss to exchequer by evasion of GST. They availed this fraudulent ITC to offset their GST liability and also passed on such fraudulent ITC to further buyers who availed the same to discharge their GST liability against their outward supplies with an ulterior motive to defraud the Government exchequer. During the course of the investigation, their employees/ dummy persons admitted to having no knowledge of the movement of the above-mentioned goods.

Thus, the said persons have committed offences under the provisions of Section 132(1)(b) & (c) of the Central Goods & Services Tax Act (CGST), 2017, which are cognizable and non-bailable offences and punishable under Section 132 of the CGST Act, 2017.

Consequently, the two were arrested on 07th October, 2019 under Section 69(1) of the CGST Act, 2017 and produced before Judicial Magistrate in Gurugram Court on 07th October, 2019. Court has sent them to judicial custody till 19th October, 2019. Further investigation in the matter is in progress.


Ministry of Finance

[Press Release dt. 09-10-2019]

Case BriefsHigh Courts

Delhi High Court: A Division Bench of S. Muralidhar and Talwant Singh, JJ. allowed a writ petition filed by a car dealer who sought directions authorities to allow them to filed GST TRAN-1 Form beyond the due date.

The petitioner was registered under Central Goods and Services Act, 2017. They prayed for a direction to the respondents to permit them to file the GST TRAN-1 manually and allow the credit of Input Tax Credit (“ITC”) as claimed in accordance with Section 140(3) of the CGST ACT, 2017, in its online electronic credit ledger for payment of its output liability under the GST Laws.

It was submitted that in terms of Rule 117 of the CGST Rules, 2017, the GST TRAN-1 Form was required to be filed by 30-09-2017. Later, this time limit was extended till 30-11-2017 and then till 27-11-2017. The petitioner stated that in view of the maze of compliance due dates, coupled with the time extended for filing the GSTR-1 Form to 31-12-2017, the accountant of the petitioner missed noticing that the time for filing GST TRAN-1 Form was extended only till 27-12-2017. The petitioner was accordingly not able to file the GST TRAN-1 declaration online within time and claim the ITC of the eligible amounts.

The petitioner was represented by Aseem Mehrotra and M.K. Gandhi, Advocates. Per contra, Anurag Ahluwalia, Central Government Standing Counsel, along with Kartikeya Rastogi and Abhigyan Siddhant, Advocates represented the Union of India. The Customs was represented by Harpreet Singh and Satyakam, Advocates.

The High Court noted that it has, in a series of the earlier order, recognised the difficulties faced by the tax payer in filing the GST TRAN-1 Form within 27-12-2017. In some of those cases, the inability was due to technical glitches.

In such view of the matter, the court issued a direction to the respondents to permit the petitioner to either submit the GST TRAN-1 Form electronically by opening the electronic portal for that purpose or allow the petitioner to tender the same manually on or before 15-10-2019, and thereafter, process the petitioner’s claim ITC in accordance with law.[Krish Automotors (P) Ltd. v. Union of India, 2019 SCC OnLine Del 10090, decided on 16-09-2019]

Case BriefsHigh Courts

Jharkhand High Court: A Division Bench of H.C. Mishra and Deepak Roshan, JJ., set aside the impugned orders and directed the Assessing Authority to re-examine the claim of the petitioner in view of original tax invoices.

The facts of the case were that the petitioner has claimed Input Tax Credit (ITC) to the tune of Rs 5,34,22,304.71. The assessing officer had allowed ITC only to the tune of Rs 3,40,37,182.46 and denied the balance ITC claim on the ground that for this amount, JVAT 404 form was not submitted by the petitioner.

The counsel for the petitioner submitted that as per provision of Section 18(6) of the JVAT Act, 2005, claim of ITC of the petitioner was required to be considered by the assessing officer on the strength of tax invoices in originally produced by the petitioner showing payment of tax. However, the said claim of the petitioner was denied by the Assessing Officer by relying upon Rule-35(2) of the JVAT Rules, 2006 which apart from prescribing the condition of original tax invoices also lays down additional condition of producing a declaration in Form JVAT 404. The contention of the petitioner is that Rule 35(2) of the JVAT Rules, 2006 provides for furnishing declaration Forms JVAT 404 for availing benefit of ITC to the extent that it cannot be treated to be mandatory in nature but as directory in nature, especially in view of fact that Section 18(6) of the JVAT Act, 2005 does not provide for furnishing of JVAT 404 forms for the purpose of claiming benefit of ITC and it only contemplates production of tax invoices in original.

In view of the above, the court held that the instant matter is squarely covered by the judgment of Brahmaputra Metallics Ltd. v. State of Jharkhand, 2019 SCC OnLine Jhar 816 allowed by this Court vide order dated 09-07-2019 and directed the respondent to re-examine the claim of the petitioner towards its claim of ITC in respect of which the petitioner has not submitted JVAT-404 Forms, by verifying the said claim from tax invoices in original containing particulars of sale evidencing the amount of input tax paid and if satisfied, extend the benefit of ITC to the petitioner.[Simplex Infrastructures Ltd., Ranchi v. State of Jharkhand, 2019 SCC OnLine Jhar 1059, decided on 20-08-2019]

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench of Dama Seshadri Naidu J., decided a writ petition wherein it directed the respondent nodal officer, GST department to facilitate the petitioner in uploading FORM GST TRAN 1 for claiming Input Tax Credit.

In the present case, petitioner a dealer registered under Kerala VAT Act had to upload FORM GST TRAN 1 so that he could claim the Input Tax Credit at the migration time of Kerala VAT Act but, due to a system error, the form could not be uploaded. Hence he had sought direction from the Court to enable him to take Input Tax Credit.

The High Court found that to address the issue of technical glitches faced by taxpayers at the GST Portal, Government of India has set up an IT Grievance Redressal Mechanism wherein taxpayers would approach the Nodal officers to address their grievances. Therefore, the Court held that the petitioner may apply to the respondent nodal officer to facilitate him in uploading the form. Further, the Court directed the tax authorities that, if the uploading is not possible then also the petitioner is allowed to take Input Tax Credit. The petition was accordingly disposed of.[B.M. Reeja v. State Tax Officer, GST,2018 SCC OnLine Ker 2743, dated 16-07-2018]

Hot Off The PressNews

Transition to GST provided for trust based transition of input tax credit of the existing taxpayers. A tax payer could file Form TRAN-1 and avail input tax credit on the basis of closing balance of the input tax credit declared in the last return under the pre GST regime. The last date for filing of Form TRAN-1 is 27th December, 2017. In keeping with the philosophy of voluntary compliance, revision of Form TRAN-1 has also been provided. The last date for revision of TRAN-1 is also 27th December, 2017.

It has been noted that some taxpayers have availed extraordinarily high transitional credit of CGST which is neither commensurate with the trend of input tax credit of the industry nor as maintained by the taxpayer himself in the past. Some of these high transitional credits may have a bonafide explanation or may be a case of bonafide mistake. However, it has been noted that high transitional credit has been claimed in many cases for which perhaps no bonafide explanation exists. Analysis to identify such units is underway. Such behaviour leads to breach of trust between the taxpayer and the tax-administration, which is the bed-rock of self-assessment regime in GST.

Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN-1 by 27th December, 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units.

Ministry of Finance