RATIO OF LATEST JUDGEMENTS ON GST
Kshitij Ghildiyal v. Director General of GST Intelligence, (2024) 25 Centax 267 (Del.) [Delhi High Court]
In present facts of the case, DGGI carried out a search u/s 67 at the Assessee’s principal place of business and detained the Petitioner without any reason or pre-information. It was submitted by the Assessee that the Revenue tried to camouflage the illegality of the initial arrest/detention. Further, it was submitted that u/s 69, ‘reasons to believe’ were required and the officer authorized to arrest the person shall inform such person of the ‘grounds of arrest’. The Hon’ble High Court while granting relief to the Petitioner and holding arrest as illegal observed that the discrepancy in summons point to the Revenue’s mismanagement of the arrest process as it created a serious doubt on the aspect of detention of the petitioner without proper paperwork. It does indicate that the respondent agency has not followed the arrest procedure, as mandated by law, meant to safeguard the rights of the arrestee. Reliance was placed upon the Judgment of the Hon’ble Supreme Court in the matter of Arvind Kejriwal v. Directorate of Enforcement 2024 INSC 512 wherein it was categorically stated that these pre-conditions act as stringent safeguards to protect the life and liberty of individuals. It was stated that “the conditions are salutary and serve as a check against the exercise of an otherwise harsh and pernicious power.”
Vigneshwara Transport Company V. Additional Commissioner of Central Tax, Writ Petition No.18305 Of 2023 (T-Res) [Karnataka High Court]
Investigation has been initiated against the petitioner which has culminated in the SCN issued by Asst. Commissioner. It was submitted that investigation was initiated by Commissioner of Central Tax against the petitioner was without jurisdiction wherein the petitioner was forced to deposit Rs. 50,00,000/-. Commissioner of Central Tax after realizing that he does not have the necessary jurisdiction transferred the case to Principal Commissioner of Central Tax to conduct the necessary investigation. But Principal Commissioner of Central Tax instead of conducting the investigation afresh, relying upon the old records received from Commissioner issued a show cause notice u/s 74. The Hon’ble High Court after considering submissions from both sides observed that if Commissioner of Central Tax after investigation has transferred the case to Principal Commissioner of Central Tax, for issuance of notice under Section 74, Principal Commissioner of Central Tax was required to redo the investigation and come to an independent conclusion as contemplated under Section 74 of the CGST Act and only thereafter a fresh notice requires to be issued. Assistant Commissioner of Central Tax cannot issue a notice under Section 74 on the ‘borrowed satisfaction’. Consequently, the impugned notice was set aside, and the respondents were directed to refund the sum of Rs.50,00,000/-. Fresh application of mind by the Authority before issuing the notice under section 74 is thus necessary.
Aalidhra Texcraft Engineers & Anr. Vs Union of India & Ors., R/Special Civil Application No. 14554 Of 2024 (Gujarat High Court)
In present facts of the case, the petitioner deposited Rs.40,00,000/- in FY 2020-21 believing bonafidely that credit of Rs.40,00,000/- was erroneously availed. The petitioner filed an application for refund on 30.3.2024 stating that the petitioner has paid excess GST by mistake. But the said application was rejected being time barred. The Hon’ble High Court observed that when the petitioner has deposited
voluntarily the amount of Rs. 40,00,000/-, the same would not be covered by the provisions of Section 54 of the GST Act and the same is required to be refunded by the respondent authorities as the same could not have been rejected on the ground of limitation under Section 54(1) of the GST Act. Consequently, the petition was allowed. It means that the limitation period prescribed for filing of the refund application does not apply when the claim of refund is of the amount which has been voluntarily deposited under the bona fide belief.
- T. Pharma v Union of India, CWP No. 4899 of 2024 (Himachal Pradesh High Court)
In present facts of the case, the petitioner due to instability and financial distress filed its GSTR 9 on 13.03.2023 instead of 07.02.2020. Subsequently, the CBIC issued Notification No. 07/2023, dated 31.03.2023 which provides benefit to a particular set of people who has filed GSTR 9 and 9C returns from 01.04.2023 to 30.06.2023. But the benefit was denied to the Petitioner by the Revenue even though the petitioner has sue motto already filed its GSTR-9 prior to the cut-off date of extended period. The Hon’ble High Court held that the intention of the Government is not to harass the assessee but to encourage for filing of Returns. The Petitioner in this case, came forward for filing their return for the assessment years mentioned in the notification within the stipulated period. The benefit would extend to the petitioner who filed the return late on 13.03.2023, which is before the cut-off date mentioned in the above notification. Consequently, the writ petition was allowed.
Prestige Mulund Realty Private Limited Vs Union of India & 3 Others (Writ Petition No. 4548 OF 2024) (Bombay High Court)
In present facts of the case, an SCN was under challenge before Hon’ble High Court. The said SCN was disposed of by the Deputy Commissioner while the writ was pending before Hon’ble High Court. The Petitioner filed the interim application for challenging the said Order. The said Order was set aside by the Hon’ble High Court as the revenue have not taken into consideration the two Judgments of Hon’ble Supreme Court which the petitioner has earlier referred to the Revenue. Consequently, the Hon’ble High Court remanded the matter granting permission to file detailed reply & to maintain the Judicial Discipline so that the Judgments of Higher Courts shall be followed by the Lower Authorities. Thus, in accordance to the Hon’ble Bombay High Court ‘Judicial Discipline’ is of paramount importance and must be followed by the field offices of GST.
CIRCULARS ISSUED BY CBIC
Clarification on ITC Reversal for Electronic Commerce Operators (ECOs)
Circular (No. 240/34/2024-GST, dated 31.12.2024)
The CBIC has addressed concerns regarding the reversal of Input Tax Credit (ITC) for Electronic Commerce Operators (ECOs) making supplies under section 9(5) of the Central Goods and Services Tax Act (CGST Act), particularly in relation to services other than restaurant services.
Previously, in Circular No. 167/23/2021-GST (dated 17.12.2021), it was clarified that ECOs are not required to reverse ITC when they provide restaurant services via their platform. However, questions have arisen about whether the same applies to other services supplied under section 9(5) of the CGST Act. Issue- Whether electronic commerce operator, required to pay tax under section 9(5) of CGST Act, is liable to reverse proportionate input tax credit on his inputs and input services to the extent of supplies made under section 9(5) of the CGST Act.
The CBIC has now provided further clarification:
- As per Circular No. 167/23/2021-GST, ECOs are not required to reverse the ITC related to restaurant services supplied under section 9(5). This principle extends to other specified services under section 9(5) as well.
- ECOs are not required to reverse ITC on inputs or input services for supplies made under section 9(5), including those related to services other than restaurant services.
Tax Payment via Cash Ledger: While ECOs are not required to reverse ITC for these supplies, they must pay the full tax liability for services under section 9(5) exclusively through the electronic cash ledger. The ITC availed on inputs cannot be used to offset this tax liability but can be used for other tax liabilities on services supplied by the ECO.
Clarification on ITC Availability for Automobile Dealers Under Ex-Works Contracts -Circular No. 241/35/2024-GST, dated 31.12.2024
The CBIC has addressed queries from the automobile sector about the availability of Input Tax Credit (ITC) under an Ex-Works (EXW) contract, specifically when goods are delivered by the supplier to the dealer at the OEM’s factory gate. Under the EXW contract between automobile dealers and Original Equipment Manufacturers (OEMs), the ownership of vehicles is transferred to the dealer when they are handed over to the transporter at the OEM’s factory gate. The dealer may arrange for the transport and insurance, and any claims for loss or damage are made by the dealer. Dealers typically account for the invoice when the vehicles are handed over to the transporter. However, some tax authorities have taken the view that ITC can only be claimed after the dealer physically receives the goods at their premises, leading to show-cause notices being issued to dealers regarding wrongful ITC claims.
To ensure uniformity in the application of the law, the CBIC has issued the following clarifications:
- Under section 16(2)(b) of the CGST Act, a registered person is entitled to ITC on goods or services only if they have “received” them. However, this provision does not specify that the goods must be physically received at any place.
- The Explanation to clause (b) allows for the “deemed receipt” of goods in certain cases. Goods are considered “received” when they are delivered by the supplier to the transporter (or any other person on the dealer’s direction), even if the physical receipt occurs later at the dealer’s premises. This can be done via transfer of documents of title or otherwise.
- In the case of an EXW contract between an OEM and a dealer, where the OEM hands over the goods to the transporter at the factory gate:
- The dealer is considered to have “received” the goods when they are handed over to the transporter, even if the goods are not physically received at the dealer’s premises immediately.
- The property in the goods is transferred to the dealer when they are handed over to the transporter for onward delivery.
4. Application: This principle applies to all goods supplied under EXW contracts, where the supplier delivers goods to the transporter or another person on behalf of the recipient, at the supplier’s place of business. In these cases, the goods are deemed to have been “received” by the recipient when handed over to the transporter.
5.ITC Eligibility: For the dealer to claim ITC, the goods must be used or intended to be used in the course or furtherance of business. If the goods are diverted for non-business purposes at any stage, the dealer will not be entitled to ITC. Furthermore, if the goods are lost, stolen, destroyed, or disposed of in any other manner, the dealer will lose their entitlement to ITC as per the CGST Act.
Clarification on Recording Correct Place of Supply for Online Services to Unregistered Recipients -Circular No. 242/36/2024-GST, dated 31.12.2024
The CBIC has addressed concerns raised by field formations regarding non-compliance with the mandatory requirement of recording the correct place of supply on invoices for online services provided to unregistered recipients, either directly or through electronic commerce operators. It was noted that many suppliers are incorrectly declaring the place of supply as their own location, rather than the recipient’s location, leading to incorrect revenue allocation. This issue primarily arises in cases involving taxable online services supplied to unregistered recipients, where suppliers are required to mention the recipient’s State name on the invoice, as per the provisions of the Integrated Goods and Services Tax (IGST) Act and Central Goods and Services Tax (CGST) Rules.
The following clarifications are provided to ensure uniform implementation of the law:
- As per Section 12 of the IGST Act, when services are provided to an unregistered person, the place of supply should be the location of the recipient, provided the recipient’s address is available on record. If the address is not available, the place of supply is deemed to be the location of the supplier.
- Rule 46 of the CGST Rules mandates that the tax invoice for services provided to unregistered recipients should include specific details, including the recipient’s State name. This is especially important for online services like money gaming or services provided by electronic commerce operators or suppliers of online information and database access (OIDAR) services. Regardless of the value of the service, the invoice must include the recipient’s State name.
A combined reading of relevant provisions under the IGST Act and CGST Rules clarifies that for online services provided to unregistered recipients, the place of supply must be declared as the recipient’s location, which is determined based on the recipient’s State name recorded on the invoice.
The clarification extends to all services supplied through digital platforms to unregistered recipients, whether directly by the supplier or via a third-party electronic commerce operator. This includes services like subscriptions to e-newspapers, OTT platforms, telecom services, and digital services through mobile apps. For all such online services, the State of the recipient must be recorded on the invoice, and the place of supply should reflect the recipient’s location. Suppliers must ensure that they collect the recipient’s State information before providing services to unregistered recipients. Failure to comply with these invoicing requirements, including the correct recording of the recipient’s State, may lead to penalties under the CGST Act.
Clarification on GST Treatment of Vouchers: Circular No. 243/37/2024-GST, dated 31.12.2024 ac-Circular No. 243/37/2024-GST, dated 31.12.2024,
The Circular provides clarity on several issues related to vouchers in response to queries from the trade, industry, and field formations. These questions focus on whether transactions involving vouchers are considered supplies of goods or services, the GST treatment of voucher trading by distributors/sub-distributors, and the taxation of unredeemed vouchers (breakage).
The following points summarize the key clarifications:
- Transaction in Vouchers – Supply of Goods or Services?
- A voucher, as defined under Section 2(118) of the CGST Act, is often a payment instrument that creates an obligation on the supplier to accept it as part of the consideration for goods and/or services.
- When a voucher qualifies as a pre-paid instrument recognized by the RBI (e.g., gift cards), it is treated as “money” under Section 2(75) of the CGST Act. Since “money” is excluded from the definition of goods and services, transactions in such vouchers are not subject to GST.
- If the voucher does not qualify as a pre-paid instrument and is instead an obligation for the supplier to provide goods and/or services, it may be considered an “actionable claim” as per Section 2(1) of the CGST Act. Since actionable claims are not taxable unless specified, such vouchers also do not attract GST.
Thus, regardless of whether the voucher is a pre-paid instrument or not, transactions involving vouchers are not treated as supplies of goods or services. However, the underlying goods/services redeemed through the voucher may still be subject to GST.
- GST on Voucher Trading by Distributors/Sub-distributors:
There are two main models for voucher distribution:
- Principal-to-Principal (P2P) Basis: In this model, distributors purchase vouchers from the issuer at a discounted price and resell them to sub-distributors or customers. As the transaction in vouchers is not a supply of goods or services, no GST applies to the trading of vouchers in this scenario.
- Commission/Fee Basis: If distributors or agents are acting on behalf of the issuer and receive a commission for their services, they are considered service providers under the principal-agent relationship. GST will be applicable on the commission/fee earned by the distributors/sub-distributors acting as agents.
- GST on Additional Services (e.g., Advertising, Marketing, etc.):
- When additional services such as advertising, co-branding, or customer support are provided to the voucher issuer for a fee, the service provider is required to pay GST on the fee or charge, as these activities are considered taxable services.
- GST Treatment of Unredeemed Vouchers (Breakage):
- If a voucher remains unredeemed by the end of its validity, the amount attributed to the unredeemed vouchers (breakage) is typically recognized as income by the issuer. However, as there is no supply of goods or services in the case of non-redemption, the breakage amount does not constitute consideration for a taxable supply and, therefore, is not subject to GST.
The GST treatment of unredeemed vouchers aligns with the principle that without a contractual obligation for payment upon non-redemption, the amount retained by the voucher issuer cannot be considered “consideration” for any supply. Therefore, breakage is not taxable under GST.
ARTICLE ON-RETROSPECTIVE AMENDMENTS SEPARATION OF POWERS VIS-À-VIS JUDICIARY AND LEGISLATURE
One of the most fundamental concepts of Indian Democracy is “Separation of Powers” which means that each of the three Pillars i.e. Executive, Judiciary as well as Legislature would be independent in its domain and there would be no interference. The retrospective amendment w.e.f. 1st July 2017 as proposed by GST Council and could be adopted by the Legislature to over-come the verdict dt. 3rd October 2024 by the Hon’ble Supreme Court of India in the matter of Chief Commissioner of Central Goods & Services Tax v. Safari Retreats Private Ltd, CIVIL APPEAL No 2948 of 2023 is nothing but interference in Judicial Independence.
The independence of the judiciary is fundamental to the ‘Rule of Law’. A legislation can be invalidated based on breach of ‘separation of judicial power’ since such breach is negation of equality under Article 14. Law can be declared void if it is found to have transgressed the constitutional limitations. The legislature cannot declare any decision of a court of law to be void or of no effect and that too from a retrospective date.
The present Government under the umbrella of GST Council has resorted to an unfair method of rectifying the so-called errors of drafting in Section 17(5) of the CGST Act, 2017 wherein the said change “to align the provisions of section 17(5)(d) of CGST Act, 2017 with the intent of the said section, the Council has recommended amending section 17(5)(d) of CGST Act, 2017, to replace the phrase “plant or machinery” with “plant and machinery”, retrospectively, with effect from 01.07.2017, so that the said phrase may be interpreted as per the Explanation at the end of section 17 of CGST Act, 2017.” has been proposed. The objective of avoiding cascading effect as one of the maim aims of GST has been thrown to the dustbin through this proposed retrospective amendment.
The legislature can make a validating law. Making validation as such, it removes the defect which the court finds in the existing law. There should not be an attempt to interfere with the judicial process, and such law may be invalidated. The questions to be examined are whether the legislation targeted at the decided case, what are the terms of law; the issues with which it deals and the nature of the judgment that has attained finality. If law interferes with the judicial functions the Court may declare the law as unconstitutional.
Taxpayers cannot act such as to confirm to a retrospective amendment in a commercial law like GST for the past period. Therefore, the insertion of the clause of retrospective application puts them in a dilemma that whether their execution according to law in the past period was correct or not. It is creating a lot of confusion and instability in business (domestic as well as FDIs) which is certainly not good for the Country which needs long term funds for development from inside as well as outside. No doubt, the Government has the power to make the retrospective amendment. Suffice it to say that retrospective amendments can be struck down if such amendment creating any unreasonable restriction which violate the right to carry on business or the right to hold and dispose of the property. The instant case of retrospective amendment may pass through this judicial test.
Retroactive laws pose a challenge to the fundamental principles of equality, certainty and predictability underlying the ‘Rule of Law’. Retrospective means looking backward; contemplating what is past; having reference to a statute or things existing before the Act in question. Retrospective law means a law which looks backward or contemplates the past; one which is made to affect acts or facts occurring or rights occurring, before it came into force. Every statute which takes away or impairs vested rights acquired under existing laws or creates a new obligation, imposes a new duty or attaches a new disability in respect to transactions or considerations already passed. Retroactive statute means a statute which.
creates a new obligation on transactions or considerations already passed or destroys or impairs vested rights.
A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits. Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature. Every litigant has a vested right in substantive law but no such right exists in procedural law. A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication.
In Madras Bar Association v. Union of India (2022) 12 SCC 455, the Supreme Court, based on the various earlier pronouncements, laid out the following principles in accordance with which legislative overruling could be permissible:
“(i) The effect of the judgments of the court can be nullified by a legislative act removing the basis of the judgment. Such law can be retrospective. Retrospective amendment should be reasonable and not arbitrary and must not be violative of the fundamental rights guaranteed under the Constitution.
(ii) The test for determining the validity of a validating legislation is that the judgment pointing out the defect would not have been passed, if the altered position as sought to be brought in by the validating statute existed before the court at the time of rendering its judgment. In other words, the defect pointed out should have been cured such that the basis of the judgement pointing out the defect is removed.
(iii) Nullification of mandamus by an enactment would be impermissible legislative exercise. Even interim directions cannot be reversed by a legislative veto.
(iv) Transgression of constitutional limitations and intrusion into the judicial power by the Legislature is violative of the principle of separation of powers, the rule of law and of article 14 of the Constitution of India.”
The retrospective amendments would be a huge set back to the business as lot of precise planning have to be done before acting in accordance with Law. It would also create hindrance for the economic development as both domestic & overseas players would be hesitant in doing investments in India if law would be amended with retrospective operations, de-stabilization of Law must be avoided at any cost. Doctrine of “Ignorance of law is no excuse” would not be applicable in retrospective amendment as the Person is not supposed to predict the amendments in future. Also, retrospective amendments would be contrary to Doctrine of “Promissory estoppel” as well as “Legitimate expectation”. Promissory Estoppel is in the nature of an equitable plea and must be determined in the facts and circumstances of each case. That the principle underlying legitimate expectation is based on Article 14. Any action taken by the State which goes against the rule of fairness is liable to be struck down. Any administrative or executive action of the State even under the umbrella of GST Council which is arbitrary or unjust cannot be sustained as it violates Article 14 of the Constitution of India.
LEGAL MAXIMS
LEGAL MAXIMS/PHRASE | LEGAL PRINCIPLE/CONCEPT
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Novation | Transaction in which a new contact is agreed by all parties to replace an existing contract. |
Non Sequitur | A statement (such as a response) that does not follow logically from or is not clearly related to anything previously said. |
Onus probandi | Burden of proof. |
Obiter dictum | Things said. It is generally used in law to refer to an opinion or non-necessary remark made by a judge. It does not act as a precedent. |
Obiter Dicta | Remarks of a judge which are not necessary to reaching a decision, but are made as comments, illustrations or thoughts. |
DUE DATES – GST COMPLIANCES IN JANUARY 2025 | |||
Monthly | Quarterly | Other Due Dates | |
GSTR-3B (Dec, 2024) Jan 20th, 2025 | GSTR-3B (Oct-Dec, 2024) Jan 22nd, 24th, 2025 | GSTR-5 (Dec, 2024) Jan 13th, 2025 |
GSTR-5A (Dec, 2024) Jan 20th, 2025 |
GSTR-1 (Dec, 2024) Jan 11th, 2025 | GSTR-1 (Oct-Dec, 2024) Jan 13th, 2025 | GSTR-6 (Dec, 2024) Jan 13th, 2025 | GSTR-7 (Dec, 2024) Jan 10th, 2025 |
IFF (Optional) (Dec,2024) | CMP-08 (Oct-Dec, 2024) Jan 18th, 2025 | GSTR-8 (Dec, 2024) Jan 10th, 2025 | RFD-10 2 years from the last day of the quarter in which supply was received |
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