Newsletter – Vol. 1, Issue 16 – 07.11.2021

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Issuance of the show-cause notice is vitiated for an approach which is based on an erroneous legal premise: Hon’ble Bombay High Court
In M/s Godrej & Boyce MFG. Co. Ltd. v. UOI and Ors., Writ Petition No. 3226 of 2019, Hon’ble HC held that the department while issuing the impugned show cause notice perhaps overlooked that Explanations 1 and 2 to Section 140 of the CGST Act which are yet to be brought into force. In such view of the matter, a reference to Explanations 1 and 2, as it stands now, may be held to be mindless which, in law, would amount to the issuance of notice without due regard to the provisions of law as well as facts requiring existence or non-existence of a material fact for the assumption of jurisdiction. An error in the assumption of jurisdiction might also render a notice/an order ultra vires and bad. There could have been little reason for us to interfere if the assumption of jurisdiction by respondent no. 3 on the ground appearing from the impugned show-cause notice were shown to be defensible with reference to those provisions of law, which have become operational by due exercise of power in terms of sub-section (2) of Section 1 of the Amending Act. Even otherwise, it has not been shown to us that upon introduction of Explanation 3 of Section 140 of the CGST Act read with partly un-amended Explanations 1 and 2 thereof, the respondent no. 3 did have the jurisdiction to issue the impugned show-cause notice.

Petitioner is entitled to claim refund of excess balance in its cash ledger which has been accrued because of TCS deduction: Hon’ble Telangana High Court 
In M/s Appario Retail Pvt. Ltd. v. UOI and Ors., W.P. 12183 of 2021, the Hon’ble HC held that the petitioner is entitled to claim refund of the excess balance in its electronic cash ledger, which includes the amount that has been collected by the electronic commerce operator u/s. 52 of the CGST Act from the net value of the consideration payable to the petitioner in respect of sales/supplies effected through it, as such amount paid to the Government is allowed as a credit in the electronic cash ledger of the petitioner u/s. 49(1) of the CGST Act and such balance being eligible for refund u/s. 49(6) of the CGST Act. Therefore, the petitioner is entitled to claim refund of the balance in electronic cash ledger under proviso to sub-section (1) of Section 54 of the CGST Act..

The department should decide refund applications of the amount collected from the petitioner during the pendency of the investigation: Hon’ble Karnataka High Court
In M/s Bundl Technologies Pvt. Ltd. v. UOI and Ors., Writ Petition No. 4467/2021 (T-RES), the petitioner sought the refund of the amount illegally collected during the pendency of the investigation. The HC observed as follows: (i) Alternative remedy is not a bar because the petitioner is seeking appropriate direction for consideration of the refund application, (ii) The amount deposited via DRC-03 is not self-ascertainment u/s 74(5) because the investigation is ongoing and the department has proceeded with the investigation and not have taken the stand that the tax has fallen short (as in cases of self-ascertainment) and (iii) Right of bonafide taxpayer to be treated with dignity. Hon’ble HC directed that the refund applications are to be considered and suitable orders be passed within a period of four weeks from the date of release of the order while making it clear that consideration of refund applications must be made in light of the observations.

Provisional Attachment will not survive after a year: Hon’ble Allahabad High Court
In M/s Mridul Tobie Inc. v. The Commissioner and Ors., WTAX No. 462 of 2020, Hon’ble HC held that in absence of any contrary position existing in law and in absence of any other action being shown to have been taken by the respondent authorities, whereby department may claim entitlement to attach petitioner’s bank account, it is found that the communication dated 11.05.2020 issued by the Assistant Commissioner has outlived its life and perhaps its utility (it is over a year). The writ petition is disposed of with the observation that the provisional attachment of the petitioner’s bank account may not survive under the communication.

When no discrepancy (to the extent of 90% refund claim) is found then refund claim cannot be denied: Hon’ble Telangana High Court
In M/s Bhagyanagar Copper Pvt. Ltd. v. CBIC and Ors., Writ Petition No. 15804 of 2021, the petitioner sought the claim of refund on zero-rated supply – department on the basis of system alert (overvaluing/misclassification or misdeclaration of the export consignment to claim higher export incentive) didn’t process the refund as the supplier of the petitioners were required to examine – In the said alert, nowhere it has been stated that the suppliers of the petitioner are either fake or non-existing –  Supplier of the petitioner on L1 and L2 stages were verified barring 10 suppliers (as per counter affidavit) – Hon’ble HC held that even otherwise provisional refund of 90% should be granted –  Inasmuch as no discrepancy has been found with regard to the suppliers of the petitioner, the refund claim by the petitioner cannot be denied to be processed on the ground that verification of the suppliers of the petitioner’s supplier is pending. The reluctance on the part of the respondents in granting of refund to exporters upon completion of exports would result in taking away the incentive to export and would make the exports from the country unviable due to non-flow of funds in the form of refund assured under the Act – Even the refund verification has to be done by the department within three weeks of request for verification (as per circular) – Thus Writ Petition is allowed and provisional refund to be granted.

Issue to watch: Classification of Papad of different shapes and sizes: before Hon’ble Gujarat High Court
In M/s J.K. Papad Industries v. UOI, R/SCA No. 16172 of 2021, the petitioner has challenged the AAAR, Gujarat declaring the ruling rendered by AAR void ab-initio. It is the petitioner’s grievance that in absence of any production and in absence of any pending proceedings, the petitioner cannot be precluded from taking recourse to the provision of Section 97 of the GST Act. The petitioner is also claiming (on merits) the exemption on Papad of different shapes and sizes.

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