Newsletter – Vol. 1, Issue 4 – 15.08.2021

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Issue Notice – vires of section 16(2)(c) under challenge: Tripura High Court 
In M/s Sahil Enterprises v. Union of India, W.P. (C) No. 531/2021, the petitioner-company has challenged the vires of section 16(2)(c) of the CGST Act. Section 16(2)(c) provides that a registered person would be eligible for claiming ITC subject to the condition that the tax charged in respect of such supply has been actually deposited by the supplier/vendor to the Government. A similar challenge in Surat Mercantile Association and Anr. v. Union of India and Ors., R/SCA/15329/2020 is pending before Hon’ble Gujarat High Court and in M/s. Shree Gobind Alloys Pvt. Ltd. v. Union of India and Ors., W.P.(C) No. 16242 of 2021 is pending before Hon’ble Orissa High Court.

Order of provisional attachment cannot survive after proceeding ends: Hon’ble Bombay High Court
In Fine Exim Private Ltd. v. Union of India, Writ Petition No. 2127 of 2021, Hon’ble High Court set aside the provisional attachment order on two grounds (i) Proceeding initiated u/s. 73 got terminated by final order u/s. 73(9) thereof the proceeding doesn’t survive resultantly terminating the life of the order of provisional attachment, and (ii) Jurisdictional Error: The order of provisional attachment was made not during the pendency of any proceedings but was made in view of contemplation of proceedings under Section 73 thereof. SCN was issued 45 days after the order of provisional attachment. Hence, since its inception, the order of provisional attachment was not at all a valid order.

Non-speaking and ex-parte order set aside: Hon’ble Patna High Court
In M/s National Enterprises v. Union of India and Ors., Civil Writ Jurisdiction Case No. 12233 of 2021, vide impugned order and Form GST DRC-07 the petitioner has been intimated for disallowance of Input Tax Credit and further imposing of tax (including penalty and interest). Hon’ble High Court quashed and set aside the impugned orders for two reasons- (i) violation of principles of natural justice and, (b) order passed ex-parte in nature, do not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee.

Non-reasoned order disallowing ITC set aside: Hon’ble Madras High Court
In M/s Sree Rajendra Steels v. The Assistant Commissioner, W.P. No. 16170 of 2021 and W.M.P. No. 17106 of 2021, Hon’ble High Court set aside the order disallowing ITC and held that the claim of ITC is one that would have to be decided based on documents that are supplied by an assessee as well as material collated/available with the Assessing Officer and not by way of a cursory order.

Pre-SCN consultation, based on the incomplete investigation quashed: Hon’ble Telangana High Court
In M/s. Deem Distributors Pvt. Ltd. v. Union of India, Writ Petition No. 7063 of 2021, the department alleged that the petitioner company’s certain suppliers are fictitious and requested the petitioner-company to reverse the ITC availed on such supplier invoices. Hon’ble High Court held that without there being a determination of liability of the petitioner in any enquiry conducted under the Act, demand for reversal of input tax credit or payment of tax with interest for penalty, can be raised by the department i.e. without ascertaining the liability department could not have issued the letter to the petitioner asking him immediately reverse the input tax credit allegedly availed.

Department cannot go beyond the Show Cause Notice, order set aside: Hon’ble Kerala High Court
In FR Trade Links v. State Tax Officers and Ors., W.P. (C) No. 28917 OF 2020, the department issued SCN regarding cancellation of registration on grounds that the registered person’s place of business is partially completed with no structure and no building number. Thereafter, the department cancelled the registration under section 29(2). Hon’ble High Court held that section 29(2) does not envisage the contingency of situation of place of business in a partially completed building having no building number affixed on it by the local authority. Hence, the order cannot stand the scrutiny of law.

Appeal before the wrong forum, relief granted to the petitioner: Hon’ble Madhya Pradesh High Court
In Maa Sharda Construction Company v. Union of India and Ors., W.P. 8162 of 2021. The petitioner-company filed an appeal against the cancellation of registration before the Commissioner (Appeals) under Section 107 of the CGST Act. The Commissioner (Appeals) referring to section 30 of the CGST Act, dismissed the appeal. The correct remedy was to file an application for revocation of cancellation of registration before proper officer u/s. 30 and now the application became time-barred. Hon’ble High Court considered it as a bonafide mistake and directed the proper officer to consider the application for revocation of cancellation of registration. 

The arrest can be made before completion of adjudication/assessment: Hon’ble Gauhati High
In Subhash Kumar Singh v. The State of Assam and Anr., Bail Application/ 1631/2021, Hon’ble High Court rejected the bail petition and observed that the arrest under section 69 is valid. An important observation made, “this Court is of the further view, in disagreement with the submission of the learned senior counsel for the Petitioner, that the Respondent authorities cannot invoke the power to arrest under section 69 read with section 132 of the AGST Act, 2017 prior to the completion of adjudication/assessment is bereft of reasonable and valid logic.” 


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