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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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GST UPDATE NO. 150/2019-20 Input tax credit accumulated up to July 31, 2018 will not lapse

GST UPDATE NO. 150/2019-20 Input tax credit accumulated up to July 31, 2018 will not lapse
Honorable Gujarat High Court in a landmark judgment of Shabnam Petrofills Pvt Ltd which will benefit entire Textile Weaving Industry  of India has struck down the second clause of Notification No 20/2018 due to which now the Weavers Are Not Required To Lapse ITC.
This can be seen as a major relief for the textile sector, the Gujarat High Court has made it clear that input tax credit accumulated up to July 31, 2018 will not lapse. This will facilitate refund of the credit for that period and thus end the working capital woes for fabric manufacturers.

The core of the issue is the inverted duty structure which results in a situation when there is a higher duty on raw material/input and higher duty on finished product. In such a situation, technically speaking, refund is to be provided. In case of the textile sector, man-made fabric attracts GST at the rate of 5 per cent while inputs for that attract levy at the rate of 12 per cent.

As power loom and man-made fabric manufacturers were facing problems, CBIC issued a circular saying that refund will be possible from August 2018 but accumulated ITC till July 2018 will lapse. Aggrieved by this, various companies and association of fabric weavers (power looms) filed petitions in the Gujarat High Court.

Strong reliance has been placed upon by the appellants on the decision of the Supreme Court in the case of Collector of Central Excise, Pune v. Dai Ichi Karnataka Ltd, 1999 (112) E.L.T. 353 (S.C.), wherein it is held that when credit has been validly taken, its benefit is available to the manufacturer without any limitation in time. The credit is indefeasible.

Reliance is also placed upon the decision of the Supreme Court in the case of Eicher Motors Ltd. v. Union of India, 1999 (106) E.L.T. 3(S.C.), for the proposition that a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility thereto gets worked out or until those goods existed.
Further reliance is placed on the decision of this Court in the case of Baroda Rayon Corporation Limited – 2014 (306) E.L.T. 551 (Guj.).

The impugned Notification dated July 26, 2018 bearing No.20/2018 and Circular dated August 24, 2018 bearing Circular No.56/30/2018-GST to the extent it provides that the input tax credit lying unutilized in balance, after payment of tax for and up to the month of July 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse, are hereby quashed and set aside and are hereby declared as ultra vires and beyond the scope of section 54(3)(ii) of the CGST Act, as section 54(3)(ii) of the CGST Act does not empower to issue such notifications and consequently, it is held that the petitioners and members of the petitioners are entitled for the credit and it be granted to them.

It is a well settled principle that the delegated legislation has to be in conformity with the provisions of the parent statute. By prescribing for lapsing of ITC, the Notification No. 05/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No.20/2018-C.T. (Rate) dated 07.2018, has exceeded the power delegated under Section 54(3) (ii) of the CGST Act

Earlier, the Revenue Department argued that GST reduction on manmade fiber yarn to 12 from 18 per cent gave significant relief to the sector and reduced the accumulation of ITC. As there were requests for relaxing conditions related with refund of accumulated credit, the GST Council agreed to remove the condition, however with the prospective effect.

The Council then decided that the input tax credit lying in balance on the date of the notification implementing the new provision will lapse. This lapse of accumulated ITC was in the spirit of earlier rate structure which envisaged that refund of accumulated credit was not to be allowed and accordingly circular was issued.

However, the Court did not agree with the contentions and said that no inherent power can be inferred from the provision of GST Law empowering the Centre to provide for the lapsing of the unutilized ITC accumulated on account of inverted rate structures. The petitioners have a vested right to unutilized ITC accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies.
The readers of our update will be remembering that we have already opined in our update at the time of this notification that credit earned cannot be lapsed. We have already fight this matter for textile processor in Excise regime when compounded levy was introduced and successfully won the case in case of Shankeshwar Fabrics. Following the same analogy, this notification has also been quashed. But the department is still asking for reversal and issuing show cause notice in case refund is claimed by textile processors without reversal. The authors of this update have come across such letters from the department. But High Court decision (Even of other state, when there is contradictory verdict of any other High Court is not available) is binding on all lower formation of department and they cannot take stand against the same.

This is solely for the educational purpose.

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