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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 211 on applicability of unjust enrichment for refund filed for export of services

GST update No 211 on applicability of unjust enrichment for refund filed for export of services
Exports play a pivot role in contributing towards foreign exchange reserves so the government ensures that exports are not burdened with domestic tax laws and exporters are provided with incentives and refunds. However, it is quite disheartening that getting refunds sanctioned from the Government is a tedious task. The revenue authorities are reluctant to sanction refunds easily. Therefore, the assessee is forced to knock the door of Courts to seek relief. One such case was reported by the hon’ble Bombay High Court in the case of JAR PRODUCTIONS PVT. LTD. V/S UNION OF INDIA. The decision imparted in this case is the subject matter of discussion of our present update.
 
The petitioner is a company incorporated under the Companies Act, 2013 and is engaged in providing production services to company located in U.K. i.e. ASCL. The petitioner entered into an agreement dated 12.09.2019 which was effective from 28.03.2018. Furthermore, clause 4.10 of the Agreement, provides that if the refund is sanctioned, the amount shall be reduced from the production expenses while computing the consideration of production service. For providing the said services, the petitioner utilised various inputs and input services. The petitioner therefore applied for refund which was rejected by the revenue department on the ground that incidence of tax has been passed to the client thereby resulting into unjust enrichment.
 
The Appellate Authority held that refund cannot be granted since the petitioner is not beneficiary and it tantamount to unjust enrichment. Reliance was placed on the decision of Apex Court in the case of Mafatlal Industries V/s Union of India. The petitioner thereafter preferred a Writ Petition in this Court.
 
The Counsel of petitioner argued that the principle of unjust enrichment is not applicable in the case of export of services. In the present case, it is a zero-rated supply and unjust enrichment is not applicable. Furthermore, clause 4.10 of the agreement is also in support of the fact that refund received shall be deducted from expenses of production.
 
The Counsel of revenue argued that the petitioner admitted that it is a case of unjust enrichment and the credit notes will nullify the effect of the same. Further, it was submitted that the GST Law does not prescribes any mechanism for paying back the GST by way for issuance of credit notes.
 
The Court held that the present case is related to export of service u/s 2 of IGST Act, 2017, the refund of which shall be granted as per Section 54 of CGST Act, 2017 being a zero-rate supply. The agreement executed includes all cost related to production service including the amount of GST. This reflects the fact that the incidence of tax has not been passed to the recipient. It was held that the alternative argument cannot be treated as admission. Reference was made to the decision of MOTILAL OSWAL SECURITIES LTD V/S COMMISSIONER OF SERVICE TAX. Furthermore, it was stated since the present case is related to export of service, GST shall not be applicable. Therefore, it was held that the adjudicating authority and the appellate authority erred in rejecting the refund claim of the taxpayer.
 
The above decision is favourable for the exporters for passing the hurdle of unjust enrichment. It is settled principle of law that in case of exports, the incidence of tax is not passed on to the recipient and so the question of applying the principle of unjust enrichment for granting refund does not arise at all.
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