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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 243 on denial of refund under inverted duty structure in case where input and output goods are same.

GST Update No 243 on denial of refund under inverted duty structure in case where input and output goods are same.
It is well known fact that claiming refund from the government department is a burdensome task since governmental authorities are stubborn and reluctant enough to sanction refund from the Government’s Exchequer. It is also observed that at times, clarifications issued by circulars tend to restrict the scope of refund claims to be filed by the assessees. In this context, reference may be made to the amendment made in clarification issued in para 3.2 of the Circular No. 135/05/2020-GST dated 31.03.2020 by the GST Council in its recent meeting. The Circular No. 173/05/2022-GST dated 06.07.2022 seeks to explain that the benefit of refund of credit on account of inverted duty rate structure will be available if the input and output goods are same but GST is being paid at concessional rate on the output goods. The old version of the clarification restricted claiming of refund by the assessees if the input and output goods are same. However, inspite various favourable judicial pronouncements on this issue, the revenue authorities are reluctant to follow the principle of judicial discipline due to which issue is litigated before higher judicial forums. Recently, the issue regarding denial of refund claim of inverted duty tax structure in similar situation was raised before hon’ble Rajasthan High Court in the case of M/S BAKER HUGHES ASIA PACIFIC LIMITED. The decision imparted in this case and the amendment made in the circular is subject matter of discussion of our present update. As far as the decision is concerned, the petitioner entered development contract with Vedanta Limited wherein project of exclusive rights to carry out petroleum operations was granted by Government of India. For this, a production sharing contract was entered between the Vedanta and Central Government. To procure essential goods for carrying out petroleum extraction, Vedanta entered sub-contract with the petitioner. The petitioner procured the goods from abroad and India at the GST rates ranging from 5% to 38% and delivered the same to the Vedanta at concessional GST rate of 5% subject to fulfillment of prescribed conditions. The petitioner submitted that to give a boost to oil and gas Industry, CBIC issued a Notification No. 3/2017-CGST dated 28.06.2017 providing GST rate of 5% on all supplies made in this respect subject to fulfilment of certain conditions such as procurement of a certificate from Directorate General to transfer the goods. The goods were procured at GST rate ranging from 5% to 28% and supplied to customer at 5% thereby attracting inverted tax structure for which refund was applied by the petitioner in accordance with Section 54 of CGST Act, 2017. However, the refund applied was rejected on the ground that input and output supplied are same considering Clause 3.2 of Circular dated 31.03.2020. The petitioner thereby relied on Para 59 of Circular No. 125/44/2019-GST-CBEC-20/16/04/18-GST prescribing that refund shall be granted as per inverted duty structure to the taxpayer and claiming that in case input and output are supplied at concessional rates, refund cannot be restricted. The Counsel of petitioner relied upon decision of Guwahati High Court in the case of M/S B.M.G. INFORMATICS PVT. LTD. V/S UNION OF INDIA, and Calcutta High Court in the case of M/S SHIVACO ASSOICATES & ANR. V/S JOINT COMMISSIONER OF STATE TAX wherein the circular was ignored and refund was granted to the assessee. Further, it was argued that subordinate legislation in form of statutory circular cannot supersede the parent statue and therefore, the impugned order deserves to be struck down. The Counsel of respondent relied on the Circular dated 31.03.2020 and argued that since input and output supplied are same, there is no value addition on goods supplied. Therefore, refund granted should be rejected. Further, the contentions of petitioner were fervently opposed. The Court held that Section 54 is unambiguous and does not carve out any restriction on claiming refund of input tax credit even if inputs and outputs are same. Further, the Circular dated 31.03.2020 does not pertain to the petitioner’s claim for refund as it was of prior period between September 2018 to September 2019 during which clarification dated 18.11.2019 was issued. The provision of claiming inverted tax structure refund does not mention any condition regarding value enhancement of goods supplied. Further, the decision of Guwahati High Court stated above is not challenged before any other Court. Therefore, the subordinate legislation cannot override the parent legislation and hence, the legitimate claim for accumulated ITC was directed to be refunded to the petitioner. The above decision is a landmark judgement wherein the adverse clarification issued vide circular dated 31.03.2020 was not implemented rather the statutory provisions were held to have precedence. It is worth mentioning here that although, the petitioner prayed to quash the Circular No. 135/05/2020-GST dated 31.03.2020 but the hon’ble Rajasthan High Court had simply stated that since the provisions contained in section 54 are clear, the same would supersede the clarification issued by the circular. The Hon’ble High Court refrained from quashing the said circular. Even if we refer to the decisions given by Guwahati High Court in the case of M/S B.M.G. INFORMATICS PVT. LTD. V/S UNION OF INDIA, and Calcutta High Court in the case of M/S SHIVACO ASSOICATES & ANR. V/S JOINT COMMISSIONER OF STATE TAX, it is found that the circular was not set aside and rather it was held that the statutory provisions should be made applicable. Hence, the action of the government to amend the Circular No. 135/05/2020-GST dated 31.03.2020 is proper and is in consonance with the decisions rendered by the High Courts. Therefore, the current position is that in the recent 47th GST Council Meeting, the government has issued Circular no. 173/05/2022-GST dated 06.07.2022 wherein it has been clarified that refund of credit accumulated on account of inverted duty rate structure will be admissible in case where inputs and output goods are same but the output supplies are made under a concessional GST rate notification due to which the rate of tax on output supplies is less than the rate of tax on inputs. The above clarification is definitely a huge sigh of relief to the assessees.
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