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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 on Circular contradicting relaxation provided during pandemic 56/2020-21

GST Update on Circular contradicting relaxation provided during pandemic 56/2020-21
It was represented by trade and industry that in order to cater to their working capital requirements during this pandemic situation prevailing in the Country, the operation of Rule 36(4) of CGST Rules, 2017 restricting the availment of input tax credit upto 10% of the eligible input tax credit reflected in GSTR-2A should be suspended. The government considered the suggestion and provided relaxation to comply with the requirement of Rule 36(4) vide notification no. 30/2020- Central Tax dated 03.04.2020, by way of inserting a proviso to rule 36(4) allowing the assessees to avail input tax credit irrespective of reflection of such credit in their GSTR-2A during the period from February 2020 to August 2020 and make cumulative adjustment in the return filed for the month of September, 2020. This amendment was a sigh of relief to the assessees but the clarification issued by circular no. 135/05/2020 dated 31.03.2020 poured cold water on the efforts to provide liquidity to the businesses during this difficult time.
The circular no. 135/05/2020 dated 31.03.2020 clarified that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. The circular seek to take away the benefit provided by the earlier circular no. 125/44/2019-GST, dated 18.11.2019 allowing the assessees to claim refund of invoices not reflected in GSTR-2A by uploading/furnishing hard copies to the refund sanctioning authority. Hence, the government provided relaxation as regards operation of Rule 36(4) during the period from February 2020 to August 2020 but at the same time snatched the facility to claim refund of invoices not reflected in GSTR-2A by the assessees, in total contradiction to the notification no. 30/2020- Central Tax dated 03.04.2020.  
It is worth mentioning that restricting refund of ITC to the invoices uploaded by supplier in 2A is again in violation of Rule 89 which takes into account full ITC for a period. The Rule 89 of CGST Rules, 2017 prescribing formula also defines the meaning of “Net ITC” as input tax credit availed on inputs during the relevant period and does not distinguishes the input tax credit not reflected in GSTR-2A.
Moreover, if the refund claim is being denied of certain invoices which were not reflected in GSTR-2A, the question arises is that how will the assessee claim refund of such invoices subsequently when such invoices are reflected in their GSTR-2A at future point of time. There is no answer for this inbuilt hardship faced by the assessee on implementing the clarification issued by the circular. The circular is also silent on the procedure to claim refund of input tax credit in cases where the invoices not reflected in GSTR-2A have been subsequently uploaded by the supplier at future point of time. In our opinion, the circular cannot take away the right of assessee to claim refund merely for non-reflection of invoices in GSTR-2A, particularly when the provision contained in Rule 36(4) of CGST Rules, 2017 has been suspended during February, 2020 to August, 2020 for cumulative adjustment in the return filed for the month of September, 2020.
The government should ensure that the clarifications issued by way of circular should is not contrary to the other provisions of law. When the notification no. 30/2020- Central Tax dated 03.04.2020 is not restricting availment of input tax credit of invoices not reflected in GSTR-2A, how can the circular restrict refund of accumulated input tax credit for non-reflection of such invoices in GSTR-2A?
It is pertinent to mention that there have been numerous judgements in the erstwhile regime that have been affirmed by Supreme Court wherein it has been concluded that circulars which are contrary or inconsistent with the statutory provisions are not binding on departmental officers also. Reliance may be placed on the decision given in the case of Commissioner of Central Excise, Bolpur v/s M/s Ratan Melting & Wire Industries [2008-TIOL-194-SC-CX-CB] wherein it was held that a circular which is contrary to the statutory provisions has no existence in law.This circular will create havoc among taxpayers as already refund sanction process consumes considerable time and efforts of the assessee and such restrictions will block the working capital for indefinite period.
In our opinion, when the vires of Rule 36(4) is being challenged in the Delhi High Court and Gujarat High Court and is sub-judice, it is probable that the clarification restricting refund claim for the invoices reflected in GSTR-2A will also be challenged before the Courts.
This is solely for educational purpose.
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