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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 CONSTITUTIONAL VALIDITY OF SECTION 13(8)(b) OF IGST ACT, 2017 PART-III:-

GST UPDATE ON CONSTITUTIONAL VALIDITY OF SECTION 13(8)(b) OF IGST ACT, 2017 PART-III:-
In our earlier updates, we discussed about the different opinions of judges involved in the case of M/s DHARMENDRA M. JANI wherein Justice Ujjal Bhuyan opined that the provision contained in section 13(8)(b) of the IGST Act, 2017 is unconstitutional and ultra-vires whereas Justice Abhay Ahuja was of the viewpoint that the provision contained in section 13(8)(b) of the IGST Act, 2017 is constitutionally valid and operative for all purposes. Although, the final verdict of the larger bench in this case is pending, we would like to discuss the most appropriate and justifiable view in our opinion on this matter in this present update.
 
One of the main contentions of the petitioner in this case was that the deeming fiction created by the provision under section 13(8)(b) of the IGST Act, 2017 has the consequence of treating the export of service as ‘intra-state supply’ and thereby leading to levy of CGST and SGST which is erroneous. In this regard, the interpretation of Hon’ble Justice Abhay Ahuja appears to be more logical that when there is specific provision defining intermediary in section 2(13) of the IGST Act, and the place of supply has been specifically mentioned as the location of supplier, there is no need to go to the general meaning of export of service so as to consider the transaction of intermediary located in India providing services to foreign recipient as export ignoring the fact that place of supply is specifically mentioned as location of supplier which is NOT OUTSIDE INDIA. Consequently, considering the transaction in general parlance so as to allege that the deeming fiction is not valid does not appear to be proper.
 
The Petitioner also challenged the provision on the grounds that it violates the Article 14 of the Constitution of India. In this respect, the viewpoint of Justice Ujjal Bhuyan appears to be more suitable as similar service providers such as marketing consultants, management consultants, market research agents, professional advisors who provide consultancy services are considered as exports whereas differential treatment is being given to intermediaries. However, the Hon’ble Justice Abhay Ahuja opined that the intermediary is different service provider as the definition excludes person who renders services for himself. However, discrimination cannot be made as regards various consultants and the intermediaries.
 
As regards the fact whether the provision of section 13(8)(b) complies with the provision of Article 246A and 269A, the opinion of Justice Abhay Ahuja appears to be to the point wherein it was stated that just because the import into India has been deemed to be inter-state trade or commerce, that under Article 269A, in no way would take away the power of the Parliament to stipulate any other type of supply to be supply in the course of inter-state trade or commerce. Parliament can very well make laws on what is inter-state supply and also make laws as regards determination of place of supply.
 
Furthermore, it was contended by the petitioner that Article 286(1) provides that State cannot impose tax on supply which takes place outside the State or in the course of import or export. The Hon’ble Justice Ujjal Bhuyan conceded with the petitioner that no State has authority to levy local tax on export of services and so section 13(8)(b) deeming export to be local supply is violation of Article 286(1) of the Constitution of India. However, in our opinion, the view placed by Justice Abhay Ahuja appears to be reasonable that as the transaction is not covered under export of service, the contention that levy of local tax on export is improper is not at all tenable. When the transaction is not export, the tax can be very well levied by State as well and there is no violation of Article 286(1) of the Constitution of India.
 
As regards violation of Article 245 is concerned which states that a law which has extra-territorial operation cannot be enforced. With respect to this, again the viewpoint of Justice Abhay Ahuja appears to be appropriate that provision of section 13(8)(b) does not lead to extra-territorial operation of law because the location of supplier of services is in India. Hence, it cannot be said that the transaction has no nexus at all in India.
 
The petitioner also contended that by virtue of section 13(8)(b), the service provided by petitioner to its overseas customers has resulted in an unreasonable restriction upon the right of the petitioner to carry on trade under Article 19(1)(g) of the Constitution of India which action could result in closure of business of petitioner and that it would encourage the foreign service recipient to set up liaison offices in India and escape taxation. There was no express discussion on this contention by Justice Ujjal Bhuyan whereas it was held by Justice Abhay Ahuja that the contention is baseless because if it was true then any tax levied by the Central or State Government would be a restriction to carry on trade under Article 19(1)(g) of the Constitution of India.
 
In view of the above comparative discussion of the opinions of the two judges, it is observed that the justification in support of the decision that the provision of section 13(8)(b) of IGST Act, 2017 is constitutionally valid and operative appears to be logical and reasonable. The above comparison has been done for academic discussion only and the final verdict of the third member will have precedence.
 
 
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