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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 RETROSPECTIVE AMENDMENT IN SECTION 50

GST UPDATE ON RETROSPECTIVE AMENDMENT IN SECTION 50
The budget 2022 has made considerable changes in the CGST Act, 2017 and has tried to remove anomalies prevalent in the various sections of the CGST Act, 2017. The matching concept could not be operationalised since the inception of GST and it was perceived as far possibility to develop sufficient infrastructure for the same. Consequently, the provisions related to matching concept being section 42, 43 and 43A of the CGST Act, 2017 have been deleted. Similarly, section 50(3) of the CGST Act, 2017 has been amended retrospectively w.e.f. 01.07.2017 to rectify the drafting error in the said section. The analysis of the retrospective amendment made in section 50(3) of the CGST Act, 2017 is the subject matter of discussion of our present update. The provision of section 50(3) of the CGST Act, 2017 prevalent as of now, reads as follows:- (3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council. Moreover, the notification no. 13/2017-Central Tax dated 28.06.2017, prescribing interest rate has reference of section 50(1) specifying interest rate as 18% and states interest rate of 24% for section 50(3). Now, the question arises is the applicable interest rate for wrongful availment and utilisation of input tax credit for reason other than matching concept which is not made operational till date. There is no specific provision in section 50 of the CGST Act, 2017 covering situations wherein the interest is leviable for wrongful availment and utilisation of input tax credit for various other reasons such as ineligible credit under section 17(5) availed by the assessee or inadvertently credit taken twice by the assessee. In such cases, there was confusion as regards the applicability of interest rate as 18% or 24% or 0% as there is no specific provision for the same. It is worth mentioning that this lacunae in the provision of section 50 was pointed by us in our earlier GST update titled- MADARS HC DECISION ON LEVY OF INTEREST ON WRONG AVAILMENT OF ITC. It is submitted that the hon’ble Madras High Court in the case of M/S F1 AUTO COMPONENTS PVT. LTD. [W.P. NO. 6631 OF 2021] had concluded that since the provisions of section 42 were not invoked in the case of petitioner, they were not required to pay interest rate of 24% but were required to pay interest of 18% for the wrongful availment and utilisation of input tax credit. While analysing the reasoning adopted by the Hon’ble High Court, we had pointed that as per the provisions contained in section 50 of the CGST Act, 2017, section 50(3) only covers the situation of wrongful availment and utilisation of input tax credit under section 42/43 of CGST Act. Consequently, once it is held that provisions of section 42/43 are not applicable, interest should not be leviable for wrongful availment and utilisation of credit. It appears that the government has realised the drafting lacunae and has resorted to rectification of the said provision. The retrospective amendment as proposed in the Finance Bill, 2022 reads as follows:- “(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.” It is worth noting that simultaneously retrospective amendment has been made in the notification no. 13/2017-Central Tax dated 28.06.2017 prescribing 18% for section 50(3). On harmonious construction of the above amendments, after enactment of the Finance Act, 2022, the wrongful availment and utilisation of input tax credit will be liable to interest at the rate of 18%. It is submitted that the above amendment on the one hand confirms the levy of interest on wrongful availment and utilisation of credit by removing the drafting error in section 50 while on the other hand provides benefit to the assessee that interest is not payable on mere wrongful availment of input tax credit. The issue regarding levy of interest on mere wrongful availment of interest is decided in favour of the assessees. Reference may be made to the decision given by the Hon’ble Patna High Court in the case of M/S COMMERCIAL STEEL ENGINEERING VS STATE OF BIHAR [W.P. NO. 2125 OF 2019] wherein it was concluded that interest is to be charged only if the wrongful availment of input tax credit has resulted in short payment of tax by the assessee. Therefore, the amendment seeks to reduce the possibility of litigation as regards interest liability on wrong availment and utilisation of input tax credit in future
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