Top GST Rulings in 2023 – Taxmann.com | Research

Contents 1.

Summary Notice under DRC-01 is not a substitute for proper SCN required to be issued under Section 74: HC

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2.

Form DRC-07 alone can’t make an assessee liable to pay any tax, interest or penalty: HC

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3.

No liability of interest would arise if credit was reversed by petitioner before its utilization: HC

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4.

Non-issuance of notice under Section 61 would not affect validity of proceedings initiated under Section 74: HC

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5.

HC stayed operation of demand-cum-show cause notice issued by dept. without issuing Form GST ASMT-10

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6.

Provisions of Section 13(8)(b) and Section 8(2) of IGST Act are legal, valid and constitutional: HC

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7.

HC directed to return currency seized by GST officers being illegal & without any authority of law

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8.

Andhra Pradesh High Court upheld the vires of time limit for availing ITC prescribed under Section 16(4)

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9.

Voluntary deposit made under protest during adjudication to be treated as part of pre-deposit for filing appeal: HC

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10.

No ITC allowed if supplier didn’t pay GST to Government even if tax was collected from buyer: Patna HC

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11.

Dept. can’t conduct GST audit after approving cancellation of GST registration: Madras HC

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12.

Amendment in Rule 89(4) introducing comparison of tax invoice and shipping bill is not clarificatory in nature: HC

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13.

Intent to evade payment of tax is mandatory for invoking the proceeding u/s 129(3) and 130: HC

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14.

Essential characteristic of tea being an ‘agricultural produce’ would not stand extinguish by mere processing and packing: SC

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15.

Assessee was not entitled to cross-examine witnesses relied upon by dept. while cancelling registration: HC

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16.

Order of Patna HC denying use of Electronic Credit Ledger for purposes of paying pre-deposit to be stayed: SC

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17.

Assessee’s request to amend/rectify Form GSTR-1 could not be rejected if wrong GSTIN mentioned inadvertently: HC

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18.

Refund of accumulated ITC is admissible even if principal input & output have same GST but other inputs have different rate: HC

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19.

Amount deposited during search can’t be retained by dept. if proceedings were not initiated: HC

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20.

Action against supplier is essential for non-reflection of invoices before seeking reversal from recipient: Calcutta HC

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21.

Onus on GST authority to prove that e-way bill was reused to levy tax and penalty: HC

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22.

Proper officer not allowed to direct customers of assessee to stop further payments to assessee: HC

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23.

Goods which are returned need not be necessarily accompanied with a Credit Note: Madras HC

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24.

Rummy is predominantly a game of skill, not chance; HC quashes SCN issued on Gameskraft

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25.

Pre-import condition in Foreign Trade Policy for availing benefit of exemption is not arbitrary or unreasonable: SC

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In 2023, numerous consequential decisions were made, carrying crucial implications for taxpayers and revenue.

Our editorial team diligently scrutinized and analyzed the year’s judgments and orders, resulting in over 2000 meticulously reported cases at taxmann.com. Covering a wide spectrum of significant facets within indirect-tax laws, we’ve highlighted nearly all favorable cases. We have compiled the top 25 cases featured on taxmann. com, and the roster for 2023 is outlined below.

25 Key GST Rulings of 2023

1.

Summary Notice under DRC-01 is not a substitute for proper SCN required to be issued under Section 74: HC Sidhi Vinayak Enterprises v. State of Jharkhand [2023] 148 taxmann.com 416 (Jharkhand) The department conducted search in the premises of the petitioner for irregular availment of ITC. Pursuant to search conducted by department, two summary of show cause notice in Form DRC-01 were issued. The petitioner submitted reply but the reply was rejected and summary of order was issued imposing tax and penalty.

It filed writ petition against the notice & order and contended that both show cause notice as well as summary have to be issued. The department submitted that the petitioner participated in the proceedings by furnishing a reply in Form GST DRC-06 and therefore, there was no denial of principles of natural justice.

The Honorable High Court noted that even though petitioner submitted reply, the department can’t take benefit of said action as summary of show cause notice can’t be considered as show cause notice as mandated under section 74(1). In the instant case, the proceeding suffered from material irregularity and hence not sustainable being contrary to section 74(1) and subsequent proceedings/ impugned orders cannot sanctify same. Therefore, it was held that the summary of show cause notices issued in Form GST DRC-01 as well as impugned orders were liable to be quashed.

2. Form DRC-07 alone can’t make an assessee liable to pay any tax, interest or penalty: HC Shree Ram Agrotech v. State of Jharkhand [2023] 152 taxmann.com 82 (Jharkhand) The petitioner was engaged in the business of trading of ferrous waste and scrap, iron, steel, ingots and other metal articles. It received a recovery notice based on alleged summary order, which was based on DRC-07. However, the petitioner was not provided with show cause notice or detailed adjudication order in terms of Section 73 of GST Act. It filed appeal but the Appellate authority dismissed the appeal. Thereafter, it filed writ petition and contended that detailed adjudication order, as required under section 73 (9) of GST Act, 2017, had not been passed by the department.

The Honorable High Court noted that the adjudication order was not available on records of the SGT department. Since no detailed adjudication order, as required under section 73 (9) was passed, the petitioner was not liable to pay any tax, interest or penalty only on basis of said Form DRC-07. The Court also noted that Form DRC07, alone cannot make an assessee liable to pay any tax, interest or penalty and this ground was not considered by the Appellate Authority. Therefore, the Court held that the summary order in Form GST DRC-07 and recovery notice were liable to be quashed.

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25 Key GST Rulings of 2023

3. No liability of interest would arise if credit was reversed by petitioner before its utilization: HC Grundfos Pumps India (P.) Ltd. v. Joint Commissioner of GST & Central Excise [2023] 150 taxmann.com 176 (Madras) The petitioner had been an assessee under the erstwhile Central Excise regime and migrated into the regime of GST. The unutilized credit was taken forward as transitional credit on introduction of GST by the petitioner. However, the said credit was not reflected in Electronic Credit Ledger (ECL), and petitioner reflected same as available ITC in Form GSTR-3B return. The audit wing of GST department during audit demanded interest on ITC which was claimed in GSTR-3B. The petitioner submitted that when ITC without explanation, came to be reflected in ECL, such credit was reversed without set off / utilization against output tax liability at any point of time. However, the department passed demand order levying interest. It filed writ petition against the levy of interest.

The Honorable High Court noted that the liability to interest arises only in case of actual utilisation of credit by assessee. By virtue of amendment in 2022 with retrospective effect from 2017, interest liability was attracted only when ITC wrongly availed and utilized with revenue impact. However, in present case, original error of non-maintenance of ECL was admittedly attributable to department. Moreover, the petitioner did not utilise credit and reversed the same.

Thus, it was held that there was no liability to interest and the impugned order to extent to which it levied interest under section 50(3) was to be set aside.

4. Non-issuance of notice under Section 61 would not affect validity of proceedings initiated under Section 74: HC Nagarjuna Agro Chemicals (P.) Ltd. v. State of U.P. [2023] 150 taxmann.com 419 (Allahabad) The petitioner had submitted returns for period 2019-20. The GST department had not issued any notice under Section 61 of CGST Act, 2017 (the Act) but it initiated proceedings under Section 74 against petitioner on certain grounds with regard to classification and consequential tax payable of certain goods.

The department had examined issue and ultimately passed order whereby tax previously paid was found short and a demand had been raised for deposit of appropriate short fall in deposit of tax as also interest and penalty. It field writ petition against the assessment order and contended that the department must have pointed out deficiency in the returns submitted by the petitioner so as to give it an opportunity to rectify the return before proceeding under Section 74 of the Act. The Honorable High Court noted that the scrutiny proceedings of return as well as proceeding under Section 74 are two separate and distinct exigencies. Therefore, the issuance of notice under Section 61(3) cannot be construed as a condition precedent for initiation of action under Section 74 of the Act.

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25 Key GST Rulings of 2023

Thus, the Court held that merely because no notices were issued under Section 61 of the Act, it would not mean that issues of classification or short payment of tax could not be dealt with under Section 74 as exercise of such power was not dependent upon issuance of notice under Section 61. The Court dismissed the writ petition and the petitioner was permitted to prefer appeal against the impugned order.

5. HC stayed operation of demand-cum-show cause notice issued by dept. without issuing Form GST ASMT-10 Pepsico India Holdings (P.) Ltd. v. Union of India [2023] 157 taxmann.com 428 (Gauhati) In the present case, the petitioner company was served with a demand-cum-show cause notice under section 73(1) alleging that there was an un-reconciled ITC amount as reflected in GSTR-9C for financial year 2017-18 and petitioner was liable to reverse wrongly availed and utilized ITC along with applicable interest and penalty.

The petitioner filed writ petition against it and contended that mandatory conditions precedent required for invoking provisions of section 73(1) for issuance of impugned demand-cum-show cause notice were absent in instant case since Form GST ASMT10 was not issued.

The Honorable High Court noted that in instant case, Form GST ASMT-10 was not issued to petitioner. Therefore, prima facie the act of issuance of impugned Demandcum-Show Cause Notice under Section 73(1) by proper officer was without compliance of mandatory conditions, more particularly, provisions of Section 61 read with Rule 99. Thus, the Court held that the operation of impugned Demand-cum-Show Cause Notice was to be stayed and matter was listed for hearing.

6. Provisions of Section 13(8)(b) and Section 8(2) of IGST Act are legal, valid and constitutional: HC Dharmendra M. Jani v. Union of India [2023] 151 taxmann.com 91 (Bombay) The petitioner was engaged in providing marketing and promotion services to customers located outside India. It was providing services only to the principal located outside India and in lieu thereof receiving consideration in convertible foreign currency from the principal located outside India.

The petitioner contended that the transaction entered into by it with the foreign customers would be one of export of service from India earning valuable convertible foreign exchange for the country by an intermediary. However due to deeming fiction by Section 13(8)(b) of IGST Act, the place of supply shall be the location of the supplier of services which is in India and levy of CGST and SGST would arise. It filed writ petition assailing the constitutional validity of section 13(8)(b) of the IGST Act. The coram of Division Bench Bombay High Court was of two judges. One Judge of Division Bench Bombay High Court observed that Section 13(8)(b) of IGST Act not only falls foul of overall scheme of CGST Act and IGST Act but also offends Articles 245, 246A, 269A and 286(1)(b) of Constitution.

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25 Key GST Rulings of 2023

Thus, as per one opinion, the provision is unconstitutional, other has expressed his disagreement and has rendered his separate opinion. Therefore, in view of such difference in opinion, the matter was placed before the Hon’ble Chief Justice for an administrative order and the Chief Justice referred these matters for the opinion of third Judge.

The third Judge held that that provisions of Section 13(8)(b) and Section 8(2) of IGST Act are legal, valid and constitutional and are confined in their operation to provisions of IGST Act only and same cannot be made applicable for levy of tax on services under CGST and State GST Acts. Therefore, the Hon’ble Chief Justice held that the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid and constitutional.

7. HC directed to return currency seized by GST officers being illegal & without any authority of law Arvind Goyal CA v. Union of India [2023] 151 taxmann.com 228 (Delhi) A search operation was conducted at residence of petitioner by GST officers under section 67(2) of GST Act. During course of search, the officers found cash aggregating to Rs.1,22,87,000 and took possession of the said cash. The petitioner filed writ petition and challenged search conducted since no seizure memo was drawn in respect of the said cash.

The Honorable High Court noted that the power under section 67(2) to seize goods could be exercised only if goods were liable for confiscation and documents, books or things, could only be seized if same were useful or relevant to any proceedings under GST Act. In the instant case, the officers forcibly took over possession of currency from the premises and no seizure memo was drawn in respect of seized cash. It was clear that the action of taking away currency was illegal and without any authority of law.

Therefore, the Court directed to return cash amount along with interest accrued thereon to petitioner and bank guarantee furnished by petitioner for release of currency was directed to be released forthwith.

8. Andhra Pradesh High Court upheld the vires of time limit for availing ITC prescribed under Section 16(4) Thirumalakonda Plywoods v. Assistant Commissioner - State Tax, Circle-1 [2023] 152 taxmann.com 640 (Andhra Pradesh) In the present petition, the validity of Section 16(4) of CGST Act, 2017 which imposed time limit for claiming Input Tax Credit (ITC) was challenged. It was submitted by the petitioner that once returns were accepted with late fees then ITC can’t be denied. It was further contended that this section violated Article 14, Article 19(1)(g) and Section 300-A of Constitution of India since ITC is a statutory right which an assessee is entitled to claim and this section placed stumbling blocks by way of imposing time limit.

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25 Key GST Rulings of 2023

The Honorable High Court noted that ITC is a mere concession/rebate/benefit, and not a statutory or constitutional right. The imposing conditions including time limitation for availing said concession would not amount to violation of constitution or any statute. Thus, it was held that the time limit prescribed for claiming ITC under section 16(4) of APGST Act/CGST Act, 2017 is not violative of Article 14, Article 19(1)(g) and Section 300-A of Constitution of India.

The Court also noted that the collection of late fee is only for purpose of admitting returns for verification of taxable turnover of petitioner and mere filing of return with a delay fee would not act as a springboard for claiming ITC if such ITC was claimed beyond the prescribed time limits.

9. Voluntary deposit made under protest during adjudication to be treated as part of pre-deposit for filing appeal: HC Vinod Metal v. State of Maharashtra [2023] 153 taxmann.com 322 (Bombay) In the present case, the petitioner approached High Court alleging that GSTN Portal prevented it from lodging/filing of a statutory appeal under Section 107 of CGST Act without fulfilment of pre-deposit at the time of appeal. The petitioner contended that for the purpose of the pre-deposit, the amount voluntarily deposited under protest to be accepted towards fulfilment of such pre-deposit. However, the department contended that such deposit was not available for compliance of sub-section (6) of Section 107 of the CGST Act. The Honorable High Court noted that an amount deposited under sub-section (5) section 73 of CGST Act is not an amount, which is deposited in pursuance of any demand or any assessment order. It would be certainly a voluntary deposit and such deposit would be accounted in event of any liability of assessee to pay tax, and would be integral to assessment. Therefore, the Court held that such deposit cannot be excluded from consideration for purpose of compliance of pre-deposit as mandated by sub-section (6) of Section 107.

10. No ITC allowed if supplier didn’t pay GST to Government even if tax was collected from buyer: Patna HC Aastha Enterprises v. State of Bihar [2023] 153 taxmann.com 491 (Patna) In the present case, the purchases were made by the petitioner from supplier after making payments through bank accounts. However, the selling dealer had not paid up the tax liability to the Government and the department denied Input Tax Credit (ITC) to the petitioner. It filed writ petition and contended that the department should proceed against the selling dealer to recover the collected amount of tax.

The Honorable High Court noted that for availment of ITC, its conditions are to be strictly followed by the purchaser and the purchasing dealer could only claim ITC benefit if supplier who collected tax from the purchaser has paid it to Government

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25 Key GST Rulings of 2023

and not otherwise. Moreover, as long as the tax paid by the purchaser to the supplier, is not paid up to the Government by the supplier; the purchaser cannot raise a claim of Input Tax Credit under the statute.

The Court further noted that mere production of a tax invoice, establishment of movement of goods and receipt of same and consideration having been paid through bank accounts would not enable ITC. Therefore, it was held that claim of ITC raised by the petitioner cannot be sustained when supplying/selling dealer had not paid up the amounts to Government; despite collection of tax was done from the petitioner.

11. Dept. can’t conduct GST audit after approving cancellation of GST registration: Madras HC Tvl. Raja Stores v. Assistant Commissioner (ST) [2023] 153 taxmann.com 657 (Madras) The petitioner was a partnership firm registered under GST and intended to close business. It submitted an application before the authorities which was accepted and registration was cancelled with effect from 31.03.2023. Thereafter, it received notice for conducting audit. It filed writ petition and contended that the petitioner’s registration was cancelled and GST Department can’t conduct audit of unregistered concern.

The Honorable high Court noted that as Section 65 of CGST Act, 2017 specifically states ‘any registered person’, then it ought to be construed as existing concern and unregistered person is exempted from purview of section 65.

Further, the Court noted that when Section 65 provides for periodical audit, the department having failed to conduct audit for all these years, suddenly could not wake up and conduct an audit. However, the department can initiate assessment proceedings for petitioner under Sections 73 and 74. Therefore, the Court allowed the petition and notice for audit was quashed.

12. Amendment in Rule 89(4) introducing comparison of tax invoice and shipping bill is not clarificatory in nature: HC Tata Steel Ltd. v. Union of India [2023] 154 taxmann.com 76 (Jharkhand) In this petition, the refund claim of petitioner was rejected on the ground that while processing refund claims in case of exports, lower of values indicated in tax invoice and shipping bill should be taken into account. It filed writ petition and contended that amendment brought in rule 89 (4) of CGST Rules, 2017 which introduced comparison between values indicated in tax invoice and shipping bill would have a prospective effect.

The Honorable High Court noted that the CBIC has inserted a new stipulation for comparison between two values being values indicated in tax invoice and shipping bill. A policy can be changed only by way of an amendment under parent Act and not by a circular and policy change will be effective from date of amendment.

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25 Key GST Rulings of 2023

Moreover, no retrospective date has been indicated in Notification No. 14/ 2022-Central Tax dated 5-7-2022 for bringing amendment under Rule 89 (4). Therefore, by way of amendment, a substantive change has been brought in law and it ought to operate prospectively since mere use of term explanation will not be indicative of fact that amendment is clarificatory/declaratory. Thus, the Court held that the period involved in the instant case was prior to amendment and the impugned order deserved to be quashed and set aside.

13. Intent to evade payment of tax is mandatory for invoking the proceeding u/s 129(3) and 130: HC Shyam Sel and Power Ltd. v. State of U.P 2023] 155 taxmann.com 145 (Allahabad) The petitioner sold goods to a person registered in Uttar Pradesh and transported the same. The goods accompanied tax invoice, e-way bill, and consignment note. The goods were intercepted during transportation and on verification, it was found that the e-way bill had been cancelled by the purchasing dealer, whereupon, goods were seized and GST MOV-07 was prepared seeking the response from the petitioner.

In response, the petitioner submitted that all e-way bills were duly filled up and the petitioner was not aware about the cancellation of e-way bills by the purchasing dealer, and the goods sold were accompanying genuine documents. Dissatisfied by the response, an order was passed under section 129(3) of the CGST Act imposing a penalty and further appeal was also rejected.

It is held by HC that, for invoking the proceeding under section 129(3) of the CGST Act, section 130 of the CGST Act was required to be read together, where the intent to evade payment of tax is mandatory but while issuing notice or while passing the order of detention, seizure or demand of penalty, tax, no such intent of the petitioner was observed in the present case.

It is also held that once the dealer has intimated the attending and mediating circumstances under which e-way bill of the purchasing dealer was cancelled, it was a minor breach. Once the authorities have not observed that there was intent to evade payment of tax, proceedings under Section 129 of the CGST Act ought not to have been initiated, but it could be done under Section 122 of the CGST Act.

14. Essential characteristic of tea being an ‘agricultural produce’ would not stand extinguish by mere processing and packing: SC Nutan Warehousing Company (P.) Ltd. v. Commissioner, Central Tax [2023] 157 taxmann. com 260 (Bombay) The petitioner was engaged in the business of providing warehousing services for agricultural produce. The primary activities of the petitioner included loading, unloading, packing, storage or warehousing of agricultural produce. One of its client procured in bulk ‘tea’ of various qualities after standard processing and stored it in the petitioner’s warehouse. The client was undertaking blending and packing of

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25 Key GST Rulings of 2023

tea at the petitioner’s warehouse. After packing the tea, it was exported overseas to different countries.

The petitioner contended that it was entitled to exemption from the payment of GST in terms of Sl. No. 54(e) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.

The Maharashtra Authority for Advance Ruling held that the process by which tea leaves are dried results in the emergence of a manufactured product. Therefore, tea ceases to be an agricultural produce. Aggrieved by the order, a petition was filed to the Bombay High Court.

The High Court held that the reasoning adopted by the AAR would go contrary to the decisions of the Supreme Court. The essential characteristic of tea being an ‘agricultural produce’ would not stand extinguished by mere processing and packing in whatever form. Therefore, the petitioner would be entitled to the exemption when the petitioner had provided services of warehousing of agricultural produce.

15. Assessee was not entitled to cross-examine witnesses relied upon by dept. while cancelling registration: HC Steel India v. State Tax officer [2023] 156 taxmann.com 250 (Kerala) The petitioner received a show cause notice issued by GST Authority for cancellation of its registration on ground that it was not conducting business from its declared place of business. It filed reply to the notice stating that business premises were temporarily closed due to unforeseen reasons and would resume business when conditions improved. But the GST Authority cancelled its registration.

It filed writ petition against the cancellation order and contended that it had been denied opportunity to cross-examine landlord whose statement had been relied upon by department while cancelling registration as there was violation of principles of natural justice.

The Honorable High Court noted that the petitioner did not file any document for change of its business place nor supported its claim that it was running business from given address by producing any documentary or oral evidence. The Court further noted that the petitioner was not entitled to cross examination as enquiry conducted by department was not a trial, but just summary proceedings.

Therefore, it was held that there was no infraction of principles of natural justice and action by department was not arbitrary as reasonable opportunity was given to submit reply to notice. However, the petitioner may avail remedy of appeal against cancellation of registration.

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25 Key GST Rulings of 2023

16. Order of Patna HC denying use of Electronic Credit Ledger for purposes of paying pre-deposit to be stayed: SC Flipkart Internet (P.) Ltd. v. State of Bihar [2023] 157 taxmann.com 166 (SC) Recently, the High Court of Patna has held that as per Section 49 of CGST Act, 2017, the amount in Electronic Credit Ledger (ECRL) cannot be utilized for purposes of paying the pre-deposit under Section 107(6) of CGST Act, 2017. The Court noted that Section 49(4) only permits for making payments towards output tax and scope of utilization of amounts in ECRL cannot be enlarged for making payment for any other purpose since the amount of pre-deposit can’t be considered as output tax.

Therefore, the Patna High Court held that no interference was required in order of Appellate Authority holding that pre-deposit can only be made through Electronic Cash ledger (ECL). The assessee filed SLP before Supreme Court against order of High Court.

The Apex Court admitted the SLP and held that pending disposal of SLP, the observations of High Court order regarding mode of payment of pre-deposit would remain stayed. The notices were issued to the Revenue.

17. Assessee’s request to amend/rectify Form GSTR-1 could not be rejected if wrong GSTIN mentioned inadvertently: HC Star Engineers (I) (P.) Ltd. v. Union of India [2023] 157 taxmann.com 285 (Bombay) In the present case, the assessee carried out delivery of goods under “Bill-to-Ship-toModel” in line with instructions received from its customer during period July 2021, November 2021 and January 2022 and GSTIN of third party were wrongly mentioned instead of its customer. It filed an application before Deputy Commissioner seeking approval to modify/amend Form GSTR-1 for financial year 2021-22 but Deputy Commissioner informed that matter was time barred and accordingly, petitioner’s application was rejected. It filed writ petition seeking permission to amend GSTR-1.

The Honorable High Court noted that the assessee had correctly issued e-invoices by appropriately citing GSTIN. However, at time of filing of Form GSTR-1, inadvertently GSTIN of third parties to whom shipment was delivered, was reported instead of its customer. The Court further noted that the errors of assessee were inadvertent and bonafide and there was not an iota of an illegal gain being derived by assessee.

Therefore, the Court held that the instant petition was to be allowed and GST authorities were directed to permit assessee to amend/rectify Form GSTR-1 for relevant period either through online or manual means within a period of four weeks.

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25 Key GST Rulings of 2023

18. Refund of accumulated ITC is admissible even if principal input & output have same GST but other inputs have different rate: HC Indian Oil Corporation Ltd. v. Commissioner of Central Goods & Services Tax [2023] 157 taxmann.com 431 (Delhi) In the present case, the assessee procured Liquified Petroleum Gas (LPG) in bulk and same was refilled and bottled in cylinders after being compressed into liquid and sold. It filed application for refund of accumulated ITC but the refund of accumulated ITC was denied on ground that input and output attract same rate of GST of 5%. It filed writ petition against the rejection of refund.

The department contended that the refund of accumulated ITC was rejected relying on CBIC Circular No.135/5/2020-GST dated 31-3-2020, which stated that refund of accumulated ITC under section 54(3)(ii) of CGST Act would not be applicable in cases where input and output supplies are same.

The Honorable High Court noted that various items were used for production including accessories required for safety and such goods were essential for production of bottled LPG and making it suitable for retail supply such as valves, nylon thread, clips and plastic seals which were chargeable to different rate of GST of 18%.

The word ‘inputs’ used in plural in provision indicated refund of accumulated ITC was not confined to ITC accumulated on a single input and the law did not require comparing tax rate of principal input with tax rate of principal output supply. The Court further noted that tax rate of other inputs could not be disregarded and there were no reason or scope for confining refund of unutilized ITC to cases where tax rate on main input was higher than tax rate of principal output.

Moreover, the aforementioned Circular was not applicable in the instant case as it was related to ITC accumulated on account of different rates applicable at different points of time. Thus, the Court directed GST authorities to process refund applications along with interest.

19. Amount deposited during search can’t be retained by dept. if proceedings were not initiated: HC Parsvnath Traders v. Principal Commissioner, CGST [2023] 153 taxmann.com 361 (Punjab & Haryana) The petitioner was engaged in the business of trading of different types of chemicals.

The officials of GST Department had searched the business premises of the petitioner and verbally informed during investigation that there were allegations that the petitioner had got issued bogus invoices. The petitioner was forced to deposit tax amount on the same day by the officials of GST Department. It filed writ petition seeking refund of amount deposited and contended that the department did not issue any show cause notice and no order determining its tax liability had been passed by them.

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25 Key GST Rulings of 2023

The Honorable High Court noted that the deposit of amount on day of search and shortly thereafter when proprietor of petitioner was naturally under stress of search/ investigation did not amount to lead to ‘self-assessment’ or ‘self-ascertainment’.

Further, it was noted that no crystalised liability was shown to be existing against petitioner and no show cause notice had been issued to it either at that time or even till date.

Therefore, any amount deposited during search can’t be retained by department if proceedings under section 74(1) of GST Act were not initiated. Thus, it was held that the department shall refund this amount along with interest at 6% p.a. from the date of deposit till its realisation.

20. Action against supplier is essential for nonreflection of invoices before seeking reversal from recipient: Calcutta HC Suncraft Energy (P.) Ltd. v. Assistant Commissioner, State Tax [2023] 153 taxmann.com 81 (Calcutta) In the present case, the department disallowed appellant’s input tax credit (ITC) after alleging non-reflection of supplier invoices in GSTR 2A for FY 2017-18. The appellant argued that it had made payment to supplier through valid tax invoice but the demand was confirmed. It file writ petition but the Court directed to file appeal before the Appellate Authority. Therefore, it filed intra Court appeal against the decision.

The Honorable High Court noted that Press Release dated 18-10-2018 clarifies GSTR-2A does not impact input tax credit of buyers. However, the reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.

In the instant case, the appellant had already submitted invoices and showed that payments were made through bank to the suppliers. However, the department failed to inquire on supplier despite clarifications submitted by the appellant and directed appellant to reverse ITC. The Court further noted that in such cases, action against supplier would be essential before seeking reversal from recipient. Therefore, it was held that the Revenue’s action was deemed to be arbitrary and the impugned order was liable to be set aside & demand raised on the appellant was not sustainable.

Note- Revenue filed SLP against this order but the Supreme Court after considering facts and circumstances of this case and the extent of demand being on the lower side, declined to interfere and dismissed SLP.

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25 Key GST Rulings of 2023

21. Onus on GST authority to prove that e-way bill was reused to levy tax and penalty: HC BI Agro Oils Ltd. v. State of U.P. [2023] 149 taxmann.com 434 (Allahabad) A transport vehicle carrying goods of the petitioner was intercepted by the department and seizure order was passed on the ground that invoice and e-way bill dated 23.10.2017 were bearing packing date of 26.10.2017 and hence, the documents did not relate to the goods intercepted.

The petitioner submitted reply and stated that while under transportation earlier, the goods were damaged on the way and oil contained therein spilled over other packaging and, thus, same were brought back and thereafter properly packed goods were supplied through the same invoice and e-way bill.

The department levied penalty which was paid by the petitioner under protest and appeal was filed. However, the appeal was rejected and it filed writ petition to challenge the order of penalty.

The Honorable High Court noted that the seizing authority had to establish by evidence that e-way bill was being reused but there was no evidence produced by such authority. The mere assertion made at the end of the seizure order that it was clearly established that the assessee had made double use of the e-way bills would be merely a conclusion drawn bereft of material on record. Therefore, the Court held that the impugned order was liable to be set aside.

22. Proper officer not allowed to direct customers of assessee to stop further payments to assessee: HC Sri Sai Balaji Associates v. State of Andhra Pradesh [2023] 149 taxmann.com 66 (Andhra Pradesh) The petitioner filed writ petition before the High Court to challenge the notices issued by the proper officer to the customers of petitioner. It was contended that the proper officer had no power to direct customers to stop making payment to the petitioner.

The Honorable High Court noted that as per Section 70 of CGST Act, 2017, the proper officer has power to summon any person whose attendance is considered necessary either for giving evidence or producing a document or any other thing in any inquiry.

As per Section 83, the Commissioner may order provisional attachment of any property including bank account belonging to the taxable person.

However, in the instant case, one of the portion in the impugned notice issued under Section 70 stated that “in view of the above explanation you are hereby requested stop all further payments from here onwards until clearance is given by the undersigned”.

Therefore, it was held that such a direction was beyond the jurisdiction and thus, the same was liable to be set aside.

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25 Key GST Rulings of 2023

23. Goods which are returned need not be necessarily accompanied with a Credit Note: Madras HC Luminous Power Technologies (P.) Ltd. v. State Tax Officer, Adjudication-I [2023] 153 taxmann.com 623 (Madras) The petitioner dispatched goods to consignee/buyer by four different invoices which were accompanied with e-way bills. However, those goods were not received by consignee/buyer as goods got wet due to heavy down pour and re-transported back by petitioner after generating four different e-way bills. The goods were detained by Roving Squad when goods were transmitted back to petitioner’s factory in Chennai on the ground that no Credit Note was issued for return of goods. The petitioner filed writ petition against the detention of goods.

The Honorable high Court noted that the credit note under Section 34 is not required to be issued at stage when goods were being returned without receiving by recipient.

The issuance of Credit Note and/or Debit Note under Section 34(1) of CGST Act, is required only for adjustment of tax liability and goods which are returned need not necessarily accompany a Credit Note.

In this case, goods that were detained were covered by four invoices and therefore, the Court held that detention of goods was per se illegal and unwarranted particularly in light of fact that goods accompanied e-way bills, which were generated for return of goods.

24. Rummy is predominantly a game of skill, not chance; HC quashes SCN issued on Gameskraft Gameskraft Technologies (P.) Ltd. v. Directorate General of Goods Services Tax Intelligence [2023] 150 taxmann.com 252 (Karnataka) The petitioner was running technology platform namely Rummy that allowed users to play skill based online games against each other. The department issued SCN to the petitioner whereby it had been alleged that the petitioner was involved in ‘betting/gambling’ & supply of ‘actionable claims’ and guilty of evasion of GST by misclassifying supply as services under SAC 998439.

It filed writ petition to challenge the impugned SCN and submitted that “games of skill” played with monetary stakes does not partake the character of betting. The main question for consideration in the petition was, whether offline/online games such as Rummy would tantamount to ‘gambling or betting’ as contemplated in Entry 6 of Schedule III of the Goods and Services Act, 2017.

The Honorable High Court noted that there is a distinct difference between games of skill and games of chance. The Court noted that a game of skill whether played with stakes or without stakes is not gambling and games such as rummy, etc. whether played online or physical, with or without stakes would be games of skill and test of predominance would apply. The taxation of games of skill is outside the scope of the term “supply” in view of Section 7(2) of the CGST Act, 2017 read with Schedule III of the Act.

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25 Key GST Rulings of 2023

Therefore, it was held that Online/Electronic/Digital Rummy game and other Online/ Electronic played on the petitioner’s platform would not be taxable as ‘Betting’ and ‘Gambling’ and the Court also set aside the impugned SCN being illegal, arbitrary and without jurisdiction or authority of law.

25. Pre-import condition in Foreign Trade Policy for availing benefit of exemption is not arbitrary or unreasonable: SC Union of India v. Cosmo Films Limited [2023] 149 taxmann.com 473 (SC) The Directorate of Revenue Intelligence initiated investigation and issued summons to the manufacturers on the ground that exemption claimed from all custom duty levies, including IGST and compensation cess was not admissible. It was argued that exemption was not allowed when goods manufactured were exported first in anticipation of licence/authorisation, with duty-free import against the authorisation having been undertaken later. The assesse approached the High Court against it and challenged the pre-import condition.

The Honorable Gujarat High Court had struck down the ‘pre-import’ condition in Foreign Trade Policy for availing benefit of exemption from levy of integrated tax and GST compensation cess on import under Advance Authorisation (AA) as unconstitutional. The Revenue filed appeal before the Apex Court.

The Honorable Supreme Court noted that inconvenience caused to exporters by paying two duties and claim refunds could not be a ground to hold the ‘pre-import’ condition as arbitrary. Therefore, the Apex Court set aside Gujarat High Court judgment and held that pre-import condition in Foreign Trade Policy for availing benefit of exemption is not arbitrary or unreasonable.

However, the Supreme Court has directed the Revenue to permit the manufacturerexporters who were enjoying interim orders, till the impugned judgments were delivered, to claim refund or input credit and they shall approach the jurisdictional Commissioner and apply with documentary evidence within six weeks from the date of the judgment.

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25 Key GST Rulings of 2023

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25 Key GST Rulings of 2023

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25 Key GST Rulings of 2023

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