Tax Vista Your weekly tax recap Edn. 127 - 21st Nov. 2022 By Dr. G. Gokul Kishore

 

 

Transitional credit - Benefit of Apex Court ruling available to litigated cases also?

In Filco Trade Centre case, the Supreme Court directed opening of GST portal for two months for filing or revising TRAN-1 or TRAN-2 form by taxpayers whether or not their issue was decided by IT Grievances Committee [2022-VIL-38-SC]. CBIC clarified through circulars regarding the procedure to be followed for filing by taxpayers and verification by officers. One of the points clarified is that if transitional credit claim has already been rejected by way of adjudication and appeal is pending, then such taxpayers will not have the option to revise the TRAN-1 form. However, it appears that those taxpayers who are before various High Courts on a variety of transitional credit issues are being directed to file or revise TRAN-1 form as per the Supreme Court judgment. In a recent case, a group of petitions was decided by Jharkhand High Court involving alleged excess claim of transitional credit and consequential action by the department. Though in these cases, proper show cause notice was not issued and only summary was issued which was taken note of by the High Court, the outcome that taxpayers challenging transitional credit related orders will also be entitled to file or revise TRAN-1 or TRAN-2 form, will be beneficial to many [2022-VIL-759-JHR].

 

Pre-GST excise credit cannot lapse - High Court grants time-bound relief

High Courts are fountains of justice particularly when they face extreme adversity of tax authorities. In an order substantiating the above sentence, the Bombay High Court has held that the taxpayer cannot be compelled to forego deemed excise credit attempted to be transitioned through TRAN-1 form but could not materialize as registration was cancelled subsequently at the request of the taxpayer. It appears there was an issue in revocation of cancellation since cancellation was made at the request of the taxpayer and not by the department. The order is unambiguous - petitioner to submit physical application for restoration of registration by next day evening, department to restore registration in the next three days as time granted by Apex Court for revising TRAN-1 gets over on 30^th November, GSTN to open the portal so that the taxpayer is able to do the necessary work regarding TRAN-1 by such date and if online facility is not feasible, taxpayer to be permitted to file forms manually [2022-VIL-760-BOM].

 

Cancellation of GST registration - All blunders at one place

High Courts get furious over administrative excesses but they are restrained in expression. In a case relating to cancellation of GST registration, all blunders were in full display and yet, the High Court used minimal expressions to show its displeasure. As usual, the show cause notice was issued using the template without alleging whether cancellation is proposed due to fraud or suppression of facts, reply was asked to be furnished in a week but the taxpayer was directed to appear for personal hearing the very next day, order was passing on the same day when reply was filed and to cap it all, the order stated that as per directions from head office registration was being cancelled. The High Court held that cancellation cannot be based on such directions from head office even though there was no information as to what the direction really was. The Court held -"From a conjoint reading of the show cause notices and orders for cancellation of the registrations, we are of the view that conduct of the first respondent does not at all inspire the confidence of the Court. There appears to be something amiss in the entire affair. The show cause notices were issued and the impugned orders were passed in a most mechanical manner exhibiting complete non-application of mind."

 

The order was set aside and the Principal Commissioner was directed to look into the conduct and functioning of the officer concerned and take remedial steps. The High Court could have imposed costs but it refrained from doing so. The issue with the tax administration is that most of the higher officers have also come up in the hierarchy passing such orders earlier and no miracles can be expected. The system needs drastic overhaul [2022-VIL-753-TEL].

 

Cancellation of registration on verification in the absence of taxpayer is not valid

Rule 25 of CGST Rules deals with physical verification of business premises of taxpayer and, among other reasons, the officer is empowered to undertake such exercise "due to any other reason after grant of registration". The rule clearly says that such verification shall be made in the presence of the taxpayer and the verification report along with other documents including photos shall be uploaded in the GST portal. While the officer concerned was particular in invoking this rule for verification and on the ground of absence of business, registration was also cancelled, neither notice for verification was issued nor the same conducted in the presence of taxpayer. Verification report was prepared but not uploaded in the portal. The High Court set aside the order cancelling registration, restored it and granted time for filing of returns [2022-VIL-754-DEL].

 

In this column, sufficient safeguard to taxpayer is something which is emphasized always but even the minimal safeguards provided in the statute are ignored by the authorities compelling the taxpayers to seek the intervention of High Court only to permit them to continue to do business. Right to do business is a fundamental right under Article 19(1)(g) of the Constitution and the same can never be subservient to laws like CGST Act or subordinate legislations like CGST Rules. GST authorities cannot invoke statutory provisions in a manner which flies in the face of such Constitutional rights.

 

Payment of tax voluntarily and right to file appeal - Kerala GST issues instructions

In Tax Vista dated 8th August, 2022, Kerala High Court order holding that payment of tax to get the detained goods released does not deprive the taxpayer of the right to file appeal was analysed. In this case, the department had pointed out certain practical portal related issues and High Court issued directions to address the same. In compliance, Kerala GST department has issued circular which speaks in the voice of an advocate representing the taxpayer. The practical inconvenience, network issues, portal fixations, or software problems are not valid grounds to prevent a party from pursuing their statutory appellate remedies, as per the circular. The issue identified is not uploading the relevant order after detention online and sharing of the same physically with the taxpayer. Since the order is not available online, the taxpayer at the time of filing appeal online, is unable to find the impugned order. Therefore, the circular says that as far as possible, manual / physical sharing of orders should be avoided and online mode shall be preferred. The circular recognizes the fact that payment of tax and penalty may be due to exigencies / urgency of the situation when goods are detained on road. For getting the right to file appeal as provided in the statute, taxpayers have to go through the process of filing writ petition and then issuance of circular by the department. The online processes may stabilize in a few years if one were to be very optimistic [Circular No. 10/2022 dated 10-11-2022 issued by Commissioner of SGST, Kerala].

 

Recurring SCN and enforcement action when both Centre and State authorities are involved - Maharashtra clarifies

In GST regime, since assessee can be subject to investigation and enforcement by State and Centre simultaneously leading to confusion, Maharashtra has clarified by way of Trade Circular No. 12T of 2022 dated 17-11-2022 that the authority (Centre or State) initiating enforcement itself shall undertake all consequential action including appeal, review, adjudication, rectification and revision. It has also been clarified that in the matter of issue of recurring SCN where no fresh investigation is required the jurisdictional authority responsible for assessment will issue the SCN for subsequent period if so warranted. The crux of this circular is this issue - the concern is adoption of divergent practices as the investigating department issues subsequent period SCNs also while in certain cases it is left to the jurisdictional assessing authority. In case of grant of refund, it has been clarified that it may be granted only by jurisdictional tax authority, administering the taxpayer considering specific finding by CBIC if any.

 

Tamil Nadu directs cancellation of registration in cases of default in filing GST returns

Circular No. 14/2022-TNGST dated 12-11-2022 has been issued to ensure that there is proper monitoring of top taxpayers and returns are filed in a timely manner. Lamenting that the earlier communications in this regard are not being followed, the present Circular requires proper officer to contact the defaulter over phone once Form GST-3A has been issued electronically. E-mails shall be sent to the defaulter's authorised signatory for the same purpose. The dangerous part of this circular is that it fixes responsibility on the Deputy Commissioner if there is any default in filing return by top taxpayers. The circular calls for best judgment assessment which anyway most of the officers undertake without this circular. When the officers are unleashing their powers to cancel registration without any discretion in most of the cases, the circular directs them to go ahead and cancel registration.

 

 

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He has edited R.K. Jain's GST Law Manual - 15th Edition - Feb., 2022. E-mail - gokulkishore@gmail.com)