Tax Vista Your weekly tax recap Edn. 128 - 28th Nov. 2022 By Dr. G. Gokul Kishore

 

 

Provisional attachment under GST - Amendment does not alter requirement on pendency of proceedings for invocation

Section 83 of CGST Act empowering the GST authorities to provisionally attach property of taxpayer is fairly well-known as it is frequently invoked. This provision was amended from 2022. Before amendment, certain sections were specified and pendency of proceedings under any such provision was a pre-condition for invoking Section 83. After amendment, instead of sections, reference to relevant chapters has been given in Section 83. Further, before amendment invocation was possible during pendency of proceedings while after amendment, it can be used after initiation of proceedings under specified provisions. This amendment has been held by Gujarat High Court as not bringing out any change to the requirement that there must be proceedings pending during which period only Section 83 can be invoked. Pendency of proceedings remains sine qua non for exercise of powers relating to provisional attachment.

 

Based on the above analysis, the High Court has held that summons in the case before were issued after notice / order of attachment was issued and the basis for the same was absent when no proceedings were pending. Order attaching bank account was held as illegal and the same was set aside. The High Court order is dated 19-10-2022. It is not known when the writ petition was filed and admitted. The provisional attachment order is dated 6-1-2022. This means, the taxpayer has been prevented from operating the bank account for ten months. Investigations could have been completed by now. This points to the need for measures to speed up disposal of writ petitions as otherwise, the purpose of filing the same will be lost when provisional attachment ceases after one year [2022-VIL-770-GUJ].

 

"In relation to" in GST law - Direct and proximate relationship is required

Certain words and expressions in tax laws have eternal popularity. They are often used, frequently interpreted and decisions of courts tend to be influenced by the presence and impact of such words. "In relation to" occupies an important place in jurisprudence. While in pre-GST credit scheme, inputs used in or in relation to manufacture were eligible for credit, the same now finds place in exemption Notification No. 12/2017-Central Tax (Rate) also. When pure services are provided to government in relation to function entrusted to panchayat or municipality as per the Constitution of India, GST is exempted. Water board being a governmental authority (this has been omitted from 2022) was before Appellate Authority for Advance Ruling (AAAR) arguing that health / medical insurance service received for employees and their family members would be covered under exemption entry. However, the AAAR held that use of "in relation to" indicates that direct and proximate relation to water supply is required for exemption and the insurance service received does not satisfy this test. Exemption was, therefore, held as not admissible. After amendment, exemption is anyway not available as such water boards are not covered now with the omission of the terms "government entity" and "governmental authority". While medical insurance for employees may not have direct relationship and exemption may not be available, the ruling that direct and proximate relationship is required for exemption needs to be tested in court of law [2022-VIL-86-AAAR].

 

AAAR propounds principles of classification under GST

When different rates are prescribed for various goods under GST, differences in classification are natural. The AAAR has propounded certain principles in GST classification. In the words of AAAR - "A simple thumb rule in reading the GST rate notification is that, where the entry in any Schedule specifies a description of goods at a four-digit Chapter Heading level and the description matches the Chapter Heading description in the Customs Tariff, the rate of tax will apply to all goods under all the sub headings and tariff items of the said Chapter Heading. However, when the entry in the rate notification specifies a description of goods at a four-digit Chapter heading level which is different from the description in the Customs Tariff Chapter Heading or which excludes certain goods, the rate of tax will apply only to those goods which are described against the respective entry in the rate notification. In other words, when the description of goods under a chapter heading in the GST rate notification is different from the description in the Customs Tariff Chapter heading, it cannot be assumed that all sub-headings and tariff items are automatically covered under the entry."

 

The above principle was used to hold that parts of hearing aid are not covered under the entry relating to hearing aid and therefore, exemption available to supply of hearing aid cannot be extended to parts of hearing aid. It further held that they will be taxed at 18% under the residuary entry. The appellate ruling has upheld the advance ruling denying exemption to parts. Indian tax policy can be really quixotic sometimes and this issue proves the same. If hearing aid can be exempted, there can hardly be any rationale for not exempting parts [2022-VIL-89-AAAR].

 

Appellate AAR has no power to give ruling when AAR has rejected application

Two questions of some significance have been answered by Appellate AAR in a recent ruling. The first one is relatively simpler - advance ruling is available when the question involved requires determination of place of supply though such issue is absent in the list of questions that can be raised for advance ruling but clause (e) of Section 97(2) of CGST Act covers determination of liability to pay tax and if such determination is linked to place of supply, AAR has jurisdiction to decide on place of supply. The AAAR held that advance ruling taking contrary view is not sustainable. However, the AAAR did not agree with the appellant that it can give original ruling when the AAR has refused to answer a particular question. The appellant's contention was powers of appellate authority are coterminous with that of original authority and the power to modify the ruling includes answering the unanswered questions. It held that the Appellate AAR can pass order only when the party is aggrieved over the ruling and when no ruling has been passed there is nothing for the AAAR to confirm or modify. It further held that when there is difference of opinion among Members of AAR, then Appellate AAR can pass ruling in respect of matter referred to them. According to it, appeal cannot be filed when an application for advance ruling has been rejected by AAR. The only relief the appellant got was the matter was remanded to AAR for fresh consideration [2022-VIL-88-AAAR].

 

High Court rejects writ petition when engineer shown as respondent in GST matter

It is well-settled that writ petition is not generally maintainable at show cause notice stage. It is equally well-settled that on question of fact, writ petition will not lie. However, it is rare to come across an order where the High Court finds that there is non-joinder/mis-joinder of parties. These are generally used in civil suits when the persons to be made as respondents are missed out and instead, some other persons from whom relief cannot be obtained are shown as respondents. In an order passed by Odisha High Court, the writ petitioner, a works contractor, had made Irrigation Department Engineer as respondent when the matter related to reimbursement of differential GST consequent to implementation of GST from the service recipient - government. The background was the earlier round of litigation where the High Court had told the petitioner to approach the authority concerned and representation filed before such authority (the Engineer) was pending and the petitioner pleaded action at this juncture. The present writ petition was filed challenging show cause notices issued by GST officer and the High Court rejected the argument that since representation has not been considered by the engineer, GST officer has no jurisdiction to initiate action under Section 73 of CGST Act. It further that GST determination of tax liability is within the domain of proper officer and SCNs issued cannot be held as vague or invalid [2022-VIL-761-ORI].

 

 

(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)