The Jharkhand High Court ruled that a concessional sale price cannot be regarded as a sham transaction and invalidated the Goods and Service Tax (GST) notice.
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The question was whether the GST-ASMT-10 notices issued by Respondents claiming to invoke power under Section 61 of the Jharkhand Goods and Services Tax Act, 2017 (JGST Act) by alleging that Sri Ram Stone Works , the petitioners quoted a lower market price than the actual market price in their returns filed under the Act and asking the Petitioners to explain the same were completely without jurisdiction and beyond the scope of Section 61 of the Act.
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The petitioners are mining lessees/dealers who are registered under the Jharkhand Goods and Services Tax Act, 2017 and who sell stone boulders, stone chips, etc. to different clients. Petitioners received notices stating, among other things, that they had sold stone chips and boulders for less than the going rate in the market. As a result, they were asked to provide justification for why they should not face charges under Section 73/74.
In their responses, a few petitioners argued that notices under Section 61 of the JGST Act read with Rule 99 of the Jharkhand Goods and Services Tax Rules, 2017 (JGST Rules) are only applicable to the extent of discrepancies in the returns and that it is outside the purview of Section 61 of the Act to issue notices by comparing the taxable value of the supply that the petitioners disclosed in their returns with the market price of the goods.
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As the notices do not relate to any of the discrepancies in the returns filed by Petitioners, but rather rely on the returns filed by Petitioners and document that in the returns filed by Petitioners, a taxable supply of goods has been reflected at a price lower than the prevalent market price, the petitioner argued that the Respondent-authorities had overreached themselves in issuing the notices, specifically the GST-ASMT-10, under Section 61 of the JGST Act read with Rule 99 of the JGST Rules.
A simple reading of Section 61 of the GST Act reveals that the appropriate officer may examine the returns and the information they contain, confirm that the returns are accurate, and report any discrepancies. The provisions of Section 61 cannot be used simply because a dealer sold their goods for less than the going rate in the market.
The bench of Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan has observed that the Revenue would not have the right to determine the difference between the market price and the buyer’s price as transaction value unless it could be demonstrated that the sales were fraudulent or that the products were sold at a discounted price.
The court clarified that the notices contain certain overlapping data about alleged discrepancies in the returns of different writ petitioners. The Assessing Officer may issue new notifications regarding inconsistencies in the returns, if any, pertaining to specific writ petitioners; we will not comment on the aforementioned disparity as stated in the notices vis-à-vis returns.
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