In the case of Mitsubishi Electric India, the Punjab and Haryana High Court stayed proceedings under the Goods and Service Tax (GST) Act, 2017 as the department failed to consider tax paid on salary received in Indian currency.
The petitioner has entered into a Secondment & Cost Reimbursement Agreement with Mitsubishi Electric Corporation, Japan, the parent company wherein certain employees have been seconded for service in India. While referring to the salary component it is pointed out that certain amounts are paid in Indian currency whereas certain amounts are paid in Japanese Yen, to be remitted abroad.
It was submitted that on account of the judgment of the Apex Court in C.C., C.E. & S.T., Bangalore [Adjudication] V. Northern Operating Systems Pvt. Ltd., 2022, the law was clarified regarding providing of manpower supplying service being a taxable service on 19.05.2022.
The investigation started regarding the GST implications and conducting internal due diligence. The petitioner-company paid a sum of Rs.8,00,46,776/- on the total amount of Rs.4,44,704,312/- paid by it to its parent company given the decision by the Apex Court and interest element of Rs.2,79,80,800/- was also paid which is mentioned in the letter dated 31.10.2022.
Having received the same, the respondent authorities closed the proceedings without issuance of the show cause notice as per the provisions of Section 73(6) of the Central Goods Service Tax Act, 2017 (the ‘Act’) leaving its right open to investigate for remaining tax duties and liabilities and other issues for the similar period.
After that, the petitioner was put to notice as to whether proper tax along with applicable interest had been deposited by the petitioner on the Indian component for payment or not. The detailed reply was filed leading to the amount being quantified vide order wherein after noticing the amounts deposited an additional sum of Rs.20,46,87,723/- + applicable interest was quantified and the petitioner was advised to pay the same by 22.09.2023 failing which show cause notice was to be issued under Section 73(1) of the Act.
The Petitioner again submitted a detailed representation wherein specific objections were then raised that the amount deposited in Indian currency of the salary component was not covered and secondly, a closure letter had already been issued. Despite that, notice was issued under Section 73(8) of the Act that if the amount be paid within 30 days no penalty will be payable in respect of such tax and interest.
It was contended that a similar issue has also come up for consideration before the High Court of Karnataka in M/s Alstom Transport India Ltd. Vs. The State of Karnataka and an interim order has been passed on 02.11.2023 keeping in view the fact that the writ petition would be rendered infructuous if there is no interim protection.
A division bench comprising Justice G S Sandhawalia and Justice Lapita Banerji stayed the proceedings in pursuance of the show cause notice.
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