Supreme Court and High Courts Weekly Round-Up

This weekly round-up analytically summarises the key tax judgments of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from September 2 to September 8, 2023.

Appeal Restoration shall be allowed when Taxpayer is Unsuccessful in Availing Benefit under Amnesty Scheme: Supreme Court P. M. PAUL vs THE STATE TAX OFFICER & ORS 2023 TAXSCAN (SC) 216

In a civil appeal case, the Supreme Court has noted that there is no specific prohibition against pursuing the restoration of the appeal when the taxpayer is unsuccessful in benefiting from the Amnesty Scheme. This is because the appeal is a legally mandated recourse, and the appellant had initially pursued this statutory remedy but withdrew it solely as a prerequisite for availing remedy under the Amnesty Scheme.

The Supreme Court set aside the orders of the High Court as well as the appellate authority on grounds that neither the appeal has been restored nor has he been heard on merits and further remedies have also been foreclosed. Thus, the appeal before the KVATA No.174/2019 which was pending before the Joint Commissioner of Appeals was restored on the file of the said authority. The apex court has listed the case on 04.10.2023 at 11.00 A.M for the final hearing and disposal. Additionally, it was instructed that the appellant has the liberty to request temporary relief from the appellate authority. If such a request is made, it should be quickly evaluated and handled in accordance with the law.

No Material Evidence To Show Malafide Intention of Govt in Transferring State Tax and Excise Commissioner: Himachal Pradesh HC Dismisses WP Challenging Transfer Order Ganesh Dutt Thakur vs State of H.P. & Ors 2023 TAXSCAN (HC) 1338

The Himachal Pradesh High Court dismissed the writ petition (WP) which challenged the transfer order as there is no material evidence to show malafide intention of Government in transferring of State Tax and Excise Commissioner.

The Court observed that even the transfer policy adopted by the State Government does not reserve any privilege of being not transferred before a minimum period of time for Class I, Gazetted officer(s). The Court observed that the petitioner has not been able to make out a case for himself and dismissed the petition.

Reversal of Deletion of Addition on Unexplained Cash Credit: Delhi HC Directs ITAT to state Valid Reasons for Reversal M/S OM SHIVA TRADERS PVT. LTD vs INCOME TAX OFFICER WARD 13(4) NEW DELHI 2023 TAXSCAN (HC) 1337

In the case of reversal of deletion of addition on unexplained cash credit, the Delhi High Court directed the Income Tax Appellate Tribunal (ITAT) to state valid reason for the reversal.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the reversal of the CIT(A)’s order has taken place, without the Tribunal discussing as to what part of the order was unsustainable. Further held that the Tribunal will have to deliberate on the matter afresh and articulate in the order its reasoning, if it chooses not to agree with the order of the CIT(A). While allowing the appeal, the Court set aside the impugned order.

Bombay HC quashes SCN issued by GST Commissioner on not following statutory time mandate u/s 73(4)(B) of CGST Act UPL Limited vs The Union of India 2023 TAXSCAN (HC) 1336

In a recent case the Bombay High Court quashed the Show Cause Notice (SCN) which was issued by Goods and Service Tax (GST) Commissioner which was without following statutory time mandate under section 73(4)(B) of Central Goods and Service Tax (CGST Act), 2017.

A division bench comprising Justice G S Kulkarni and Justice Jitendra Jain observed that “even in absence of the provisions of sub-section (4)(B) of Section 73, respondent no.2 could not have acted oblivious to the settled principle of law, that a show cause notice would be required to be adjudicated within a reasonable time depending the facts of each case. However, as observed by us in our decision in Coventry Estates Pvt. Ltd. Versus The Joint Commissioner CGST and Central Excise & Anr. (supra), reasonable time would not be an egregious, unjustified and unexplained inordinate delay. Having perused the reply affidavit, we find that no justification whatsoever is given by the Deputy Commissioner in Commissioner not adjudicating the show cause notice.”

No Records to Show Findings on Shortage of Chemical found during Survey: Allahabad HC Upholds the Regular Assessment Order M/S National Chemical vs The Commissioner Commercial Tax 2023 TAXSCAN (HC) 1335

The Allahabad High Court upheld the regular assessment order which alleged the shortage of chemical though they are registered in the stock register as there was no record brought by the asseese to show that there was findings on the same in the provisional assessment.

The Court viewed that the revisionist has failed to show any finding or detailed decision on merit, which was recorded by any of the competent authority in his favour to justify the shortage of chemical found at the time of survey dated 13.5.2015, though the same was mentioned in the stock register. Since no interference is called , the Court dismissed the revision.

Madras HC dismisses Writ Petition against GST Registration Cancellation as Govt Notifies Amnesty Scheme to Consider Revocation Application TNGST Act DDA Tyres and Services vs Deputy Commissioner of GST 2023 TAXSCAN (HC) 1334

In a significant case, the Madras High Court dismissed the writ petition against Goods and Service Tax (GST) registration cancellation as government notifies amnesty scheme to consider revocation application under Tamil Nadu Goods and Service Tax (TNGST) Act, 2017.

Considering the single judge bench comprising Justice C Saravanan closed the Writ petition by giving liberty to the petitioner to approach the authorities in terms of the above notification.

Failure to note disclosures in ITR prior to issuance of notice u/s 148A(b) of Income Tax Act: Delhi HC quashes income tax notice MS. SHALINI MITTAL vs INCOME TAX OFFICER 2023 TAXSCAN (HC) 1333

The Delhi High Court in a recent case quashed the income tax notice as the department failed to note the disclosure made in the Income Tax Return (ITR) prior to the issuance of Income Tx notice under section 148A(b) of the Income Tax Act,1961.

A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia held that “it is a clear case of non-application of mind by the Assessing Officer and consequently, the notice under Section 148A(b) of the Act, coupled with its corrigendum and followed by the consequent order under Section 148A(d) and notice under Section 148 of the Act cannot survive, so the same are hereby set aside.”

Patna HC directs Refund of recovered GST Dues on next day of dismissal of Appeal, slams Tax Officer with Rs. 5000 costs for arbitrary recovery action in the absence of GSTAT Sita Pandey vs The State of Bihar, through the Commissioner of State Tax, Patna 2023 TAXSCAN (HC) 1332

A Division Bench of the Patna High Court has imposed a penalty of Rs. 5,000 on officials for arbitrarily conducting a tax recovery in gross violation of Goods and Services Tax regulations.

In cases involving bank accounts, prior notice must be given to the assessee before any funds are withdrawn, granting them an opportunity to present their case or seek legal remedies.

Departmental Inquiry against Government Servant not Casual Exercise: Allahabad HC quashes Suspension of Assistant Commissioner of State Tax made without Merit Ashok Kumar Singh vs State Of U.P 2023 TAXSCAN (HC) 1331

In a significant ruling the Allahabad High Court observed that “Departmental Inquiry against Government Servant not Casual Exercise” and thereby quashed the suspension of Assistant Commissioner of State Tax made without merit.

The Court concluded by noting that they are inclined to allow the present petition and set-aside the impugned order of the learned Tribunal. Since the learned Tribunal having called upon to adjudicate the matter in its right perspective has failed to determine and return any findings on the various grounds and issue raised by the petitioner as can be borne out from the claim petition itself filed before the Tribunal.

Blowback to Gameskraft: Supreme Court stays Karnataka HC order quashing Rs. 21000 Cr Online Gaming GST Demand DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE (HQS) vs GAMESKRAFT TECHNOLOGIES PRIVATE LIMITED 2023 TAXSCAN (SC) 217

The Supreme Court has recently stayed the order of the Single Judge of the High Court of Karnataka that quashed the 21000 Crore Rupee GST Demand served on Gameskraft.

In the High Court order, Justice SR Krishna Kumar asserted that Rummy, whether played online or in physical form, predominantly involves skill rather than chance. As a result of the High Court’s decision, online Rummy games and other digital games on Gameskraft’s platforms were not classified as ‘betting’ or ‘gambling,’ making them exempt from taxation. The Karnataka government has also submitted a plea contesting this ruling in the Supreme Court. The Special Leave Petition is now listed to be heard on 10 October 2023.

Petition Challenging GST Council’s Power to Change Classification of Commodity: Allahabad HC Stays CBIC Circular and Notices as Interim Relief M/S Dharampal Satyapal Limited vs Union Of India And 6 Others 2023 TAXSCAN (HC) 1330

On a petition challenging the Goods and Service Tax (GST) Council power to change the classification of a commodity and increasing the GST rate, the Allahabad High Court stayed the effect and operation of Central Board Of Indirect Taxes & Customs (CBIC) Circular and notice as an interim relief.

A division bench comprising Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava held that “the effect and operation of the Circular dated 6.10.2021 (Annexure 2 to the writ petition), impugned show cause notices shall remain stayed provided the petitioner deposits a sum of Rs.10 crores with the respondents within three weeks from today which shall be kept in a separate account and submits a bank guarantee of the balance amount other than cash within the same period. It is clarified that the adjudication proceedings may go on but shall not be given effect without the leave of the Court.”

Test of Commercial Expediency for determining Business Expenditure shall be applied from point of Business Man, not Revenue: Bombay HC grants Relief to Indian Hume Pipe The Indian Hume Pipe Co. Ltd vs Commissioner of Income Tax 2023 TAXSCAN (HC) 1329

The Bombay High Court, while granting relief to the Indian Humes Pipe Co. Ltd. has observed that the test of applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the businessman’s point of view and not from the Revenue’s perspective.

The bench observed that it is a settled position that the Revenue cannot sit in judgment over the assessee to come to a conclusion, how much payment should be made for the services received by the appellant-assessee. Therefore, in the view of the Division bench, the Tribunal was not justified in confirming the disallowance of 2/3rd as made by the AO and allowing the relief of only 1/3rd of the expenses.

Non-Receipt of Service Tax Order due to Lack of Communication between Husband and Wife: Madras HC Condones Delay of 455 Days in filing Service Tax Appeal K.Murugan vs .The Commissioner of Central Excise (Appeals) 2023 TAXSCAN (HC) 1327

The Madras High Court condoned delay of 455 Days in filing Service Tax Appeal on the ground of non-receipt of Service Tax Order due to the lack of communication between husband and wife.

A Single Bench comprising Justice S Srimathy observed that “Therefore, considering the facts and circumstances of the case, this Court is inclined to allow this Writ Petition. The petitioner is directed to file an appeal within a period of four (4) weeks from the date of receipt of a copy of this order. The respondents are directed to take the petitioner’s appeal on file and consider the appeal on merits. As far as the delay is concerned, the petitioner is directed to pay Rs.5,000/- (Rupees Five Thousand only) to the respondents to condone the delay.”

Relief to Novartis Healthcare: CESTAT rules Information Technology Software Services are Taxable Services u/s 65(105) of Finance Act M/s. Novartis Healthcare Pvt. Ltd vs Commissioner of CGST & Central Excise 2023 TAXSCAN (CESTAT) 1075

In a major relief to M/s. Novartis Healthcare Pvt. Ltd, the appellant, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench, ruled that Information Technology Software Services are taxable services under Section 65(105) of the Finance Act,1994.

A Two-Member Bench comprising Dr. Suvendu Kumar Pati, Member (Judicial) and Anil G. Shakkarwar, Member (Technical)observed that “The services rendered by the Appellant are defined as taxable services under 65(105) of the Finance Act, 1994 but for the purpose of export only they were allowed to export the same without payment of Service Tax but that by itself would not put the services under the category of unentitled service, so as to deny Cenvat Credit and consequential refund to the Appellant.”

Non-Consideration of uploaded Bank Realization Statement in Portal: Madras HC quashes Order Denying Duty Drawback M/s. Style Garments vs The Assistant Commissioner of Customs 2023 TAXSCAN (HC) 1328

The Madras High Court quashed an order denying duty drawback on the ground of non-consideration of the uploaded Bank Realization Statement in its portal.

A Single Bench of Justice S Srimathy observed that “In view of the foregoing reasons, this Court is of the considered opinion that the petitioner is entitled to the relief based on the statement of Bank realization.” “Accordingly, the impugned order, dated 22.09.2020 is hereby quashed. The respondents shall issue notice to the petitioner and grant personal hearing to the petitioner. The petitioner shall submit the bank realization statement before the respondents and thereafter, the respondents shall pass order” the Bench noted. B.Vijay Karthikeyan, the Counsel, appeared for the petitioner, and R.Nandakumar, the Senior Standing Counsel, appeared for the respondents and perused the material documents available on record.

High Court in its Writ Jurisdiction cannot act as AO to Scrutinise Facts and Evidences: Calcutta HC SHRI SHYAM SUNDAR DHANUKA vs UNION OF INDIA AND OTHERS 2023 TAXSCAN (HC) 1326

In a recent decision, a Division bench of the Calcutta High Court confirmed the observation of the Single bench of the same court, which stated that the High Court, when exercising its Writ Jurisdiction, cannot assume the role of an Assessing Officer (AO) to examine the facts and evidence, and replace them with its own opinion.

The division bench, in the light of the findings recorded by the assessing officer, observed that the order passed under clause (d) of Section 148 is a non speaking order nor the order to be branded as outcome of non-application of mind. To test the correctness of the order, it is necessary that the disputed question of facts have to be thoroughly analyzed. Further stated that there are several stakeholders in the entire process which requires deeper probe into the matter and such an exercise cannot be done in exercise of writ jurisdiction. Therefore, it was held that the single bench was fully justified in not entertaining the writ petition and leaving it upon to the appellant to agitate all issues in the reopening proceedings for which notice under Section 148 of Income Tax Act.

Income from sub licensing software for healthcare business in India Shall not be taxed as Business Income under India – USA DTAA due to absence of PE: ITAT GE Precision Healthcare LLC vs Assistant Commissioner of Income Tax 2023 TAXSCAN (ITAT) 2088

The Income Tax Appellate Tribunal (ITAT) Delhi bench held that the Income from sub licensing software for the healthcare business in India should not be taxed under Business Income due to absence of Permanent Establishment (PE) under India -USA Double Taxation Avoidance Agreement (DTAA).

After considering the facts submitted by both parties, the two member bench of G.S. Pannu, (President) and Saktijit Dey, (Vice President) held that the Due to the absence of a Permanent Establishment, the income from sub licensing software for healthcare business should not be taxed as business Income.

Relief to Larsen & Toubro Limited: Bombay HC confirms Reversal of Credit to Input Services on Usage for Manufacture of Dutiable and Exempted goods The Principal Commissioner of CGST vs Larsen & Toubro Limited 2023 TAXSCAN (HC) 1325

A Division Bench of the Bombay High Court confirmed the reversal of credit to input services on usage for manufacture of dutiable and exempted goods and thereby granting major relief to Larsen & Toubro Limited (HED).

The Court of Justices Jitendra Jain and GS Kulkarni observed that “The benefit of reversing the proportionate credit was extended with retrospective effect in cases where common input and input services were used for dutiable and exempted products. This permitted the respondent to proportionately reverse the credit attributable to input / input services used for manufacture of exempted goods, in a case where common inputs or input services were used for manufacture of both dutiable and exempted goods.” “It is rightly observed by the CESTAT that when for such period the dispute has arisen only in such event, a show cause notice was issued and hence, the case of the respondent for the period 2007-08 was covered by the amendment made by way of insertion of subrule (7) of Rule 6 of CCR,2004 by the 2010 Amendment” the Bench noted.

CGST Superintendent has No Jurisdiction to issue SCN u/s 61 of CGST Act: Calcutta HC M/S. GOPESHWAR IRON AND STEEL WORKS PRIVATE LIMITED vs THE SUPERINTENDENT 2023 TAXSCAN (HC) 1324

The Calcutta High Court has held that the Central Goods and Service Tax (CGST) Superintendent has no jurisdiction to issue a show cause notice (SCN) under section 61 of the Central Goods and Service Tax Act, 2017( CGST Act).

While allowing the appeal, the Court comprising Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya held that “the notice issued by the Superintendent, CGST & Central Excise, L-1, Circle-III, Durgapur 1 Division, Durgapur dated 17.04.2023 shall remain stayed till the disposal of the writ petition being WPA 10506 of 2023. The respondent is directed to file the affidavit-in-opposition in the writ petition after which the writ petition will be heard and disposed of on merits and by law. “

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