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 9 to September 15, 2023.
The Supreme Court bench of Justice M.M. Sundaresh and Justice J.B. Pardiwala presiding, provided relief to Oriental Structural Engineers by endorsing the Arbitration Tribunal’s ruling to either refund or apply a deduction for the overpaid taxes.
The Supreme Court noted that the perspective presented by the Tribunal is indeed a reasonable one. Under the authority granted by Section 37 of the Arbitration Act, this perspective cannot be substituted, even though an alternative viewpoint is also conceivable. Further, the apex court stated that “Admittedly in the case on hand, the tax was reduced by the operation of law whereas the appellant has paid higher tax as was in existence earlier. In such a view of the matter, we are inclined to set aside the order impugned. The civil appeal stands allowed.”
In a significant judgment concerning the Constitutionality of retrospective repeal of Section 144-B(9) of the Income Tax Act, the Supreme Court bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan validated the omission by the Finance Act, 2022. The bench also upheld the decision of the Allahabad High Court remitting the case back to the Assessing Authority for proper hearing.
While upholding the decision of the Allahabad High Court, the Supreme Court bench held that “We note that since the matter has been remitted to the Assessing Authority to be considered on merits, we dispose of this Special Leave Petition reserving liberty to the petitioner to revive this petition in the event the petitioner is unsuccessful before the statutory authorities so as to raise the contentions raised in this special leave petition on the other aspects of the matter.”
In a major decision, a Single Bench of the Jharkhand High Court observed that setting aside penalty order leads to automatic quashing of prosecution under Section 276C (1) of the Income Tax Act, 1961.
The Court of Justice Sanjay Kumar Dwivedi observed that “The Court comes to the conclusion that once penalty order is set aside, it will be presumed that there is no concealment and quashing of prosecution under Section 276C(1) of the Income Tax Act is automatic. The petitioner cannot be allowed to suffer and to face criminal trial and the same cannot sustain in the eyes of law.” “There is no doubt that penalty proceeding and prosecution can go simultaneously in the facts and circumstances of the cases, however, in the case in hand, the penalty proceeding has already been set aside in view of the appellate order. Further, if the penalty proceeding has been set aside, mens rea is one of the essential ingredients of a criminal offence” the Bench concluded.
The Delhi High Court recently observed that the possession of liquor as purchaser by the same manufacturer under different company names is with intention to evade excise duty.
A Single Bench of Justice Subramonium Prasad observed that “The Director of M/s Tilak Nagar Industries Private Limited and the Petitioner herein are one and the same person. The modus operandi of the Petitioner was to sell liquor belonging to one group under different names and avail the benefit of the excise duty under the garb of stock transfer.”
In a recent judgment, the Delhi High Court noted that the undisclosed income in question, which is the matter of the current dispute, has already been subjected to taxation in the accounts of the primary company. Therefore, it cannot be taxed once more when used as share capital in another company.
After considering the facts and submissions, the bench of Justice Girish Kathpalia and Justice Rajiv Shakdher ruled that “since the undisclosed income which is subject matter of the present dispute had already been taxed in the hands of the flagship company Surya Food & Agro Ltd., it cannot be again subjected to tax in the hands of the respondents/assessee companies in the form of application of the said income as their share capital.” Accordingly, the question as framed above was answered against the appellant/revenue and in favour of the respondent/assessee.
The High Court of Andhra Pradesh has clarified that proceedings initiated under Section 130 of the Goods and Services Tax (GST) Act against a third party are insufficient grounds for detaining vehicles and goods in transit. The court emphasised the independent nature of Sections 129 and 130 of the GST Act and highlighted that they serve distinct purposes.
The division bench comprising Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa directed the authorities to release the detained goods in favour of the 1st petitioner, subject to the 1st petitioner depositing 25% of their value and executing a personal bond for the balance. The court also instructed the release of the vehicles in favour of the second petitioner upon their execution of personal security bonds for the determined value as per the Road Transport Authority. The bench thus clearly distinguished Sections 129 and 130 of the GST Act when dealing with the detention and confiscation of goods and conveyances in transit and highlighted the need for authorities to initiate separate proceedings against the purchaser/owner of the goods under Section 129 when detaining goods while they are in transit.
The High Court of Andhra Pradesh has clarified that a bonafide purchaser cannot be held liable for the Goods and Services Tax (GST) irregularities of the seller. The court clarified that the responsibility of the purchaser is limited to proving the genuineness of the transaction and ensuring compliance with the GST Act.
The division bench comprising Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa clarified that a bonafide purchaser like the 1st petitioner cannot be held responsible for the irregularities of the seller, the 4th respondent. The purchaser’s responsibility is confined to proving the genuineness of the transaction, including providing evidence of the GST registration, mode of payment and authenticity of the documents.
The High Court of Andhra Pradesh has declared the detention of vehicle and goods in transit by tax authorities as unlawful when proceedings were not initiated against the owner under Section 129 of the Goods and Services Tax (GST) Act, 2017.
The division bench comprising Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa held that the tax authorities can initiate proceedings against the petitioners under Section 129 of the GST Act, allowing the petitioners an opportunity to present their case and prove the legitimacy of their transaction. The bench directed the release of the detained goods upon the 1st petitioner’s deposit of 25% of their value and the execution of a personal bond for the balance. The vehicles were also to be released upon the execution of personal security bonds for their determined value by the Road Transport Authority. The ruling aims at ensuring that owners are not unduly penalised when they have legitimate transactions and documentation in place, while also allowing tax authorities to take appropriate action against those in violation of the law.
The High Court of Andhra Pradesh has ruled against the detention of goods in transit by tax authorities solely on the basis of suspicions regarding the credentials of the seller. The court emphasised the importance of adhering to proper legal procedures and ensuring that the taxpayers are given a fair opportunity to establish the legitimacy of their contentions.
The bench highlighted the importance of adhering to proper legal procedures and ensuring that taxpayers are given a fair opportunity to establish their innocence, even in cases where doubts exist regarding the credentials of other parties involved in a transaction.
In a recent ruling, the Delhi High Court instructed the Goods and Services Tax Authorities to reinstate the GST registration of the petitioner and pointed out that the taxpayer’s incapacity to submit the necessary form to update their address should not be considered as a valid reason for denying the restoration of GST registration.
The bench set aside the impugned orders and directed the authorities to restore the GST registration. It was also clarified that the respondents are not precluded from taking such steps, albeit, in accordance with law, if they are of the view that the petitioner’s registration is required to be cancelled or any other measures are required to be taken.
The Delhi High Court invalidated the assessment order made by the Income Tax authorities, neglecting the request to postpone the response to the Show Cause Notice (SCN) and passed the order violating the principles of natural justice.
The High Court further instructed that the Assessing Officer (AO) should make sure that the petitioner is granted access to the portal for uploading their response, as the petitioner’s legal representative indicated that they would submit their reply within three weeks. Moreover, the petitioner is granted the right to send a copy of their response to the Jurisdictional Assessing Officer (JAO) via email. Following this, the AO will send a notice to the petitioner for a face-to-face meeting, specifying the date and time for the hearing.
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the Tax Deducted at Source (TDS) deducted in the hands of the transferor company shall belong to the transferrer company when the amalgamation scheme is approved by the High Court.
The Two-member bench comprising of Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) examined the Form 26AS of the amalgamating companies and found that TDS is deducted in the name of transferee companies but that is immaterial when the scheme is approved by the High Court as post the appointed date, the TDS deducted in the hands of the transferor company shall belong to the transferee company. Therefore, the order of the Commissioner of Income Tax (Appeal) [CIT(A)] was set aside and the Assessing Officer was directed to allow the credit of Rs, 3,31,880/- to the assessee. Thus, the appeal of the assessee was allowed.
A Division Bench of the Delhi High Court ruled that Rule 8 of Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules 2010 (CTUT) not ultravires to Section 3A of the Central Excise Act, 1944 (CEA).
A Division Bench comprising Justices Yashwant Varma and Dharmesh Sharma observed that “The principal part of Rule 9 requires that the monthly duty be deposited by the fifth day of the same month. If the Rule were to stop at this point, there would clearly be a vacuum in case an additional packing machine were to be added to the production line after the fifth day of the said month. The Third Proviso to Rule 9 consequently cannot possibly be read as diluted the deeming fiction which stands embodied in Rule 8.” “Accordingly, and for all the aforesaid reasons, we find ourselves unable to hold Rule 8 as being ultra vires Section 3A nor do we find any error in the view as expressed by the Tribunal while passing the order impugned” the Bench concluded.
A Division Bench of the Delhi High Court directed to dispose of Rectification Application within 4 weeks and observed that “Repeated representations to AO and grievances sought cannot explain delay of 7 years”.
The Court of Justices Rajiv Shakdher and Girish Kathpalia observed that “That said, we find it difficult to understand why the petitioner did not approach the Court within a reasonable period. Repeated representations to the Assessing Officer (AO) and grievances sought cannot explain, in our view, the delay and laches in approaching the Court. The period involved is more than seven (7) years.” The Court made the following direction that “The concerned officer will dispose of the rectification application within four (4) weeks of receipt of a copy of the judgment.” The Court also directed the AO to bear in mind that the first representation to the respondent was made on 09.10.2019 and opined that the interest between the period after the expiry of six (6) months from when the rectification application was filed and 09.10.2019 in the facts of this case, ought not to be paid to the petitioner.
A Division Bench of the Delhi High Court quashed an order issued under Section 127 of the Income Tax Act, 1961 as the objection filed by the petitioner, Samson Healthcare Pvt Ltd, was not considered.
The Court of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “Therefore, according to us, the best way forward would be to set aside the impugned order dated 25.07.2023, with liberty to the Assessing Officer (AO) to pass a fresh order, albeit, as per law. The AO, before passing a fresh order, will accord a personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice indicating the date and time of the hearing to the petitioner.”
The Delhi High Court quashed assessment order passed without considering the delay in filing reply to income tax notice due to incorrect login password.
A Division Bench of Justices Girish Kathpalia and Rajiv Shakdher concluded that “In view of above discussion, all these four writ petitions are allowed and accordingly, the draft assessment orders dated 26.07.2022, final Assessment Orders dated 10.09.2022, the demand notices dated 10.09.2022 and the Penalty Orders dated 30.03.2023 are set aside, remanding the matters back to the Assessing Officer with the directions to afford a fair hearing to the petitioner/assessee in accordance with law after issuing fresh notices under Section 142(1) of the Act.”
The Allahabad High Court directed the GST Department to allow the assessee to upload Form ITC-01 to claim Input Tax Credit (ITC).
A Division Bench of Justice Ashutosh Srivastava and Pritinker Diwaker noted that “The writ petition is disposed of by directing the respondents to do the needful and ensure that the writ petitioner is permitted to upload the Form ITC-01 so as to enable him to claim the Input Tax Credit worth Rs. 31,18,718/- as stated in para 13 of the writ petition) under Section 18 (1) (c) of the Act. Let the exercise be done within 4 weeks from the date of service of certified copy of the order of this Court upon the concerned respondents.”
The Kerala High Court in a significant ruling observed that the execution of contract for delivery of goods is taxable event in contract for transfer of right to use goods under the Kerala Value Added Tax Act, 2003 (KVAT Act).
A Division Bench of Justice Dr AK Jayasankaran Nambiar and Justice Mohammed Nias CP, noted that “In the light of the above, it has to be held that in a contract for the transfer of the right to use the goods, the taxable event is the execution of the contract for delivery of the goods, and if that has taken place, it was immaterial whether the transfer was exclusively or to the exclusion of all others. In the instant case, the transferee obtained a legal right to use the goods for the period during which he had such legal rights, which had to be to the exclusion of the transferor.”
In a recent decision, the High Court of Delhi has modified its earlier order in the case of Amazon Web Services India Pvt Ltd & Anr. vs. Income Tax Officer & Anr. The case pertains to a dispute over the withholding tax deducted at source (TDS) on payments made by Amazon Web Services India (AWS India) to its U.S. counterpart, AWS USA.
The Delhi High Court further clarified that the modified order applies for the limited period from 01.11.2022 to 31.03.2023, but it does not prevent the Revenue from taking any measures related to the period before November 1, 2022, based on the absence of a Section 195(2) application or assessment.
The High Court of Delhi has held that the seizure of cash by the Goods and Services Tax (GST) authorities under Section 67(2) of the Central Goods and Services Tax (CGST) Act, 2017 on the suspicion of it being black money is illegal. The court has ordered the immediate release of seized funds and has allowed the possibility of a refund.
The division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan concluded that the tax authorities cannot seize cash solely on the suspicion of it being unaccounted for without concrete evidence. The ruling also highlights the importance of due process and the rights of taxpayers in such cases.
In the issue of the restriction in utilization of cenvat credit during default period, the Bombay High Court listed the matter for further hearing since it was pending.
A division bench comprising Justice G.S. Kulkarni and Justice Jitendra Jain listed the matter to hear the parties and pass appropriate orders on these proceedings.
The High Court of Bombay has held that the State Tax Officer (STO) does not have the jurisdiction to issue communication under Section 83 of the Maharastra Goods and Services Tax (MGST) Act, 2017. The STO voluntarily withdrew the communication and Bombay HC disposed the Writ Petition in consequent to the withdrawal.
In result, the division bench comprising Justice G. S. Kulkarni and Justice Jitendra Jain disposed the Writ Petition filed by the appellant in consequent to the withdrawal of the Communication under Section 83 of the GST Act by the STO.
In a recent ruling, the Delhi High Court has denied the anticipatory bail filed by the Chartered Accountant (CA) accused of Forgery and Goods and Services Tax (GST) evasion through false invoices from non-existent entities he was allegedly operating.
The bench ruled that the applicant must be provided with several documents and witness statements after taking into account the entire set of circumstances and the case’s context. It was further stated that there were no good grounds to grant anticipatory bail for the petitioner given the seriousness of the accusations against him, which involve forgery and GST evasion by fabricating invoices from fictitious companies. In result, the interim protection granted to the applicant CA on 14th March, 2023 was also vacated by the Delhi High Court.
The Madras High Court directed to reassess bill of entry as there is no suspension of preferential Tariff Treatment on Imported Areca Nut under section 28 DA of Customs Act, 1962.
A single judge bench comprising Justice C Saravanan observed that there are no records to show that the petitioner was called for to furnish information, which the petitioner has failed to furnish. There is also no suspension of preferential tariff treatment of the imported goods in terms of Section 28 DA of the Customs Act, 1962. The Court directed the respondents to re-assess the Bill of Entry dated 15.06.2023 provisionally in accordance with the procedure prescribed under Section 28 DA of the Customs Act, 1962 and the rules made thereunder and thereafter allow clearance of the imported consignment of arecanut.
A Single Bench of the Delhi High Court directed the Restaurant Association to replace ‘Service Charge’ with ‘Staff Contribution’ and also to make sure that the Staff Contribution amount should not exceed 10% of the bill.
The Court of Justice Prathiba M Singh directed the members of the Federation of Hotel and Restaurant Associations of India (FHRAI), who are collecting the charges, shall with immediate effect cease the usage of the term ‘Service Charge’ and only use the terminology ‘Staff Contribution’ for the amount being charged as ‘Service Charge’ currently and the said amount being charged as ‘Staff Contribution’ by members of FHRAI shall not be more than 10% of the total bill amount excluding the GST component.” “In case of establishments mentioned in the members of FHRAI, who are collecting the charges, the menu cards shall specify in bold that after the payment of ‘Staff Contribution’, no further tip is necessary to be paid to the establishment/servers/restaurant staff” the Court directed.
The Delhi High Court in a recent decision observed that clear reasons should be indicated in show cause notice (SCN) for which Goods and Service Tax (GST) registration cancellation is proposed.
A Division Bench of Justices Vibhu Bakhru and Amit Mahajan observed that “It is clear from the above that the impugned order is not informed by reason as it does not reflect any intelligible reason as to why the petitioner’s GST registration was cancelled. Further, the Show Cause Notice did not disclose that the petitioner’s GST Registration was proposed to be cancelled with retrospective effect. The impugned order for the cancellation of the GST registration also does not reflect any ground to support the decision to cancel the GST registration with retrospective effect.” “The present petition is allowed solely on the ground that the Show Cause Notice falls short on the standards required of a Show Cause Notice. At the least, the Show Cause Notice must clearly indicate the reasons for which an adverse order is proposed to be passed in order for the noticee to respond to the same” the Court concluded.
The Madras High Court in a significant ruling observed that the GST Audit under Section 65 of the Central Goods and Service Tax (CGST) Act, 2017 cannot be conducted after closure of business, can be conducted only on registered entities.
“When a Section provides for periodical audit, the respondent having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit. However, this will not preclude the respondent from initiating assessment proceedings for the said concern under Sections 73 and 74. Therefore, the said impugned order is liable to be quashed. Hence, the impugned order is quashed with liberty to the respondent to initiate assessment proceedings under Sections 73 and 74 of the Act” the Bench concluded.
In a significant case, the Madras High Court held that asseese cannot be punished for expecting a notice fixing date for hearing and set aside the assessment order passed under the Tamil Nadu Value Added Tax Act (TNVAT),2006 as it was passed after 15 days which was requested by the assessee to submit documents.
The Court found that the assessment order impugned in the writ petition is in violation of the principles of natural justice and set aside the assessment order passed by the second respondent.
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