This weekly round-up analytically summarises the key stories related to the Supreme Court and High Court reported at Taxscan.in during the previous week from August 29 to September 4, 2022.
The Three Judge Bench of the Supreme Court of India Held that On Execution of Moratorium, Insolvency and Bankruptcy Code (IBC) Prevails over Customs Act to the extent that once moratorium proceedings begin under the Code, the customs authority does not have the power to initiate any recovery actions for dues from the corporate debtor.
The Delhi High Court, in a major relief to PricewaterhouseCoopers (PwC) Private Ltd, has dismissed a petition filed under Section 482 of the Code of Criminal Procedure by its former Chief Finance Officer Sarvesh Mathur. Dismissing the petition, the Court said that “if the statement that the petitioner‟s employment was terminated in 2012 after it was found that he had retained and misused some of the company’s proprietary information had adversely affected his prospects of employment, no such evidence has been placed on record. In any case, the fundamental requirement was to establish that these statements were made by the respondents No.2-5.”
The Supreme Court, on Friday has granted an extension of one -month time to the re-opening of GST portal for filing of transitional credit. In July, the Supreme Court has directed to open the GST system enabling to claim transitional credit for two months starting from 1st September to 31st October.
The High Court of Delhi has observed that the reassessment order cannot be passed without considering the reply of the assessee and held notice issued under section 148 of the Income Tax Act,1961 was not sustained. The Court observed that the respondent failed to issue a show cause notice at a stage before the issuance of a re-assessment notice under Section 148 of the Act. The impugned order stated that income had escaped assessment as no return of income had been filed by the school without dealing with the contention of the petitioner-society that all the financial transactions of the school had been accounted for in its return of income.
Kannauj-based perfume businessman Peeyush Jain has received a bail order from the Allahabad High Court in a tax evasion case involving more than Rs. 196 crore cash and 23 kg gold were seized from his residence and factory in Kanpur and Kannauj during a search by the Directorate of GST Intelligence (DGGI) team in December last year following which Jain was arrested. Justice Subhash Vidyarthi, while allowing the bail application of Jain has imposed several conditions including that he will not tamper with the evidence during the trial and will not influence any witness. Jain was seeking his release on bail in criminal case number 7646 of 2022 in the court of special chief judicial magistrate (economic offences)/additional metropolitan magistrate-III, Kanpur Nagar.
The Allahabad High Court, in a significant ruling, has slammed the GST officials for seizing the goods inside the godown without jurisdiction. Criticizing the action of the officials, the Court held that “the Court does not wish to go deeper into the intention of the officers concerned in issuing such notices and drawing up such proceedings for which they had no jurisdiction as that would entail calling of personal affidavits of the officers at the cost of precious time of the Court. However, the officers are accountable for their acts. Therefore, let this order be communicated to the Commissioner Commercial Tax UP to look into the matter, call for explanation and take appropriate action commensurate to the misconduct, if any, that may be found committed by the erring officers and to take consequential and corrective action to avoid such occurrences, in future.”
The Telangana High Court has held that the investigation initiated post-filing of the application would not debar the application seeking Advance Ruling. The Court observed that in a case the Telangana State Authority for Advance Ruling held that such investigation post-filing of application would not debar the applicant from seeking advance ruling and accordingly advance ruling was granted. While allowing the petition Chief Justice Ujjal Bhuyan and Justice C V Bhaskar Reddy viewed that Telangana State Authority for Advance Ruling was not justified in rejecting the application of the petitioner vide the order dated 03.06.2022 and the said order dated 03.06.2022 was set aside and quashed.
In the case of Bluestar Malleable Pvt Ltd, the Jharkhand High Court has held that the failure in following the specific procedure under sections 73 & 74 of the Central Excise Act for dispute on liability of interest will invalidate the appellate order. In light of the case, Mahadeo Construction (supra) it appears that “if any assessee disputes the liability of interest under Section 50 of the JGST Act then the revenue will have to follow the specific procedure as stipulated under Section 73 or 74 of the JGST Act”. Justice Paresh Kumar Singh and Justice Deepak Roshan quashed the appellate order and remitted back the matter to the revenue to initiate a fresh proceeding about the liability towards interest under Section 50 of the JGST Act by law as stipulated in JGST Act.
The Madras High Court held that the Exporter not deprived of Merchandise Exports from India Scheme (MEIS) Benefit on technical error in electronic system. The Bench consisting of Justice Abdul Quddhose held that “Due to technical error or lacunae in the electronic system, the petitioner cannot be deprived of its benefit/incentive under the Merchandise Export from India Scheme (MEIS).”
The High Court of Madhya Pradesh has held that the delay of a few hours of expiry of tenure of E- way bill was not to evade tax. The Court set aside the penalty imposed by the order dated 25/05/2022. While allowing the writ petition the amount of penalty already deposited by the petitioner was ordered to be refunded back to him within 30 days failing which it will carry 6% interest till the time of actual payment.
In a significant ruling in the case of ONGC, the Madras High Court (HC) has held that the revenue can’t be restrained from collecting tax under GST when an adverse order to ONGC sustain. The Court observed that in light of the above-said order the prayer of the petitioner for a mandamus forbearing the respondents from levying, collecting or recovering GST does not arise. The single bench judge closed the petition by granting liberty to the petitioner to challenge the order dated 24.06.2022, by the law.
The Division Bench of Madras High Court held that cut or sized shade trees is agricultural produce, not taxable under Tamil Nadu Goods and Services Act (TNGST), 1959. The Bench consisting of Justice R Mahadevan and Justice Muhammed Shaffiq observed that “These shade trees viz., Silver Oak need to be attended to periodically and they have to be planted and grown at particular intervals/distance to serve its purpose as shade trees for growth of tea plants. It is not the case of the Revenue that the growth of Silver Oak is wild or spontaneous, rather it is the case of the petitioner, which remains uncontroverted, these require human effort/labour and attention and thus, would constitute “agricultural produce”.
In an assessee-friendly ruling, the Allahabad High Court has imposed a cost of Rs. 50,000 on the GST department finding that the registration of the assessee was arbitrarily cancelled. Noting that this kind of actions not only affects the assessee, but the same is also causing adverse effects on the revenue as it is not in consonance with the ease of doing business.
In a single bench decision of the Madras High Court, it was held that appeal against Award passed under Motor Vehicles Amendment Act, 2019 of less than a lakh can be entertained on claim petitions filed prior to 01.04.2022. Justice P T Usha observed that “Therefore, considering the march of Law in this regard, the filing of an appeal against an Award of less than a sum of Rs.1,00,000/- can be entertained in respect of appeals arising out of claim petitions filed prior to 01.04.2022.”
The Delhi High Court has ruled that an application under the Companies Act against the order rejecting the application for waiver of interest would fall within the scope of Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act). The Bench consisting of Justices Mukta Gupta and Anish Dayal ruled that the VSV Act is not a taxing statute but one which provides a dispute resolution scheme for tax disputes and it was the intent of the legislature to include all sorts of disputes under the VSV Act, even if they were pending before the Commissioner of Income Tax or the courts.
The Division bench of Delhi High Court held that refund of unutilized CENVAT credit can be claimed on export of legal services under Rule 5 of CENVAT Credit Rules, 2004. The Bench consisting of Justice Rajiv Shakdher and Justice Tara VitastaGanju observed that “A plain reading of Rule 5 of the 2004 Rules would show that as long as the service provider provides an output service which is exported without payment of service tax, such service provider will be eligible for refund of CENVAT credit.”
The Madras High Court has held that the timelines for uploading GST TRAN 1 for seeking credit as well as revision of the credit must not be identical. The Bench observed that mere transition does not create any vested right upon the assessee as the eligibility to credit was an entirely different matter that would be tested by the Assessing Authority in their respective assessments. The single bench of Justice Anitha Sumanth allowed the writ petition with the direction to complete within a period of eight weeks from the date of uploading of this order on the official website of the Court.
The Single Bench of Kerala High Court held that, the reason for invoking Section 129 of the Central Goods and Service Tax (CGST) Act when the E-way bill has expired then the officer is duty bound to consider the explanation offered by the petitioner for the expiry of the E-way bill. Justice Gopinath P, observed that “As noticed by the Division Bench of the Telangana High Court in Satyam Shivam’s case, the officer was duty bound to consider the explanation offered by the petitioner for the expiry of the E-way bill.”
The Kerala High Court has held that the amendment to the Kerala Value Added Act in the year 2018 after the introduction of the GST Act is invalid due to legislative incompetence. Concluding the order, the High Court held that “We have taken note of the applicable amendments introduced by CAA to the Constitution of India, corresponding changes in the schedules, and taken note of the repeal of the KVAT Act and the extent of operation of Section 174 of Kerala Goods and Services Taxes Act. The legislative competence to amend KVAT Act through Finance Act 5/2018 is not established. In our view, and from the scope and scheme of powers enjoyed by the Centre and the State as regards the supply of goods and services, power to amend the KVAT Act is unavailable. The principle laid down in the A Hajee Abdul Shukoor and Company case is also applied by the Gujarat and Telangana High Courts. The amendment to KVAT Act by Finance Act 5/2018 is without competence. We are in complete agreement with the view taken in the judgment under appeal i.e., Baiju A A case.”
A division bench of the Bombay High Court, while considering a bunch of petitions relating to the transition of ISL Credit to Electronic Cash Ledger (ECL) under the GST regime, held that the same can be availed during the re-opening of transitional credit window from 1st September to 31st October as per the Supreme Court decision last month.
While quashing a VAT demand, a division bench of the Rajasthan High Court has held that the implants, surgical items and medicines sold by the hospital to the in-house patients. Holding in favour of the assessee, the Court held that the value recovered by the hospitals towards the cost of medicines, implants, stents, lenses and various other charges towards room rent, supply of food cannot be classifiable as sale or supply of goods but the transaction will be of service on account of Predominant Test/ Aspect Doctrine.
The Rajasthan High Court has held that the benefit of amnesty scheme under the Sabka Vikas Legacy Dispute Resolution Scheme, 2019 cannot be denied merely on ground that the enquiry notice under section 125 of GST Act is issued to the assessee.
The Calcutta High Court held that the reassessment proceedings initiated beyond the limitation period are not sustainable. It was viewed that the matter deserves adjudication by calling affidavits from the respondents and the petitioner has been able to make out a prima facie case for an interim order by raising the issue of jurisdiction of the assessing officer concerned in initiating the impugned re-assessment proceeding.
In a recent ruling, the Delhi High Court held that the withholding of income tax refund is legally impermissible and there is no further obligation on the assessee to file a separate claim for filing of income tax refund.
The Madras High Court has recently held that the refund claim of the assessee cannot be rejected merely for the reason that the claim was made before the Lessor and not before the service tax authorities. Holding in favour of the assessee, the Court held that “In this case, the petitioner has filed the claim before PIPDIC which is altogether a different entity. However, the mere fact that the entity approached was PIPDIC and not an officer of the Department does not, in the light of the reasoning adduced above, persuade me to take a view adverse to the petitioner as I believe that such a conclusion would be hyper-technical.”
A division bench of the Delhi High Court has held that the difference between the price at which stock options were offered to employees of the appellant company under ESOP and ESPS and the prevailing market price of the stock on the date of grant of such options is allowable as revenue expenditure under Section 37(1) of the Income Tax Act, 1961.
A division bench of the Delhi High Court, while dismissing a petition by ERNST AND YOUNG U.S. LLP, has held that an order under section 143(1) of the Income Tax Act, 1961 is not an “assessment”. Dismissing the petition, the Court held that “Needless to state that if petitioner is able to satisfy the Assessing Officer that the services rendered in the present assessment were similar/identical to the services rendered in the assessment year 2019-20, the re-assessment proceedings would be closed.”
The division bench of the Supreme Court has held that appeals against Income Tax Appellate Tribunal (ITAT) order lies before the High Court in whose jurisdiction the Assessing Officer who passes the assessment order is situated. The Coram of Justices U.U. Lalit, S. Ravindra Bhat, and P.S. Narasimha have held that “we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s)”. The Supreme Court directed the High Court of Delhi to entertain the appeal and dispose of the appeal as per law.
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