Supreme Court & High Courts Weekly Round-up

This weekly roundup analytically summarizes the key stories related to the Supreme Court and High Court reported at Taxscan.in from September 7th, 2024, to September 14th, 2024.

Supreme Court dismisses PIL on Enforcement of Compliance Rating Mechanism under CGST Act [Read Judgement]  PRADEEP GOYAL vs UNION OF INDIA & ORS CITATION: 2024 TAXSCAN (SC) 259

The Supreme Court has dismissed a Public Interest Litigation ( PIL ) seeking the enforcement of a compliance rating mechanism under the Central Goods and Services Tax ( CGST ) Act, 2017. The Court held that it could not interfere in the administration of GST, a matter that falls under the jurisdiction of the government and legislature, not the judiciary.

However, the Supreme Court rejected the plea, stating, “We are not inclined to entertain the Writ Petition instituted under Article 32 of the Constitution of India. The Writ Petition is accordingly dismissed.” The Court emphasized that the issue was a matter for Parliament, not the judiciary, to resolve.

SC Dismisses Rs. 5L Cost imposed by Allahabad HC against Income Tax Dept for Initiating Reassessment with Incorrect Information [Read Order]  UNION OF INDIA & ORS. vs S.R. COLD STORAGE CITATION: 2024 TAXSCAN (SC) 260

The cost of Rs. 5 lakhs was dismissed by the Supreme Court which was imposed by the Allahabad High Court following the power abuse of the income tax department. The apex court condoned the delay, however, without going into merits, set aside the cost imposed  by the High Court.

The SLP was filed by the department itself to delete the cost imposed by the Allahabad High Court. The bench of Justices B V Nagarathna and Nongmeikapam Kotiswar Singh, in its decision stated that “That in the event, this Court is not inclined to interfere in the matter on merits then the order as to costs of Rs.5,00,000/- may be set aside.

Denial of Personal Hearing due to Printing Error in GST SCN Reply Form: Madras HC sets aside Order [Read Order] MATCON IMPEX vs The State Tax Officer CITATION: 2024 TAXSCAN (HC) 1908

In a recent ruling, the Madras High Court set aside the order dated April 29, 2024, citing a violation of natural justice, as the petitioner was denied a personal hearing due to a printing error in the GST Show Cause Notice ( SCN )  reply form, contrary to the mandate under Section 75(4) of the Goods and Service Tax Act.

A writ petition was filed under Article 226 of the Constitution of India, seeking the issuance of a Writ of Certiorari to quash the order dated April 29, 2024, issued by the first respondent under GSTIN: 33AAWFM9907E1ZV/2018-19.

Failure to disclose New GST Registration does not Justify GST Appeal Dismissal: Allahabad HC [Read Order] M/S Genius Ortho Industries vs Union Of India And 2 Others CITATION: 2024 TAXSCAN (HC) 1907

The Division Bench observed that although the failure to disclose the new registration may have misled the Court regarding the need for premises verification, this alone did not justify dismissing the writ petition. The Court concluded that the non-disclosure was not material enough to affect the ultimate resolution of the case. Consequently, the order passed by the Single Judge could not be sustained.

The Division Bench allowed the appeal, set aside the order of the learned Single Judge, and remanded the matter back to the Single Judge for reconsideration on merits.

Madras HC quashes Adverse GST Order issued due to Non-Appearance, grants Reconsideration with Conditions [Read Order] M/s.Umesh Electricals vs Commercial Tax Officer CITATION: 2024 TAXSCAN (HC) 1910

In a recent case, the Madras High Court ( Madras HC ) has quashed a adverse GST ( Goods and Services Tax ) order passed against the petitioner by the department due to the petitioner’s non-appearance during the hearing, and remanded the matter back for reconsideration with certain conditions.

The writ petition was disposed of with these directions, and all connected miscellaneous petitions were closed. The Court did not impose any costs in this matter.

Madras HC Orders Conditional Provisional Release of Copying Machines in which Bill of Lading raised before DGFT Restriction Notification [Read Notification]  M/s.Cann Office Equipment Private Limited vs M/s.Cann Office Equipment Private Limited CITATION: 2024 TAXSCAN (HC) 1912

The Madras High Court has ordered the provisional release of secondhand digital multifunction print, copying, and scanning machines which import process already initiated by the petitioners before a restriction notification was issued by the Directorate General of Foreign Trade ( DGFT ).

The bench of Justice Krishnan Ramasamy directed the Customs Department to provisionally release the goods on the condition that the petitioners deposit the enhanced duty amount. Once the duty is paid, the customs department was directed to release the machines within three weeks.

Additionally, the court clarified that the Customs Department can proceed with further legal adjudication. Furthermore, the court also allowed the petitioners to file for a waiver of demurrage charges, which would be considered by the Customs Department based on the circumstances.

No Penalty upon Fulfillment of Tax Liability: Calcutta HC directs to Issue Fresh Reasoned Order [Read Order] M/s Saptarshi & Anr. vs Deputy Commissioner of State Tax CITATION: 2024 TAXSCAN (HC) 1914

In a recent ruling of Calcutta High Court the writ petition challenging an order passed by the Deputy Commissioner of State Tax was remanded owing to imposition of penalty on fully paid tax liability.

The single bench of Calcutta High Court comprising Justice Raja Basu Chowdhury observed that the matter requires reconsideration by respondent 1, hence the matter was remanded back to respondent 1 and was asked to reconsider it and pass a fresh reasoned order.

S. 130 Proceedings under GST Act cannot be initiated against Excess Stock found during Survey: Allahabad HC [Read Order]  M/S Vk Electricals vs Additional Commissioner Grade-2 Appeal-Ii CITATION: 2024 TAXSCAN (HC) 1913

In a recent judgement, the Allahabad High Court ruled that proceedings under Section 130 of the Goods and Service Tax (GST) Act cannot be initiated for excess stock discovered during a survey.

The present writ petition was directed against the order dated 26.12.2023, issued by Respondent No. 1 in Appeal No. 204 of 2021, under Section 130 read with Section 122 of the UP GST Act.

Justice Piyush Agrawal, presiding, affirmed that the law mandates that Section 130 proceedings cannot be invoked solely based on the discovery of excess stock during a survey. The order dated 26.12.2023, passed by Respondent No. 1, under Section 130 read with Section 122 of the UP GST Act, was declared unsustainable and quashed. The writ petition was allowed.

Non-Consideration of Additional Reply and Hearing Request: Madras HC quashes TNGST Order [Read Order] GEN Engineering Works vs Assistant Commissioner CITATION: 2024 TAXSCAN (HC) 1906

The Madras High Court ( HC ), in a recent case, quashed an order passed under Tamil Nadu Goods and Services Tax Act, 2017 ( TNGST Act ) noting that the said order was passed without considering the additional reply and hearing request made by the petitioner, which is violative of principles of natural justice.

The case in question is a writ petition filed under Article 226 of the Constitution of India, which empowers the High Courts to issue directions, orders, or writs to any person or authority, including the government, for enforcement of fundamental rights and for any other purpose.

Writ Petition against NBFC u/s 14(2) SARFAESI Act not maintainable: Delhi HC suggests DRT Approach [Read Order]  ASHISH KUMAR vs TATA CAPITAL FINANCIAL SERVICES LTD & ORS. CITATION: 2024 TAXSCAN (HC) 1916

The Delhi High Court disposed the Writ Petition against Non-Banking Financial Company (NBFC) under section 14(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002), as the writ petition is not maintainable against NBFC due to lack of jurisdiction.

Also the court suggests the aggrieved party to approach the Debt Recovery Tribunal (DRT) in terms of Section 17 of the SARFAESI Act, 2002.

No Ingredients to Invoke Reassessment u/s 147 IT Act: Bombay HC quashes Reassessment Notices [Read Order]  Aashish Niranjan Shah vs Union of India CITATION: 2024 TAXSCAN (HC) 1896

The Division Bench comprising of Justice G.S Kulkarni and Justice Somesekhar Sundaresan observed that the the essential ingredient for attracting the Section 147 and 148 is that no action for reassessment can be taken after the expiry four years from the end of the relevant assessment year, unless the income escaping assessment has been caused by the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. That vital element is sorely missing in the instant case.

So without showing anything to prove that the Petitioner had failed in disclosing any material facts fully and truly, there is no scope for initiating reassessment. Consequently the writ petition is allowed by the court, quashing the Impugned Notices (dated 31st March, 2021), and both consequential notices under Section 143(2) (dated 30th June, 2021) and the notice under Section 142(1) (dated 21st December, 2021).

GST Dept Ignored Detailed representation to Unlock Blocked Credit Ledger: Madras HC Orders Disposal Within 2 Weeks [Read Order]  AJ Power Center vs The Assistant Commissioner (ST) CITATION: 2024 TAXSCAN (HC) 1917

The Madras High Court ordered the GST ( Goods and Services Tax ) to dispose of the ignored representation to unlock blocked credit ledger filed by the assessee-petitioner.

In response, the government’s advocate acknowledged that the reply was yet to be addressed but assured the court that it would be considered as soon as possible. Justice Krishnan Ramasamy heard both the sides. The court observed that while the petition was filed challenging the initial blocking order, the primary issue was the department’s failure to act on the petitioner’s representation. As a result, the court directed the GST Department to dispose of the representation within two weeks from the receipt of the court’s order. Accordingly, the petition was disposed of.

Madras HC remands ITC denial matters u/s 16(4) of GST Act to AO, Orders Fresh Review under Finance Act 2024 [Read Order]  M/s.Sagar Brush Industries vs The State Tax Officer CITATION: 2024 TAXSCAN (HC) 1918

The Madras High Court has remanded several writ petitions involving the denial of Input Tax Credit ( ITC ) under Section 16(4) of the GST ( Goods and Services Tax ) Act, 2017 back to the Assessing Officer ( AO ) for a fresh review in light of the Finance Act, 2024.

Justice C. Saravanan decided that “Since the Parliament itself has come to the rescue of the assessees, I am of the view that the impugned orders passed by the Original Authority as also the Appellate Authority upholding the orders of the Assessing Officer in the batch of Writ Petitions are set aside and the cases are remitted back to the Assessing Officer to pass a fresh order on merits strictly in accordance with the Finance Act, 2024. In case, the proposals in Clauses 114 and 146 of the Finance (No.2) Bill, 2024 are accepted and enacted in the Finance Act, 2024, the benefit of these provisions may be extended to the respective petitioners.”

Delhi HC dismisses Petition Challenging Bail in Rs.200 Crore fake GST invoice Case: Statutory Bail u/s 167 Recognized as Constitutional Right [Read Order] THE COMMISSIONER OF CENTRAL TAX vs ADESH JAIN CITATION: 2024 TAXSCAN (HC) 1922

The Delhi HC observed that Section 167(2)(a)(ii) of the CrPC has been recognized by the apex court as a constitutional right to bail when procedural delays occur. The Court noted the prosecution’s lack of action in filing a complaint even after five years, suggesting that the department was more concerned with keeping the accused in custody than carrying out the actual trial.

The bench, consisting of Amit Mahajan, found no merit in the petition and dismissed it.

Bombay HC quashes Provisional Attachment passed w/o Written Order [Read Order] Global Tabacc Legacy vs Union of India CITATION: 2024 TAXSCAN (HC) 1919

In a recent case before Bombay High Court the petition was allowed in absence of written reasoning mandated by Section 83(1) with respect to provisional attachment proceedings.

The division bench of Bombay High Court comprising Justice M.S.Jawalkar and Justice Avinash G. Gharote observed that, in absence of reasons for such opinion the impugned order can’t be sustained and the same was quashed and set aside, and the matter was remitted back to the Commissioner to record his reasons in writing.

The petition was allowed on the aforesaid terms.

SCN Fails to Provide Specific Details on Alleged Fraud or Misstatement: Delhi HC Sets Aside GST Registration Cancellation [Read Order]  M/S S.M. TRADING CO vs ASSISTANT COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX CITATION: 2024 TAXSCAN (HC) 1923

In a recent ruling, the Delhi High Court has set aside the cancellation of Goods and Service Tax registration, ruling that the Show Cause Notice ( SCN ) failed to provide specific details regarding the alleged fraud or misstatement. The court found that the cancellation order was unsustainable due to a breach of natural justice principles.

Light Green Float Glass ( tinted non-wired type ) shall be Classified under Tinted Glass: Madras HC [Read Order]  M/s.Asahi India Glass Ltd vs Commissioner of Customs CITATION: 2024 TAXSCAN (HC) 1921

The bench of Justice Senthil Kumar after examining the facts of the case, agreed with the petitioner-company’s argument that the Customs Department could not re-open the classification issue, which had already been settled by appellate authorities.The Court stressed that there was no fraud or willful misstatement on the part of the petitioner, as the goods had consistently been imported under the same classification without any objections from the authorities.

In result, the Court quashed the show cause notice issued by the Customs Department and directed the department to clear the goods under CTH 70051010, provided that the goods imported matched the description of “Light Green Float Glass (Tinted Non-Wired Type).” However, the Court declined to issue a declaration affirming the correctness of the classification, noting that such a declaration would require a detailed examination of the goods, which was beyond the scope of the writ jurisdiction.

No Withholding of GST Registration Cancellation for Assessing Petitioner’s Liability: Delhi HC [Read Order] M/S J.M.D. TRADERS vs PRINCIPAL COMMISSIONER OF GOODS AND SERVICE TAX NORTH DELHI CITATION: 2024 TAXSCAN (HC) 1920

In a recent ruling, the Delhi High Court by relying on the Central Board of Indirect Taxes and Customs ( CBIC ) Circular dated 26-10-2018, held that the cancellation of GST registration cannot be withheld due to pending liabilities.

The Delhi High Court Bench, comprising Justice Vibhu Bakhru and Justice Sachin Datta, directed the concerned authority to process the new application that was submitted by the petitioner for the cancellation of GST within four weeks and asked the petitioner to submit the required KYC documents and a valid address for future correspondence.

The petition was disposed of, along with the pending application.

No Re-Opening of Income Tax Assessment u/s 148 without New Materials: Delhi HC [Read Order]  GENPACT INDIA PRIVATE LIMITED vs ASSISTANT COMMISSIONER OF INCOME TAX CITATION: 2024 TAXSCAN (HC) 1925

The Delhi High Court recently ruled that an income tax assessment cannot be reopened under Section 148 of the Income Tax Act without new material evidence and quashed the reassessment proceedings initiated for the Assessment Year 2015-16.

The Bench noted that, “We also bear in mind that no fetter operated upon the AO to take remedial steps and follow or adopt the procedure as prescribed by Section 148A prior to 31 March 2022. This aspect assumes added significance in light of the writ petitioner itself having drawn the respondents attention to the amended procedure for reassessment. Thus, even though the AO was duly apprised and placed on notice of the aforesaid aspects, it failed to take any corrective action.”

“Not even a line of reason which may justify information of belief”: Delhi HC quashes Reopening of Assessment [Read Order]  WELL TRANS LOGISTICS INDIA PVT. LTD. vs ADDL.COMMISSIONER OF INCOME TAX & ORS CITATION: 2024 TAXSCAN (HC) 1926

In a recent ruling, the Delhi High Court allowed the writ petition, and the court was of the view that the reopening of the assessment did not meet the legal requirements under Sections 147 and 148 of the Income Tax Act, 1961.

The bench was of the view that it was incumbent on the part of the AO to conduct further inquiries and gather additional material to form a valid belief of escaped income. The bench, comprising Justice Yashwant Varma and Justice Ravinder Dudeja, allowed the writ petition and held that there was not even a line of reason to justify the formation of the belief.

The court was satisfied that the reopening did not meet the legal requirements under Sections 147 and 148 of the Income Tax Act, 1961.

AO’s Failure to issue Notice u/s 143(2): Delhi HC quashes Reassessment order [Read Order]  SHAILY JUNEJA vs ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 34 -1 CITATION: 2024 TAXSCAN (HC) 1927

The Delhi High Court quashed the reassessment order because the Assessing Officer failed to issue a notice under Section 143(2) of the Income Tax Act, 1961, and further noted that, according to Ashok Chaddha’s judgment and various other decisions, compliance with Section 143(2) is mandatory during reassessment actions.

The bench, comprising Justice Yaswant Varma and Justice Ravinder Dudeja, found Mr. Agrawal’s contention untenable for several reasons. The Court noted that Ashok Chaddha specifically addressed assessments conducted under Section 153A, which are governed by different rules compared to standard reassessment procedures. The Court highlighted that in Ashok Chaddha, it was determined that compliance with Section 143(2) was not mandatory for search assessments under Section 153A.

Revenue Challenges ITAT Decision on Extended Tax Stay Beyond Statutory Limit u/s 254(2A): Madras HC dismisses Matter as Stay Already Expired [Read Order]   The Commissioner of Income Tax vs Durr India Pvt. Ltd CITATION: 2024 TAXSCAN (HC) 1928

In a recent ruling, the Madras High Court dismissed the Appeal against Income Tax Appellate Tribunal’s decision on extended tax stay beyond the statutory limit under section 245(2A). This decision was made since the stay in question had already expired.

Justice R. Mahadevan observed that the stay period granted by the ITAT had already expired. Therefore the court decided no further adjudication was required. The court kept open the substantial questions of law raised by the Revenue for adjudication in an appropriate future proceeding. Thus, the appeal of the revenue was disposed of without any order as to costs.

Madras HC quashes Inquiry Report and Proceedings due to Procedural Lapses under CBLR Regulation 17(5) [Read Oder]  M/s.Jai Logistics Services Pvt. Ltd vs The Principal Commissioner of Customs CITATION: 2024 TAXSCAN (HC) 1929

In a recent ruling, the Madras High Court quashed the inquiry report and the proceedings due to procedural lapses under Regulation 17(5) of the Customs Broker Licensing Regulation, 2018.

The court acknowledged that the pandemic led to extended timelines under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, but no further extensions were granted after December 2020.

Madras HC Sets Aside Draft Assessment Issued u/s 144C Due to Failure to Address Objections, Remands Matter [Read Order]  Kalyanasundaram Chandrasekaran vs The Income Tax Officer CITATION: 2024 TAXSCAN (HC) 1930

The Madras High Court set aside the draft assessment issued under Section 144C of the Income Tax Act, 1961 by the assessing officer ( AO ). This decision was made due to AO’s failure to address the objections raised by the petitioner.

Justice C. Saravanan observed both sides’ arguments and records submission. The court noted that the petitioner had provided additional documents that show the transfer of shares to Mr. V.N. Seshagiri Rao on 12.02.2015, during the financial year 2014-15. The court further observed that the procedure outlined in the GKN Driveshafts judgment was not fully complied with as the petitioner’s objections were not adequately addressed in a speaking order.

Supplier belatedly files GST Returns paying Tax under B2C instead of B2B Triggers GST Demand on Buyer: Madras HC Remands Order [Read Order]  Tvl.Mohanasundaram Senthilvelu vs The State Tax Officer CITATION: 2024 TAXSCAN (HC) 1931

In a recent ruling, the Madras High Court remanded the matter to the State Tax Officer ( First Respondent ) concerning the supplier’s delayed filing of Goods and Services Tax ( GST ) returns under B2C instead of B2B. This misclassification led to the issuance of a GST demand order against the buyer.

Justice Krishnan Ramasamy observed that the impugned order passed without giving a hearing opportunity which violated the principles of natural justice. The court agreed with the petitioner’s claim and directed the petitioner to pay 10% of the demand within four weeks. Upon payment, the court set aside the impugned order and remanded the matter to the State Tax Officer (First Respondent). Thus, the petitioner’s writ petition was disposed of without any order as to the costs.

Notices communicated to E-mail ID created by Former Accountant: Karnataka HC Returns Case to S. 148A(b) Stage [Read Order]  M/S AZEEM INFINITE DWELLING INDIA PVT LTD vs THE INCOME TAX OFFICER CITATION:   2024 TAXSCAN (HC) 1932

In a recent ruling, the Karnataka High Court remits the case back to the Section 148A(b) stage as the income tax notices are being sent to an outdated email address created by the former accountant of the assessee who is not in service.

Acknowledging the procedural flaw and the impact it had on the petitioner’s ability to participate in the proceedings, the bench of Justice S. Sunil Dutt Yadav decided that it would be just to revert the matter to the stage of Section 148A(b). This section deals with the issuance of a notice and requires the recipient to respond before any further action is taken.

The court sets aside the orders and notices previously issued on April 1, 2022, and February 26, 2024, including the assessment order and penalty notices.

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