GST Recent Judicial Decisions

Suncraft Energy Private Limited And Another Vs Assistant Commissioner, State Tax (Calcutta High Court) [2023] 63 TAXLOK.COM 001 (Calcutta)

The Calcutta High Court recently delivered a significant ruling in the case of Suncraft Energy Private Limited and Another vs. Assistant Commissioner, State Tax [2023] 63 TAXLOK.COM 001 (Calcutta). The court addressed the issue of denial of Input tax credit (ITC) to the recipient without conducting a proper investigation of the supplier. The ruling emphasizes the need for a thorough examination of the supplier’s actions before reversing ITC claims.

Background: The dispute centered around the denial of ITC availed by Suncraft Energy Private Limited under the provisions of the West Bengal Goods and Services Tax Act, 2017 (WBGST Act). The Assistant Commissioner of State Tax issued a demand notice to Suncraft Energy based on discrepancies between their GSTR 2A and GSTR 3B ITC. However, the court found that no investigation was carried out against the supplier, leading to an arbitrary decision.

Court’s Verdict: The Calcutta High Court ruled that the demand notice issued to Suncraft Energy for reversing the Input tax credit availed could not be sustained without proper inquiry into the supplier’s actions. The court referred to the judgments of the Hon’ble Supreme Court in Bharti Airtel and Arise India Ltd., emphasizing that Form GSTR-2A should only serve as a facilitator for self-assessment and not as a conclusive basis for denial of ITC.

Whether criminal proceedings can be initiated under IPC even in cases where GST law prescribes punishment for same offense?

Ans. Yes, The Honorable Jharkhand High Court in Anupam Kumar Pathak v. The State of Jharkhand and Ors. [W.P. (Cr.) No. 141 of 2022 dated July 04, 2023] [2023] 62 TAXLOK.COM 002 (Jharkhand) held that the FIR logged and criminal proceeding initiated under Sections 120B/406/ 420/471 of the Indian Penal Code ("IPC") cannot be quashed merely because of the reason that the offense is covered under GST law.

The Honorable Jharkhand High Court relied upon the judgment of the Honorable Supreme Court of India in Jayant and Others v. State of Madhya Pradesh [(2021) 2 SCC 670] wherein the court held that in case where the violator is permitted to compound the offenses on payment of penalty as per of Section 23A(1), considering the Section 23A(2) of the Mines and Minerals (Development and Regulation) Act, 1957 ("the MMDR Act"), there shall be no further proceedings against the offender in respect of the offenses punishable under the MMDR Act or any rule made thereunder so compounded. However, the bar under Section 23A (2) of the MMDR Act shall not affect any proceedings for the offenses under the IPC, such as Sections 379 and 414 of the IPC and the same shall be proceeded without any restriction.

The Honorable Court held that the dispute in the case is related to the forging of invoices and bills without any transaction and it was found that there was such offence committed by the Petitioner. Since there is no bar for prosecution under IPC merely because the provisions of GST law prescribe punishment.

Seizing authority to establish by evidence that e-way bill was reused: Allahabad HC

1. Background of the Case: The petitioner, BL Agro Oils Ltd., contested an order dated October 31, 2017, issued by the Assistant Commissioner, Commercial Tax, Mobile Squad, Unit-1, Lucknow. This order imposed tax and penalties on the petitioner. Additionally, an appeal filed by the petitioner against this order was also rejected by the Additional Commissioner Grade-2 (Appeal-I), Commercial Tax, Lucknow, on August 23, 2019.

2. Seizure and Allegations: On October 28, 2017, a transport vehicle carrying goods belonging to the petitioner was intercepted. Subsequently, on October 31, 2017, a seizure order was issued, alleging that the invoice and E-Way bill dated October 23, 2017, bore a packing date of October 26, 2017. This discrepancy raised concerns that the documents did not correspond to the intercepted goods. Furthermore, it was noted that the E-Way bill’s validity, as per Circular No.102/1718024 issued by the Commissioner, expired after 4 days, while the goods were being transported beyond this period.

3. Petitioner’s Defense: The petitioner contended that the goods had been previously transported but were damaged in transit. As a result, the oil contained in the damaged packaging was brought back, and the goods were subsequently repackaged and transported using the same invoice and E-Way bill. On October 31, 2017, a tax liability and penalty, amounting to Rs. 62,500/- under Section 129(3) of the U.P. Goods and Services Tax Act, 2017, were imposed on the petitioner. The petitioner deposited this amount under protest.

4. Legal Argument: The crux of the legal argument presented by the petitioner was that it is the duty of the taxing authority to provide positive evidence to establish the reuse of the E-Way bill. Citing the judgment in the case of ‘M/S Anandeshwar Traders Vs. State of U.P. and Others [2021] 32 TAXLOK.COM 073 (Allahabad),’ the petitioner argued that the onus is on the taxing authority to prove E-Way bill reuse.

5. Court’s Observations: The Allahabad High Court, in line with the cited judgment, emphasized that it is the seizing authority’s responsibility to present evidence demonstrating E-Way bill reuse. In this case, the court noted the absence of such evidence from the seizing authority, and therefore, the tax and penalty imposed on the petitioner lacked a proper foundation.

Conclusion: In conclusion, the Allahabad High Court ruled in favor of BL Agro Oils Ltd., setting aside the orders dated October 31, 2017, and August 23, 2019. The court’s decision underscored the importance of the taxing authority’s responsibility to provide evidence of E-Way bill reuse before imposing tax and penalties. This judgment reaffirms the principle that the burden of proof lies with the tax authority in cases of alleged E-Way bill misuse.

Can revenue submit additional evidence before the Appellate Authority?

Ans. No, as to the power of the appeal authority to entertain additional evidence, again, there can be no doubt that Rule 112 of the Rules does not allow for additional evidence to be led at the instance of the respondent in the appeal. In the case of penalty or assessment, where the appeal may be filed by the assessee alone, the correctness of the order is to be tested on the strength of the reasons given in that order and not on the basis of any supplementary or other material that may be brought on record by the revenue authority during the appeal proceedings. To do that would be to allow the order impugned in an appeal proceeding to be tested and affirmed on fresh reasons, existing outside the assessment or penalty order. Clearly, that is impermissible and against the principle laid down by the Supreme Court in Mohinder Singh Gill. (M/S Anandeshwar Traders Vs. State of U.P. and Others) [2021] 32 TAXLOK.COM 073 (Allahabad).