Tag: high court judgement

ITAT Mumbai Bench Upholds Mauritius Firm’s Exemption of Long-Term Capital Gains under India-Mauritius Tax Treaty

The Income-tax Appellate Tribunal (ITAT) Mumbai bench upheld the exemption of long-term capital gains on the sale of equity shares of an Indian company by Comstar-Mauritius, acquired before April 1, 2017, under the India-Mauritius tax treaty. A revisionary order by the Commissioner of Income-tax (Appeals) was overturned.

The Mauritius entity held a Category-1 Global Business License and a valid tax residency certificate. A protocol to the treaty amends Article 13 from April 1, 2017, giving India the right to tax capital gains from shares acquired after this date, with a grandfathering provision until March 31, 2019. Additionally, a new Article 27A adds ‘Limitation of benefits’, denying the reduced rate on capital gains in cases where the arrangement’s primary purpose is to exploit the tax benefit.

The denial also applies to shell companies during the grandfathering period. The ITAT noted that the taxpayer submitted all transaction details and necessary documents, including the tax residency certificate, and referred to Circular No. 682 dated March 30, 1994, stating that as the shares sold were acquired before April 1, 2017, India did not have the right to tax them.

Sections 13(8)(B) And 8(2) Of The IGST Act Reviewed By The Bombay High Court

Facts 

The petitioners in both the petitions primarily challenge the constitutional validity of the provisions of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017.

In Writ Petition, there is an additional prayer assailing the constitutional validity of Section 8(2) of the IGST Act. The petitioners have commonly contended that the impugned provisions are violative of Articles 14, 19, 245, 246, 246A, 248, 265, 269A, and 286 of the Constitution. 

Submission 

Advocate Bharat Raichandani and Advocate Abhishek Rastogi, appearing for the petitioners contended that Section 13(8)(b) of the IGST Act read with Section 2(13) and 2(6) to the extent, these provisions seek to levy GST on services provided by the petitioners to its overseas customers, which are consumed by such customers/ recipients outside India, by fiction of law as created by these provisions are treated as intra-state supply making GST leviable on such export of service, under the CGST Act and MGST Act. 

They submitted that these provisions are violative of the provisions of Article 246A read with Articles 269A and 286 of the Constitution this more particularly when the nature of the transaction entered by the petitioner with overseas customers is not in dispute and in fact, is accepted by the respondent in the reply affidavit.

Additional solicitor General, submitted that the case of the petitioners is premised on the plea that service rendered by them amounts to “export of services”, and that “export of services”, is not taxable and hence the levy on the petitioners as supplier of intermediary services is invalid.

He submitted that such contention is not tenable, as on a plain reading of the averments as made in the petition and the supporting agreements produced therewith would show that the respondents’ case that the services being rendered by the petitioner take place entirely in India, hence, there is no export of service.

AGP, Jyoti Chavan, appearing for the State Government contended that the principal foreign company had entered into an Agency Agreement with the petitioner, as such foreign party was desirous of selling the goods in India. 

She submitted that the commission payable to the petitioner is for a particular item, contract, or buyer, and it may change from time to time by mutual consent, which is also clear from the facts that the invoices raised by the petitioner would show that the petitioner is entitled to commission as per the orders placed by the Indian customers and therefore, the petitioner’s commission depends upon the orders placed by the Indian Customers and thus the services rendered by the petitioner are of the peculiar nature and, therefore, under Section 2(13) of the IGST Act, the petitioner has been classified as “Intermediary”.

Decision 

The single judge bench of Justice G. S. Kulkarni said that the contention as urged on behalf of the State Government that because the foreign exporter sells its goods to the Indian importer and which is as a consequence of the services provided by the exporter of service, it needs to be accepted that the transaction of export of service changes its character as a intra-State transaction, is untenable.

The court added that such contention cannot be accepted on the interpretation of the provisions of the Constitution or on the interpretation of the provisions of IGST Act as discussed in detail in the foregoing paragraphs.

The court opined that the provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST Act and MGST Act, on such interpretation, the provisions are intra vires the Constitution, the IGST, the CGST and the MGST Acts. 

It was held by the court that the provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid and constitutional, provided that the provisions of Section 13(8)(b) and Section 8(2) are confined in their operation to the provisions of IGST Act only and the same cannot be made applicable for levy of tax on services under the CGST and MGST Acts.  

Case title: Dharmendra M. Jani v/s The Union of India and Ors. 

Citation: Writ Petition No.2031 Of 2018

Click here to read the Order/Judgment 

Rule 86A Of CGST Rules Should Not Be Used As A Tool To Harass Taxpayer: Gujarat High Court

In the case of Samay Alloys India Pvt. Ltd. vs State Of Gujarat, the Gujarat High Court has held that:

The power under Rule 86A of the Rules should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.

The aspect of availing the credit and utilization of credit are two different stages. The utilization of credit is a vested right. No vested right accrues before taking credit.

The Government needs to apply its mind for the purpose of laying down some guidelines or procedure for the purpose of invoking Rule 86A of the Rules. In the absence of the same, Rule 86A could be misused and may have an irreversible and detrimental effect on the business of the person concerned. In this regard, the Government needs to act promptly.”

To Download The Judgement, Please Click Here

PROCEDURE FOR DELIVERY OF SCN TO BE FOLLOWED (MANDATORY to be followed)

 HIGH COURT JUDGEMENT

PROCEDURE FOR DELIVERY OF SCN TO BE FOLLOWED (MANDATORY to be followed) 

(Madhya Pradesh HC – Ram Prasad Sharma Vs Chief Commissioner)

Facts – The Petitioner had received Show Cause Notice (SCN) to their e-mail address which was not uploaded on the GST portal [Rule 142(1) of CGST Rules].

Contention – The Petitioner contended Violation of Principle of Natural Justice.

Observation – The Court observed that it is trite principle of law that when a particular procedure is prescribed, then all other procedures/modes except the one prescribed are excluded.

Conclusion – Thus, it was held that since the Statutory Procedure for communicating SCN was not followed, the Demand raised shall be STRUCK DOWN.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Shri Pankaj Ghiya, learned counsel for the petitioner.

Shri Ankur Mody, learned AAG for the respondent No.3/State.

Learned counsel for the rival parties are heard through video conferencing.

1. Instant petition invoking writ and supervisory jurisdiction of this Court under Articles 226 and 227 of Constitution prays for following reliefs:-

“(i) This Hon’ble Court may kindly be pleased to call for the record from the office of respondents for its kind perusal.

(ii) That, a writ of certiorari or any other writ or writs may kindly be issued quashing the impugned order in Form GST DRC-07 dated 18.09.2020 and orders as referred in the said order i.e. order under section 74 dated 10.06.2020 passed by the respondents.

(iii) That, a writ of mandamus or any other writ or writs may kindly be issued quashing the impugned order in Form GST DRC-07 dated 18.09.2020 and orders as referred in the said order i.e. order under section 74 dated 10.06.2020 passed by the respondents.

(iv) Direct the respondents to comply with the provisions of GST Act and upload notices and orders only on the GSTN Portal as mandated under law.

(v) Any other relief considered expedient and just under the facts of the case by the Hon’ble Court may kindly be allowed to the petitioner.”

2. Grievance of the petitioner is that while raising the demand of tax vide summary of order dated 18.09.2020 vide Annexure P/2 (at page 17 of the writ petition), the foundational show-cause notice/order No.10 dated 10.06.2020 qua financial year 2019-2020 and tax period April, 2019 to July, 2019, was never communicated to the petitioner who is an individual registered under GST Act.

3. As such on the question of violation of principle of natural justice on the anvil of Rule 142 of Central Goods and Services Tax Act, 2017 (for brevity “CGST Act”), this Court requisitioned reply of the State.

4. State has filed reply on 11.11.2020 disclosing that show-cause notice/order No.10 dated 10.06.2020 was communicated to petitioner on his E-mail address and despite receiving the same the petitioner failed to file any response. Copy of show-cause notice/order No.10 dated 10.06.2020 is Annexure R/1 filed alongwith the reply.

5. Learned counsel for the petitioner has drawn the attention of this Court to the provision of Rule 142(1) of CGST Act to contend that the said provision statutarily obliges the revenue department to communicate show-cause notice/order by uploading the same on the website of revenue so that the aggrieved person can have access to the same and be aware of reasons behind the demand to enable the aggrieved person to avail alternative remedy before the higher forum under CGST Act.

6. For ready reference and convenience, Rule 142 of CGST Act is reproduced below:-

“142. Notice and order for demand of amounts payable under the Act.-(1) The proper officer shall serve, along with the

(a) notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01,

(b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a summary thereof electronically in FORM GST DRC-02, specifying therein the details of the amount payable.

(1A) The proper officer shall, before service of notice to the person chargeable with tax, interest and penalty, under subsection (1) of Section 73 or sub-section (1) of Section 74, as the case may be, shall communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A.] 274;

(2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act [whether on his own ascertainment or, as communicated by the proper officer under subrule (1A),]275he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC–04.

(2A) Where the person referred to in sub-rule (1A) has made partial payment of the amount communicated to him or desires to file any submissions against the proposed liability, he may make such submission in Part B of FORM GST DRC01A.] 276

(3) Where the person chargeable with tax makes payment of tax and interest under subsection (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.

(4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of section 74 or sub-section (3) of section 76 or the reply to any notice issued under any section whose summary has been uploaded electronically in FORM GST DRC-01 under sub-rule (1) shall be furnished in FORM GST DRC-06.

(5) A summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.

(6) The order referred to in sub-rule (5) shall be treated as the notice for recovery.

(7) Where a rectification of the order has been passed in accordance with the provisions of section 161 or where an order uploaded on the system has been withdrawn, a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08.]”

6.1 A bare perusal of the aforesaid provision reveals that the only mode prescribed for communicating the show-cause notice/order is by way of uploading the same on website of the revenue.

7. The State in its reply has provided no material to show that show-cause notice/order No.10 dated 10.06.2020 was uploaded on website of revenue. In fact, learned AAG, Shri Mody, fairly concedes that the show-cause notice/order was communicated to petitioner by Email and was not uploaded on website of the revenue.

8. It is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein.

9. In view of above discussion, this Court has no manner of doubt that statutory procedure prescribed for communicating show-cause notice/order under Rule 142(1) of CGST Act having not been followed by the revenue, the impugned demand dated 18.09.2020 vide Annexure P/2 pertaining to financial year 2019-2020 and tax period April, 2019 to July, 2019 deserves to be and is struck down.

10. Accordingly, instant petition stands allowed with liberty to the revenue to follow the procedure prescribed under Rule 142 of CGST Act by communicating the show-cause notice to the petitioner by appropriate mode thereafter to proceed in accordance with law.