the essay of 17 June 2020 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><font color="#330066" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>JUNE 17, 2020</strong></font></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Transitional Credit - Intransient Litigation </strong></font></p> <p align="center"><u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar</strong></font></u></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</STRONG> Delhi High Court in the <em>Brand Equity Treaties </em> case - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU4MjI0" target="_blank">2020-TIOL-900-HC-DEL-GST</a> </strong>observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The transition from the erstwhile regime to GST for the availment of the CENVAT credit was to be by way of a declaration to be submitted electronically in Form GST TRAN-1. The date prescribed for filing of the said Form was extended several times by way of orders issued from time to time. Several taxpayers however could not meet the deadline. This was on account of several factors - predominantly being inadequacies in the network of the respondents, which failed to meet the expectations and serve the needs of taxpayers. Thousands of taxpayers complained that there was low bandwidth and despite several attempts being made on the GST Network, they were unsuccessful in filing the statutory GST TRAN-1 Form online. Many such matters travelled to courts. Majority of them were allowed in favour of the taxpayers, and directions were issued to the respondents to permit the filing of TRAN-1 Form beyond the extended date. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court directed the Government to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. The High Court held that other taxpayers who are similarly situated should also be entitled to avail the benefit of this judgment. The High Court further directed the Government to publicise this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30.06.2020. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Did you see any government website carrying this judgement? So much for the respect the government has for the judiciary. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As expected, the government took the matter in SLP before the Supreme Court and the matter is likely to be listed this week. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The government also amended the law with retrospective effect to see that credit is denied to those who did not understand that they are liable to face the consequences of government failures. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the meantime another similar petition came up for hearing before the Delhi High Court and the above <em>Brand Equity </em> case was relied upon along with several similar cases. But the Counsel for the Revenue argued that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the Petitioner cannot avail the benefit of the judgment in the case of <em>Brand EquityTreaties</em>, with the passing of the Finance (Amendment) Act, 2020 and Section 140 of the CGST Act has been retrospectively amended. The words 'within such time' have been inserted in Section 140 (1) and this amendment has been given retrospective effect from 1st July, 2017. Thus, the Central Government has been granted the power to prescribe the time limit for filing TRAN-1. The absence of power to prescribe a time limit for filing TRAN-1 was a critical factor that weighed with the Court in the case of <em>Brand Equity Treaties </em> to hold that the limitation period under Rule 117 for filing TRAN-1 is merely directory and not mandatory. But, by virtue of retrospective amendment, there has been a change in circumstances and the benefit of the judgment in the case of <em>Brand Equity </em> is no longer available to the Petitioner. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court in a classic judgement delivered yesterday ( <em>SKH SHEET METALS COMPONENTS </em> - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MDk2" target="_blank">2020-TIOL-1031-HC-DEL-GST</a></strong> gave some sage advice to the government, which should be circulated to all GST officers who should be made to read it every morning. The Court observed, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">In our view, the stand of Central Government, focusing on condemning the Petitioner for the clerical mistake and not redressing the grievance, is unsavory and censurable. Tax laws, as it is, are complex and hard to interpret. Moreover, no matter how well conversant the taxpayers may be with the tax provisions, errors are bound to occur. Therefore, if the tax filing procedures do not provide for an appropriate avenue to correct a bona fide mistake, the same would lead to the taxpayers avoiding compliances. We cannot ignore the fact that the necessary Forms under GST are difficult to identify and the Government had to put efforts to assist the citizens in understanding the procedures. Till date, GST awareness campaigns and citizen outreach programmes are in place to acquaint the taxpayers with the GST filing procedures. Particularly, with the entire system being online, the interface between the taxpayers and authorities is entirely electronic. This requires some basic fundamental knowledge for using the technology. Since GST law is a major tax reform in indirect taxation, the difficulties faced in filing of the statutory forms is understandable. In this process, human errors cannot be ruled out and if they occur, the solution is not to criticize the taxpayer for the fault, but instead, the Government should endeavour to find a resolution. The government should support its citizens by making the burden of compliance and payment as simple as possible. The intent and efforts of the Government should be to extend proper assistance, information and education to taxpayers so that they fulfil their obligations. This should be the critical area of focus in the area of tax administration which would ensure compliance with tax laws and also build confidence amongst taxpayers. Indeed, by explaining the significance of payment of taxes, and the role that a taxpayer plays in building the nation, the Government endeavors to encourage and motivate the citizens to be tax compliant. If we strive to achieve this goal, it is necessary that we must also provide appropriate channels for resolution of their genuine problems. A successful resolution, a positive response and an effective, timebound redressal mechanism is crucial for building confidence amongst the taxpayers and for successful tax administration. We have in a series of decisions, discussed as to how the advent of GST law created challenges for the taxpayers because of the lack of understanding of procedures provided therein. In fact, in the recent decision in <em>Brand Equity </em> (supra), this aspect has been discussed elaborately …. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, in spite of the amendment, the Court permitted the petitioner to revise TRAN-1 Form on or before 30.06.2020 and transition the entire ITC, subject to verification by the Respondents. The Court issued a writ mandamus to the Respondents to either open the online portal so as to enable the Petitioner to file revised declaration TRAN-1 electronically, or to accept the same manually. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can't really deny rightful credit by not exactly creditworthy amendments. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What do you think the Government will do now? You don't need to be an Einstein to answer that. Everybody knows that it will go to the Supreme Court. In fact in a similar case, the Government has already tasted defeat in the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Chogori India Retail Ltd </em> case - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTUxMjA2" target="_blank">2019-TIOL-1823-HC-DEL-GST</a></strong>, the Delhi High Court had directed the Government to either re-open the Portal to enable the Petitioner to file its TRAN-1 Form electronically failing which to permit it to file manually on or before 13th September, 2019. The Government took the matter to the Supreme Court which just two weeks ago dismissed the SLP - <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MDk4"><strong>2020-TIOL-114-SC-GST-LB</strong></a>, however, leaving the question of law open. So, the law is yet to be decided by the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" span="span" style="background-color:#F3DBCF"><em>"Render to Caesar the things that are Caesar's; and to God the things that are God's." </em>- Jesus Christ </font></p> <p align="justify"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#000000"sans-serif" span="span">Corona cannot wither, nor Custom stale the infinite variety with which babus can keep litigation thriving. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Refuse Refund at any cost: </strong></font></p> <p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">The babus are adept in the art of refusing refunds at any cost and they can come up with reasons that would make ingenuity look like a cheap trick, as this case would show. (<font color="#006600"><strong>TEAM HR SERVICES PVT LTD</strong></font> - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTU5MDQy" target="_blank">2020-TIOL-1026-HC-DEL-ST</a></strong>) </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is the case of the petitioner: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) that an audit/investigation was conducted by the officers of the Service Tax Commissionerate, from 24th July, 2006 to 28th July, 2006, for the period 1st July, 2003 to 31st March, 2005 and a deposit of Rs.2,38,00,000/- was made by the petitioner on 27th October, 2006, under protest, under pressure from the officers during the audit/investigation, even without issuing any notice to show cause to the petitioner; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) that the Service Tax Department issued a show cause notice dated 28th July, 2008 to the petitioner, demanding service tax of Rs.4,66,39,061/- for the period of 1st July, 2003 to 31st March, 2005, admitting that the petitioner had already deposited Rs.2,38,00,000/- under protest on 27th October, 2006; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) that the Commissioner (Adjudication) Service Tax, passed the order dated 3rd October, 2011 in respect of the show cause notice confirming the demand with interest and penalty and appropriated the amount of Rs.2,38,00,000/- towards the same; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) that the petitioner preferred an appeal before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) along with an application for interim stay; the Tribunal by order dated 24th September, 2012 allowed the stay application, by waiving of pre-deposit of the balance amount owing to deposit by the petitioner, though under protest, of the said sum of Rs.2,38,00,000/-; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) that the Tribunal, vide final order dated 22nd February, 2018 allowed the appeal of the petitioner, on the ground that the demand was barred by limitation; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) that the petitioner vide application dated 2nd May, 2018 sought refund of Rs.2,38,00,000/- deposited on 27th October, 2006; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) that the respondents challenged the order dated 22nd February, 2018 of the Tribunal before the High Court - <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTQ4NDA1" target="_blank">2019-TIOL-1062-HC-DEL-ST</a></strong>), which was dismissed vide order dated 24th August, 2018, on the ground that no question of law arose; resultantly, the order of the Tribunal allowing the appeal of the petitioner was affirmed; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii) that the petitioner again, on 11th March, 2019 sought refund of the amount and on refund not being made, submitted reminders dated 16th April, 2019, 14th May, 2019 and 12th June, 2019; and, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ix) that the respondents, on the claim of the petitioner for refund, conducted a hearing on 20th August, 2019 but still failed to refund the said sum of Rs.2,38,00,000/- to the petitioner. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The refund was not granted as Revenue believed that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) the appeal preferred by the petitioner had been decided in favour of the petitioner only on the question of limitation; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) that the amount of Rs.2,38,00,000/- had been deposited by the petitioner, under protest, during the course of audit/investigation and not by way of pre-deposit pursuant to appeal before the CESTAT. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) the CESTAT had allowed the appeal of the petitioner only on limitation, though not finding the petitioner to be having a case on merit; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) that even the High Court in its order dated 24th August, 2018 had not gone into the merits of the case; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) that thus the deposit of Rs.2,38,00,000/- by the petitioner, though under protest, was made against service tax liability and which liability had not been decided in any of the Court ' s orders; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) that therefore the claim of refund of the amount of Rs.2,38,00,000/- was not admissible; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) that thus the amount of Rs.2,38,00,000/- deposited by the petitioner against service tax liability and which liability had not been set aside by CESTAT, was not refundable. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court wondered whether whether or not the aforesaid logic in the order declining refund, leads to an absurd situation; the court enquired, how and under what head have the respondents appropriated Rs.2,38,00,000/-, when the entire demand of Rs.4,66,39,061/- of which it was a part, stands set aside; the Court also reminded the government of Article 265 of the Constitution of India prohibiting any tax to be levied or collected except by authority of law. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court directed the department to refund the amount with interest and awarded a cost of Rs. 25,000/-. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Didn't all the learned mighty officers of the department who tenaciously pursued this case, know fully well that the assessee was entitled for the refund. What did they achieve by this futile litigation? An impression in the public that government is not fair. Do we need this? </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until next week </strong></font></p> </body> </html>