the essay of 18 June 2025 · 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 bgcolor="#FFFFFF"> <p align="left"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">JUNE 18, 2025 </font></strong></p> <p align="center"><strong><font color="#FF3333" size="2" face="Verdana, Arial, Helvetica, sans-serif">What Judgement? I'm the Law Here! </font></strong></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u>By Vijay Kumar</u></strong></font></p> <p align="justify"><STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF"><EM>IT</EM></FONT></STRONG><FONT SIZE="2" FACE="VERDANA, ARIAL, HELVETICA, SANS-SERIF"><EM> has become a tendency with the Government Officer to somehow or the other circumvent the orders of Court and try to take recourse to one justification or other. This tendency of undermining the court's order cannot be countenanced. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is from an order of the Supreme Court dated 13.10.2004 in Civil Appeal No. 3157 of 1998. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Twenty One years later, the Delhi High Court observed in <em>Thales India Private Limited vs Assistant Commissioner of CGST, Delhi </em> - <a href="https://taxindiaonline.com/caselaw/todays_case_indirect_tax/details?id=187904&type=caselaw"><strong>2025-TIOL-974-HC-DEL-GST</strong></a></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB">It is concerning to note that the Department is refusing to follow the decision of this Court. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The story of this interesting latest blatant disobedience of a High Court Order by a tax officer <img width="32" height="14" src="file:///C:\Users\Lenovo\AppData\Local\Temp\msohtmlclip1\01\clip_image002.png" alt="Description: Arrow Down with solid fill"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Thales India </em>got employees from foreign entities under an arrangement - <em>"secondment of employees"</em> - those seconded employees were to be employed in India in the capacity of their employees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is their case that the transactions between them and the foreign entity with respect to the seconded employees would not be liable to GST as the expenses incurred for those seconded employees are solely with respect to their employment, particularly because there was no agreement between them and the foreign entity but only between them and the persons so employed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, they paid GST of INR 8,99,61,147/- on 20 March 2024 under protest. They informed the Assistant Commissioner on 01 April 2024 about the payment under protest, contending that in the absence of any tax liability there ought not to be any liability for interest and penalties. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The GST Department issued DRC-01 on 14 May 2024 asking them to pay interest and penalty, to which they replied on 27 May 2024, that the transaction would not attract any tax liability. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, a Show Cause Notice (SCN) was issued on 31 May 2024, demanding the amount of INR 8,99,61,147/-, along with consequential interest and penalty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This SCN was challenged before the Delhi High Court in W.P.(C) 16611/2024. <a href="https://taxindiaonline.com/caselaw/todays_case_indirect_tax/details?id=187903&type=caselaw"><strong>2025-TIOL-973-HC-DEL-GST</strong></a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court noticed that the Central Board of Indirect Taxes and Customs (CBIC) in its Circular No. 210/4/2024-GST6 dated 26 June 2024 stated: - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F3DBCF"><em>it is clarified that in cases where the foreign affiliate is providing certain services to the related domestic entity, and where full input tax credit is available to the said related domestic entity, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value in terms of second proviso to rule 28 (1) of CGST Rules. Further, in cases where full input tax credit is available to the recipient, if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as Nil, and may be deemed as open market value in terms of second proviso to rule 28 (1) of CGST Rules. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Based on the Circular and an earlier decision in the case of <em>Metal One Corporation </em>, the High Court on 07.01.2025 allowed the writ petition and quashed the GST SCN dated 31 May 2024. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, they won the case, but they had already paid Nine Crore rupees – though they were not required to pay a rupee! How to get back that money? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Armed with the High Court Order dated 7th January 2025, they filed a refund application for Rs. 8,99,61,147/- with the GST Assistant Commissioner, who was not amused and promptly rejected it with his sagacious observations: <img width="32" height="14" src="file:///C:\Users\Lenovo\AppData\Local\Temp\msohtmlclip1\01\clip_image003.png" alt="Description: Arrow Down with solid fill"></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">I find that the decision of the Hon'ble Court in the matter of the noticee is based on the judgement pronounced in the case of <em>M/s Metal One Corporation India Pvt Ltd </em> and the same <strong><font color="#FF0000">has not been accepted</font> </strong>by the competent authority till date. In view of the above, I find that the Overseas Group Entity is the actual employer of the seconded employees. As the effective employer of the seconded employees is Overseas Group Entity, there does not appear to be a real employer-employee relationship between the Noticee and the seconded employees, especially when after the completion of the assigned task, the seconded employees return to their parent employer from where they may again be deployed or loaned to other locations of the Overseas Group Company. This establishes that the services provided in respect of seconded employees fall under the definition of supply under Section 7 of the CGST Act, 2017 and subsequently under the definition of 'import of service' under Section 5(3) of the IGST Act, 20 17. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">In view of above facts, I am of considerate view that party is not eligible for refund of Rs.8,99,61,147/-on the grounds of "<font color="#FF0000">Any other (specify)</font>"</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The taxpayer is back in the High Court in writ petition W.P.(C) 5563/2025 challenging the order of the learned Assistant Commissioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 29th April 2025 the Court observed: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB">It is concerning to note that the Department is refusing to follow the decision of this Court by observing that <strong><font color="#FF0000">it does not accept</font> </strong>the decision in <em>Metal One Corporation </em>. Even if the Department wishes to challenge the judgment in <em>Metal One Corporation </em> or the judgement in the Petitioner's case, so long as there is no challenge and no stay, the refund could not have been held up. It is relevant to point out that the judgement in the Petitioner's case is dated 7th January 2025 and the judgment in <em>Metal One Corporation </em> is dated 22nd October 2024. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB">Under such circumstances, the impugned order is, prima facie, unsustainable. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Departmental Counsel wanted to seek instructions in the matter from his client, the GST Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the case came up for hearing on 27.05.2025, the Departmental Counsel submitted that there is no challenge to the order dated 07th January 2025 passed in W.P.(C)16611/2024 – that is the order quashing the original Show Cause Notice! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, that order has become final and the Assistant Commissioner had no choice but to follow that. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court ordered that the refund should be processed and credited within two months. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is not a new or stray case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 2013, the Gujarat High Court in <em>EI Dupont Vs Union of India </em>(<strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMzMjM=" target="_blank">2013-TIOL-1172-HC-AHM-CX</a></strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMzMjM="> </a>) observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">we are constrained to strongly disapprove such arbitrary act on the part of the lower adjudicating authority and/or lower authorities in ignoring the binding decisions/orders passed by the higher appellate authorities/courts. Time and again the Hon'ble Supreme Court as well as various High Courts and this Court have disapproved such conduct/act on the part of the lower authorities in ignoring the binding decisions/orders passed by the higher appellate authorities/courts. Still, it appears that message has not reached the concerned authorities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#C1DFE8" span="span">we direct the Central Board Excise and Customs to issue a detailed circular to all the adjudicating authorities considering the observations made by this Court in the present judgment and order as well as the law laid down by the Hon'ble Supreme Court in various decisions referred to in the present judgment and order, within a period of 30 days from the date of receipt of the present order so that such eventuality may not happen again and again. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently, Board issued Instructions in F. No. 201/01/2014-CX.6 Dated- 26th June 2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board instructions noted that the assessee had filed appeal before the High Court against rejection of a refund claim on an issue which had earlier been decided by the High Court against the revenue, though in a matter relating to a different assessee. Thus, for deciding the refund, a binding precedent judgment existed. However, the binding precedent was not followed which led to litigation before the High Court to which the High Court took a serious view. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board further noted that on the subject of consequential refund, where the department has gone in appeal, there already exists a circular No 695/11/2003 -CX dated 24-02-2003 and had this circular been followed in the case, unnecessary litigation as well as adverse observation of the High Court could have been avoided. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board directed: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The learned adjudicating authorities to peruse the judgement of the High Court in <a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMzMjM=" target="_blank"><strong>2013-TIOL-1172-HC-AHM-CX</strong> </a>for complete understanding of the issues involved and directions of the High Court on need to follow judicial discipline. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Officers to peruse the judgement of the Supreme Court in <em>Union of India vs. Kamlakshi Finance Corporation Ltd. </em>- <a href="https://taxindiaonline.com/caselaw/details?id=65599&type=caselaw" target="_blank"><strong>2002-TIOL-484-SC-CX-LB </strong></a>which is an authoritative pronouncement on the issue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Chief Commissioners to bring the contents of the Circular to the notice of all adjudicating authorities under their jurisdiction with direction to follow the same scrupulously. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many officers in the field have as much contempt (if not more) for the Board as they have for the Courts. In any case, many of them are aware of the <em>Kamlakshi </em>judgement - this judgement was delivered in 1991 and had been discussed in hundreds of cases and must have been certainly taught in NACIN when the learned adjudicating authority was an unassuming probationer. The Apex Court in the <em>Kamlakshi </em> case very clearly held: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#F3DBCF">The mere fact that the order of the appellate authority <font color="#FF0000">is not "acceptable"</font> to the department - in itself an objectionable phrase - and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But many in the field do not consider the Supreme Court supreme and have consistently flouted this sacred principle. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The whole system of judicial decisions will end up in a mockery if lower authorities are allowed to disregard the judicial decisions of higher authorities. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2025/je176251.JPG" width="326" height="261"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Be you ever so high, the law is above you" – except for a few revenue officers who honestly believe they are above Law. The unfortunate fact is that these Revenue officers believe that they are better than the judiciary and nothing will happen to them if they pass orders in total violation of binding principles laid down by higher Courts. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until next week </font></p> <div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Comments/feedback welcome at <a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a> or 9848111243 (WhatsApp) </font></strong></div> </body> </html>