Supreme Court & High Courts Weekly Round-up

This weekly round-up analytically summarizes the key tax judgments of the Supreme Court and all High Courts reported at during the previous week from January 27 to February 02 of 2024. Respite for SEBI in the Karvy Stock Broking Matter: SC stays SAT order SECURITIES AND EXCHANGE BOARD OF INDIA vs AXIS BANK LIMITED & ORS 2024 TAXSCAN (SC) 153 The Supreme Court issued a stay on the Securities Appellate Tribunal’s (SAT) order following a petition filed by the Securities and Exchange Board of India (SEBI) in the Karvy Stock Broking case. The bench comprised of D.Y.Chandrachud(Chief Justice), J.B. Pardiwala and Manoj Misra.”This process was not done, and like a highway robber, NSDL, through illegal directions from SEBI, transferred the pledged shares (which were fungible) to the clients of Karvy, an action taken without any authority of law,” Relief to Blackberry: Supreme Court Upholds Rs. 8.55 Cr Excise Duty Refund along with Interest u/s 11BB COMMISSIONER OF CENTRAL EXCISE vs BLACKBERRY INDIA PRIVATE LIMITED  2024 TAXSCAN (SC) 151 A two-judge bench of the Supreme Court affirmed the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in a case involving Blackberry India Pvt. Ltd.

The bench ruled that interest must be paid promptly after the lapse of three months from the dates on which applications were submitted for filing interest. Revenue was represented by N. Venkatraman, Mukesh Kumar Maroria, V.C Bharathi, Prantap Singh, Kritagya Kait,  H. R. Rao and Sarthak Karol.The respondent was represented by Pawanshree Agrawal, Priyanka Rathi, Ashwini Chandrasekharan, Shubhangi Gupta and Shubhangi Negi Import of “Concrete Batching Plant” Not eligible for Customs Exemption Claim: Supreme Court rejects plea ATLANTA LIMITED vs COMMISSIONER OF CUSTOMS (IMPORT)  2024 TAXSCAN (SC) 152 A two-member bench of the Supreme Court ruled that the import of the “Concrete batching plant” by Gammon cannot be regarded as an import by M/s GammonAtlanta JV, the entity awarded the contract for road construction in India. The bench noted that a joint venture has the potential to adopt the form of a corporation, where two or more individuals or companies come together. This requires a shared interest in the performance of the subject matter, the right to direct and govern policy in connection with it, and a duty, alterable by agreement, to share both profits and losses. SC imposes stay on implementation of order against Anant Automobiles under Section 42(5) of the OVAT Act  M/S.ANANTA AUTOMOBILES PVT. LTD vs THE SALES TAX OFFICER & ORS 2024 TAXSCAN (SC) 154 A two judge bench of the Supreme Court put a stay on the imposition of fine under section 42(5) of the OVAT Act on Anant Automobiles.

The Court is due to hear a Special Leave Petition on the matter. A Special Leave Petition on this matter is scheduled for a hearing, during which the bench will determine the appropriateness of imposing fines. The Orissa High Court had upheld the Revenue’s imposition of penalty under Section 42(5) of the OVAT Act. The two judge bench of the Supreme Court comprising Abhay S Okha and Ujjal Bhuyan imposed a stay on implementing the order of the Orissa High Court. Deposit of 15% of Outstanding Dues: SC quashes Deposit of Additional Amount as Condition Precedent for Continuation of Stay SAMBHU PRASAD AGARWAL vs THE STATE OF WEST BENGAL 2024 TAXSCAN (SC) 155 The Supreme Court quashed deposit of additional amount as condition precedent for continuation of stay as there was deposit of 15% of the outstanding dues. A Two-Judge Bench of Justice BR Gavai and Justice Sandeep Mehta observed that “In that view of the matter, we find that it was not necessary for the High Court to have directed the appellant to deposit an additional amount of Rs.1,00,00,000/-( Rupees One Crore Only ) for continuing the stay.” Time Limit prescribed for claiming ITC U/s 16(4) APGST Act is not unconstitutional: Andhra Pradesh HC Thirumalakonda Plywoods vs Assistant Commissioner – State Tax 2024 TAXSCAN (HC) 263 The Andhra Pradesh High Court ruled that the time limit prescribed for claiming Input Tax Credit (ITC) under Section 16(4) of the Andhra Pradesh Goods and Service Tax (APGST) Act, 2017 was not unconstitutional. The division bench of the court comprising Justice Durga Prasad Rao and Justice T.

Mallikarjuna Rao observed that without serving a proper show cause notice in Form GST DRC-01 and without granting sufficient opportunity to the petitioner U/s 74(5) of the CGST Act, and not considering the petitioner’s submissions and COVID-19 limitations r/w Amnesty Notifications, but confirming the demand of tax, interest, and penalty by restricting the credit with erroneous facts, despite collecting a late fee of Rs.10,000/- for the delay in filing the returns, was not only violated of principles of natural justice but also arbitrary, improper, illegal, and in violation of Article 14, 19(1)(g), 20, 21, and 300-A of the Constitution of India. Sufficient Cause for Delay of 1365 days: Allahabad HC upholds Decision of Commercial Tax Tribunal M/S Royal Sanitations vs Commissioner Of Commercial Tax 2024 TAXSCAN (HC) 264 The Allahabad High Court upheld the decision of the Commercial Tax Tribunal as there was explanation related to the sufficient cause for delay of 1365 days.  A Single Bench of Justice Shekhar B. Saraf observed that “I am of the view that the delay is explained by the authorities and the appeal is required to be heard by the Tribunal, as so much time has already elapsed. I am also of the view that the hearing of the appeal should be expedited. Accordingly, the Tribunal is directed to hear and decide the appeal within four months from date.”

Marginal Delay of 11 Days: Bombay HC directs Income Tax Dept to accept Declaration under VSV Act Neelam Ajith Phatarpekar vs The Assistant Commissioner Of Income Tax 2024 TAXSCAN (HC) 265 The Bombay High Court instructed the Income Tax Department to acknowledge the declaration under the Vivad se Vishwas Act, 2020 (VSV Act) due to a negligible delay of only 11 days. Directing the Income Tax Department to accept the petitioner’s declaration, a Division Bench comprising Justices M. S. Sonak and Valmiki Sa Menezes observed that “As noted above, even if the contention about technical glitches is kept aside, this is a matter where the Respondents themselves committed several errors in processing the Petitioner’s declaration in Form 1, which was made within the prescribed period and by due compliance with the prescribed procedure. This is a matter where the Petitioner withdrew her pending appeal. Imposition of Penalties within Realm of Tax Laws not to be Solely based on Insignificant Technical Errors Devoid of any Financial Consequences: Allahabad HC M/S Ashoka P.U. Foam (India) Pvt. Ltd vs State Of U.P 2024 TAXSCAN (HC) 269 The Allahabad High Court noted that the imposition of penalties within the realm of tax laws should not solely rely on insignificant technical errors without any financial consequences. A Single Bench of Justice Shekhar B. Saraf observed that

“The imposition of penalties within the realm of tax laws should not be based solely on insignificant technical errors devoid of any financial consequences. The foundational principle guiding this approach is the commitment to maintain a tax system that is characterized by fairness and justice, where the severity of penalties corresponds to the gravity of the offense committed. Section 5 of Limitation Act not applicable to appeals filed u/s 107 of CGST Act: Allahabad HC Garg Enterprises vs State Of U.P 2024 TAXSCAN (HC) 266 The Allahabad High Court recently observed that Section 5 of the Limitation Act, 1963 is not applicable to appeals filed under Section 107 of the Central Goods and Services Tax Act, 2017 ( CGST Act ). A Single Bench of Justice Shekhar B. Saraf observed that “The Central Goods and Services Act is a special statute and a self-contained code by itself. Section 107 of the Act has an inbuilt mechanism and has impliedly excluded the application of the Limitation Act. It is trite law that Section 5 of the Limitation Act, 1963 will apply only if it is extended to the special statute. Section 107 of the Act specifically provides for the limitation and in the absence of any clause condoning the delay by showing sufficient cause after the prescribed period, there is complete exclusion of Section 5 of the Limitation Act. Accordingly, one cannot apply Section 5 of the Limitation Act, 1963 to the aforesaid provision”. Non-filing of GSTR for Some Period Does not Warrant Retrospective Cancellation of GST Registration :

Delhi HC POLYTEC INDUSTRIES vs COMMISSIONER OF DELHI GOODS AND SERVICES TAX 2024 TAXSCAN (HC) 268 The Delhi High Court has ruled that merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant. In light of these considerations, the court modified the cancellation order, determining that it shall operate with effect from 01.02.2019, aligning with the date of the petitioner’s business discontinuation. The petitioner was directed to furnish necessary details for a comprehensive assessment by the respondents, who are not precluded from taking lawful steps for tax, penalty, or interest recovery. Set Back to Market Dominants: Delhi HC upholds Validity of GST Anti-Profiteering Provisions The Delhi High Court, led by a bench consisting of Acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma, rendered a verdict on Monday affirming the validity of legal provisions associated with the Goods and Services Tax ( GST ) National Anti-Profiteering Authority (NAA). The National Anti-Profiteering Authority (NAA) serves as the statutory mechanism within the GST law, tasked with scrutinising unfair profiteering activities carried out by registered suppliers under the GST law. The primary responsibility of the Authority is to verify that the benefits arising from the reduction in GST rates on goods and services, as determined by the GST Council, and the utilisation of Input Tax Credit, are passed on to the recipients.

This is to be accomplished through a proportional reduction in prices by the suppliers, ensuring that consumers receive the intended advantages of these measures. Granite Stone Blocks and Pieces attract Sales Tax at 5%: Allahabad HC upholds  Tribunal Order The Commissioner, Commercial Tax vs Peethambra Granites Pvt. Ltd. 2024 TAXSCAN (HC) 270 A Single Bench of the Allahabad High Court has ruled that granite stone blocks and pieces attract 5% sales tax. The judgment carries far-reaching implications for the taxation of granite stone, establishing a precedent for interpreting similar entries in tax schedules. It was thus held by the Allahabad High Court bench that, “ In light of the above findings, there is no scope of interference in the well reasoned order passed by the Tribunal, and accordingly, this revision petition is dismissed.”

Appeal filed u/s 107 of CGST Act: Allahabad HC grants Benefit of Section 14 of Limitation Act Murli Packers vs State Of U P 2024 TAXSCAN (HC) 275 The Allahabad High Court granted benefit of Section 14 of the Limitation Act, 1963 for appeal filed under Section 107 of the Central Goods and Service Tax Act, 2017 (CGST Act). A Single Bench of Justice Shekhar B. Saraf observed that “I find merit in the submission of counsel appearing on behalf of the petitioner, and accordingly, I quash and set aside the impugned order dated October 15, 2019 and direct the respondent no.3/Additional Commissioner, CGST, (Appeals), Meerut, to grant benefit of Section 14 of the Limitation Act to the petitioner and hear the appeal afresh. If after granting the benefit of Section 14 the petitioner’s appeal is filed within time, the appeal shall be heard on merits.” Order of Cancellation of GST Registration is to Take Effect from Date on which Business was Last Carried: Delhi HC MANISHA GUPTA PROP VARUN ENTERPRISES vs UNION OF INDIA 2024 TAXSCAN (HC) 276 The Delhi High Court observed that the order of cancellation of GST Registration is to take effect from date on which business was last carried.

A Division Bench comprising Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “Records clearly demonstrates that petitioner had submitted an application seeking cancellation of the GST registration on 03.08.2022 and thereafter, vide order dated 07.10.2022, the registration of the petitioner had been cancelled. We note that the cancellation of registration has been done with retrospective effect.” Rs 195 Crores GST Fraud: Delhi HC grants Anticipatory Bail to Co-Accused DIRECTORATE GENERAL OF GST INTELLIGENCE vs JITENDER KUMAR 2024 TAXSCAN (HC) 273 The Delhi High Court granted anticipatory bail to accused in the matter relating to Rs 195 crores GST fraud. During the course of investigation, it was found that M/s Radiant Traders, the manufacturers of smoking mixtures, had supplied the smoking mixture to M/s Harsha International. Upon search, it was found that no business activity was being conducted from the registered premises of M/s Radiant Traders and no goods or plant or machinery was found at their premises.

A Single Bench of Justice Amit Bansal observed that “From the material on record, it appears that Jitender Kumar was not the main player involved in the GST fraud and was acting on instructions from the main accused Chirag Goel and Chaman Goel. It is the case of the DGGI itself that out of the receipt of GST refund of Rs.198 crores by M/s Harsha International, Rs.195 crores were transferred to M/s Radiant Traders. Even otherwise, Jitender Kumar has clean antecedents and has been co-operating in investigation and has given his statement under Section 70 of the CGST Act. Opportunity of Hearing is Mandatory u/s 75(4) of UPGST Act before Imposing Tax or Penalty: Allahabad HC M/S Primeone Work Force Pvt. Ltd vs Union Of India 2024 TAXSCAN (HC) 272 The Allahabad High Court observed that the opportunity of hearing is mandatory under Section 75(4) of the the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act) before imposing the tax or penalty. A Division Bench comprising Justices Om Prakash Shukla and Vivek Chaudhary observed that “Since in the present cases, both tax and penalty are imposed against the petitioners and admittedly, an adverse decision is contemplated against the petitioners, therefore, under Section 75(4) of the Act of 2017, an opportunity of hearing was mandatorily required to be given by the department to the petitioners and merely marking the same as “NO” in the option cannot entitle the department to pass an order without giving any opportunity or even without waiting for the petitioners to appear on the date fixed.”

Non-Appearance for Investigation on One or Two Dates cannot be Ground for Cancellation of Bail u/s 132 of CGST Act: Delhi HC DIRECTORATE GENERAL OF GST INTELLIGENCE vs MANISH GOYAL 2024 TAXSCAN (HC) 271 The Delhi High Court observed that non-appearance for investigation on one or two dates cannot be ground for cancellation of bail under Section 132 of the Central Goods and Service Tax Act, 2017 ( CGST Act ). A Single Bench of Amit Bansal observed that “I am in agreement with the submissions made on behalf of Manish Goyal that non-appearance for investigation on one or two dates cannot be ground for cancellation of bail. It is an admitted position that after grant of regular bail, Manish Goyal did appear before the authorities pursuant to summons received by him on various occasions.

Therefore, the order dated 15th September, 2023, passed by the Sessions Court cancelling bail on account of non appearance on one or two dates is harsh and is accordingly set aside.” Proper Scrutiny conducted by AO on Allegations of Under Valuation of Closing Stock: Calcutta HC quashes Decision of CIT COMMISSIONER OF INCOME TAX, KOLKATA vs GOPAL SHARMA 2024 TAXSCAN (HC) 277 The Calcutta High Court quashed the decision of the Commissioner of Income Tax (CIT) as proper scrutiny conducted by the Assessing Officer ( AO ) on allegations of under valuation of the closing stock. A Division Bench comprising Chief Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya observed that “In the preceding paragraphs, we have noted as to the exercise conducted by the assessing officer in the scrutiny assessment which was examined by the tribunal and found that the due enquiry conducted by the assessing officer and after perusal of the documents, stock register etc. the assessment was completed. The tribunal also re-appreciated the factual position and found that the CIT while exercising power under Section 263 of the Income Tax Act has not recorded a specific finding that it is as case of no enquiry by the assessing officer rather the observation was there could be a possibility of understatement of the closing stock.” Extension of Time for Filing Appeal against Orders passed u/s 73/74 of CGST Act: Kerala HC directs to file Appeal ADITHYA MARKETING vs STATE TAX OFFICER-I 2024 TAXSCAN (HC) 274 The Kerala High Court directed to file appeal in the matter relating to extension of time for filing appeal against orders passed under Section 73/74 of the Central Goods and Service Tax Act, 2017 ( CGST Act ).

A Single Bench of Justice Dinesh Kumar Singh observed that “Considering the aforesaid fact, the present writ petition is disposed of with liberty to the petitioner to file appeal under Section 107 of the CGST/SGST Act, 2017 against the assessment order 20.06.2022, before 31.01.2024 and if the petitioner files appeal before 31.01.2024 against the assessment order, the appeal should be heard and decided on merits.” Fraudulently obtaining ITC worth Rs.200 crores by Projecting Transactions: Delhi HC cancels Anticipatory Bail DIRECTORATE GENERAL OF GST INTELLIGENCE vs CHIRAG GOEL 2024 TAXSCAN (HC) 278 The Delhi High Court cancelled the anticipatory bail in the case relating to fraudulently obtaining input tax credit (ITC) worth Rs.200 crores by projecting transactions. A Single Bench of Justice Amit Bansal observed that “In the present case, the accused persons are involved in fraudulently obtaining Input Tax Credit worth Rs.200 crores by projecting transactions only on paper and without the actual purchase or sale of goods. As a result, they have duped the government exchequer and the taxpayers of a huge amount of money.”

Prosecution Initiated by ED is liable to be quashed when Accused is Acquitted/Discharged in Predicate Offence: Delhi HC JEEVAN KUMAR vs DY. DIRECTOR DIRECTORATE OF ENFORCEMENT 2024 TAXSCAN (HC) 280 The Delhi High Court observed that the prosecution initiated by the Enforcement Directorate (ED) is liable to be quashed when accused is acquitted/discharged in a predicate offence. A Single Bench of Dr Justice Sudhir Kumar Jain observed that “In view of the aforesaid legal position, the complaint filed by the respondent/ED and the consequential proceedings cannot survive. Considering that the co-accused Dr. Jeevan Kumar has been acquitted by the trial court vide judgment dated 22.03.2013 and that the said judgment has not been challenged till date, there can be no offence of money laundering under section 3 of PMLA against the petitioner. Accordingly, the ECIR bearing no. ECIR/7/DZ/2008 is quashed along with all consequential proceedings arising therefrom stated to be pending before the concerned court.”

Kerala HC dismisses Writ Petition Claiming Refund of Excess Payment of Tax BIJU.K.P vs THE ASSISTANT COMMISSIONER 2024 TAXSCAN (HC) 279 The Kerala High Court dismissed a writ petition claiming refund of excess payment of tax. A Single Bench of Justice Dinesh Kumar Singh observed that “I do not find any ground to entertain such a writ petition, which has been filed seeking for a direction to consider order dated 17.12.2020 afresh by filing an application as late as on 9.3.2022. The writ petition lacks merit and is hereby dismissed. Pending interlocutory application, if any, in the present writ petition stands dismissed.” Penalties should be Reserved for Cases where Intentional Act to Defraud Tax System is Evident: Allahabad HC M/s FALGUNI STEELS vs STATE OF U.P. AND OTHERS 2024 TAXSCAN (HC) 281 In a recent decision, the Allahabad High Court observed that penalties should be reserved for cases where intentional act to defraud tax system is evident.  A Single Bench of Justice Shekhar B. Saraf observed that “A penal action devoid of mens rea not only lacks a solid legal foundation but also raises concerns about the proportionality and reasonableness of the penalties imposed.

The imposition of penalties without a clear indication of intent may result in an arbitrary exercise of authority, undermining the principles of justice. Tax evasion is a serious allegation that necessitates a robust evidentiary basis to withstand legal scrutiny. The mere rejection of post-detention e-Way Bills, without a cogent nexus to intention to evade tax, is fallacious.” Bombay HC allows Dealer to Amend GSTR-1 for FY 2018-19 to enable Mahindra & Mahindra to Claim Input Tax Credit M/s. Railroad Logistics (India) Pvt. Ltd vs The Union of India & Ors 2024 TAXSCAN (HC) 285 A Division Bench of the Bombay High Court has granted the liberty to a dealer to amend the Goods and Services Tax ( GST ) Return – GSTR-1 to enable its client, Mahindra & Mahindra to claim Input Tax Credit ( ITC ). The Bench of Justice G S Kulkarni and Justice Firdosh P Pooniwalla thus directed the respondents to permit the petitioner to amend and rectify form GSTR-1 for the period in question for financial year 2018-19, either through online or manual means, within a period of four weeks.

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