GST Case Law Compendium 1. Whether the limitation to file an appeal commence from the date of the rectification order? Yes, the Honorable Madras High Court (Madurai Bench) in the case of M/s. SPK and Co v. State Tax Officer [W.P. (MD) No. 27787 of 2024 dated November 22, 2024] disposed of the writ petition thereby holding that the date of limitation for filing of appeal would start from the date of passing of the rectification order. The Honorable Court noted that the petitioner filed a writ petition stating the vagueness of SCN which is not tenable since a detailed reply has been submitted to the SCN and the application for rectification had also disposed of. The application for rectification was disposed of holding that the grounds raised in the rectification application are in nature of challenging the order of assessment. However, the Petitioner further stated that the appellate authority would press upon calculating the period of limitation from the date when the original assessment order was passed and, in such case, the appeal would be beyond the period of limitation and thus, there is an apprehension that the appeal would not be entertained due to limitation issue. The Honorable High Court noted that since the rectification application filed was rejected on 12.11.2024, the period of limitation would only start from the date on which the rectification order has been passed and disposed of the petition. 2. Whether an Order can be passed beyond the allegations mentioned in the SCN? No, the Honorable Madras High Court in the case of Tvl. Senthil Hardwares v. State Tax Officer, Pattukottai [W.P. (MD) No. 17626/2024 dated July 30, 2024] quashed the impugned order as it suffers from the gross violation of principles of natural justice. The Honorable Court noted that a Show Cause Notice was issued to the Assessee vide FORM DRC-01 and the reply filed by the Assessee was accepted by the Department, but a certain part of the demand was confirmed vide the Order in respect of the defect, which was not part of the notice. The Honorable Madras High Court observed that the Impugned Order suffers from a gross violation of the principles of natural justice as the Petitioner was not put to notice of such defects. Therefore, the reasoning, produced in the conclusion of the Impugned Order, is also unsustainable. The Honorable Court held that the Impugned Order, which stands quashed, shall be treated as acorrigendum to the Impugned Notice. The Respondent was also directed to issue afresh additional addendum to the Impugned SCN within a period of 45 days. The Petitioner shall, thereafter, file a reply to the same within a period of 30 days. The Respondent shall thereafter pass a fresh order on merits and in accordance with law as expeditiously as possible preferably within a period of two months. 3. Whether negative blocking of ECL is within the scope of provisions of Rule 86A? Yes, the Honorable Madras High Court in the case of Tvl. Shanthaguru Innovations Private Limited v. Commercial Tax Officer &Ors. [Writ Petition No. 29872 of 2024 dated November 28, 2024] held that the negative blocking is well within the scope of provisions of Rule 86A of the CGST Rules, 2017. The Honorable Court noted that ECL had been blocked without the availability of any credit after issuing the intimation for the same. Subsequently, notice in form ASMT-10 is issued by the State Authority on September 26, 2024 alleging wrongful availment of ITC to the extent of a sum of Rs.13,10,44,864/. The Central Authorities had already conducted the investigation at the Petitioner’s premises and found that till March 2024, the Petitioners had wrongfully availed a sum of Rs.6.3 Crores as ITC. Accordingly, the Central Authorities had issued a summons with regard to the wrongful availment of ITC to the extent of Rs.6.3 Crores and subsequently, froze the bank accounts of the Petitioners. Thereafter, the Central Authorities issued FORM DRC-01A on October 08, 2024, with regard to the wrongful availment of a sum of Rs.13.10 Crores. The Honorable Madras High Court observed that the issue raised by the Central and State Authorities is similar, although, the quantum of the amount demanded by them is entirely different and the period of demand also differs. Thus, the question of cross-empowerment would not arise. Therefore, to the extent of difference in amount and period, the State Authorities will have the power to issue the notice. However, in the absence of any further orders, subsequent to the issuance of the Impugned Notice by the State Authorities, it is pre-mature to decide as to whether the State Authorities are barred by cross empowerment or not. Further, noted that Rule 86A of the CGST Rules would show that if the Commissioner or an Officer, not below the rank of Assistant Commissioner, having reason to believe that the credit of ITC available in ECL has been fraudulently availed or ineligible under the circumstances mentioned in Clauses (a) to (d) of Rule 86A(1) of GST Rules, for the reasons to be recorded in writing, not allow the debit of amount equivalent to such credit in ECL for discharge of any liability under Section 49 of the CGST Act. In the case on hand, the Rule was incorporated to stop debiting the ITC from ECL, which was availed fraudulently by virtue of a bogus invoice and other situations mentioned in Clauses (a) to (d) of Rule 86A(1) of CGST Rules. Thus, the object of Rule 86A of the CGST Rules is to prohibit the debiting of ITC from the ECL to the extent of fraudulently availed credit. Therefore, by no stretch of the imagination, one could have construed that no blocking orders can be passed at the time of zero balance of ITC in the ECL. Since the negative blocking can continue up to the stage of accumulation of ITC to the extent of wrongful availment of credit in the ECL, the blocking orders can be issued even at the time of zero balance of ITC in the ECL. The Honorable Court held that the State Authorities are empowered to pass blocking orders to the extent of credit, which was fraudulently availed and available in ECL for discharge of output tax liabilities either at the time of blocking or subsequently, in the event if the same was already utilised. Though the issues raised by the Central and State Authorities are similar in nature, if the period, for which the notice was issued, is different, both the Authorities are empowered to initiate the proceedings for the respective period. Hence, the writ petition was dismissed. 4. Whether the assessment proceedings without giving an opportunity to reply is valid? No, the Honorable High Court of Madras in the case of Sundarapandian v. State Tax Officer-1 [W.P. (MD) 17429/2024 dated July 29, 2024] held that an order issued without giving proper opportunity to reply to the SCN is contrary to principles of natural justice. The Honorable Court noted that the petitioner was served notices vide FORM DRC-01A dated October 26, 2023, and FORM DRC-01 dated November 15, 2023, for the assessment year 2018-19. Subsequently, the Impugned Order dated February 12, 2024,was issued. The Petitioner contended that the Impugned Order was passed without the issuance of the aforementioned notices, hence, it is a gross violation of the principles of natural justice. The Respondent submitted that the notices that preceded Impugned Orders were posted on the GST common portal and the Petitioner ought to have participated in the said proceedings. The Honorable Madras High Court observed that the Petitioner may have a case on merits as the dispute pertains to the difference of turnover reported in FORM GSTR-7 and FORM GSTR-3B. Considering the same, the Impugned Order was set aside and remitted the case to the Respondent to pass a fresh order on merits. The Impugned Order passed for the Assessment Year 2018-19 which stands quashed hereby, shall be treated as an addendum to the SCN. The Petitioner shall file a consolidated reply within a period of 30 days from the date of receipt of a copy of the order and also deposit 20% of the disputed tax from the electronic cash ledger. 5. Whether demand can be confirmed on the basis of requirements not mentioned in the SCN? No, the Honorable Delhi High Court in the case of APN Sales and Marketing v. Union of India [W.P. (C) No. 9536 of 2024 dated July 15, 2024] held that an order which does not provide sufficient reasons is not legally sustainable as it is in violation of principles of natural justice and the demand confirmed on the allegations not mentioned in the Show Cause Notice is not sustainable. The Honorable Court noted that the petitioner was served SCN alleging that ITC availed by the Petitioner was not correct as the supplier’s GST registration was cancelled. Pursuant to the Impugned SCN, an Impugned Order dated December 29, 2023 was passed. The Impugned SCN referred to Section 16(2)(c) of the CGST Act, which posits that registered persons are entitled to avail ITC on supply of goods or services subject to the condition that the tax charged on such supply has been paid to the Government either in cash or through the utilization of admissible ITC. The Honorable High Court observed that the Impugned SCN did not allege that the Petitioner had not received the goods from the dealer in question. The Impugned SCN is premised on Section 16(2)(c) of the CGST Act. However, the Impugned Order does not indicate that the Adjudicating Officer had finally concluded that the dealer in question i.e. Modern Traders had not paid the taxes due on the supplies made to the Petitioner. The Honorable Court held that the Impugned order be set aside and the matter remanded back to decide afresh. 6. Whether penalty u/s 129(1)(b) can be imposed if goods are transported by a person whose registration is cancelled? No, The Hon’ble Allahabad High Court in the case of M/s Lakhdatar Traders v. State of Uttar Pradesh [Writ Tax No. 1852 of 2024 dated December 11, 2024] dismissed the writ petition where goods in transit detained were accompanied with a proper tax invoice and e-way bills and penalty imposed on account of suspension of registration of the owner of goods. The Honorable Court observed that the statement of the driver was obtained in Form GST MOV-01 and physical verification was made in which, it is claimed that no discrepancy was found. However, the goods were detained by indicating the movement of goods without proper documents. A notice dated October 08, 2024, was issued in Form GST-MOV-07 inter alia indicating that the registration of the Petitioner was suspended. Further, several indications were made pertaining to the validity of the registration of the Petitioner. The Hon’ble Allahabad High Court Relied on, a coordinate Bench of this Court in the case of Halder Enterprises v. State of Uttar Pradesh [Writ Tax No.1297 of 2023 dated December 11, 2023], came to the conclusion that once the goods were found with proper tax invoice and E-way bill belonging to the Petitioner, the circular dated December 31, 2018 would apply and the Petitioner would be deemed to be owner of the goods and the same was to be released in terms of Section 129(1)(a) of the CGST Act. The Honorable Court noted that the facts are not in dispute that the documents in question were accompanied with the goods, were dated October 01, 2024, and at the time of interception of the vehicle, the requisites were found. The notice issued by the Respondents indicated the fact the registration being suspended by the jurisdictional authorities at Bihar on October 03, 2024, based on which, the penalty has been imposed under provisions of Section 129(1)(b) of the CGST Act. Hence, the writ petition was allowed and directed authorities to carry out proceedings in terms of section 129(1)(a) of the CGST Act. 7. Whether the date of online filing of an appeal is to be considered as the date of filing the GST appeal for considering limitation? Yes, the Honorable Madras High Court in the case of Kasturi & Sons (P.) Ltd. v. Additional Commissioner of GST & Central Excise (Appeals-1), Chennai [W.P. No. 18642 of 2024 dated July 10, 2024] considering Rule 108(3) of the CGST Rules held that the date of online filing of appeal must be considered as the date of filing GST appeal for the purpose of limitation. The Honorable Court noted that the petitioner filed a refund application under Section 54 of the CGST Act, however, the application was rejected vide order dated August 30, 2024.Thereafter, the appeal was filed against the order online on October 31, 2022, and a hard copy of the appeal was submitted on August 02, 2023, which was beyond the prescribed time period, based on which the appeal filed was rejected vide order dated March 13, 2024. The Revenue contended that the date of issuance of provisional acknowledgment would be considered as the date of filing of appeal only when the order appealed against was uploaded on the common portal. The Honorable Madras High Court noted that as per rule 108(3) of the CGST Rules, the self-certified copy of the order has to be submitted along with the appeal, only when the order appealed against is not uploaded on the GST portal. And when the order is duly uploaded on the common portal, the date of online filing would be considered as the date of filing of the appeal. The Honorable Court opined that when the appeal is filed online, the filing of a hard copy of the appeal is just a procedural requirement and consequently, the Impugned order is not sustainable. Therefore, the Impugned Order is liable to be set aside and directed the appellate authority to receive the appeal and decide the same on merits. 8. Whether an Order passed without considering credit in GSTR-2A is liable to be set aside? Yes, the Honorable Madras High Court in the case of M/s. Oasys Cybernetics Private Limited v. State Tax Officer, Chennai [W.P. No. 16224 OF 2024 dated July 09, 2024] disposed of the writ petition by setting aside the order in case where the credit as reflected in GSTR-2A was not taken into consideration at the time of passing of the order. The Honorable Madras High Court noted that the petitioner had challenged the Order in Original on the ground that the impugned order was issued without considering credit of 11 bill of entries reflected in GSTR-2A. Further, the order of adjudication refers to amounts not reflected in the GST Model-2 portal and such information was not made available to the petitioner. After considering the 11 bill of entries reflecting in GSTR-2A, the petitioner agrees to remit a sum of Rs.8,00,000/- as condition for remand. The Honorable Court opined that credit in GSTR-2A was not taken into consideration at the time of passing of the order and held that the Impugned Order is set aside and the matter is remitted back for reconsideration. 9. Whether the refund application for RCM paid on ocean freight is valid if filed after the Notification was struck down? Yes, the Honorable Gujarat High Court in the case of H K Enterprise v. Union of India & Ors [R/Special Civil Application No. 14119 of 2024 dated November 20, 2024] quashes the rejection of there fund application of IGST paid on ocean freight, filed subsequent to Notification No. 10/2017-IT (Rate) dated June 28, 2017 being struck down by Honorable Supreme Court in case of Mohit Minerals. The Honorable Court noted that the petitioner’s refund claim for the unutilized GST paid on Ocean Freight under the RCM for June 2018 was rejected because it was found to be filed after the statutory two-year period from the relevant date. The Honorable Gujarat High Court noted that the issue of levy of IGST on ocean freight is no longer res integra and has been decided by the Honorable Apex Court in the case of Union of India and another v. Mohit Minerals Private Limited through Director [2022 (5) TMI 968] and the decision of various High Courts including this Court in case of BLA Coke Pvt. Ltd v. Union of India & Ors. [Special Civil Application No. 19481 of 2023], wherein, it was categorically held that when the Notification itself is struck down, the Authorities cannot insist on a levy of IGST on the amount of ocean freight. The Honorable Court relied on the decision of Mafatlal Industries and others v. Union of India and others [1997 (5) SCC 536] where the Apex Court has contemplated three situations where the right to refund may arise. The Apex Court has held that for the cases covering unconstitutional levy, the remedy of writ jurisdiction exists, both under Articles 32 and 226 of the Constitution of India, respectively. The Honorable Court observed that it is but implicit that to obviate the impossible, it must be held that the Petitioner could have filed the application for refund only after the RCM Notification in question was finally struck down and the appeal of the Union of India dismissed in the year 2022. Therefore, it is held that the application for are fund having been filed within a reasonable time thereafter, cannot be held to be time-barred. The writ petition filed by the Petitioner seeking a GST Refund of the IGST is maintainable and must be allowed as the levy has been held to be unconstitutional. The petition, therefore, succeeds and is accordingly allowed. The Impugned Order was hereby quashed and set aside. 10. Whether demand can be raised solely based on the oral statement of a witness without any further evidence or corroboration? No, the CESTAT, Ahmedabad in the case of Krish Corporation v. Commissioner of C.E. and S.T.-Surat -I [Service Tax Appeal No. 10686 of 2014-DB dated November 26, 2024] allowed the appeal wherein the tax demand has been raised solely based on the statements of various witnesses during investigation without any evidence and further corroboration. The CESTAT, Ahmedabad observed that the primary dispute is related to the calculation of taxable value as the Respondent has calculated the value solely on the basis of a statement recorded of persons as it has been alleged that the persons have admitted that the amount of rent has been collected by the Appellant in cash. Further noted that an admission by a person, cannot be considered to be conclusive evidence to establish the guilt of the assessee. The Burden of proof is on the Revenue and the same is required to be discharged effectively. Without corroborative evidence, only on the basis of the statement of a few tenants, it cannot be concluded that the appellant has collected the part of the rent in cheques and the balance is taken in cash. Further, none of the persons whose statement was recorded and was relied upon for raising the demand was cross-examined by the Respondent Commissioner which was required as per Section 9D of the Central Excise Act, 1944, as applicable in service tax matters, regarding examination in chief of witness. The CESTAT opined that the oral statement of the service recipient is not admissible as evidence and the demand of service tax on the basis of a statement of persons is not sustainable. Therefore, the demand of tax amount is reduced and the penalty is not payable as the tax amount was paid before the issuance of SCN. 11. Whether the refund rejection order is valid if the SCN does not provide the required information? No, the Honorable Madras High Court in the case of Tvl. Orange Sorting Machines (India) (P.) Ltd. v. Additional Commissioner [W.P. No. 4211 of 2024 dated February 23, 2024] quashed the impugned order as the Revenue failed to provide a breakup of the amount demanded, thereby deciding that the refund rejection order is not proper when the required information for defending the claim made is not provided to the Applicant. The Honorable Court noted that a SCN dated September 22, 2023,was issued for the erroneous refund claimed. Subsequently, the Petitioner in its reply filed, requested for a breakup of the amount so that they can reply to the notice appropriately.