HC upholds Limitation Act not applicable to condone appeal filing delay beyond

period stipulated in section 107 (4) of CGST Act

Venkateswara Rao Kesanakurti vs State of Andhra Pradesh [TS-549-HC(AP)-2024-

GST] Dated 05.09.2024

Facts of the Case:

• Venkateswara Rao Kesanakurti (“The petitioner”), filed writ petition before the AP HC. The
petitioners were aggrieved by orders of the assessing authorities u/s 107 of the APGST Act, which
they had failed to appeal within the prescribed period.

• Appeals were filed beyond the three-month limit set under the APGST Act, and the appellate
authority had refused to condone the delay, stating it exceeded the additional month allowed by
Section 107(4).

Issues:

• Whether Section 29(2) of the Limitation Act, 1963 could extend the time limits for filing appeals
beyond the statutory period specified in the APGST Act.

Ruling:

• The ruling emphasized that it is not necessary that there should be an express exclusion of the
provisions of section 4 to 24 of the limitation Act.

• The Court held that the appeal period under Section 107 (4) of the APGST Act is strictly limited
and cannot be extended beyond the specified timeframe, which is a maximum of 3 months and a
possible 1-month extension.

• The Court confirmed that Section 5 of the Limitation Act, which permits condonation of delay, is
impliedly excluded for appeals under Section 107 of the APGST Act.

Cretum Advisory Comments

This ruling is a negative outcome for taxpayers, as it reinforces strict adherence to
the statutory period for filing appeals under the GST Act. This decision upholds that
limitation act is not applicable to condone delay beyond period stipulated in section
107 (4) of CGST Act, potentially disadvantaging those who may have valid reasons
for late submissions.
 Gauhati HC Rules Notification No. 56/2023 Ultra Vires

Barkataki Print and Media Services vs. UOI [TS-588-HC(GAUH)-2024-GST] Dated

23.09.2024

Facts of the Case:

• Barkataki Print and Media Services (“the petitioner”), challenged the issuance of Notification
No. 56/2023 by the Central Board of Indirect Taxes and Customs (CBIC). The notification
extended the time period for issuing orders under Section 73(9) of the CGST and SGST Acts for
the financial years 2018-19 and 2019-20, relating to tax liabilities in due.

• The petitioner argued that this notification was ultra vires, as it was issued without proper
recommendation from the GST Council as required under Section 168A of the CGST Act.

• The petitioner also contended that the government had invoked force majeure due to COVID-19
to justify the extension of the time limit, but by the time the notification was issued, the pandemic
was already over, and there was no valid reason to continue invoking force majeure.

Issue:

• Whether Notification No. 56/2023, which extended the time period for tax authorities to issue
demand orders under Section 73(9), is valid?

Ruling:

• The Gauhati HC, ruled that Notification No. 56/2023 was ultra vires the CGST Act and could not
be legally sustained. The court emphasized that Section 168A of the CGST Act requires two
conditions for the extension of time limits: (1) a valid recommendation from the GST Council,
and (2) the existence of force majeure. In this case, both conditions were not met.

• The court quashed the notification no. 56/2023 stating that the GST Council had not
recommended the extension, and since the COVID-19 pandemic had subsided, there was no
longer a valid force majeure situation to justify the extension.

Cretum Advisory Comments

This ruling is a positive outcome for taxpayers, as it reaffirms the necessity of
adhering to statutory requirements, such as obtaining the GST Council's
recommendation for notification extending time limits for passing recovery orders.
 HC Finds GST Authorities Cannot Bypass Penal Procedure Under GST Act and
Invoke IPC Provisions - 3

Deepak Singhal vs. Union of India and Ors. [TS-601-HC(MP)-2024-GST] Dated

25.09.2024

Facts of the Case:

• A summons was issued to Deepak Singhal (“the petitioner”), under Section 70 of the CGST
Act, 2017, following an investigation into M/s Shreenath Soya Exim Corporate, a firm alleged to
have engaged in issuing invoices without the actual supply of goods or services. The firm was
accused of wrongfully availing Input Tax Credit (ITC) by issuing fake invoices.
• Based on an inspection report and a memorandum recorded under Section 27 of the Indian
Evidence Act, the petitioner was implicated in a FIR filed under Sections 420 467, 468 and 471
of the IPC.
• The petitioner contested the FIR, arguing that the GST authorities (“the respondent”)
bypassed the procedure mandated under the GST Act and directly invoked the IPC’s provisions
without first applying the penal provisions under the GST Act.

Issue:

• Whether the GST authorities can bypass the penal provisions of the GST Act and directly invoke
the IPC Provisions?

Ruling:

• The MP HC ruled in favor of the petitioner, holding that the GST authorities cannot bypass the
penal procedure prescribed under the GST Act and directly invoke the penal provisions of IPC.
• The court stated that Section 132 of the GST Act specifically deals with offences such as issuing
invoices without actual supply, availing fraudulent ITC, and tax evasion. These offences are
subject to strict procedural safeguards, including the requirement of prior sanction from the
Commissioner under Section 132(6) before any prosecution can be launched.

Cretum Advisory Comments

This ruling is a positive outcome for taxpayers, as it reinforces the importance of
following due process under the GST Act before invoking criminal provisions of the
IPC. It safeguards taxpayers from arbitrary actions by ensuring that GST authorities
must adhere to the specific penal procedures outlined in the GST Act.
 HC Denies Bail in Fake Firms Syndicate Case, Emphasizing the 'Gravity' of
Economic Offences as a Key Principle

Case: Rajiv Jindal vs. State of U.P. [TS-590-HC(ALL)-2024-GST] Dated 23.09.2024

Facts of the Case:

• Three FIRs were filed against Rajiv Jindal and others (“the petitioners”) at Police Station
Noida, Sector-20, in Gautam Buddh Nagar, under Sections 420, 467, 468, 471, and 120B of the
IPC.

• The informants, including a journalist named Saurabh Dwivedi, discovered that their personal
identification documents were used without their consent to register these fake firms.

• The Petitioners, challenging their arrests related to a syndicate involved in the registration of fake
GST firms filed bail applications. The syndicate allegedly used Aadhaar and PAN cards to
fraudulently register fake firms and claim ITC.

Issue:

• Whether the accused persons, including Rajiv Jindal, are entitled to bail, considering the gravity
of the alleged economic offense, which involved a large-scale GST fraud.

Ruling:

• The Allahabad HC rejected the bail applications. The court emphasized the seriousness of the
economic offense, noting that such fraud affects the economic fabric of the society.

• It relied on the Supreme Court rulings in cases like P. Chidambaram vs. Enforcement
Directorate and Satendra Kumar Antil v. Central Bureau of Investigation and
another, underscoring that the gravity of the offense, especially in economic matters, is a key
consideration in deciding bail.

Cretum Advisory Comments

This judgement is a positive judgment as it highlights the courts' strict stance on
grave economic offenses. The denial of bail underscores the severity with which such
cases are treated, prioritizing the protection of the economic fabric of society over
leniency.
 HC Rules Petitioner Entitled to Interest at Actual Fixed Deposit Rate on Seized Cash
Refund

Ramkaran Karwa Vs Union of India [TS-594-HC(BOM)-2024-GST] Dated

24.09.2024

Facts of the Case:

• Ramkaran Karwa, (“the petitioner”) challenged an order passed by the Revenue department
(“the respondent”), which granted him 6% interest per annum on the refund of cash seized
during an investigation
• The seized amount totalled ₹2,22,27,008. The seized cash was deposited in a Fixed Deposit (FD)
with Punjab & Sind Bank, earning an interest rate higher than 6% per annum.
• The petitioner contended that since the fixed deposit earned a higher interest rate than 6%, he
was entitled to interest at the actual rate earned by the FD, not just 6%. The petitioner sought
18% interest on the refund, arguing that the Revenue department's grant of 6% was unjust and
amounted to unjust enrichment by the Revenue authorities.

Issue:

• Whether the Revenue’s decision to grant 6% interest per annum on the refund of cash seized was
justified, given that the FD earned a higher interest rate.

Ruling:

• The Bombay High Court, ruled that the 6% interest rate granted by the Revenue was not justified.
• The Court rejected the petitioner's claim for 18% interest, stating that there was no legal provision
to justify such a claim. However, the Court accepted the alternative submission that the petitioner
was entitled to interest at the rate actually earned by the FD.

Cretum Advisory Comments

This ruling is a positive development for taxpayers, as it ensures that interest on
seized cash refunds is granted at the actual fixed deposit rate rather than a lower
arbitrary rate. It reinforces the principle that taxpayers should not be disadvantaged
by the authorities' actions when their funds generate higher returns.
 SC approves bail for accused after Considering custody-period, challan filed,
subject to conditions

Saurabh Kumar vs The State of Madhya Pradesh [TS-571-SC-2024-GST] Dated

13.09.2024

Facts of the Case:

• Saurabh Kumar (“the petitioner”), was accused of creating 12 bogus firms and committing an
Input Tax Credit (ITC) fraud amounting to ₹8.99 crore under the GST Act.

• The accusations include influencing witnesses, destroying evidence, and using fraudulent
documents like Aadhaar and PAN cards to set up fake firms, and obtaining GST registration.

• The petitioner was in custody since nearly a year, and filed for regular bail after the completion
of the investigation and filing of the challan. The Madhya Pradesh High Court previously denied
bail based on concerns raised by the revenue department (“the respondent”), such as non-
submission of documents and influencing witnesses.

Issues:

• Whether the filing of the challan and completion of the investigation justify granting bail of the
petitioner, who has been in custody for nearly a year.

Rulings:

• The Supreme Court granted bail to the petitioner without expressing any opinion on the merits
of the case, considering the following factors:

1. The petitioner had been in custody for almost a year.

2. The investigation was completed, and the trial could take considerable time to conclude.

Cretum Advisory Comments

This ruling is a positive development for taxpayers, as it recognizes the importance
of timely justice and the need for bail considerations after prolonged custody. By
granting bail based on the completion of the investigation, the Supreme Court
emphasizes the principle that individuals should not be held in custody longer than
necessary without trial.
 HC quashes a SCN u/s 74 on the same facts after the earlier SCN u/s 73 was dropped

HCL Infotech Ltd vs Commissioner, Commercial Tax & anr. [TS-613-HC(ALL)-

2024-GST] Dated 30.09.2024

Facts of the Case:

• A SCN U/s 73 of the CGST Act was issued to HCL Infotech Ltd. (the petitioner), on 30.09.2023,
alleging discrepancies in the ITC claimed. The petitioner responded with supporting documents,
and after verification, the proceedings under Section 73 were dropped on 30.12.2023.

• However, on 03.08.2024, the Deputy Commissioner issued a second SCN under Section 74 of the
CGST Act on the same matter.

• The petitioner contended that Section 73 and Section 74 of the CGST Act deal with distinct
circumstances. Since the proceedings under Section 73 were dropped after verification, the
matter could not be reopened under Section 74 without any new evidence of fraud or
misrepresentation.

Issue:

• Whether a fresh SCN under Section 74 of the CGST Act can be issued on the same facts, after the
proceedings under Section 73 have been dropped?

Rulings:

• The Allahabad HC, ruled in favor of the petitioner, quashing the second SCN issued under Section
74. The court emphasized that Section 73 and Section 74 operate in distinct fields. The court
observed that the earlier SCN under Section 73 was dropped after proper verification.
• Therefore, reopening the case under Section 74 required prima facie evidence of fraud or
suppression, which was missing in the second SCN. Reliance was placed on the Supreme Court
cases, including Raj Bahadur Narain Singh Sugar Mills Ltd. v. Union of India and
CCE v. HMM Ltd.

Cretum Advisory Comments

This ruling is a positive ruling for taxpayers, as it prevents tax authorities from
issuing fresh notices under Section 74 without new evidence after an earlier notice
under Section 73 has been dropped on the same facts.
 HC quashes recovery notices issued without adjusting ITC; Cites 'Finance Act, 2024'
amendment

Tvl.SRP Communications vs The State Tax Officer (Intelligence) [TS-589-

HC(MAD)-2024-GST] Dated. 23.09.2024

Facts of the Case :

• Tvl. SRP Communications (“the petitioner”), was issued Recovery Notices by the State Tax
Officer (Intelligence) (“the respondent”) under the TNGST Act, 2017 for the FY 2017-18 and
2018-19.

• The assessment was made under Section 62 of the TNGST Act, as the petitioner had failed to
claim ITC within time u/s 16 nor did he filed GST returns for those years.

• The petitioner argued that the authorities failed to consider ITC available for adjustment,
resulting in inflated tax liabilities. The petitioner relied on the recent amendment of Finance Act,
2024, which incorporated Section 16(5) and (6) into the GST law, allowing for ITC claims in any
return filed by November 30, 2021, for supplies made in financial years 2017-18 to 2020-21.

Issue:

• Whether the petitioner is eligible to claim ITC in light of the recent amendment under the
‘Finance Act, 2024’

Rulings:

• The Madras HC, ruled in favor of the petitioner. The court found that the recovery notices were
issued without considering the petitioner's eligibility to claim ITC under the new provisions
introduced by the Finance Act, 2024.

• The Court held that Section 16(5) and 16(6) of the Act entitled taxpayers to claim ITC in returns
filed by November 30, 2021, for transactions in FY 2017-18, 2018-19, 2019-20, and 2020-21.

Cretum Advisory Comments

This ruling is a positive ruling for taxpayers, as it reinforces their right to claim Input
Tax Credit (ITC) under the recent amendments of the Finance Act, 2024 allowing for
ITC Claims in any return filed by November 30, 2021 for supplies made in FY 2017-
18 to 2020-21.
 HC Directs 'No Adverse Order' following Multiple Assessments just before Initial
FY Limitation Expiry

Mohinder Kumar vs. Principal Commissioner of DGST [TS-567-HC(DEL)-2024-

GST] Dated 13.09.2024

Facts of the Case:

• Mohinder Kumar along with several others (“the petitioner”), filed petitions challenging the
assessment orders issued by the revenue department (“the respondent”) under Section 73 of
the CGST Act, which pertains to tax determination in cases other than fraud.

• The petitioners argued that the assessment orders were passed in haste, just three days before
the expiration of the statutory limitation period for financial years 2017-18 and 2018-19.

• Petitioners also raised concerns about automated issuance of SCNs using Artificial Intelligence,
leading to errors such as notices being issued even to taxpayers who had already discharged their
tax liabilities.

Issue:

• Whether the assessment orders based on AI under Section 73 of the CGST Act, right before the
expiration of the limitation period, were valid, especially when they lacked proper reasoning

Ruling:

• The Delhi High Court, ruled in favor of the petitioners. The court observed that many of the
assessment orders issued under Section 73 lacked adequate reasoning and merely repeated the
demands proposed in the SCNs.

• The court found merit in the petitioners’ argument that these orders were unreasoned and issued
in bulk in order to comply with the limitation period. The court set aside these orders and
remanded the cases for fresh adjudication.

Cretum Advisory Comments

This ruling is a positive outcome for taxpayers, as it emphasizes the need for thorough
and reasoned assessment orders rather than hasty decisions driven by impending
deadlines. By setting aside the unreasoned orders and remanding for fresh
adjudication, the court upholds the principles of fairness and accountability in tax
assessments.
 HC dismisses challenge to show cause notice premised on audit finding

Magicon Impex Private Limited Vs. Commissioner of Central Goods and Service
Tax & Ors. [TS-558-HC(DEL)-2024-GST] Dated 06.09.2024

Facts of the case:

• SCN u/s 74 of the CGST Act, 2017 was issued to Magicon Impex Private Limited, (“the
petitioner”). The SCN was based on an audit report conducted under Section 65 of the CGST
Act, which highlighted tax discrepancies for the financial years 2017-18 to 2020-21.

• The petitioner had already paid the tax liability indicated in the initial audit memo but continued
to receive multiple audit memos for the same period, each revising the tax liability upward.

• The petitioner argued that the issuance of multiple audit memos was beyond the limitation period
prescribed under Section 65(4) of the CGST Act and claimed that this procedural irregularity
invalidated the subsequent SCN.

Issue:

• Whether the SCN issued based on issuance of multiple audit memos beyond the statutory
limitation period under Section 65(4) could be quashed at the preliminary stage.

Ruling:

• The Delhi HC acknowledged the procedural irregularities in issuing multiple audit memos and
noted that the CGST Act did not contemplate such repeated demands during an audit.

• However, the court held that these irregularities did not invalidate the SCN issued under Section
74. The court ruled that the SCN was still within the statutory framework, despite the flawed audit
process.

Cretum Advisory Comments

This ruling is a negative ruling for taxpayers, as it upheld the validity of the SCN
under Section 74 despite procedural irregularities in the audit process. While
acknowledging that multiple audit memos exceeded the statutory limitation under
Section 65(4), the court ruled that these flaws did not invalidate the SCN, leaving the
taxpayer liable to respond despite procedural lapses by the tax authorities.
 HC Quashes demat account attachment orders issued to ex-Director without Notice

Gaurav Modwel vs. The Deputy Commissioner of State Tax & Ors. [TS-541-
HC(BOM)-2024-GST] Dated 03.09.2024

Facts of the Case:

• Gaurav Modwel, director of the M/s. Wadhawan Sports Private Ltd (“the petitioner”) demat
accounts were frozen without notice as part of recovery proceedings under Section 89 of the CGST
Act. The Revenue (“the respondent”) held the petitioner vicariously liable for the company’s
unpaid GST dues.
• The petitioner argued that the attachment orders were issued in violation of natural justice, as no
notice was given before freezing the accounts. The petitioner further contended that, since he had
resigned before the GST demand notice was issued, he should not be held liable.
• The respondent argued that the GST portal showed that the petitioner had resigned only in 2022,
and therefore, he could still be held liable for the company’s dues.

Issues:

• Whether the attachment of the petitioner’s demat accounts without notice violated principles of
natural justice?

Ruling:

• The Bombay HC, quashed the attachment orders issued to freeze the petitioner’s demat accounts.
The court ruled that issuing such attachment orders without providing prior notice to the
petitioner was a clear violation of natural justice.

• The court noted that the petitioner’s liability as a former director, under Section 89, could not be
fastened without due process, especially given the dispute over the petitioner’s resignation date.

Cretum Advisory Comments

This ruling is a positive development for taxpayers, reinforcing the principle of
natural justice by ensuring that individual’s demat account cannot be attached
without prior notice. This decision emphasizes the need for due process, particularly
in cases involving the liability of former directors for recovery proceedings.