In a significant ruling, the Kerala High Court, while allowing a petition by M/s Manappuram Finance Ltd, has held that the circular issued by the Central Board of Indirect Taxes and Customs (CBIC) clarifying that GST not applicable to the notice pay received from an employee, has retrospective effect and has directed the GST department to refund the amount recovered from the petitioner (employee).
The petitioner is a non-banking finance company. the GST department held that the petitioner is liable to pay tax on notice pay received from the former employees of the petitioner.
On appeal, the appellate authority upheld the orders of the original authority, which had rejected the claim for refund made by the petitioner for a refund of GST paid on notice pay received from the erstwhile employees.
Before the High Court, the petitioner relied on the CBIC Circular and contended that with the issuance of the aforesaid Circular, it is now clear that the petitioner is clearly not required to pay any GST on notice pay received from employees.
Allowing the contention, Justice Gopinath P held that the Circular only clarifies the existing law.
“In that view of the matter, the question as to whether the Circular has any retrospective effect need not be considered. Even otherwise, in the light of the law laid down in Suchitra Components Ltd (supra), the provisions of a Circular in the nature of Ext.P8 will have to be deemed to apply retrospectively,” the Court observed.
The Court further rejected the contention of the department that the petitioner has an effective alternative remedy before the GST Appellate Tribunal does not appeal to this Court for the simple reason that the GST Appellate Tribunal is yet to be constituted.
“The fact that the period of limitation will start to run only from the date of the constitution of the Appellate Tribunal is no solace to the petitioner. The petitioner is, therefore, entitled to exercise the jurisdiction of this Court under Article 226 of the Constitution of India to challenge the orders impugned in this writ petition,” the Court said.
Allowing the contentions of the petitioner, the Court held that “As a result of the aforesaid findings, this writ petition is allowed. Ext.P1 and all orders rejecting the application of the petitioner for a refund of GST paid on notice pay received by the petitioner from its employees will stand quashed. The applications filed by the petitioner for refund shall stand restored to the file of the 1st respondent, who shall reconsider the matter, having regard to the findings contained in this judgment.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
