Supreme Court and Highcourts Weekly Round-Up

This weekly round-up analytically summarises the key tax judgements of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from May 13 to May 19 2023. Failure to Issue Notice pursuant to Refund Adjustment Order: Bombay HC directs GST authorities to reconsider Refund application TML Business Services Limited vs Deputy Commissioner of State Tax CITATION: 2023 TAXSCAN (HC) 818 A Division Bench of Bombay High Court directed the appropriate authorities to consider the refund application after giving an opportunity of hearing and after considering the submissions of the petitioner, pass a reasoned order in accordance with law. The court stated that measures unfavourable to a party cannot be carried out without providing the party with adequate notice and a chance to defend. The Maharashtra Value Added Tax Act further required the respondents to notify the assessee before making any adjustments to refunds, the court added. The Defect Notice and the Refund Adjustment Order are separated by just one day, thus the Petitioner would not have had enough time to even request that the Authorities address his issue. The subject was therefore remanded to the respondent authorities by the bench. Cancellation of GST Registration: Telangana HC directs to Avail Remedy Prescribed under CBIC Notification M/s Integrated Techno Systems vs The Superintendent of Central Tax CITATION: 2023 TAXSCAN (HC) 819 In a recent decision, the Division Bench of Chief Justice Ujjal Bhuyan and Justice N. Tukaramji of Telangana High Court ordered to avail the remedy under the Central Board of Indirect Taxes and Customs (CBIC) notification issued on March 30, 2023, where it was stated that the application to file the revocation of Cancellation of Goods and Services Tax (GST) Registration can be done till June 30, 2023. The application for revocation must also be completed following the submission of all returns that are due up until the registration cancellation's effective date, as well as the payment of any taxes, interest, penalties, and late fees related to those returns. According to the provisions of the CBIC notification, the petitioner is free to request the revocation or cancellation of the GST registration, the bench determined. Supreme Court delivers Split Verdict on Tax Holiday Exemption Applicability on Legitimate Expectation M/s. K.B. Tea Product Pvt. Ltd. vs Commercial Tax Officer CITATION: 2023 TAXSCAN (SC) 178 The issue concerning the applicability of the doctrine of legitimate expectation, where a tax holiday/sales tax exemption granted to the appellant-manufacturer was stopped pursuant to the amendments made to the West Bengal Sales Tax Act, 1994, has resulted in a split verdict from the Supreme Court bench comprising Justices M.R. Shah and Krishna Murari. Referring to the case's facts, Justice Murari observed that the government had not offered an adequate defence for a change in policy that would have snatched away the reasonable expectation established in the appellant's favour. "Neither the considerations of the injured party nor an appropriate justification for the amendment's enactment have been discussed. My conclusion is that the government's burden of proof cannot be satisfied by a simple assertion of a change in policy. In allowing the appeal, Justice Murari ruled that the government "must specifically demonstrate what the change of policy is, and why such a change of law is in furtherance of public policy, and the public good." Typographical Error in Export Invoice: Bombay HC directs Sales Tax Dept to reconsider ITC Refund Application Principal Global Services Pvt. Ltd. vs State of Maharashtra & Others CITATION: 2023 TAXSCAN (HC) 820 The Bombay High Court (HC) presided by Justice Abhay Ahuja and Justice Nitin Jamdar directed the Sales tax department to reconsider the Goods and Services Tax (GST) Input Tax Credit (ITC) refund application. Also to examine the evidence that is produced by the Petitioner in addition to the invoices and take a decision. The bench pointed out that the typographical error is clear-cut because there is no such state in the United States. Since Iowa State is the name of the location in question, the Deputy Commissioner ought to have taken the Petitioner's statement into account. The Petitioner may also offer additional supporting documentation for its request for a refund. Court cannot Interfere with Union Executive’s Power to Amend/Withdraw Notifications u/s 25 of Customs Act: SC UNION OF INDIA & ORS. vs A. B. P. PVT. LTD. & ANR. CITATION: 2023 TAXSCAN (SC) 179 The Supreme Court of India, in a significant judgement, has held that the court cannot interfere with the union executive’s power to amend/withdraw notifications under Section 25 of the Customs Act, 1962 since it was in line with the provisions of the Customs Act. The High Court erred in determining the merits of the reasons that the executive government issued the Amended Notification, according to a single-judge bench that included Ravindra Bhat. No ulterior motives or veiled arguments were advanced; the use of authority was in accordance with the Act's terms. The grant of exemption to a class of goods that are comparable to those made in the country and its likely negative impact on such manufacturers or producers, however, cannot be characterised as an irrelevant factor or consideration, and the indigenous angle, i.e. the availability of equipment, is germane and relevant. The court upheld the appeal and overturned the challenged decision. Supreme Court Directs States to file Counter Affidavit in Enrolment fee Challenge by Law Graduates GAURAV KUMAR vs UNION OF INDIA & ORS. CITATION: 2023 TAXSCAN (SC) 180 The Two – bench of Chief Justice D.Y. Chandrachud and Justice Pamidighantam Sri Narasimha of Supreme Court of India directed the states to file unfiled counter affidavits on enrolment fee of law graduates within 4 weeks and any counter affidavits beyond said dates would be forfeited. The Kerala Bar Council is charging Rs. 20,050 as total enrolment fee and the amount is divided as follows: Enrolment fee – Rs. 600; Welfare fund under rule 40 BCI – Rs 3,000; Application / Enrolment form fees – Rs. 1,000; Registration fees – Rs. 3,000; Certificate fees – Rs. 2,000; Processing and Verification Fees – Rs. 4000; Identity card fees – Rs. 200; Photographs and CD Fees – Rs. 350; Advocate’s Act Book Fee- Rs. 750; Continuing legal Education – Rs. 2,500; Chairman’s Relief Fund – Rs. 1,000; Bar Council India Collection Fund- Rs. 150 The information above makes it evident that there is no consistency in how the states collect the charge. Each state bar council uses a separate name and their own advertising to collect money. The students were compelled to pay a hefty sum to enrol in their ideal field of study. It is now time for the Central Government to establish a consistent, extremely low charge for all states after consulting with the Bar Council of India and other State Bar Councils. Tushar Mehta, the Indian government's top lawyer, has been asked by the Supreme Court to provide assistance in this case. Sub section (5A) inserted by Amendment of Finance Act,2017 has no Retrospective Effect: Patna HC Pankaj Kumar vs Commissioner of Income Tax CITATION: 2023 TAXSCAN (HC) 824 A Division Bench of the Patna High Court observed that Sub section (5A) inserted by amendment of Finance Act,2017 has no retrospective effect. According to the bench of Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad, "we are of the opinion that sub-section (5A), inserted by way of an amendment to the Finance Act, 2017, expressly stated to be effective from 01.04.2018, cannot be treated as retrospective, for reason of the express words employed and there can be no intendment ferreted out, so as to deem it impliedly retrospective." The Court also noted that the consequences as per Section 45 of the Income Tax Act, for a person who transfers a capital asset as contemplated under Section 2(47)(v) of the Income Tax Act insofar as having to compute the total income by including the capital gains accrued in the previous year in which a transfer was affected, when the JDA was entered into prior to 01.04.2018 was not an unintended consequence. Semi Finished fabric mentioned in Register would not be considered as Finished Product: Bombay HC quashes order of CESTAT Dhanesh Textiles Industries Pvt. Ltd vs Commissioner of Central Excise CITATION: 2023 TAXSCAN (HC) 821 In a recent decision, the Bombay High Court declared that the semi-finished fabric encompassed in the RG-1 register would not be regarded as a finished product and nullified the Customs, Excise and Service Tax Appellate Tribunals (CESTAT) finding. Also, the bench restored the file back for readjudication. Justices Abhay Ahuja and Nitin Jamdar, sitting as a divisional bench, determined that the "manner in which one of the main findings sought to be scrutinised is reversed, we have to accept the submission of the learned counsel for the Appellants that the matter needs reconsideration by the Appellate Tribunal." Arrest under PMLA for Diversion of APSSDC Fund: AP HC grants Bail Suresh Goyal vs Directorate of Enforcement CITATION: 2023 TAXSCAN (HC) 825 The Andhra Pradesh High Court granted bail to the accused, Suresh Goyal with regard to arrest under Prevention of Money Laundering Act for diversion of Andhra Pradesh State Skill Development Corporation, Andhra Pradesh (‘APSSDC’) fund. The petitioner was detained on March 4, 2023, and has been held in judicial custody ever since. The petitioner has continued to appear before the investigating agency and cooperate with the investigation, according to a single bench of Justice K Sreenivasa Reddy. the view that it is not required for this Court to keep the petitioner in custody any longer. The Bench took into account the fact that the primary offence has not been the subject of a charge sheet for more than 15 months. The petitioner in this case, who has been incarcerated since 04.03.2023, is also a Chartered Accountant by profession. Insofar as the petitioner is concerned, it is the first offence. Non-Speaking GST Registration Cancellation Order: Patna HC sets aside Cancellation Order Jyoti Electricals vs Union of India CITATION: 2023 TAXSCAN (HC) 822 A division bench of Patna High Court has set aside the Goods and Services Tax (GST) registration cancellation order on ground that the order itself was ‘Non-speaking’. The bench of Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad allowed the appeal and observed that the form GST REG -19 lacks proper reason to cancel the Goods and Services Tax registration. The court further stated that if the cancellation was carried out in accordance with Section 29(2)(c) and Section 29(2)(c) of the Central Goods and Services Tax, the assessee would likewise be eligible to use the aforementioned remedy. Nature of Material is Relevant for Assessing other years, not Date of Discovery: Orissa HC directs Re Adjudication M/s. Om Shri Ashirbad vs State of Odisha CITATION: 2023 TAXSCAN (HC) 823 While entertaining the case, a Division Bench of Justice Dr B.R. Sarangi and Justice M.S. Raman of Orissa High Court observed that the date of the discovery of material is not relevant but the nature of material or evidence discovered. The petitioner was determined to have secured a Weights and Measures Licence, the court said, after the Vigilance officers' check of the premises revealed the presence of an electronic weighing equipment. However, that cannot be taken as information that can be used to establish judgements ipso facto. "The material's discovery date is not important. According to the High Court, "what is relevant is the nature of evidence or material uncovered during the inspection is the most important item. Also stated that in the absence of the same, the same cannot be utilized for making assessments for other years unless their relevance to any other period is established by the Assessing Officer. Suspension of GSTN Registration based on SCN with New Cause of action: Bombay HC directs Re Adjudication Focus Ingredients Impex Pvt. Ltd. vs The State of Maharashtra & ors. CITATION: 2023 TAXSCAN (HC) 826 The Bombay High Court in a recent judgement has directed the re-adjudication of the matter when the assessee challenged the suspension of Goods and Service Tax (GST) registration based on Show Cause Notice (SCN) with a new cause of action. Without going into the merits of the matter, the two-judge bench comprising Justice Amit Borkar and Justice Kamal Khata directed the Petitioner to appear before Respondent and to decide the show cause notice dated 26th April 2023 as expeditiously as possible and within four weeks. No Sales Tax Evasion Assumption on Dealers merely on Unmaintained Books during Cancelled Registration: Orissa HC M/s. Om Shri Ashirbad vs state of Odisha CITATION: 2023 TAXSCAN (HC) 828 In a recent ruling, the Orissa High Court ruled that non-maintenance of books of account by the dealer whose registration has been cancelled under Section 9(3-f) of the Orissa Sales Tax Act 1947 cannot be taken as sales tax evasion.A Division Bench of the Orissa High Court granted the relief, concluding that the lack of accounting records could not be taken as proof that sales were being kept secret. Additionally, it was decided that the type of evidence matters more than when it was found. Bank Guarantee Imposed in Furtherance Freezing Accounts Unwanted: Supreme Court M/s. Jermyn Capital LLC Dubai vs Central Bureau Of Investigation & Ors. CITATION: 2023 TAXSCAN (SC) 181 The Supreme Court recently ruled that the requirement of a bank guarantee in relation to freezing accounts is unnecessary and unwanted. The bank guarantee in prolongation of the freeze order and the objective of the freeze order can only be in operation to support the investigation into the suspected crime. The inquiry into the appellant company was unnecessary, so the asset freeze and bank guarantee that were imposed to support the freeze order are likewise unnecessary. As a result, it was determined that the requirement that the appellant provide a bank guarantee was unjustified and it was overturned. The appellant was therefore given permission to withdraw the aforementioned sum plus 4% simple interest, which is due from May 8, 2006, until the date of actual payment. No Freezing of Company’s Bank A/c for Investigation against Third Party: Supreme Court M/s. Jermyn Capital LLC Dubai vs Central Bureau Of Investigation & Ors. CITATION: 2023 TAXSCAN (SC) 181 The Supreme Court recently ruled that the bank account of the company cannot be frozen for an investigation against a third party. The freeze order on the appellant firm's properties was judged unnecessary in regard to the investigation as the appellant company was not necessary for its conclusion given the appellant company's lack of involvement in the alleged crime and absence from the FIR or charge sheet. The Court was further informed that the freeze order had been in place for 17 years, costing the appellant company a considerable amount of money. The bank guarantee that went along with the freeze order was there to help with the investigation into the alleged crime. The hold on its assets and the bank guarantee, however, were superfluous because it was determined that the inquiry into the appellant firm was pointless. As a result, the assessee's appeal was granted. Delhi HC allows interest on Delayed Tax Refund ALEX TOUR AND TRAVEL PRIVATE LIMITED vs ASSISTANT COMMISSIONER CITATION: 2023 TAXSCAN (HC) 829 In a significant case, the Delhi High Court allowed the interest on delayed tax refunds since the authority failed to pay the granted refund. A two-judge bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan observed that the petitioner is also entitled to an interest by the law. While allowing the appeal, the Court directed the respondent to forthwith disburse the petitioner’s claim for refund along with interest as payable by the law. Sales Tax leviable on free replacement of Defective Motor Vehicles Parts during Warranty Period: Supreme Court M/S. TATA MOTORS LTD vs THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES(SPL) & ANR CITATION: 2023 TAXSCAN (SC) 182 In an important decision, the Supreme Court has held that the free replacement of defective motor vehicle parts during warranty period is subject to the levy Sales Tax. The judgement in Mohd. Ekram Khan does not apply to a situation where the dealer has just obtained a replacement part from the vehicle manufacturer in order to replace a defective part thereof under a warranty ancillary to the sale of the automobile, the Apex Court Bench added. In this case, the dealer may also be compensated for his services as a dealer via a dealership agreement or any other agreement that makes him an agent of the manufacturer but does not include a sale. Thus, the appeals filed by the dealers were dismissed and the appeals filed by the revenue were allowed, leaving parties to bear respective costs. Date on which Order was Pronounced and Time taken to provide Certified Copy excluded from Limitation Period for Appeal to NCLAT: SC Sanket Kumar Agarwal & Anr vs APG Logistics Private Limited CITATION: 2023 TAXSCAN (SC) 183 The Supreme Court (SC) of India ruled that the date on which order was pronounced and the time taken to provide certified copy is excluded from the limitation period for appeal to the National Company Law Appellate Tribunal (NCLAT). The Bench further added, "With technological advancements, the country's judiciary and tribunals must move towards efiling," as it came to a conclusion. This process has already started and cannot be stopped. To promote e-filing across tribunals, the Union Government needs to take a fresh look at the regulations. Perhaps setting up a Working Group to analyse the situation thoroughly across tribunals and recommend regulatory reforms would be a step in the right direction. Power of AA in Insolvency Proceedings limited to Verification of Default in Payment of Debt: Supreme Court M. Suresh Kumar Reddy vs Canara Bank & Ors CITATION: 2023 TAXSCAN (SC) 184 In a recent ruling, a two-judge bench of Justice Abhay S. Oka and Justice Rajesh Bindal of the Supreme Court of India observed that the Adjudicating Authority is empowered only to verify the occurence of default in payment of debt. Following the ruling, the Insolvency and Bankruptcy Board of India (IBBI) issued notes on the Supreme Court of India's findings that clarified the Adjudicating Authority's function. The IBBI notice stated that it should not be used as a reference for taking or recommending any action or decision, whether commercial or otherwise. It was prepared by the Legal Affairs Division for the express aim of raising awareness. If someone wants to act on the information presented here, they must conduct their own study, read the original judgement, or consult a specialist. Provisional Attachment of Bank Account Ceases after 1 year Expiry: Delhi HC directs bank to operate account as attachment order no longer operative M/S MERLIN FACILITIES PVT. LTD vs UNION OF INDIA & ORS CITATION: 2023 TAXSCAN (HC) 831 A Division Bench of the Delhi High Court considered the case while relying on section 83(2) of the Central Goods and Services Act, 2017, and instructed the bank to handle the account normally since the attachment order was no longer in effect. The High Court noted that the simple language of Section 83(2) of the Central Goods and Services Tax Act makes it apparent that the operation of an order provisionally attaching the bank account would cease to be operative after the statutory term of one year had passed. Further, it was said, "Insofar as the petitioner's prayer for permitting the petitioner to operate its bank account is concerned, clearly; the impugned order would not impede the petitioner, in any manner, from operating its bank account." GST Authorities detain Consignment on ground that Supplier Wrongly Passed ITC to Buyer: Madras HC directs Buyer to Pre-deposit 200% of Maximum Penalty Haresh Kumar vs The Assistant Commissioner (ST) CITATION: 2023 TAXSCAN (HC) 832 A single Bench of Justice C. Saravanan of Madras High Court directed the buyer to make a pre-deposit of 200% of maximum penalty or an alternative furnish Bank Guarantee in terms of Section 129(c) of the respective Goods and Services Tax enactments and the Rules made thereunder. In order to balance the interests of the revenue and the petitioner, the High Court stated, "Therefore, I am of the view that there can be a direction to the petitioner to deposit the maximum penalty of 200% of the tax to safeguard the interest of the revenue." Notice of Proceedings u/s 110(1B) of Customs Act must be issued to Owner of Seized Goods: Delhi HC GANESH SAWANT vs COMMISSIONER OF CUSTOMS CITATION: 2023 TAXSCAN (HC) 830 The Delhi High Court has held that notice of proceedings under Section 110(1b) of the Customs Act, 1962 must be issued to the owner of seized goods. It was viewed that the contention of the respondent that no notice is required to be served of the proceedings under Section 110(1D) of the Customs Act is not valid. In light of precedent in the case of Ishwar Parasram Punjabi v. Union of India (supra), the Court held that the petitioner is entitled to insist that the proceedings under Section 110(1D) of the Customs Act be conducted de novo. Notice u/s 148A(b) received on Date of Reassessment: Delhi HC directs Re Adjudication PREMIUM ESTATES PRIVATE LIMITED vs ASSISTANT COMMISSIONER OF INCOME TAX CITATION: 2023 TAXSCAN (HC) 833 The Delhi High Court directed re-adjudication since the notice under section 148A(b) of the Income Tax Act, 1961 was received on the date of reassessment. A two-judge bench of Justice Rajiv Shakdher and Justice Girish Kathpalia set aside the impugned order passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act. The petitioner was directed to file a reply to the notice dated 10.03.2023 issued under Section 148A(b) of the Act within three (3) weeks commencing from today. Failure by Dept to Consider Assesee’s Email: Delhi HC quashes Penalty Order under BMA PRATEEK CHITKARA vs JOINT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2 & ANR CITATION: 2023 TAXSCAN (HC) 834 The Delhi High Court has quashed the penalty order under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) since the department failed to consider the assessee’s email. The reply submitted by the petitioner/assessee on March 9, 2023, did not contain any references to Section 46(4)b) of the B.M. Act, according to the two-judge panel made up of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju. The Court revoked the contested penalty order and instructed the relevant authorities to perform a de novo investigation. HC in exercise of Constitutional Writ Jurisdiction cannot act as AO and scrutinize facts and evidence : Calcutta HC SHRI SHYAM SUNDAR DHANUKA vs OFFICE OF THE INCOME TAX OFFICER WARD 8(1) CITATION: 2023 TAXSCAN (HC) 836 In a recent decision, a Single Bench of the Calcutta High Court ordered the Assessing Officer (AO) to submit a report on May 18, 2023, in order to inquire about the deponent’s business operations and verify from his return the type of business and transaction at issue in this case. The bench ruled that the contested order was not a non-speaking order, that it did not contravene natural justice principles, that it did not contain any procedural errors, and that it was not issued by an officer who lacked jurisdiction as a result of the relevant facts, findings, and evidence. According to a directive from the High Court given to Mr. Bagaria, the petitioner's counsel must provide a copy of the pan card to Mr. Tilok Mitra, who is representing the respondent Income Tax Authority, who will then inquire about the business activity of this deponent, Ravi Kumar Agarwal, who affirmed the writ petition and identified himself as a businessman. Recording of Satisfaction Necessary for Initiation of Proceedings u/s 35 (7) of JVAT Act: Jharkhand HC quashes Rejection of Revision Petition M/s. Mishri Lal Jain & Sons vs The State of Jharkhand CITATION: 2023 TAXSCAN (HC) 837 The Jharkhand High Court quashed the rejection of revision petition and ruled that the Recording of satisfaction necessary for initiation of proceedings under Section 35 (7) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act). It is appropriate to note that the requirement of recording satisfaction under proviso to Section 35 (7) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act) is a prerequisite before initiation of proceedings and cannot be dispensed with by the AO, according to the two-judge bench made up of Justice Rongon Mukhopadhyay and Justice Deepak Roshan. The Bench stated, "Therefore, it is necessary to remand the matter to the AO to comply with the provisions of Section 35(7) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act) for initiating the proceeding, if he finds any evidence that the goods have been sold at higher price than shown by the dealers." Exide Industries Fails to Receive Time Extension by GST authorities to Reply to SCN: Madras HC allows 30 days to File Explanation on Pending Queries Exide Industries Limited vs The Deputy Commissioner CITATION: 2023 TAXSCAN (HC) 838 In a recent ruling, a Single Bench of Madras High Court allowed an extension of 30 days to Exide Industries to file the explanation on pending queries which was denied by the Goods and Services Tax authorities.The court emphasised that the respondent's circular, dated 26.09.2022, specifically states that the assessee must receive a copy of any letter granting or refusing a request for a delay. According to the High Court, the respondent has obviously broken the circular, thus it was determined to be just and proper to provide the petitioner a fair chance to answer three open questions within a reasonable amount of time. The respondent may then make additional orders after considering the petitioner's complete justification, including any prior justifications it has offered. Microsoft’s Two-Tier Authentication Solution Patentable, not “Computer Program per se” as per Section 3(k): Delhi HC directs Re-examination of Patent Application MICROSOFT TECHNOLOGY LICENSING vs THE ASSISTANT CONTROLLER OF PATENTS AND DESIGNS CITATION: 2023 TAXSCAN (HC) 835 The Delhi High Court set aside the denial of the patent in the application filed by Microsoft Technology Licensing LLC, rejecting the view that the “METHODS AND SYSTEMS FOR AUTHENTICATION OF A USER FOR SUB-LOCATIONS OF A NETWORK LOCATION” invented by Microsoft was a Computer Program per se and non-patentable. In conclusion, the Delhi High Court's decision specifies how Microsoft's Two-Tier Authentication Solution is to be classified, highlighting the significance of technical breakthroughs and real-world applications in determining patent eligibility rather than simple classification as patentable or non-patentable. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates