Author: Khushi J Prajapati
The Goods and Services Tax (GST) and E-Way Bill system jurisprudence shaping has had a significant impetus from the Delhi High Court in recent times. The Court made momentous judgments in 2023-2024 that addressed major issues like goods detention, procedures, input tax claims and legality of certain GST parts. The decisions have been important to businesses and tax administrators because they shed light upon compliance requirements for it is important to stick to them under the GST framework. The most significant ten decisions issued by the Delhi HC during that span served as valuable tools in refining GST and E-Way Bill rule implementation across India.
Top 10 Judgements on GST and E-way Bill
1. BANSAL INTERNATIONAL v. COMMISSIONER OF DGST & ANR. (Delhi High Court, 21/11/2023):
Judgement – The High Court gave permission for the petition to be filed and cancelled the subject order. It was observed by the court that refund applications made as a result of appellate decisions do not need new evaluation. Additionally, the bench stressed that there has to be an interpretation of Section 56 together with its proviso, and without restriction, one is entitled to, interest. Differences between the main provision (6%) and its exception (9%) were identified by the court so that both provisions should be taken into account. Thus, the petitioner was entitled to an amount of 6% per annum interest starting from expiration date of sixty (60) days after statutory period handing down internal revenue on which sundry appeal is provided for by s 54(1) CGST Act. As such, the court ordered Adjudicating Authority to process refund request made by petitioner accordance with this decision.
Facts – On 11.07.2023, the Additional Commissioner, Department of Trade and Taxes made an order which was later challenged by the person who filed a petition.Furthermore, the petitioner wanted to receive back his tax amount paid on goods worth ?13,12,761/- at the rate of 9 percent for every year which had already been refunded under Goods and Services Tax (GST).However upon hearing on whether interest should be granted after lapse of sixty days from the date of application for claims for refunds or not, it was found out that in this particular instance this did not apply hence no payment would have been made therefore claiming an interest on it was out of place hereby making it unworthy.
2. LOVELESH SINGHAL PROP SHIVANI OVERSEAS v. COMMISSIONER, DELHI GOODS AND SERVICES TAX & ORS. (Delhi High Court, 5/12/2023)
Judgement
In a landmark ruling in favor of the petitioner, the Court has ordered a refund of the compulsorily paid tax with interest at six per cent. The court observed that the search order did not conform to the provisions of law under CGST Act and Rules. At the time of payment, no clear legal obligation was established for the applicant to pay tax, it further stated. The court emphasized that under Section 67 of the CGST Act, in respect of search and seizure operations, there should be no tax recovery without following due process, as per Central Board of Indirect Taxes and Customs (CBIC) instructions. As a result, the payment made by the petitioner was involuntary according to the court’s finding; hence he/she cannot be forced into it.
Facts
Petitioner had filed a petition for seeking the amount of ?18,72,000/- which was deposited during a search/inspection on his premises. The Petitioner challenged the order dated 07.10.2022 allowing a search under Section 67 of the CGST Act. According to the petitioner, the search and seizure are unlawful while the authorization document is vague. Petitioner was informed that supplier’s GST registration has been canceled retrospectively. The petitioner states he was forced to submit DRC-03 form and to debit ITC without any examination of liability.
Issues- Was there an illegal seizure occurring at petitioner’s premises under Section 67 of the CGST Act?
3. BSES RAJDHANI POWER LTD. & ANR. v. NORTH DELHI MUNICIPAL CORPORATION & ORS. (Delhi High Court, 23/11/2023)
Judgement
The court directed MCD, to pay back the taxes that the petitioners had paid plus an interest rate of 9% effective from 1st July, 2017. The court noted that since there were no counter-affidavits presented by anyone from the respondents, one could say that their claims for reimbursement were unchallenged. In addition, the court agreed with High Court’s reasoning and held that the exemption notification dated 28.06.2017 could not apply on the services rendered by the petitioners as such services involved substantial supply of goods. Consequently, the petitioners were entitled to GST reimbursement.
Facts
Petitioners claimed exemption from GST on the ground that they were engaged purely in services delivery. However, they disclaimed classification as “pure service” providers on the argument that goods supplied for street lighting maintenance formed about 25% of their total charges for service. Their notification with effect from June 28, 2017 exempting pure service providers from tax did not cover them but they have been paying rightly at 6 percent each CGST and DGST since April 1st, 2017. The Municipal Corporation of Delhi (MCD) argued that petitioners provided ‘pure services’, which were taxable at nil rate, thus making them ineligible for refunds. In this instance, however, there are no counter-affidavits filed by the respondents who represent tax officials.
4. M/S ERNST AND YOUNG LIMITED v. ADDITIONAL COMMISSIONER, CGST APPEALS -II, DELHI AND ANR. (Delhi High Court, 23/03/2023)
Judgement
The plea was upheld by the court by quashing both the contested order-in-appeal and the original orders. The Court held that an erroneous interpretation of the term ‘intermediary’ was made by the Adjudicating Authority under IGST Act. It noted that the applicant rendered professional services which were different from those of an intermediary. The judgment concluded that the services offered by the applicant satisfied the requirements for ‘export of services’ as stated in Section 2(6) of IGST Act because its recipient was outside India. As such, it emphasized that this last limb only limits it but does not control it and so he was not acting as a buyer or seller but rather as a person rendering professional services entitled to ITC refund.
Facts
The aggrieved party, being the Indian Branch Office for the overseas firm M/s. Ernst & Young Limited hailing from UK, preferred a petition appealing against orders-in-appeal dated 15th March 2022 (Annexure- III) rejecting all its appeals against three orders-in-original which had denied refund applications for Input Tax Credit (ITC) in relation to export of services from December 2017 to March 2020. The Adjudicating Authority denied the refund applications by classifying the petitioner as an ‘intermediary’ under the IGST Act, determining that the place of service was in India where it was located. The Petitioner argued that it provided professional services on its own account and not as an intermediary, asserting that since they were provided to someone outside India they were ‘Export Of Services’ classification.
5. NATIONAL BOARD OF EXAMINATION IN MEDICAL SCIENCES v. UNION OF INDIA & ORS. (Delhi High Court, 16/04/2024)
Judgement
The court used the legal precedent set in W.P.(C) No.1298/2023, to indicate that the matters presented in this appeal had been resolved by its decision. Therefore, based on this precedent, the court upheld in favor of the petitioner as rejecting a refund is not sound. For this reason, the court ordered those involved to endorse with respect to the refund of GST paid by the petitioning individual during Financial Year 2019-20 and any other relevant implications according to existing laws.
Facts
The petitioners presented a petition against the Refund Rejection Orders of 29.06.2022 and 28.10.2022, which denied their application for a refund of Goods and Services Tax (GST) for the Financial Year 2019-20 under Section 54 of the Central Goods and Services Tax Act, 2017. They had requested court involvement to compel the respondents to approve the GST refund and mentioned their right to interest on the refund according to the Act. On the other hand, it was contended by the respondents that refusing such refunds was in compliance with the provisions of the CGST Act.
6. M/S PARITY INFOTECH SOLUTIONS PVT. LTD. v. GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF DELHI & ORS. (Delhi High Court, 2023)
Judgement
The Court ruled that the impugned show cause notice and order were issued without fulfilling the conditions laid down in the Section 74 of the CGST Act therefore the same were set aside. It held that under Rule 86A, a competent officer must have “reasons to believe” that certain specified conditions such as fraudulent ITC claims are satisfied for blocking ITC. In the instant case, however, the ITC was locked without serving any proper grounds, and subsequently a show cause notice was issued mechanically without giving proper reasons.
Thus, the Court directed the respondents to restore the specifically appropriated ITC in favor of the petitioner’s Electronic Credit Ledger because they had not adhered to legal requirements. The Court also observed that issuing the show cause notice was done disregarding provisions laid down by CGST Act and Rules.
Facts
The petitioner has moved a petition assailing a show cause notice dated 28.02.2022 as well as an order issued under Section 74 of the Central Goods and Services Tax (CGST) Act, dated 30.03.2022. The impugned order raised a demand of ₹27,88,200/- for the Financial Year 2020-21. The petition also assailed instructions issued by the Department of Trade & Taxes dated 08.03.2022. The petitioner’s Input Tax Credit (ITC) was blocked as per Rule 86A of the CGST Rules on 26.11.2020 pursuant to an investigation into fake bills by the Commissionerate of Central Tax. The respondents appropriated blocked ITC against tax demand created on 30.03.2022. It was argued by the petitioner that ITC had been wrongfully blocked without any justification thereby not enabling him to file statutory returns and discharge tax liabilities. Besides it was claimed by him that show cause notice was mechanically issued without proper grounds that would be accepted in law.
7. RASHTRIYA TRANSPORT CORPORATION v. COMMISSIONER OF DELHI GOODS AND SERVICE TAX & ANR. (Delhi High Court, 2024)
Judgement
The court noted that the word ‘individual’ in Sections 38 and 42 of the DVAT Act extends to more than mere ‘traders’. As such, Section 42 which deals with refund interest cannot just be restricted to the petitioner’s classification as a trader. Hence, considering that the petitioner was not identified as a trader; therefore DVAT Act rates should not limit interest. Consequently, the legal order challenged that restricts rate of interest was thrown out and quashed. The Revenue was ordered by the Court to pay correct interest within period of four weeks.
Facts
The petitioner who is in the business of carrying goods had deposited ₹10,32,138/- with the respondents which was neither tax nor fine in terms of the Delhi Value Added Tax (DVAT) Act. The respondents held on to the money illegally for over 17 years. Though a competent authority issued an order for refund, it limited the interest payable on the same to the rates as mentioned in the DVAT Act. The Tribunal ruled that the petitioner could not be termed as a ‘dealer’ under the DVAT Act and raised issues regarding whether such interest payable on refund could be restricted by DVAT Act itself.
8. S M TRADING CO v. COMMISSIONER OF CUSTOMS & ANR. (Jul 11/07/2023)
Judgement
The court has granted relief in the writ petitions and quashed all the contested SCNs. The Court said that the SCNs were all invalid since they had been issued after the period of limitation set out under Section 28(9) of the Customs Act. In addition, there was no impact of Canon India on the SCN issued by the Deputy Commissioner of Customs. It also held that the Board’s directions did not extend the limitation period for said SCN. Therefore, any proceeding below the SCNs against these petitioners could not be sustainable on legal grounds.
Facts
Under Section 28(4) of the Customs Act, 1962, four writ petitions were filed challenging show cause notices (SCNs). The primary challenge was based on the expiration of the period for completion of proceedings as prescribed in Section 28(9) of the Act. On 05 August, 2021, a specific SCN was issued against Gautam Spinners concerning five Bills of Entry. The petitioner replied to it on the same day and thereafter pointed out that the SCN was not issued by an officer who is constitutional in number and power but an ordinary deputy commissioner of customs not affected by the decision made by Canon India when it said that Additional Director General of DRI is not the appropriate person to issue SCNs under Section 28(4). By 18th March, 2022, therefore this SCN was set to crop off, although pending as per directions given by the board without extending limitation.
9. MEP INFRASTRUCTURE DEVELOPERS LTD v. SOUTH DELHI MUNICIPAL CORPORATION AND OTHERS (10/04/2023)
Judgement
The appeal was rejected as the court had previously held that in case of contract dispute, a writ jurisdiction under Article 226 is not available. It further stated that the appellant is attempting to evade his contractual obligations by invoking a writ jurisdiction that does not apply, as well as suggesting that the alternative remedies may also be considered. Besides, there was no substance found in the allegations made by the appellant regarding arbitrary or discriminatory acts of Respondents.
Facts
On twenty-first day of July 2017, the Respondent Corporation made a tender for the collection of Toll Tax and also Environment Compensation Charge (ECC) from commercial vehicles at one hundred and twenty-four toll plazas which are on the borders of Delhi. The Appellant was selected as the successful bidder and signed a Toll Tax and ECC Collection agreement with the Respondent on twenty-eight September 2017. The agreement provided that the Appellant was to collect penalties from vehicles evading toll taxes. However, after a strike taken on twentieth July 2018, an extensive report showed that toll tax evasion had become rampant in that area. A demand notice of Rs. 756.56 crores was issued by Respondent on fourteenth February 2020; this led to a writ petition challenging it by the Appellant which was dismissed by both Single Judge Court as well as later on by Division Bench of Bombay High Court.
10. RECKITT BENCKISER INDIA PRIVATE LIMITED v. UNION OF INDIA THROUGH ITS SECRETARY & ORS. (Delhi High Court, 2024)
Judgement
The Court indicated that an exploration into the constitutional validity of Section 171 of the CGST Act, 2017 along with accompanying Regulations would be done before going into details about case merits. The bench observed that how crucial it is to strike a balance between consumer welfare and legislative power.
The Court further observed that the entire Act as well as the Rules were aimed at achieving parity by ensuring that consumers benefitted from any taxes levied, hence favouring simplification of taxation system and enhancement of competitiveness in the economy. A common national market was also identified by the court as a goal behind some indirect tax regulations which would lead to better compliance.
Facts
The petitioners challenged the constitutional validity of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017 and the associated Rules. The main contention was that the anti-profiteering provision in Section 171 was similar to a tax or financial exaction, exceeding Parliament’s legislative competence and amounting to price-fixing which violated fundamental rights under Articles 19(1)(g) and 300A of the Constitution. The petitioners also argued that there was an absence of appeal mechanism against orders given by National Anti-profiting Authority (NAA) as a big constitutional flaw. Also, they claimed penalties under Section 171(3A) could not be imposed retroactively. The respondents defended these provisions by arguing that section 171 was meant to be an assurance for passing on tax benefits to consumers so as to promote equity among them as well as taking care of their welfare needs.
