<h2>Introduction:</h2>
The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 05/2023-GST on 13th December 2023, addressing the ramifications of the Hon&rsquo;ble Supreme Court's landmark judgment dated 19th May 2022 in the case of CC, CE &amp; ST, Bangalore (Adj.) etc. Vs. Northern Operating Systems Private Limited (NOS). This article delves into the key instructions provided by CBIC in relation to Section 74(1) of the Central Goods and Services Tax Act, 2017 (CGST Act).
&nbsp;
<h2>1. Background of the NOS Judgment:</h2>
The focal point of CBIC's instruction lies in the aftermath of the NOS case, where the Supreme Court examined the nature of secondment of employees by overseas entities to Indian firms and its Service Tax implications. The judgment emphasized a nuanced examination based on the unique characteristics of each arrangement, rejecting a one-size-fits-all approach.
&nbsp;
<h2>2. Nuances in Tax Implications:</h2>
2.1 The CBIC, after a meticulous examination, notes that the NOS judgment, while primarily focusing on Service Tax, has implications in the realm of GST. The court's emphasis on a nuanced examination implies that each case of secondment must be scrutinized based on its specific terms and conditions.
&nbsp;
2.2 Citing the Hon'ble Supreme Court's observation in the Commissioner of Central Excise, Mumbai Vs. M/s Fiat India(P) Ltd, the CBIC underscores the need to avoid mechanical application of legal principles. Each case, as the court emphasized, depends on its unique facts, and a broad resemblance to another case is not decisive.
&nbsp;
2.3 Considering the diverse nature of secondment arrangements, the CBIC clarifies that the NOS judgment should not be mechanically applied to all cases. Instead, the tax implications must be determined based on the distinct factual matrix, including the terms of the contract between the overseas company and the Indian entity.
&nbsp;
<h2>3. Caution Against Mechanical Invocation of Section 74(1):</h2>
3.1 The CBIC addresses concerns raised by the industry regarding the mechanical invocation of the extended period of limitation under Section 74(1) of the CGST Act in cases involving secondment.
&nbsp;
3.2 Section 74(1) reads, "Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax..."
&nbsp;
3.3 The CBIC clarifies that Section 74(1) can only be invoked if there is evidence of fraud, wilful misstatement, or suppression of facts to evade tax. Mere non-payment of GST without these elements cannot trigger Section 74(1). The CBIC emphasizes that the provision should only be invoked when there is concrete evidence of fraudulent activities, and such evidence should be included in the show cause notice.
&nbsp;
<h2>4. Recommendations for Investigation and Show Cause Notices:</h2>
In light of the above, the CBIC advises field formations to consider the unique aspects of each case involving secondment. Investigation should focus on the distinct factual matrix, terms of contracts, and evidence of fraud or wilful misstatement before invoking Section 74(1). The CBIC emphasizes the need for a meticulous examination, aligning with the principles laid down by the Hon&rsquo;ble Supreme Court in the NOS case.
&nbsp;
<h2>Conclusion:</h2>
CBIC's Instruction No. 05/2023-GST serves as a guiding beacon for GST investigations concerning secondment in the post-NOS judgment era. The nuanced approach advocated by the CBIC aligns with the Supreme Court's emphasis on a case-specific examination. It also provides a cautionary note against the mechanical application of Section 74(1), ensuring that its invocation is warranted only in cases involving fraud or wilful misstatement. Field formations are encouraged to undertake thorough investigations, taking into account the unique facets of each secondment arrangement.

Decoding CBIC Instructions on Section 74(1) Post NOS Judgment

Summary of the instructions: CBIC issued instructions vide 03/2022-GST dated 14-June-2022 - instructs GST officials to upload Speaking Order along with GST Refund sanction order in FORM GST RFD-06 - also instructed regarding details to be mentioned in the speaking order in order to ensure uniformity - specified that Post-Audit may be conducted within 3 months from issue of FORM GST RFD-06 order for GST Refund claims exceeding Rs. 1 Lakh and review shall be completed at least 30 days before the expiry of the time period allowed for filing appeal under Section 107(2) of the CGST Act.
The instructions are as follows:
F. No. CBEC-20/16/35/2019-GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes &amp; Customs GST Policy Wing, New Delhi *****
Instruction No. 03/2022-GST | Dated: 14th June, 2022
To, The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of Central Tax (All) The Principal Directors General / Directors General (All) Madam/Sir, Subject: &nbsp; &nbsp;Procedure &nbsp; &nbsp;relating &nbsp; &nbsp;to &nbsp; &nbsp;sanction, &nbsp; &nbsp;post-audit &nbsp; &nbsp;and &nbsp; &nbsp;review &nbsp; &nbsp;of refund claims&ndash; reg.
Attention is invited to sub-section (2) of section 107 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as &ldquo;CGST Act&rdquo;) which provides that the Commissioner may review any decision or order, including an order of refund, with respect to its legality or propriety and he may direct any officer subordinate to him to file an appeal against the said decision or order within 6 months of the date of communication of the said decision or order. Reference is further drawn to entry against the subject pre-audit in table under para 3.3 of the Circular 17/17/2017-GST dated 15.11.2017 wherein it has been stated that pre-audit of refund orders is not required to be carried out but the post-audit of the refund orders may, however, continue on the basis of extant guidelines.
2. Subsequently, Board has been receiving reports of different practices being followed by the field formations regarding sanction, review and post-audit of refund claims.
The matter has been examined with the twin purpose of ensuring uniformity in procedure and enabling effective monitoring of sanction of refund claims in order to safeguard interest of revenue. Accordingly, the Board hereby issues the following instructions/guidelines for sanction, post-audit and review of refunds:
2.1 Sanction of Refund
2.1.1 &nbsp; &nbsp;Detailed guidelines for processing of refund claims in GST have been issued by the Board vide Circular 17/17/2017-GST dated 15.11.2017 (for manual processing of refunds) and Circular No. 125/44/2019-GST dated 18.11.2019 (for electronic filing and online processing of refunds) to ensure uniformity in processing of refund claims. In both of these Circulars, it has been mentioned that the proper officer shall follow the principle of natural justice before taking the final decision with regard to refund claim. Principle of natural justice inter- alia provides that a detailed speaking order needs to be issued providing a basis for sanction/rejection of refund. Therefore, while passing the refund sanction order in FORM GST RFD-06, the proper officer should also upload a detailed speaking order along with refund sanction order in FORM GST RFD-06. In order to ensure uniformity in issuance of such speaking order, it is clarified that such speaking order should inter alia contain the following details:
A. Details for all category of refund claims:
a) &nbsp; &nbsp;The period for which refund claim has been filed, date of filing &amp; the category in which refund has been claimed.
b) &nbsp; &nbsp;Whether it has been checked that refund claim for the same period has not been filed in the same category including any claim filed under &lsquo;Any Other&rsquo; Category.
c) &nbsp; &nbsp;Details of Deficiency Memo, if any, in FORM GST RFD-03 issued in respect of the said refund claim previously.
d) &nbsp; &nbsp;Whether the refund claim has been filed within limitation of time, as provided under CGST Act and Rules thereof, including in the cases, where Deficiency Memo in FORM GST RFD-03 had been issued previously.
e) &nbsp; &nbsp;Details of the documents/ statements uploaded along with the refund claim. Whether all the necessary documents have been uploaded with the refund claim in terms of rule 89(2) of the CGST Rules. Details of document furnished by the applicant via e-mail/ in soft copy/ in hard copy, if any, may also be provided.
f) &nbsp; &nbsp;Whether all the due returns have been filed by the applicant or not, whether any dues are pending recovery from the applicant, and whether refund is required to be withheld/ any amount is required to be deducted as per provisions of section 54(10) of CGST Act on account of non-filing of returns or dues being pending for recovery from the applicant.
g) &nbsp; &nbsp;Whether any SCN was issued to the applicant. Details of reply of the applicant and PH details.
h) &nbsp; &nbsp;Discussion and findings in respect of applicant submission. Details of case laws relied upon in deciding the matter, if any.
i) &nbsp; &nbsp;Whether provisions of unjust enrichment are applicable or not in terms of the provisions of section 54(8) of the CGST Act. If unjust enrichment is applicable in the refund, whether the applicant has furnished due &nbsp; documents/ certificates, in terms of clause (b) of section 54(4) of CGST Act, certifying/ establishing not passing burden of tax, in respect of which refund is being claimed, on any other person.
B. &nbsp; &nbsp;Additional details in case of the refund of accumulated ITC (on account of zero-rated supplies/ inverted rated structure) and refund of IGST paid on account of zero-rated supplies:
a) &nbsp; &nbsp;Whether the refund amount claimed has been debited from the electronic credit ledger, in terms of sub- rule (3) of rule 89 of CGST Rules.
b) &nbsp; &nbsp;In case of refund of IGST paid on account of zero-rated supplies, whether the amount of IGST has been paid through GSTR-3B return.
c) &nbsp; &nbsp;Whether the calculation given by the applicant of export/ zero-rated turnover, adjusted aggregate turnover, turnover of inverted duty supplies. as applicable, is correct as per the relevant provisions.
d) &nbsp; &nbsp;Whether calculation of Net ITC, where ever applicable. is correct as per the relevant provisions. Also, whether the verification of admissibility of ITC as per the provisions of GST Law has been done or not and the findings thereof
e) &nbsp; &nbsp;Whether it has been verified that ITC on capital goods has not been included in calculation of Net ITC for refund of ITC in zero rated supplies.
f) &nbsp; &nbsp;Whether it has been verified that ITC in respect of input services as well as capital goods is not included in calculation of Net ITC in case of inverted tax structure refund.
g) &nbsp; &nbsp;Whether refund has been restricted to the ITC as per those invoices, details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in FORM GSTR-2A of the applicant in terms of Circular No. 135/05/2020-GST dated 31.03.2020.
h) &nbsp; &nbsp;Whether the refund is barred under the provisions of 2? and 3rd proviso to section 54(3) of the CGST Act, 2017.
i) &nbsp; &nbsp;Details of computation of refund claim amount as per the relevant provisions/ prescribed formula in the Act/ Rules and verification whether the refund amount claimed is correct or not.
j) &nbsp; &nbsp;In case of refund on account of inversion, whether the supply qualifies for refund of unutilised ITC under clause (ii) of 1st proviso to section 54(3) of the CGST Act, 2017.
k) &nbsp; &nbsp;In case of refund on account of export of goods, whether the details of shipping bill/ bill of exports, where ever applicable, have been verified from the ICEGATE portal.
l) &nbsp; &nbsp;In case of refund on account of export of services, whether the claimant has furnished the BRC/FIRC/ other relevant documents evidencing receipt of export remittances in respect of zero-rated services for which refund is being claimed.
m) &nbsp; &nbsp;In case of refund on account of zero-rated supply by DTA to SEZ, whether the said supply is meant for authorized operations on the basis of Letter of Authorisation (LoA). Further, whether the details of supply by the applicant to the SEZ have been cross checked from the SEZ Online portal.
n) &nbsp; &nbsp;Whether the documents pertaining to zero-rated supply to SEZ have been endorsed by the specified/authorized officer of the zone. &nbsp; o) &nbsp; &nbsp;Whether the DTA supplier has received the payment from the SEZ recipient in case of supply of services to SEZ.
C. &nbsp; &nbsp;Additional details in case of refund of tax paid on supplies regarded as deemed export:
a) &nbsp; &nbsp;Whether necessary procedure was followed while making procurement/supplying of goods regarded as deemed exports.
b) &nbsp; &nbsp;Whether the ITC claimed against the tax paid on such deemed export supplies has been debited from the electronic credit ledger by the recipient for filing application of refund.
c) &nbsp; &nbsp;Whether it has been verified that no ITC has been claimed by the recipient when refund is claimed by supplier.
D. &nbsp; &nbsp;Additional details in case of refund of excess balance in cash ledger:
a) &nbsp; &nbsp;Whether the amount claimed has been debited from the electronic cash ledger.
b) &nbsp; &nbsp;Whether the amount to be refunded has been calculated in accordance with the provisions of section 49(6) of COST Act.
E. &nbsp; &nbsp;Additional details in case of refund filed under the other categories of refund except those mentioned above:
a) &nbsp; &nbsp;Whether the documents furnished/uploaded along with the refund claim have been verified for their correctness from the source like FORM GSTR-1, FORM GSTR-3B, 10EGATE portal etc., where ever required.
b) &nbsp; &nbsp;Details of the verification conducted and reasoning for grant/ rejection of refund. c) In case of refund ITC filed under &ldquo;Any Other- category, whether the amount claimed has been debited from the electronic credit ledger, wherever required.
2.1.2 &nbsp; &nbsp;It is mentioned that ACES-GST portal provides the facility for uploading a document in pdf format along with the FORM GST RFD-06 order. The same may be utilized by proper officer for uploading the speaking order along with refund sanction order in FORM GST RFD-06 so that the same is made available to the refund applicant as well as Post-audit/Reviewing Authority online.
2.2 &nbsp; &nbsp;Post-Audit and Review:
2.2.1 &nbsp; &nbsp;Sub-section (2) of section 107 of the CGST Act provides that the Commissioner may examine any decision or order, including an order of refund, with respect to its legality or propriety and he may direct any officer subordinate to him to file an appeal against the said decision or order within 6 months of the date of communication of the said decision or order. The said sub-section is reproduced below:
(2) The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified &nbsp; by the Commissioner in his order.
2.2.2 &nbsp; &nbsp;Accordingly, as per extant practice, all refund orders are required to be reviewed for examination of legality and propriety of the refund order and for taking a view whether an appeal to the appellate authority under provisions of sub-section (2) of section 107 of the CGST Act is required to be filed against the said refund order.
2.2.3 &nbsp; &nbsp;As already mentioned in Circular 17/17/2017-GST dated 15.11.2017, refund claims shall not be subjected to pre-audit. However, the post-audit of refund claims may continue. Considering the large number of refund claims filed in GST, it has been decided that post-audit may henceforth be conducted only for refund claims amounting to Rs. 1 Lakh or more till further instructions.
2.2.4 &nbsp; &nbsp;The post-audit and review of the refund claims shall be conducted as per the following guidelines:
(a) &nbsp; &nbsp;All the refund orders passed should be immediately transmitted online to the review module after issuance of refund order in FORM GST RFD-06. The review and post-audit officers shall have access to all documents/ statements on ACES-GST portal pertaining to the said refund claims.
(b) &nbsp; &nbsp;For the purpose of post-audit of refund order, a Post-Audit Cell under a Deputy/Assistant Commissioner along with one/ two Superintendents and Inspectors as required, may be created in Commissionerate Headquarters.
(c) &nbsp; &nbsp;The post-audit should be concluded within 3 months from the date of issue of FORM GST RFD-06 order. The findings of the post-audit shall be communicated to the review branch within the said time period of 3 months.
(d) &nbsp; &nbsp;The review of refund order shall be completed at least 30 days before the expiry of the time period allowed for filing appeal under Section 107(2) of the CGST Act.
2.2.5 &nbsp; &nbsp;Till the time the functionality for conducting post-audit online is developed on ACESGST portal, post- audit of refund orders may be conducted in offline mode. For the said purpose, the refund orders covered under para 2.2.3 above and the relevant documents may be provided to the post-audit cell by the concerned Division through e-Office within 7 days of issuance of refund sanction order in FORM GST RFD-06. The report of the post audit may be furnished by the Post-Audit Cell to the Review Cell through e-Office as per the time-limit specified in para 2.2.4(c) above.
3. &nbsp; &nbsp;Difficulty, if any, in the implementation of these instructions/guidelines may be brought to the notice of the Board.
(Sanjay Mangal)
Principal Commissioner (GST)
&nbsp;

CBIC instructions on the GST refunds, Procedure relating to sanction, post-audit and review of refund claims

GST Refund, CBIC instructions on GST Refund, inverted rated refund GST

On 10-May-2022, the GSTN issued an advisory regarding reporting of taxable value chargeable at 6%. The advisory is reproduced as under:
10/05/2022
<ol>
<ol>
<li>A new tax rate of 6% IGST or 3% CGST+ 3% SGST has been introduced on certain goods vide Notification No. 02/2022 dated 31st March 2022. Changes are being made on the GST portal to include this rate in GSTR-1. As a temporary measure, taxpayers who have to report goods at this rate may do so by reporting the entries in the 5% heading and then manually increasing the system computed tax amount to 6%. This can be done by entering the value in the&nbsp;&lsquo;Taxable value&rsquo;&nbsp;column next to 5% tax-rate and then increasing the system computed tax-amount to 6% IGST or 3% CGST + 3% SGST in the&nbsp;&lsquo;Amount of Tax&rsquo;&nbsp;column under the relevant Table, namely B2B, B2C or Export, as applicable. This will ensure that correct tax amount is reported in GSTR-1. Meanwhile, this rate will be made available on the GST portal shortly.</li>
<li>GSTN regrets any inconvenience caused in this regard.</li>
</ol>
</ol>
&nbsp;
The above advisory is explained as Follows. Suppose the taxpayer has issued an invoice of Rs. 20,000 by charging GST at 6% (3% CGST and 3% SGST) then the tax would be Rs. 1,200/- (Rs. 600 each). Now in such case, the amount is required to reported in 5% column and the value of the tax has to be increased&nbsp;manually.&nbsp;(Please refer following screenshot)
<img src="https://res.cloudinary.com/netd/image/upload/v1652268721/post-img/sgm5gedqqldtz1wehx9b.jpg" alt="Screenshot" width="960" height="720" />

How to Report  6% rate in GSTR-1

6% rate in GSTR-1, GST on Brick Kilns Sector, GST at 6 percent

In this case, the petitioner applied manually on 10th June, 2021 and 22nd June, 2021 for FY 2018-19 and 2019-2020. Such applications were returned without being processed with an instruction that in terms of Circular No. 125/44/2019-GST dated 18th November 2019, a refund application has to be filed in FORM GST RFD 01 on the common portal and the same has to be processed electronically, with effect from 26th September 2019.&nbsp;
In this context, the High Court analyse the Rule 97A of CGST Rules, 2017 and observed as under:
<blockquote>
<div>9.&nbsp;Since rule 97A contains a&nbsp;non-obstante&nbsp;clause, it is intended to override rules 89 to 97 of the CGST Rules forming part of Chapter X. The plain and simple construction of rule 97A is that despite rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X any reference to electronic filing of an application on the common portal shall, in respect of that process or procedure, include manual filing of the said application. If indeed the argument of Mr. Mishra that no application in any form other than online can be received and processed is accepted, rule 97A would be a dead letter and rendered redundant. Rule 97A cannot be construed in a manner so as to defeat the purpose of legislation. We, therefore, conclude that the impugned circular would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule,&nbsp;i.e.,&nbsp;rule 97A of the CGST Rules or derogate from it.</div>
<div>&nbsp;</div>
</blockquote>
<div>The full judgement is as under-</div>
<div>
<div>1.&nbsp;Having failed to upload "Statement 5B" along with refund applications which were filed online, the petitioner applied manually on 10th June, 2021 and 22nd June, 2021 for F.Y.s 2018-19 and 2019-2020. Such applications were returned without being processed with an instruction that in terms of Circular No. 125/44/2019-GST dated 18th November 2019 (hereafter "the impugned circular", for short), a refund application has to be filed in FORM GST RFD 01 on the common portal and the same has to be processed electronically, with effect from 26th September 2019. Such an instruction is contained in letter bearing F. No. CGST/RGD/Div-II/Tech-I/Misc/21-22, New Panvel, dated 27th July 2021 issued by the Superintendent, Tech-, Division-II, CGST &amp; C. Ex., Raigad (hereafter 'the said Superintendent", for short). Aggrieved thereby, this writ petition dated 4th September 2021 has been presented before this Court seeking,&nbsp;inter alia, the following relief: -</div>
<table class="list">
<tbody>
<tr>
<td class="list" align="right" valign="top">"(a)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">that this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction calling for the records pertaining to the Petitioner's case and after going through the facts of the Petitioner's case hold and declare that impugned circular no. 125/44/201-GST dated 18-11-2019 in so far as it creates a condition that the refund application has to be filed online only as being wholly beyond the parent provisions (i.e.&nbsp;Section 54, section 16 and section 168(1) of CGST Act, 2017 and Rule 89 of CGST Rules, 2017) and hence, ultra vires the Act;</td>
</tr>
<tr>
<td class="list" align="right" valign="top">(b)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">that this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction calling for the records pertaining to the Petitioner's case and after going through the facts of the Petitioner's case hold and declare that the Petitioner is entitled to file a refund application manually as well, if he is not in a position to file the refund application online."</td>
</tr>
</tbody>
</table>
<div>2.&nbsp;Mr. Raichandani, learned advocate for the petitioner has invited our attention to rule 97A of the Central Goods and Services Tax Rules, 2017 (hereafter "the CGST Rules", for short) and contended that such rule permits processing of an application for refund filed manually and not on the common portal as referred to in the impugned circular. According to him, the terms of rule 97A of the CGST Rules are such that an application filed manually has to be accepted and an order passed thereon one way or the other. It is contended that the said Superintendent acted illegally in not accepting and processing the application for refund. The writ petition, he submits, ought to succeed by granting relief claimed in terms of prayer clauses (a) and (b).</div>
<div>3.&nbsp;A short reply affidavit has been filed by the respondents contesting the petitioner's claim and bringing on the record the impugned circular.</div>
<div>4.&nbsp;According to Mr. Mishra, learned advocate for the respondents, the said Superintendent who issued the letter dated 27th July 2021 is bound by the terms of the impugned circular and, therefore, was disabled from accepting the application for refund filed by the petitioner manually. He has referred to a decision of the Gujarat High Court reported in 2020 (32) G.S.T.L. 321 (Guj.) (F.S. Enterprise&nbsp;v.&nbsp;State of Gujarat), which we propose to deal with hereafter. Resting on such authority, it is submitted that no illegality has been committed by the said Superintendent. As regards rule 97A, paragraph 6.1 of the reply affidavit has been referred to where it is pleaded that "any provisions of Rules under the said Chapter X of the CGST Rules, 2017 when applicable for 'electronic filing' shall also be applicable for 'manual filing'." Therefore, it is urged that the writ petition may not be entertained and the petitioner ought to file the application for refund in the manner prescribed by the impugned circular.</div>
<div>5.&nbsp;We have heard the parties and perused the materials on the record, including the statutory provisions as well as the impugned circular.</div>
<div>6.&nbsp;The origin of the impugned circular can be traced to section 168 of the Central Goods and Services Tax Act, 2017 (hereafter "the CGST Act", for short), which empowers the Central Board of Indirect Taxes and Customs (hereafter "the Board", for short) to issue such orders, instructions or directions to the central tax officers as it may deem fit and thereupon all such officers and all other persons employed in the implementation of the CGST Act shall observe and follow such orders, instructions or directions. There can hardly be any dispute that the said Superintendent was under an obligation to follow the terms of the impugned circular. However, it is axiomatic that the said Superintendent is also equally bound by the CGST Act and the CGST Rules and could not have turned a blind eye to rule 97A of the CGST Rules. In our considered opinion, the said Superintendent failed to appreciate that the impugned circular could not have been ignored on the face of rule 97A, which is equally binding on him in the discharge of his duties. We say so for the reason that follows.</div>
<div>7.&nbsp;Chapter X of the CGST Rules is titled "Refund" and begins with rule 89. Rule 89 provides for the procedure to be observed while applying for refund of tax, interest, penalty, fees or any other amount. In terms of sub-rule (1) of rule 89, such an application could be made by the person eligible therefor electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner. We need not refer to the other sub-rules of rule 89 and the provisos appended to some of such sub-rules as well as rules 90 to 97, because the same have not been shown to us to be relevant for the purpose of a decision on this writ petition.</div>
<div>8.&nbsp;Adverting to rule 97A, which is the sheet-anchor of the petitioner's claim, we find that the same was inserted in the CGST Rules by a notification dated 15th November 2017 and is the last rule in Chapter X. Obviously, such insertion was in exercise of the rule-making power conferred on the Central Government by section 164 of the CGST Act. It would be appropriate to reproduce below rule 97A in its entirety for facility of convenience: -</div>
<div>"97A.&nbsp;Manual filing and processing.&mdash;Notwithstanding anything contained in this Chapter, in respect of any process or procedure prescribed herein, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to these rules."</div>
<div>9.&nbsp;Since rule 97A contains a&nbsp;non-obstante&nbsp;clause, it is intended to override rules 89 to 97 of the CGST Rules forming part of Chapter X. The plain and simple construction of rule 97A is that despite rule 89 providing for electronic filing of applications for refund on the common portal, in respect of any process or procedure prescribed in Chapter X any reference to electronic filing of an application on the common portal shall, in respect of that process or procedure, include manual filing of the said application. If indeed the argument of Mr. Mishra that no application in any form other than online can be received and processed is accepted, rule 97A would be a dead letter and rendered redundant. Rule 97A cannot be construed in a manner so as to defeat the purpose of legislation. We, therefore, conclude that the impugned circular would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule,&nbsp;i.e.,&nbsp;rule 97A of the CGST Rules or derogate from it.</div>
<div>10.&nbsp;The proposition of law laid down in&nbsp;F. S. Enterprise&nbsp;(supra) that officers and all other persons employed in the institutions governed by the CGST Act and the CGST Rules are bound by instructions issued by the Board under section 168 of the CGST Act admits of no doubt. However, such decision did not lay down the law, as it could never have, that in a given case governed by a statutory rule the tax officers would be at liberty to elect and apply the orders, instructions or directions issued under section 168 of the CGST Act ignoring such statutory rule framed under section 164 thereof while discharging public duties entrusted to them. For the reasons we have assigned above, such decision does not advance the case of the respondents.</div>
<div>11.&nbsp;We, therefore, dispose of this writ petition with the following order: -</div>
<table class="list">
<tbody>
<tr>
<td class="list" align="right" valign="top">(i)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">the impugned circular is clarified and it is observed that its terms shall be applicable only to applications filed electronically on the common portal but would have no applicability to an application for refund which is filed manually;</td>
</tr>
<tr>
<td class="list" align="right" valign="top">(ii)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">the letter dated 27th July 2021 issued by the said Superintendent stands set aside;</td>
</tr>
<tr>
<td class="list" align="right" valign="top">(iii)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">the petitioner is permitted to file afresh the application for refund manually within a fortnight from date and on such receipt, the said Superintendent shall process the same and ensure that the application is taken to its logical conclusion in accordance with law as early as possible, preferably within 2 (two) months thereof; and</td>
</tr>
<tr>
<td class="list" align="right" valign="top">(iv)</td>
<td class="list" align="justify" valign="top">&nbsp;</td>
<td class="list" align="justify" valign="top">should the application be rejected, the order must have the support of reasons but if it succeeds no time shall be wasted to effect refund to the extent the petitioner is found eligible.</td>
</tr>
</tbody>
</table>
<div>12.&nbsp;The writ petition stands allowed on the aforesaid terms. There shall be no order as to costs.</div>
<div>&nbsp;</div>
<div>Citation:</div>
<div>
<div>WRIT PETITION NO. 7861 OF 2021</div>
</div>
</div>

GST Refund application filed manually cannot be returned without processing

GST Refund application, manual application of GST Refund, Section 54 

In the recent judgement, the Hon'ble Guahati High Court set aside the Circular and directed the GST department to allow the Refund under inverted duty structure.&nbsp;
In the instant case, the assessee obtains its input supplies either from the manufacturer, or from some other authorized dealer and makes the output supplies to a Government Department or PSU or a Research and Educational Institute within the NE Region. The tax rate applicable in respect of a supply made to a Government Department, PSU or a Research and Educational Institutes within the NE Region is subjected to a partial exemption of the GST under Notification&nbsp;45/2017-GST (Rate) dated 14.11.2017 of the Government of India in the Ministry of Finance, Department of Revenue. The Notification 45/2017-Central Tax (Rate) dated 14.11.2017 is issued under Section 11(1) of the CGST Act of 2017 and provides that on the recommendation of the GST Council, the goods specified in column(3) of the table therein are exempted from the so much of the central tax leviable thereon under Section 9 of the Act as in excess of the amount calculated at the rate of 2.5% in respect of supplies to the institutions specified in the corresponding entry in column(2) of the said table.
Section 54(3)(ii) provides as under:
<blockquote>
54(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than&mdash;
(i) zero-rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified50 by the Government on the recommendations of the Council:
</blockquote>
Then, the CBEC issued a circular vide Circular No.135/05/2020 - GST Dated the 31st March, 2020 which clarifies certain issues related to refunds and the relevant para, which is under the dispute is as under:
<blockquote>
3.2 It may be noted that refund of accumulated ITC in terms clause (ii) of sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of sub-section (3) of section 54 of the CGST Act. It is hereby clarified that refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same.
The hon&rsquo;ble High Court carefully examined the provisions of the Section 11, Section 54, Section 168 and provisions of the applicable Notification No. 45/2017-GST (Rate) dated 14.11.2017 and concluded as under:
24. Accordingly, we are to conclude that in the instant case the input supplies and the output supplies made by the petitioner assessee are not governed either by a nil rate of tax nor it is governed by fully exempted rate of tax and, therefore, the refund provided under Section 54(3)(ii) would be applicable in respect of the difference between the rate of tax of input supplies and the rate of tax on output supplies. In other words, the provisions for refund of the unutilized input tax credit under Section 54(3)(ii) of the CGST Act of 2017 would be applicable in case of the petitioner assessee.
26. When we read the provisions of paragraph 3.2 of the circular No.135/05/2020-GST dated 31.03.2020 vis a vis, the provisions of Section 54(3)
27. The law in this respect is settled to the extent that whenever there is a conflict between the provisions of a statutory Act and that of a notification or circular issued by an administrative authority, the provisions of the statutory Act would prevail over such conflicting provisions of a notification or a circular of an administrative authority. The said principle of law is so well entrenched that we are not required to refer to any specific judgment on the said point of law and it is a well accepted principle of law. The further implication of such conflict between the provisions of a statutory Act and that of a notification or circular by an administrative authority has been interpreted by the Supreme Court in a plethora of decisions that the provisions of such notification or circular, which would be in conflict with the provisions of a statutory Act, would have to be ignored and not taken into consideration for the purpose of arriving at any such decision
33. Consequently, in view of the clear unambiguous provisions of Section 54(3) (ii) providing that a refund of the unutilized input tax credit would be available in the event the rate of tax on the input supplies is higher than the rate of tax on output supplies, we are of the view that the provisions of paragraph 3.2 of the circular No.135/05/2020-GST dated 31.03.2020 providing that even though different tax rate may be attracted at different point of time, but the refund of the accumulated unutilized tax credit will not be available under Section 54(3)(ii) of the CGST Act of 2017 in cases where the input and output supplies are same, would have to be ignored.
</blockquote>
Citation:
Case No. : WP(C)/3878/2021

High Court set aside GST circular and directed to allow the Refund under inverted duty structure

CBIC Circular read down, GST Refund, inverted duty refund

The Rule-59(6) has been inserted vide Notification No. 1/2021 dated 1st January 2021, and this rule provides for restriction in filing of GSTR-1 in cases where GSTR-3B for the previous two monthly tax-periods is not filed by monthly filers or GSTR-3B for the previous quarterly tax period is not filed by quarterly filers.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Now, GSTN has issued an update to inform taxpayers that this rule will be implemented on GST Portal with effect from 1st September, 2021.
The system will check whether taxpayers have done filing of GSTR-3B as per Rule 59(6) before allowing taxpayers to file GSTR-1. This check will operate on clicking the SUBMIT button of GSTR-1 and the system will give an error message if the condition of Rule-59(6) is not met.
Cosequently, taxpayer would not be able to transfer the credit as he could not file the GSTR-1/IFF.

Implementation of Rule 59(2) on GST portal and consequences

Rule 59(2) of GST, non filing of GSTR 3B

In this case, the 11 bank accounts of the taxpayer was provisionally attached by the GST Department.
company had filed its objections&nbsp;qua&nbsp;the order of attachment, which were rejected on 18-2-2021. It is in this backdrop that the petitioner-company has approached this Court for interim directions for lifting the provisional attachment so that the subject bank accounts could become operable and the petitioner-company is not only able to pay the salaries and other statutory dues concerning its employees but is also able to pay the amounts claimed by the respondents.
It was not in dispute that the respondents have not carried out an assessment, as yet and also it was not in dispute that the petitioner-company has not made a self-assessment of the tax dues, if any, payable by it.
Considering the all relevant facts of the case, the Hon&rsquo;ble High Court directs as under:
<blockquote>
5. We also make it clear that Rs. 2.00 crores which the petitioner-company, for the moment, has been permitted to collect from the 11 bank accounts will be only used to pay the salaries of the employees whose details have been given in the affidavit of Mr. Singh.
</blockquote>
Citation: W.P.(C) NO. 2435 OF 2021, CM NO. 7083 OF 2021 Delhi High Court

High Court permits the Taxpayer to collect 2 crores from provisionally attached bank accounts to pay salaries of employees

bank account attachment, GST department attached bank account

Whether the GST Authority can direct the Taxpayer to reverse the ITC before determination of liability u/s 74 of the GST Act?
The Hon'ble Telangana High Court carefully gone through with provisions of the section 74 and observed that:
<blockquote>
19. In our opinion, sub-Section (5) of Section 74 of the Act gives a choice to the tax payer to make any payment, if he is so chooses, but it does not confer any power on the respondents to make a demand as if there has been a determination of liability of the Assessee and demand tax along with interest and penalty.
</blockquote>
&nbsp;The High Court Further observed and concluded that:
<blockquote>
21. Also no advisory jurisdiction is conferred on the respondents to issue any 'advises' of the nature issued to the petitioner by 3rd respondent on 22-1-2021 asking him to pay Rs. 1,17,35,822/- .
22. In our opinion, no tax demand can be issued or raised when investigation is still in progress. The respondents cannot be allowed to put the cart before the horse and collect any tax, interest or penalty before they determine, in an enquiry, after putting the petitioner/assessee of notice, and we are of the opinion that their action is wholly arbitrary and without jurisdiction.
23. Accordingly, the Writ Petition is allowed; the respondents are restrained from coercing the petitioner to make any payment without issuing notice under section 74(1) of the Act and following the procedure therein; and they are directed to refund Rs. 35,00,000/-already paid by petitioner with interest @ 7% p.a from the date of payment till date of refund within four (04) weeks from the date of receipt of a copy of this order.
</blockquote>
Read the Complete judgement as under:
&nbsp;
HIGH COURT OF TELANGANA
Deem Distributors (P.) Ltd. v. Union of India
M.S. RAMACHANDRA RAO AND T. VINOD KUMAR, JJ.
I.A. NO.2 OF 2021 AND WRIT PETITION NO.7063 OF 2021
AUGUST &nbsp;3, 2021&nbsp;
ORDER
The Background facts
M.S. Ramachandra Rao, J. -&nbsp;The petitioner is a partnership firm and is registered under the Telangana GST Act, 2017, CGST Act, 2017 and IGST Act, 2017 and is involved in the business of dealing in goods and services relating to Ferrous waste and scrap, re-melting scrap ingots of iron or steel, flat rolled products of iron or non-alloy steel of a width of 600 mm or hot rolled, not clad, plated or coated etc.
<ol start="2">
<li>In the instant case, the 4th respondent issued a letter dt.25-4-2019 to the petitioner saying that the petitioner had availed input tax credit on the basis of invoices issued by certain suppliers/firms. It is stated in the said letter that the investigations conducted by the departmental officials reveal that the said suppliers/firms are fictitious and are issuing fake invoices with an intent to pass on input tax credit, and it appears that the said credit was availed by the petitioner in a fraudulent manner without receiving any material, and the petitioner was requested to reverse the input tax credit of Rs. 1,52,35,820/- availed on such invoices immediately.</li>
<li>The 3rd respondent sent an intimation of tax ascertained as being payable on 22-1-2021 saying that petitioner is liable to pay Rs. 1,17,35,822/- for the period February, 2018 to March, 2018 and he was being advised to pay it, failing which a show cause would be issued under sub-Section (1) of Section 74 of the Act.</li>
<li>No doubt summons have been issued to the Director of the petitioner firm under section 70 of the Act to give evidence/depose statement and to produce certain purchase orders and to appear on 24-12-2020 and 25-1-2021vide&nbsp;summons dt.22-12-2020 and 22-1-2020 respectively but admittedly investigation against the petitioner is not complete and no notice under Sub-section (1) of Sec.74 of the Act has been issued to it.</li>
</ol>
&nbsp;
Contentions of Counsel for petitioner
<ol start="5">
<li>The petitioner is assailing the conduct of respondents in directing it to remit the amount availed as input tax credit at the stage of summons itself without following due procedure under section 74 of the CGST Act, 2017 (for short 'the Act').</li>
<li>Petitioner contends that to buy peace with the respondent and to avoid coercion, petitioner had paid Rs. 10.00 lakhs on 30-4-2019 and Rs. 25.00 lakhs on 13-9-2019 and the respondents are not entitled to make such a demand.</li>
<li>According to the Counsel for the petitioner, liability cannot be determined by respondents before conducting enquiry when even the investigation is incomplete; any advise or demand by the respondents 3 and 4 can at best be a provisional one; and when no enquiry has been initiated, petitioner cannot be compelled coercively to pay amounts to the respondents and this violates Art.14 and 300-A of the Constitution of India.</li>
</ol>
&nbsp;
I.A.No.1 of 2021 in W.P.No.7063 of 2021
<ol start="8">
<li>On 23-3-2021, in I.A.No.1 of 2021 in W.P.No.7063 of 2021, this Court initially granted interim stay of all further proceedings pursuant to the demand dt.25-4-2019 issued by 4th respondent and also the summons issued to the petitioner, and the said order was also extended on 6-4-2021 and 19-7-2021.</li>
</ol>
&nbsp;
I.A.No.2 of 2021
<ol start="9">
<li>I.A.No.2 of 2021 is filed to vacate the said order.</li>
</ol>
&nbsp;
The stand of the respondents
<ol start="10">
<li>In the counter-affidavit filed on behalf of respondents, it is admitted in para-7 that investigation proceedings are still going on against the petitioner and have not been concluded.</li>
<li>In para-8 of the counter-affidavit, reference is made to the intelligence information obtained from the Assistant Commissioner, Balasore Division, and it is contended that the intelligence passed on by them is very much actionable and on that basis, summons had been issued on 9-9-2019 and statement was recorded on 13-9-2019 from the Director of the petitioner firm.</li>
<li>Though certain allegations are leveled against petitioner in para-10 to 13 of the counter affidavit, they require to be put to the petitioner by way of a notice under section 74 of the Act for the petitioner to respond.</li>
<li>It is admitted in para-15 of the counter-affidavit that no notice for tax demand has been served or raised under section 74 of the Act as the investigation is still in progress and had not reached finality. It is contended that pending investigation, petitioner was advised, before issue of show cause notice, based on the intelligence received from the other Commissionerates to pay the amount of tax along with applicable interest and penalty under section 74(5) of the Act.</li>
<li>In para-18 of the counter-affidavit, it is specifically stated that since investigation is under progress, no notice for a tax demand has been made or raised under section 74 of the Act.</li>
</ol>
The consideration by the Court
<ol start="15">
<li>Section 74 of the Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts. It states:</li>
</ol>
"74.&nbsp;Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts:&mdash; (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to tax specified in the notice.
(2) The proper officer shall issue the notice under sub-section (1) at least 6 months prior to the time limit specified in sub-Section (10) for issuance of order.
(3) Where a notice has been issued for any period under sub-Section (1), the proper Officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under sub-Section (1), on the person chargeable with tax.
(4) The service of statement under sub-Section (3) shall be deemed to be service of notice under sub-Section (1) of Section 73, subject to the condition that the grounds relied upon in the said statement, except the ground or fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under sub-Section (1) or the same as are mentioned in earlier notice.
(5) The persons chargeable tax may, before service of notice under sub-Section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to 15 per cent of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper office and inform the proper officer in writing of such payment.
(6) The proper officer, on receipt of such information, shall not serve any notice under sub-Section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the Rules made thereunder.
(7) Where the proper officer is of the opinion that the amount paid under sub-Section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-Section (1) in respect of such amount which falls short of the amount actually payable.
(8) Where any person chargeable tax under sub-Section (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to 25 per cent of such tax within 30 days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.
(9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order.
(10) The proper office shall issue the order under section 9 within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within 5 years from the date of erroneous refund.
(11) Where any person served with an order issued under sub-Section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to 50 per cent of such tax within 30 days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded. &hellip;."
<ol start="16">
<li>A reading of the above provision indicates that a notice in sub-Section (1) of Section 74 of the Act may be issued by the proper officer if he is of the opinion that the input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts, to the person who has wrongly availed or utilized input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.</li>
</ol>
Sub-Section (5) of Section 74 of the Act, however, enables the person chargeable with tax to, before service of notice under sub-Section (1) of Section 74, pay the tax along with interest payable under section 50 and a penalty of 15% of such tax on the basis of his own ascertainment of such tax or the tax ascertained by the proper officer and inform the proper officer in writing of such payment.
Sub-Section (9) of Section 74 of the Act enables the proper officer to determine the amount of tax, interest and penalty due from such person and issue an order, if the contents of the notice are disputed.
<ol start="17">
<li>The tenor of the counter affidavit filed by respondents suggests that a conclusion appears to have been drawn on the basis of the incomplete investigation already done that petitioner had availed input tax credit and raised invoices by certain fictitious suppliers without actual receipt of goods.</li>
<li>We do not see how, without there being a determination of liability of the petitioner in any enquiry conducted under the Act, a demand for reversal of input tax credit or payment of tax with interest for penalty, can be raised by respondents.</li>
<li>In our opinion, sub-Section (5) of Section 74 of the Act gives a choice to the tax payer to make any payment, if he is so chooses, but it does not confer any power on the respondents to make a demand as if there has been a determination of liability of the Assessee and demand tax along with interest and penalty.</li>
<li>Before ascertainment of liability, the 4th respondent could not have issued the letter dt.25-4-2019 to the petitioner asking him immediately reverse the input tax credit of Rs. 1,52,35,820/- allegedly availed.</li>
<li>Also no advisory jurisdiction is conferred on the respondents to issue any 'advises' of the nature issued to the petitioner by 3rd respondent on 22-1-2021 asking him to pay Rs. 1,17,35,822/- .</li>
<li>In our opinion, no tax demand can be issued or raised when investigation is still in progress. The respondents cannot be allowed to put the cart before the horse and collect any tax, interest or penalty before they determine, in an enquiry, after putting the petitioner/assessee of notice, and we are of the opinion that their action is wholly arbitrary and without jurisdiction.</li>
<li>Accordingly, the Writ Petition is allowed; the respondents are restrained from coercing the petitioner to make any payment without issuing notice under section 74(1) of the Act and following the procedure therein; and they are directed to refund Rs. 35,00,000/-already paid by petitioner with interest @ 7% p.a from the date of payment till date of refund within four (04) weeks from the date of receipt of a copy of this order.</li>
<li>It is however made clear that respondents can proceed with the investigation as well as enquiry under the provisions of the Act against the petitioner and act strictly in accordance with the Act.</li>
<li>I.A.No.2 of 2021 is dismissed. No costs.</li>
<li>Consequently, miscellaneous petitions, pending if any, shall stand closed.</li>
</ol>

Whether the GST Authority can direct the Taxpayer to reverse the ITC before determination of liability u/s 74 of the GST Act?

GST Reversal, Show cause u/s 74, gst assessment, gst audit

<center>
Petitioner / Applicant: FR TRADE LINKS
Respondent: THE STATE TAX OFFICER AND OTHERS
Court: Kerala High Court
Date: Aug 5, 2021
Order No.: WP(C) NO. 28917 OF 2020
</center><center>ORDER</center>
Heard both sides.
2. The petitioner, a registered person, by this petition, is challenging the orders at Exts.P8 and P12 cancelling his certificate of registration under the CGST/SGST Act and rejection of his application for revocation of cancellation of registration certificate.
3. Learned counsel appearing for the petitioner drew my attention to the order of cancelllation of registration and submitted that respondents have invoked provisions under Sub Section (2) of Section 29 of the CGST/SGST Act, 2017 for cancellation of registration of the petitioner. However, the reasons stated in the impugned order at Ext.P8 are not in consonance with the powers conferred by the respondents for cancellation of registration. It is further submitted by the learned counsel appearing for the petitioner that the order for rejection of application for revocation of cancellation also suffers from non-application of mind and it is an unreasoned order, without mentioning any reason for rejection of application for revocation of cancellation. Learned counsel appearing for the petitioner submitted that the petitioner has honestly given all necessary particulars in the application for registration of (Ext.P17) and no case is made out by the respondents that the registration has been obtained by the petitioner by means of fraud, willful misstatement or suppression of facts.
4. Learned counsel appearing for the petitioner, by placing his reliance on judgment of this Court in the matter of&nbsp;P.Y. Mustaffa, Kanakonam Traders, Erattupetta V. Additional Sales Tax Officer, Pala &amp; Another [(2002) 10 KTR 192]&nbsp;submitted that the matter of registration is merely regulatory in nature and no overbearing importance can be given to minor lapses in such matter.
5. Learned Government Pleader opposed the petition by placing reliance on the counter affidavit. She submitted that several inspections were conducted by the respondents at the principal place of business of the petitioner. It is submitted that during inspection, it was found that no business was conducted at the place of principal business centre. The building was not having any building number or shutter and no books of accounts were placed at that place of principal business. The door was fully opened and some water tanks were kept. The building was found to be having no change in structure during second inspection. In second inspection, it was found that some stock was kept at the new premises near the house of the petitioner, but that place was not added in the GST registration and therefore, it was suspected to be a bogus. The business in the name and style of 'F.R Trade Links' was not found functioning in the given address and therefore, the impugned action was taken. Learned Government Pleader tried to place reliance on some other aspects which are unfortunately not mentioned as a reason for cancellation of registration of the petitioner and therefore, it is not necessary to elaborate the same while incorporating the argument of the learned Government Pleader.
6. I have considered the submissions so advanced and also perused the materials placed before me.
7. The impugned order of cancellation of registration of the petitioner is dated 02.11.2020 and is at Ext.P8. Perusal of that order shows that registration is cancelled by invoking provision of Sub Section (2) of Section 29 of the CGST Act, 2017. It is worthwhile to reproduce provisions of Sub Section (2) of Section 29 of the CGST Act, which reads thus:-
&ldquo;29. Cancellation or suspension of registration:
(1) xxxxxxxxxxx
(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where, -
(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or
(b) a person paying tax under Section 10 has not furnished returns for three consecutive tax periods; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or
(d) any person who has taken voluntary registration under Sub-Section (3) of Section 25 has not commenced business within six months from the date of registration; or
(e) registration has been obtained by means of fraud, willful misstatement or suppression of facts;
Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.
Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.&rdquo;
It is seen from the foregoing provision of law that the proper officer can cancel registration of a person for the reasons stated in Sub Section (2) of Section 29 of the CGST Act. It is not the case of the respondents that the petitioner had contravened any of the provisions of the Act or Rules made thereunder, inasmuch as, no such allegation is levelled against the petitioner either in the show case notice (Ext.P5) nor such accusation is made against him in the impugned order at Ext.P8. My attention is not drawn to contravention of any provision of the Act or Rules framed thereunder by the learned Government Pleader. Similarly, there are no allegations either in the show cause notice or in the impugned order that the petitioner has failed to furnish returns for three consecutive tax periods or that he failed to file returns for a continuous period of six months. It is not averred either in the show cause notice or in the impugned order at Ext.P8 that the petitioner has taken voluntary registration under Sub Section (3) of Section 25, but has not commenced the business within six months from the date of such registration. Now the only provision which remains and empowers the respondent to cancel the registration is indulgence in fraud, willful misstatement or suppression of facts. Unfortunately, this is also not the case sought to be made out by the proper officer in the show cause notice at Ext.P5 or the impugned order at Ext.P8.
8. For better understanding of the matter, let us put on record the relevant portion of the show cause notice making out and conveying the case of the department to the petitioner for soliciting his reply. The relevant portion of the show cause notice (Ext.P5) reads thus:-
&ldquo;Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:
1. As per the intelligence squad report your business place is situated in the first floor of the three storied building which is partially completed with structure only and no building number affixed by the local authority.
You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.&rdquo;
It is thus clear that the allegation levelled against the petitioner by the respondent department is to the effect that business place is situated in a building which is partially completed with structure only and no building number is affixed by the local authority.
9. Now let us put on record the reason mentioned in the order for cancellation of registration dated 29.09.2020 (Ext.P8), which reads thus:-
&ldquo;1. As per the new registration case verification report submitted by the inspector of this office dated 14/10/2020 and also the report of ASTO, Squad2, Intelligence wing, Kottayam at Pala dated 11.08.2020, it is observed that F R TRADE LINKS, 6/580-E, THEKKEMURANJOOR BUILDING, ERATTUPETTA &ndash; VAGAMON ROAD, ERATTUPETTA, Kottayam, Kerala, 686 121 with GSTIN 32CMEPR0466B1ZG is not functioning in the address given in the registration application at the time of registration. They also reported that, the business place is situated in the first floor of the three storied building which is partially completed with structures only. Said business place is an open space in pillars, having no partition walls or shutter. No building number is seen affixed by the local authority and no stock in the business premises. There is only a banner with phone number &amp; GSTIN in the wall of three storied building. In the circumstances your contention against the SCN issued on 29/09/2020 is not acceptable. Hence the registration is canceled U/s.29(2) of the CGST/SGST Act 2017.&rdquo;
10. It is thus clear that in consonance with the allegation levelled in the show cause notice, the impugned order is passed for the reason that the business place is situated in a building which is partially completed with structures only and no building number is affixed by the local authority. Even otherwise, the respondent department cannot go beyond the show cause notice issued by it to the petitioner, requiring the petitioner to defend the case against him as conveyed to him in the show cause notice. Thus, this Court will have to examine whether the reasons stated in the show cause notice, which is reproduced in the foregoing paragraph, can be construed as reason for cancellation of registration as per provisions of Sub Section (2) of Section 29 of the CGST Act, 2017. The answer to this question is found to be in negative, because Sub section (2) of Section 29 does not envisage the contingency of situation of place of business in a partially completed building having no building number affixed on it by the local authority. Such is not the reason as contemplated by Sub section (2) of Section 29, authorising the proper person to cancel the registration of a person in exercise of the powers conferred by the relevant provision of the statute. Consequently, the impugned order at Ext.P8 cannot stand in the scrutiny of law. Consequently, the order of rejection of application for revocation of cancellation is also illegal and cannot stand in the scrutiny of law.
11. At this juncture, it is apposite to take note of Rule 25 of the CGST/SGST Rules. According to the provision of this Rule, where the proper officer is satisfied that the physical verification of the place of business of a person is required due to failure of Aadhaar authentication or due to not opting for Aadhaar authentication before grant of registration, or due to any other reason after the grant of registration, the proper officer may get verification of the place of business, in the presence of the said person, done. Thereafter, the verification report along with the other documents, including photographs, are required to be uploaded in FORM GST REG 30 on the common portal within a period of fifteen working days following the date of such verification.
12. In the case in hand, the State Tax Officer, Pala is the proper officer for assessment and he is a competent officer to invoke provisions of Rule 25. The State Tax Officer, Pala is also the registering authority of the petitioner. This officer has issued a notice to cancel the registration of the petitioner in FORM GST REG 17, based on the report of the intelligence officer. It is clear that the State Tax Officer, Pala has himself did not conduct any enquiry as contemplated in Rule 25. He proceeded further to cancel registration, despite the fact that the petitioner was aggrieved by the report of the intelligence officer as seen from the reply tendered by the petitioner. The proper officer, as such, ought not to have proceeded ahead with cancellation of the registration on the basis of report of the intelligence officer. The proper officer ought to have independently assessed the situation, particularly, when the petitioner had produced the receipt of the building tax from the local authority (Ext.P3) to prove the authenticity of his stand. This seems to have been not done by the proper officer. Without considering this document at Ext.P3, the registering authority had cancelled the registration. The application for revocation of cancellation of registration is also rejected by the respondent without proper enquiry in the matter.
In the result, the writ petition is allowed. The impugned orders at Exts.P8 and P12 are quashed and set aside. Consequently, the respondents are directed to restore the registration of the petitioner.

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