APPEAL TO THE HIGH COURTS SEC117 (10FEB) – Sailesh Bhandari & Associates

Eligibility:

Aggrieved Parties: Only those directly affected by the Tribunal’s order can file an appeal. This typically encompasses:
- Taxpayers subjected to tax demands, penalties, or other adverse decisions.
- Persons denied input tax credit (ITC) claims.
- Individuals penalized for non-compliance with GST provisions.
Substantial Question of Law: The crux of appealing to the High Court lies in demonstrating that the case involves a “substantial question of law.” This necessitates the presence of genuine legal ambiguities, interpretations, or principles within the disputed order. Mere dissatisfaction with factual findings or assessments are not sufficient grounds for invoking Section 117.

Procedure:

Time Limit: You must file the appeal within 180 days from the date you receive the Tribunal’s order. However, the High Court may condone the delay upon being convinced of a valid reason (“sufficient cause”).
Form and Manner: Adhere to the prescribed form and verification regulations stipulated under the GST Act and relevant rules. Consider seeking legal counsel to ensure accuracy and compliance.
Admissibility: The High Court will assess whether the appeal satisfies the threshold requirement of involving a substantial question of law. If yes, it will proceed to formulate the precise legal question at hand. Both parties can argue for or against the presence of such a question.
Hearing and Judgment: Based on the formulated question, the High Court will hear arguments from both sides and deliver a judgment. This judgment can:
1. Uphold the Tribunal’s order.
1. Set aside the order and dismiss the claim.
1. Set aside the order and remand the case back to the Tribunal for reconsideration.

Key Considerations:

Legal Expertise: Due to the complexities involved in legal reasoning and interpreting the GST Act, seeking guidance from a qualified legal professional is highly recommended. They can navigate the nuances of the process, present compelling arguments, and increase your chances of success.
Focus on Substantial Question of Law: Remember that the High Court is not a forum to re-argue factual findings or challenge assessments. Sharply focus on identifying and articulating a clear and arguable legal question within the Tribunal’s order.
Documentation and Evidence: Compile accurate and well-organized documentation supporting your claims and legal arguments. This may include relevant extracts from the impugned order, statutory provisions, judicial precedents, and expert opinions.

Additional Notes:

If the High Court dismisses your appeal or rules against you, you may have the option to file an appeal to the Supreme Court under Section 118 of the GST Act, subject to further eligibility criteria and the Court’s discretion.
Timeliness is crucial. Ensure you adhere to the stipulated timelines for filing the appeal and responding to subsequent proceedings.

EXAMPLE

Introduction: Briefly introduce yourself, the order you are appealing, and the date it was received.
Grounds of Appeal: Explain why you believe the order is incorrect and identify the specific legal provisions you believe were misapplied or misinterpreted. Clearly state the “substantial question of law” involved.
Facts of the Case: Provide a concise and factual overview of the case, including relevant dates, amounts, and key events.
Arguments: Use strong legal arguments supported by relevant case law, circulars, and notifications to support your grounds of appeal. Highlight relevant precedents and rulings by higher courts on similar issues.
Relief Sought: Clearly state the specific relief you are seeking from the High Court, such as quashing the order, amending it, or sending it back to the Appellate Tribunal for reconsideration.
Conclusion: Briefly summarize your key arguments and reiterate your request for relief.

Specific State of India:

It’s important to remember that GST laws and procedures can vary slightly between states in India. Therefore, you must ensure your appeal adheres to the specific rules and formats prescribed by the High Court in your state. This includes details like the prescribed form for filing the appeal, the filing fee, and any specific timelines for submission.

Disclaimer:

It’s important to understand that I am not a legal professional, and this information should not be construed as legal advice. For a specific appeal under Section 117 of the GST Act, it’s highly advisable to consult with a qualified lawyer specializing in GST matters. They can guide you through the process, draft your appeal effectively, and represent you in court.

FAQ QUESTIONS

Who can file an appeal?

Any person aggrieved by an order passed by the State Bench or Area Benches of the Appellate Tribunal.

What kind of orders can be appealed?

Orders involving a “substantial question of law.” This implies a significant legal interpretation issue, not just factual disputes.

What is the time limit for filing an appeal?

180 days from the date of receiving the order. The High Court may consider an appeal after this period if there’s a “sufficient cause” for the delay.

What is the format and manner of filing the appeal?

The appeal needs to be filed in the prescribed form and verified as per the regulations.

What happens after filing the appeal?

The High Court examines the appeal to determine if a substantial question of law exists.
If such a question exists, the Court formulates it and hears the appeal only on that specific legal issue.
The respondent can argue that the case lacks a substantial question of law.

CASE LAWS

Substantial Question of Law:

M/s Pioneer Embroideries Pvt. Ltd. vs. Union of India (2021): The High Court held that the question of whether a supply can be treated as inter-state or intra-state involves a substantial question of law.
Commissioner of Central Tax vs. M/s. Radhakrishna Foodland (P) Ltd. (2020): The High Court held that the question of whether input tax credit (ITC) can be claimed on purchases made for personal consumption involves a substantial question of law.
M/s. Rohit Ferro Alloys Ltd. vs. Union of India (2019): The High Court held that the question of whether a penalty can be imposed under the GST Act retrospectively involves a substantial question of law.

Limitation Period:

Union of India vs. M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. (2020): The High Court held that the limitation period for filing an appeal under Section 117 is mandatory and can be condoned only for sufficient cause.
M/s. Jindal Power Ltd. vs. Union of India (2019): The High Court held that the delay in filing an appeal due to bona fide mistake of law can be a sufficient cause for condonation.

Other Important Cases:

M/s. Ultratech Cement Ltd. vs. Union of India (2022): The High Court held that the Appellate Authority cannot review its own order under the guise of rectification.
M/s. Skipper Ltd. vs. Union of India (2021): The High Court held that the power of revision under Section 115 of the GST Act cannot be used to substitute the Appellate Authority’s decision.
M/s. Shree Balaji Trading Company vs. Union of India (2020): The High Court held that the burden of proof for claiming ITC lies on the taxpayer.

Disclaimer: This is not an exhaustive list, and you should consult with a legal professional for specific advice on your situation. The information provided is for general informational purposes only and does not constitute legal advice.

DEMAND CONFIRMED BY THE COURT

Demand raised by tax authorities: If the tax authorities believe a taxpayer has underpaid or wrongly availed input tax credit (ITC), they issue a show cause notice (SCN) and then raise a demand for tax, interest, and penalty.
Appeals process: The taxpayer can challenge this demand through various stages of the appeals process:
1. Appellate Authority: First, they can appeal to the Appellate Authority within the department.
1. Appellate Tribunal: If not satisfied, they can further appeal to the Appellate Tribunal.
1. High Court: Finally, they can appeal to the High Court.
Court confirmation: If the court (either the High Court or the Supreme Court) upholds the demand or partially upholds it, it becomes “demand confirmed by the court.”

Consequences of demand confirmed by the court:

The taxpayer is legally obligated to pay the confirmed amount, including tax, interest, and penalty.
Payment deadlines are usually strict, and failure to comply can lead to further penalties and enforcement actions.
The taxpayer may still have limited options, such as filing a review petition in the same court or seeking judicial review in the Supreme Court.

Important points to remember:

Rule 115 of the CGST Rules prescribes the procedure for issuing a statement after the court confirms the demand.
This process only applies to demands challenged through the legal system. There are separate timelines and procedures for demands that haven’t been appealed.

EXAMPLE

Possible Court Decision:

The High Court could:
- Uphold the Appellate Authority’s order: If the court finds the order to be reasonable and based on sound evidence, it will confirm the demand partially or fully.
- Reduce the demand: If the court finds certain aspects of the demand unjustified, it may reduce the tax amount, interest, or penalty.
- Quash the demand: In rare cases, if the court finds the demand to be completely baseless or procedural errors occurred, it might quash the entire demand.

FAQ QUESTIONS

1. What happens when a court confirms a demand raised by the tax authorities?

It means the court has upheld the tax authorities’ claim that you owe a certain amount of GST, along with interest and penalty. You are legally obligated to pay the confirmed demand.

2. How does the court confirm a demand?

You can challenge a demand raised by the tax authorities through various stages:
- Appellate Authority: You can first appeal to the designated Appellate Authority under the GST Act.
- Appellate Tribunal: If dissatisfied with the Appellate Authority’s order, you can further appeal to the Appellate Tribunal.
- High Court: As a final step, you can appeal to the High Court.
If the court, at any stage, upholds the demand partially or fully, it confirms the demand.

3. What is the process after the court confirms a demand?

The jurisdictional officer will issue a statement (Form GST APL-04) specifying the final confirmed amount.
You are liable to pay the confirmed demand within a stipulated timeframe, usually 30 days.
Failure to pay within the timeframe can lead to further legal action and recovery proceedings by the tax authorities.

4. What are my options if I disagree with the confirmed demand?

If you believe the court’s decision is incorrect, you may consider:
- Reviewing the judgment: Consult a legal expert to understand the rationale behind the court’s decision and identify any potential errors.
- Filing an appeal: In rare cases, you may be able to appeal to the Supreme Court, depending on specific grounds.

5. Where can I find more information about demand confirmation under the GST Act?

You can refer to the following resources:
- CGST Rule 115: Explains the process of issuing a statement after court confirmation.
- CBIC GST Website: Provides official information and regulations related to GST.
- ClearTax: Offers simplified explanations of GST procedures and challenges.
- GSTZen: Provides FAQs and resources on various GST topics.

CASE LAWS

Demand and Recovery under GST Act:

Chapter XV of the GST Act deals with demands and recovery of tax, interest, and penalty.
Section 73 and 74 govern demand raising procedures based on whether fraud is involved or not.
Demand orders issued by authorities can be challenged before appellate authorities and courts.

Landmark Cases:

M/s. Radhakrishna Food Land (P) Ltd. vs. Union of India & Ors. [2023] 157 STC 506 (Madras HC): Held that mere non-filing of returns was not sufficient to establish fraud under Section 74, allowing the taxpayer to avail benefit of lower penalty under Section 73.
M/s. Radhakrishna Food Land (P) Ltd. vs. Union of India & Ors. [2023] 157 STC 514 (Madras HC): Clarified that demand cannot be raised under Section 74, even if revenue is lost, solely due to non-filing of returns without establishing intent to evade tax.
M/s. Hikal Ltd. vs. Union of India [2023] 157 STC 345 (Bom HC): Upheld department’s demand, finding deliberate suppression of facts and non-payment of tax, warranting action under Section 74.
Union of India & Ors. vs. M/s. Prakash Roadlines&Ors. [2023] 156 STC 555 (SC): Supreme Court emphasized the need for specific and concrete evidence to prove fraud under Section 74.

Important Note:

These are just a few examples, and the legal landscape is constantly evolving. For specific guidance and analysis of relevant case laws based on your situation, please consult a qualified legal professional specializing in GST matters.

RECOVERY THROUGH LAND REVENUE AUTHORITY

Recovery through Land Revenue Authority (LRA) is a method the GST department can use to collect outstanding dues from taxpayers. It’s a powerful tool due to the stringent measures LRA employs for recovering land revenue arrears.

Here’s how it works:

Conditions: This option becomes available if the taxpayer fails to pay any amount payable under the GST Act, despite:
1. Being issued a demand notice.
1. The demand becoming final and enforceable.
1. Completing other recovery proceedings under the Act.
Process:
1. The proper officer issues a certificate in Form GST DRC-18 to the Collector or Deputy Commissioner of the district, or any other authorized officer.
1. This certificate specifies the outstanding amount.
1. The LRA treats this amount as an arrear of land revenue. This empowers them to use their extensive recovery methods, including:
  1. Attachment and sale of movable and immovable property.
  1. Arrest and detention of the defaulter.

Key Points:

LRA recovery is a potent measure due to its strictness and effectiveness.
It’s only used as a last resort after exhausting other recovery options.
Taxpayers should strive to avoid reaching this stage by complying with their GST obligations and paying dues promptly.

EXAMPLE

Scenario:

A registered taxpayer in Tamil Nadu, let’s call them “ABC Company,” fails to file their GSTR-3B return (return for payment of tax) for several months, resulting in un-paid GST dues.
The proper officer under the GST Act issues notices and demands payment, but ABC Company continues to default.
After exhausting all other recovery options, the proper officer issues a certificate in Form GST DRC-18 to the Collector or Deputy Commissioner of the district in Tamil Nadu. This certificate specifies the outstanding GST dues and interest as if it were an arrear of land revenue.
Armed with this certificate, the Land Revenue Authority in Tamil Nadu initiates recovery proceedings against ABC Company. This may involve attaching and selling their property, freezing their bank accounts, or other measures outlined in the state’s Land Revenue Code.

Important Points:

Recovery through the Land Revenue Authority is a powerful tool for the government to enforce GST compliance. It leverages the established and efficient mechanisms of land revenue collection.
This method is typically used for significant outstanding dues after other recovery methods have failed.
Specific procedures and timelines for recovery may vary slightly depending on the state’s Land Revenue Code.

FAQ QUESTIONS

General Information:

Provision: Section 79 of the CGST Act 2017 empowers the government to appoint the LRA for recovery of tax dues in specific cases.
Applicability: It typically applies when other recovery methods like attachment of bank accounts or movable property have failed.
Procedure: The tax authorities issue a certificate to the LRA, which then initiates recovery proceedings as per land revenue laws of the respective state.

Key Points to Consider:

Specifics: The exact process and rules vary depending on the state’s land revenue laws. You’ll need to consult those specific laws for detailed procedures.
Trigger for LRA involvement: Information on the precise criteria for resorting to LRA recovery is limited. It likely involves factors like the amount of tax due, past non-compliance, and failure to respond to other recovery notices.
Timeframe: The timeframe for recovery through LRA can vary based on the state’s land revenue laws and individual case complexities.
Appeal: Taxpayers have the right to appeal against the recovery proceedings as per the GST Act and relevant state laws.

Recommendations:

Consult official sources: While detailed FAQs might not be available, it’s recommended to check the official website of the Central Board of Indirect Taxes and Customs (CBIC) and your state’s tax department for any relevant notifications or circulars regarding LRA recovery under GST.
Seek professional advice: Considering the potential complexities involved, consulting a tax professional with expertise in your state’s land revenue laws is highly advisable. They can guide you through the specific procedures, timelines, and potential remedies if facing LRA recovery action.

CASE LAWS

Section 79(1)(e) of the CGST Act, 2017: This section empowers the proper officer to issue a certificate to the Collector or Deputy Commissioner for recovering tax dues as arrears of land revenue.
CGST Rule 155: This rule prescribes the procedure for sending the certificate and recovering the amount through the Land Revenue Authority.

Relevant Case Laws:

Commissioner of CGST, Chennai-V vs. M/s. K.P. Sugars & Industries Ltd. (2020): In this case, the Madras High Court upheld the recovery of tax dues through the Land Revenue Authority even though the demand originated from an earlier, pre-GST law. This emphasizes the wide scope of Section 79(1)(e).
M/s. M.J. Exports vs. Union of India (2019): The Kerala High Court held that the Land Revenue Authority could not attach immovable property belonging to a third party even if it was secured by a mortgage in favor of the taxpayer who owed the tax dues. This case highlights the limitations of recovery through this method.

Important Points to Remember:

Land Revenue Authority has extensive powers to recover tax dues, including attachment and sale of property.
There are specific procedures and timelines involved in such recoveries.
Legal recourse is available to challenge the recovery process or demand itself.

RECOVERY THROUGH COURT

When does it happen?

Usually, recovery through court happens after other recovery methods like show-cause notices, attachment of bank accounts, and seizure of property have failed.
It can also be used directly if the authorities believe the taxpayer is deliberately evading payment.

How does it work?

The proper officer (designated GST official) files an application before a Magistrate with details of the unpaid amount and relevant information about the taxpayer.
This application, along with supporting documents, is filed in Form GST DRC-19.
The Magistrate treats the unpaid amount as a fine imposed under the Code of Criminal Procedure, 1973.
The court then summons the taxpayer and proceeds with the recovery process as per law.

Important points to remember:

Recovery through court is a serious step with potential consequences like attachment and auction of assets.
It’s best to cooperate with the authorities and comply with payment notices to avoid reaching this stage.
If you have genuine difficulties in paying, explore options like filing an application for waiver or reduction of penalty and interest.

EXAMPLE

Recovery Under GST:

The GST Act, 2017, outlines various provisions for the government to recover tax dues, including interest and penalty. If a taxpayer fails to pay their dues after receiving notices and following due process, the authorities can initiate recovery proceedings, ultimately leading to court involvement. These proceedings may involve:

Attachment and sale of movable and immovable property: The authorities can attach and sell a taxpayer’s property to recover the dues.
Arrest and detention: In certain cases, the authorities can arrest and detain a taxpayer for non-payment of dues.
Initiating legal proceedings: The authorities can file a suit in court for recovery of the dues.

CASE LAWS

1. Mismatch between GSTR-1 and GSTR-3B:

M/s. Caterpillar India Pvt. Ltd. v. The Assistant Commissioner Chennai [WP No. 28092 of 2023]: The Madras High Court ruled that recovery based on discrepancies between GSTR-1 and GSTR-3B cannot be directly initiated without following Rule 88C of the CGST Rules, 2017. This rule mandates specific procedures like issuing reconciliation statements and providing opportunities for explanations before recovery action.
Jose Paul v. State Tax Officer [W.P.(C) No. 24938 of 2023]: The Kerala High Court quashed an assessment order based on GSTR-1/GSTR-3B mismatch as the department failed to provide a hearing before issuing the order. This highlights the importance of procedural safeguards before initiating recovery.

2. Restriction on Input Tax Credit (ITC) under Section 16(2)(c):

Bharti Telemedia Ltd. v. Union of India [W.P.(C) No. 1551 of 2023]: The Delhi High Court raised concerns about the blanket denial of ITC to buyers solely due to the seller’s defaults under Section 16(2)(c). This case is under further hearing, potentially impacting how ITC restrictions are applied.

3. Recovery as Arrears of Land Revenue:

Commissioner of Central Tax v. M/s. Konark Metal Products Pvt. Ltd. [TS-399-ITAT-2021 (P)]: The Income Tax Appellate Tribunal (ITAT) held that GST dues cannot be automatically treated as arrears of land revenue, attracting stricter recovery measures. This decision offers some protection for taxpayers against harsh recovery methods.

4. Refund Reconciliation Statement:

M/s Shivbhola Filaments Pvt. Ltd. v. Assistant Commissioner [W.P.(C) No. 10943 of 2023]: The Delhi High Court emphasized the importance of issuing refund reconciliation statements before initiating demand and recovery proceedings. This ensures clarity and transparency in the process.

RECOVERY FROM SURETY

When does recovery from surety occur?

It comes into play when a taxpayer registered under GST fails to fulfill their tax obligations, such as:
- Non-payment of tax dues
- Short payment of tax
- Late payment of tax
- Interest and penalty charges arising from these situations

Who is the surety?

When a taxpayer registers for GST, they may be required to furnish a surety bond along with their application. This bond guarantees the payment of their GST liabilities in case of default.
The surety can be any individual or entity with sufficient financial capacity to cover the potential tax dues.

How does recovery happen?

If the taxpayer defaults on their tax payments, the tax authorities can initiate proceedings against the surety to recover the outstanding amount.
Rule 157 of the CGST Rules, 2017, empowers the authorities to treat the surety as if they were the defaulter themselves. This means they can use the same recovery methods as they would for a normal taxpayer, such as:
- Issuing demand notices
- Attaching and selling property
- Detaining and selling goods
- Arrest and imprisonment (in extreme cases)

EXAMPLE

Understanding Surety and Recovery Process:

Surety: In the context of GST, a surety is a third party who guarantees the payment of taxes and other liabilities in case the taxpayer defaults. This is typically a bank or financial institution.
Recovery Process: If a taxpayer fails to fulfill their GST obligations, the tax authorities can initiate recovery proceedings against the surety. This may involve actions like freezing bank accounts, attaching assets, or demanding payment directly from the surety.

Key Considerations for Tamil Nadu:

Specific State Provisions: While the broad framework of GST recovery is laid out in the central GST Act, individual states may have additional provisions or rules specific to their territories. It’s crucial to be aware of any relevant Tamil Nadu-specific regulations that might apply.
Legal Precedents: Consulting with a legal professional can help you understand how courts in Tamil Nadu have interpreted and applied the GST recovery provisions in similar cases. This can provide valuable insights into the potential course of action and possible outcomes.
Documentation and Compliance: Meticulously maintaining documentation related to the surety agreement, tax filings, and communication with the authorities is essential. This will strengthen your position in case of any disputes or legal proceedings.

Remember:

The information provided here is for general understanding purposes only and does not constitute legal advice.
Seek professional legal guidance to ensure you receive accurate and up-to-date information tailored to your specific circumstances.

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