2020 (11) TMI 568 - Commissioner - GST

Detention of goods alongwith the conveyance - undervaluation of goods - Department has made the case against the appellant on the ground that the appellant had cleared the goods on considerably lesser value keeping in view the MRP marked on goods with intent to evade tax - HELD THAT - Under GST law, taxable value is the transaction value, i.e. price actually paid or payable, provided the supplier and the recipient are not related and price is the sole consideration. In most of the cases of regular normal trade, invoice value will be the taxable value. However, to determine value of certain specific transactions, Determination of Value of Supply rules have been prescribed in CGST Rules, 2017. In GST, tax is payable on ad valorem basis, i.e. percentage of value of the supply of goods or services. Section 15 of the CGST Act and Rule 27 to Rule 35 of CGST Rules, 2017 contain provisions related to valuation of supply of goods or services made in different circumstances and to different persons. As per sub-section (1) of Section 15 of CGST Act, 2017 The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply . In the instant case before me nothing was brought on record by the adjudicating authority to substantiate that the appellant has undervalued the goods and value declared by the appellant is not a true value in terms of Section 15(1) of CGST Act, 2017. No investigation was made by the concerned authority and simply on the basis of MRP the case was made for undervaluation. In GST law there is no provisions for determination of value on the basis of MRP. Therefore, the order passed by the adjudicating authority is contrary to the provision of CGST Act, 2017 and not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of goods for GST purposes based on MRP vs. transaction value.
2. Jurisdiction of the adjudicating authority under Section 130 of the CGST Act.
3. Adherence to procedural requirements such as issuance of show cause notice.

Analysis:

Issue 1: Valuation of Goods
The case involved a dispute regarding the valuation of goods for GST purposes. The appellant, a partnership firm engaged in trading ceramic tiles, was accused of undervaluing goods to evade tax. The authorities calculated the value of goods based on MRP, resulting in a higher GST liability. However, the appellant argued that the value declared in the invoice was accurate. The Commissioner noted that under GST law, taxable value is the transaction value, provided the supplier and recipient are not related, and price is the sole consideration. The Commissioner found that the authorities failed to substantiate the undervaluation claim and made their decision solely based on MRP, which is not a valid method under GST law. Consequently, the order passed by the adjudicating authority was deemed contrary to the provisions of the CGST Act and unsustainable.

Issue 2: Jurisdiction of Adjudicating Authority
The appellant challenged the jurisdiction of the adjudicating authority under Section 130 of the CGST Act, alleging that the order was passed without proper jurisdiction, illegally, and on presumptive grounds. The appellant contended that no show cause notice was issued, or if issued, it lacked essential details for a valid notice. The Commissioner found merit in the appellant's argument, highlighting that the order lacked a proper investigation and was based on assumptions rather than facts. As a result, the order was deemed to be without jurisdiction and set aside.

Issue 3: Procedural Compliance
Another ground of appeal was the procedural non-compliance, specifically regarding the issuance of a show cause notice. The appellant argued that the notice was non-speaking and did not disclose material facts for the proposed action. The Commissioner observed that a show cause notice should clearly outline the grounds for the proposed action, which was lacking in this case. This procedural lapse further weakened the authority's case against the appellant.

In conclusion, the Commissioner set aside the impugned order, allowing the appeal filed by the appellant. The decision was based on the failure of the authorities to prove undervaluation, the lack of jurisdiction in passing the order, and the procedural deficiencies in issuing the show cause notice. The appeal was disposed of in favor of the appellant, emphasizing adherence to legal provisions and due process in GST matters.