2025 (4) TMI 1305 - HC - GST

Jurisdiction to adjudicate issues related to Integrated Goods and Services Tax (IGST) refunds and demands - HELD THAT - The plea sought to be raised by the petitioner based on the CBITC Circular dated 18.11.2019 as well as the fact that the provisions of Rule 96B of the Rules were introduced by a Notification dated 23.03.2020 and the same being not retrospective had no application to the case of the petitioner despite being legal pleas having not been examined/could not have been examined by the Assessing Authority which aspect does require a determination by this Court at this stage when the Authority under the Act has not applied its mind to the said issues. In view of the peculiar circumstances of the case wherein the plea raised essentially is legal and its implication needs to be examined by the Authority in the circumstances of the case it is deemed appropriate and therefore the order dated 30.08.2024 passed by the Deputy Commissioner State Tax Jurisdiction Bijnor Sector 1 Bijnor Moradabad set aside and the matter remanded back to the said Authority. The petitioner shall file its response to the show cause notice dated 17.05.2024 by 02.05.2025 and on filing of the said reply respondent no.2 shall afford opportunity of personal hearing to the petitioner and thereafter pass fresh order in accordance with law. Conclusion - i) The plea challenging jurisdiction of State Tax Authority is rejected. ii) The demand order under Rule 96B is set aside on the ground of non-retrospectivity and lack of consideration by the Authority. Petition disposed off by way of remand.

Summary

Issues Presented and Considered

The core legal questions considered by the Court in this matter include:

• Whether the State Tax Authority has jurisdiction to adjudicate issues related to Integrated Goods and Services Tax (IGST) refunds and demands.
• Whether the requirement under Rule 96B of the Central Goods and Services Tax Rules, 2017 (relating to proof of realization of export proceeds and recovery of refund) is applicable retrospectively to the financial year 2019-20.
• The validity and applicability of the Circular dated 18.11.2019 issued by the Central Board of Indirect Taxes and Customs (CBIC) which states that Bank Realization Certificate (BRC) is not required to be produced for claiming IGST refund on zero-rated supplies.
• Whether the petitioner was afforded a reasonable opportunity of being heard before passing the impugned demand order and show cause notices.
• The correctness of the demand orders issued under Section 73 of the U.P. Goods and Services Tax Act, 2017, including imposition of interest and penalty for discrepancies in GST returns and refund claims.

Issue-Wise Detailed Analysis

1. Jurisdiction of State Tax Authorities to Deal with IGST Issues

Legal Framework and Precedents: Section 4 of the Integrated Goods and Services Tax Act, 2017 authorizes officers appointed under the State Goods and Services Tax Act to act as proper officers for IGST purposes, subject to exceptions notified by the Government on Council recommendations.

Court's Interpretation and Reasoning: The Court noted that the petitioner did not demonstrate any notification specifying exceptions or conditions that would exclude the State Tax Authority from adjudicating IGST-related matters in this case. Therefore, the plea challenging jurisdiction was found to be without merit and rejected.

Application of Law to Facts: Since no exceptions were notified, the State Tax Authority was competent to issue show cause notices and pass orders regarding IGST demands and refunds.

Conclusion: The State Tax Authority had jurisdiction to proceed against the petitioner on IGST-related issues.

2. Applicability and Retrospectivity of Rule 96B of the Central GST Rules

Legal Framework: Rule 96B, inserted by Notification No. 16/2020 - Central Tax dated 23.03.2020, mandates production of proof of realization of export proceeds (e.g., BRC) and provides for recovery of refund or IGST paid where export proceeds are not realized.

Court's Reasoning: The petitioner argued that since Rule 96B came into effect after the financial year 2019-20, it could not be applied retrospectively to raise demands for that period. The Court acknowledged this as a legal plea but observed that the Assessing Authority had not examined or applied its mind to this issue.

Application of Law to Facts: The demand related to FY 2019-20, prior to the insertion of Rule 96B. Hence, the retrospective application of this rule was questionable and required fresh consideration by the Authority.

Conclusion: The Court found merit in the contention that Rule 96B may not apply retrospectively and directed reconsideration by the Authority.

3. Requirement of Bank Realization Certificate (BRC) for IGST Refund Claims

Legal Framework: Circular dated 18.11.2019 issued by CBIC, para 48, clarifies that BRC is not mandatory for claiming refund of IGST on zero-rated supplies.

Court's Reasoning: The petitioner contended that the demand notice requiring BRC was contrary to this Circular and hence invalid. The Court noted that this legal plea was not examined by the Assessing Authority and required fresh consideration.

Application of Law to Facts: The petitioner had submitted BRC, bank statements, and tax invoices to substantiate the refund claim. The Authority's insistence on BRC despite the Circular was challenged.

Conclusion: The Court held that the issue deserved to be examined afresh by the Authority in light of the Circular and evidence submitted.

4. Reasonable Opportunity of Hearing

Legal Framework: Principles of natural justice require that a party must be given a reasonable opportunity to file replies and appear for personal hearing before adverse orders are passed.

Court's Findings: The show cause notice dated 17.05.2024 fixed the same date (17.06.2024) for filing the reply and personal hearing. The petitioner claimed to have filed a reply on 20.08.2024, but no proof was produced. The Court observed that no reply was filed on the fixed date and no appearance was made for hearing on that date.

Moreover, the impugned order was passed on 30.08.2024 without any fresh notice or reminder for hearing or filing reply after 17.06.2024.

Application of Law to Facts: The Court found that the petitioner was not afforded a proper opportunity to be heard as the hearing and filing deadlines coincided, and no subsequent opportunity was provided before passing the order.

Conclusion: The lack of reasonable opportunity of hearing vitiated the impugned order.

5. Validity of Demand Orders under Section 73 of the U.P. GST Act

Legal Framework: Section 73 empowers the tax authorities to issue demand notices for tax not paid or short paid due to reasons other than fraud or willful misstatement.

Court's Analysis: The petitioner had earlier responded to show cause notices and made payments towards IGST liability. Subsequent notices pointed out discrepancies and demanded further tax, interest, and penalty. However, the Court noted that the legal pleas regarding jurisdiction, applicability of Rule 96B, and Circular were not examined by the Authority.

Application of Law to Facts: Since the Authority had not applied its mind to significant legal issues and did not provide a fair opportunity of hearing, the demand orders could not be sustained in their present form.

Conclusion: The demand orders were set aside and remanded for fresh consideration.

Significant Holdings

"Section 4 of the Integrated Goods And Services Tax Act, 2017 dealing with authorization of Officers of State Tax or Union Territory Tax as proper Officers in certain circumstances clearly provides that the Officers appointed under the State Goods and Services Tax Act are authorised to be the proper officers for the purposes of the IGST."

"The provisions of Rule 96B of the Rules being not retrospective, the demand pertaining to the year 2019-20 could not be raised and on that count also, the order impugned deserves to be quashed and set aside."

"The Circular dated 18.11.2019 issued by the Central Board of Indirect Taxes and Customs in para 48 specifically provided that BRC is not required to be produced and, therefore, the requirement indicated by the Authority for the purpose of raising demand, being against the said Circular, deserves to be set aside."

"Fixing the date of filing reply to the show cause notice as the same date as date of hearing is not justified and before passing the order impugned, no opportunity of hearing was provided to the petitioner, which resulted in passing of the order impugned."

"In view of the above peculiar circumstances of the case wherein the plea raised essentially is legal and its implication needs to be examined by the Authority in the circumstances of the case, we deem it appropriate and, therefore, set aside the order dated 30.08.2024 passed by the Deputy Commissioner, State Tax... and remand back the matter to the said Authority."

Core Principles Established

• State Tax Authorities are competent to adjudicate IGST-related matters unless specifically excluded by notification.
• Tax rules and notifications are not to be applied retrospectively unless expressly stated.
• Administrative Circulars issued by CBIC clarifying procedural requirements must be adhered to by tax authorities.
• Natural justice mandates that adequate and reasonable opportunity of hearing must be provided before passing adverse orders.
• Demand orders under GST must be based on proper consideration of legal pleas and factual evidence.

Final Determinations

• The plea challenging jurisdiction of State Tax Authority was rejected.
• The demand order under Rule 96B was set aside on the ground of non-retrospectivity and lack of consideration by the Authority.
• The requirement of BRC for IGST refund claims was held to be inconsistent with CBIC Circular and required reconsideration.
• The impugned order was quashed for failure to provide reasonable opportunity of hearing.
• The matter was remanded to the Deputy Commissioner, State Tax for fresh adjudication after affording the petitioner an opportunity to file reply and appear for personal hearing.