2023 (12) TMI 1136 - HC - GST

Validity of recovery notice - Denial of benefit of exemption - - refund claim - petitioner has discharged tax under wrong head - importing Bulk Simulator Training Services to the Helicopter pilots from Indian Air Force Indian Army Indian Navy and other defence establishments including some of the departments of the State Government - Absebnce of GSTIN and PAN - HELD THAT - The second and the third respondents impugned orders are perused. These authorities have elaborately referred to the provisions of IGST Act as also the CGST/KGST Act and they have also referred to the details of the recipient establishments. There is obvious reference in the impugned orders to the details furnished by the petitioner after being served with the notice in GST DRC-02 but the proceedings are concluded in the premise that the petitioner has raised Invoices without mentioning the necessary details. This Court must opine that this consideration in the peculiarities of the case will not suffice and if it is undisputed that the recipient establishments are based in Delhi Jharkhand and Uttar Pradesh and the petitioner s supply imparting of training is exempt significance of the same should also have been considered. This Court is of the considered opinion that especially in the peculiarities of this case the third respondent to sustain the proposed demand had to examine whether failure to furnish the details of the GSTIN notwithstanding the other circumstances could justify denial of exemption. The proceedings are restored to the third respondent to reconsider the merits of the petitioner s response in the light of this Court s observation - the recovery notice dated 17.10.2023 is also quashed - Petition allowed in part.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the petitioner's failure to include GSTIN on invoices justifies the denial of tax exemption under Notification No. 12/2017 dated 28.06.2017.

2. Whether the petitioner's services qualify as intra-state or inter-state supplies under the IGST Act, considering the absence of GSTIN and PAN on invoices.

3. Whether the petitioner is entitled to a refund of the pre-deposit made during the appellate proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Denial of Tax Exemption Due to Absence of GSTIN

Relevant Legal Framework and Precedents:

The legal framework involves Notification No. 12/2017, which provides tax exemptions for services where the expenditure is borne by the Central or State Government. The CGST/KGST Act, 2017, and the IGST Act, 2017, govern the requirements for tax invoices, including the necessity of GSTIN.

Court's Interpretation and Reasoning:

The Court noted that the absence of GSTIN on invoices was a significant factor in denying the exemption. However, the Court emphasized that the exemption's applicability should also consider the nature of the services and the funding source.

Key Evidence and Findings:

The petitioner provided training services to defense establishments, which were funded by government entities. The invoices lacked GSTIN, leading to the denial of exemption.

Application of Law to Facts:

The Court opined that the failure to include GSTIN should not automatically result in exemption denial, especially if the petitioner can later demonstrate compliance with exemption conditions.

Treatment of Competing Arguments:

The petitioner argued that the absence of GSTIN should not negate the exemption if other conditions are met. The respondents contended that GSTIN is essential for determining the place of supply and eligibility for exemption.

Conclusions:

The Court concluded that the third respondent must reconsider the exemption eligibility, considering the petitioner's ability to provide GSTIN and demonstrate government funding.

2. Determination of Intra-state vs. Inter-state Supply

Relevant Legal Framework and Precedents:

Section 12(5) of the IGST Act determines the place of supply based on the recipient's location. The absence of GSTIN and PAN influences whether a supply is classified as intra-state or inter-state.

Court's Interpretation and Reasoning:

The Court highlighted that the absence of GSTIN led to the classification of services as intra-state, impacting the tax liability under KGST/CGST instead of IGST.

Key Evidence and Findings:

The petitioner provided services to establishments in various states, but the lack of GSTIN on invoices resulted in the classification of supplies as intra-state.

Application of Law to Facts:

The Court considered whether the petitioner's services should be deemed inter-state, given the defense establishments' locations and the services' nature.

Treatment of Competing Arguments:

The petitioner argued for inter-state classification, while the respondents maintained that the absence of GSTIN necessitated intra-state classification.

Conclusions:

The Court determined that the classification should be re-evaluated, considering the petitioner's ability to provide GSTIN and the services' nature.

3. Entitlement to Refund of Pre-deposit

Relevant Legal Framework and Precedents:

The CGST/KGST Act outlines the conditions for refunds, including pre-deposits made during appeals.

Court's Interpretation and Reasoning:

The Court did not explicitly address the refund entitlement but implied that the reconsideration of tax liability could impact the pre-deposit status.

Key Evidence and Findings:

The petitioner made a pre-deposit of 10% of the disputed amount during the appeal process.

Application of Law to Facts:

The Court's decision to remand the case for reconsideration suggests potential adjustments to the pre-deposit based on the final tax liability determination.

Treatment of Competing Arguments:

The petitioner sought a refund, while the respondents focused on the procedural correctness of the initial tax assessments.

Conclusions:

The entitlement to a refund will depend on the outcome of the reconsideration by the third respondent.

SIGNIFICANT HOLDINGS

The Court held:

"The petition is allowed-in-part and the impugned order-in-appeal dated 30.09.2023 is quashed and the proceedings are restored to the third respondent to reconsider the merits of the petitioner's response in the light of this Court's observation."

Core Principles Established:

The necessity of GSTIN on invoices should not automatically negate tax exemptions if other exemption conditions are met and can be demonstrated subsequently.

Final Determinations on Each Issue:

The Court quashed the impugned orders and remanded the case for reconsideration, emphasizing the need to evaluate the petitioner's eligibility for exemptions and the classification of services based on the newly provided GSTIN information.