M/S Volvo Group INDIA PVT LTD vs. State Of Karnataka
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Cause title — parties, addresses and appearances
ORAL ORDER
In this petition, petitioner seeks the following reliefs: a) Issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ or order or direction under Article 226 of the Constitution of India quashing the impugned Show Cause Notice No. ADCOM (ENF)/SZ/DCCT-01/GST/ADJN- 04/2023-24 dated 29.09.2023 bearing DIN MA290923228413R issued by the Respondent No. 4 enclosed at Annexure A demanding input tax NC: 2024:KHC:34733 credit availed by the Petitioner along with interest and penalty, b) Hold that the Petitioner has rightly availed input tax credit of Rs.13,37,21,288/- in respect of the IGST paid on manpower supply services received by the Petitioner during the period 2017-2023, c) Hold that the Petitioner is not liable to pay Rs.42,58,800/- being IGST on the External Commercial Borrowings (ECB) received from VTAL, in terms of the exemption provided under of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017; d) Pass such further order(s) and other reliefs as the nature and circumstances of the case may require.
The petitioner is involved in the business of manufacture of trucks, tractors, compactors and construction equipment and also engaged in the distribution of construction equipment and after market parts in addition to providing administrative services, logistic services and engineering design services to their group companies.
The respondents are the State GST Authorities under the Karnataka Goods and Services Act, 2017 (KGST Act). The petitioner seeks quashing of the impugned Show Cause Notice at NC: 2024:KHC:34733 Annexure — A dated 29.09.2023 issued by Respondent No. 4 and for other reliefs.
Heard learned counsel for the petitioner and learned AGA for the respondents and perused the material on record.
In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner submits that the demand made by the respondents in the impugned Show Cause Notice was illegal, arbitrary and without juri iction or authority of law and opposed to the statutory provisions. The learned counsel for the petitioner submits that the impugned Show Cause Notice proposes to raise two demands: (i) Demand of Input tax credit of IGST paid on Seconded employees totalling to Rs.13,37,21,288/- with interest. The demand has been raised by invoking Section 16(4) of the CGST Act, 2017; (ii) Demand of GST of Rs.42,58,800/- with interest on financial services of external commercial borrowings.
With regard to the first demand, the learned counsel for the petitioner submits that the demand of input tax credit is liable to be set aside in the light of Circular No. No.211/5/2024-GST NC: 2024:KHC:34733 dated 26/06/2024 issued by the Central Board of Indirect taxes and Customs, New Delhi and CGST Notification dated 28.06.2017 as well as the judgments of this Court in the case of Bosch Limited Vs. State of Karnataka and others - 2024 VIL-828-KAR, Musashi Autoparts Private India Ltd., Vs. State of Karnataka - W.P.No.478/2024 dated 29.07.2024. 7. With regard to the second demand, the learned counsel for the petitioner submits that the same is covered by Circular No. 218/5/2024 – GST dated 26/06/2024 and Judgment of the Hon’ble Court in the case of AO Smith India Water Products Pvt. Ltd., Vs. State of Karnataka and others - W.P.No.7227/2023 dated 20.08.2024 and accordingly the impugned Show Cause Notice deserve to be quashed on this ground also.
Per contra, learned AGA for the respondents submits that if the petitioner submits a reply along with necessary documents to the impugned Show Cause Notice at Annexure-A, the concerned respondents would consider the same and proceed further in accordance with law. NC: 2024:KHC:34733
Having heard the Counsel for the Parties and perusing the facts on record, in my view the issue regarding admissibility of input tax credit by invoking Section 16(4) is covered by the Judgment of this Hon’ble Court in the cases of Bosch and Musashi (supra) read with Circular No. 211/5/2024-GST dated 26/6/2024. In my view the credit has been validly taken as clarified by the Circular and as held by this Court in the judgments supra.
In regard to the second demand Circular No. 218/5/2024- GST dated 26/6/2024 and the decision of this Hon’ble Court in the case of AO Smith India Water Products Pvt. Ltd, supra are applicable. The authorities are directed to consider the same including the applicability of Section 128A & Section 13(3)(c) as regards demand of interest on the aforesaid amounts.
In view of the aforesaid facts and circumstances, I deem it just and appropriate to dispose of this petition by issuing certain directions.
In the result, I pass the following: ORDER (i) Petition is hereby disposed of. NC: 2024:KHC:34733 (ii) The petitioner is reserved with liberty to submit a reply along with documents to the impugned Show Cause Notice at Annexures - A dated 29.09.2023 within a period of three weeks from the date of receipt of a copy of this order. (iii) The concerned respondents shall consider the said reply and documents to be submitted by the petitioner and proceed further in accordance with law after providing sufficient and reasonable opportunity of hearing to the petitioner and bearing in mind the observations made in this order as well as the relevant statutory provisions, Circulars, judgments, contentions, etc., relied upon by the petitioner and pass appropriate orders within a period of four weeks from the date of receipt of the Reply to be filed by the petitioner. (S.R.KRISHNA KUMAR) JUDGE MDS / SV
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.