BharatTaxGST

Micro Systems And Services (Sole Proprietorship) vs. The Union Of INDIA And 5 Others

Original PDF →
WP/37465/2021HC TelanganaGSTCNR HBHC01057134202105 September 2022Bench: C.V. BHASKAR REDDY,UJJAL BHUYAN13 pages
For Petitioner: SRI.MADHOOR SAICHANORAHAAS NAIDU /, SRI.SAI CHANDRA HAASFor Respondent: SRI.B.NARASIMHA SARMA

No AI summary yet for this judgment.

Cause title — parties, addresses and appearances
HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) IUONDAY, THE FIFTH DAY OF SEPTEN/BER TWO THOUSAND AND TWENTY TWO PRESENT WRIT PETITION NO: 37465 OF 2021 Between: Micro Systems and Services (Sole Proprietorship), Represented by its Sole Proprietor, Smt. Yeshala Prasuna Giri Having its office at, 12-5-35lAQlS1, Ballad Estate, Tarnaka, Secunderabad, TS - 500017. ...pETrrtoNER AND '1. The Union of lndia, tr/inistry of Finance, Represented by its Secretary, Department of Revenue GOl, North Block, New Delhi - 1'10 001. 2. The Chairman, Central Board of lndirect Taxes and Customs, Office at, Department of Revenue GOl, North Block, New Delhi - 1 10 001 . 3. The State of Telangana, Represented by the Principal Secretary Finance Department, Government of Telangana. 4. The Chief Commissioner of GST and Customs, Hyderabad Zone, Office at, GST Bhavan, L B Stadium Road, Basheerbagh, TS - 500004. 5. The Joint Commissioner (Appeals - ll), Hyderabad, Office at, Office of Commissioner (Appeals - ll) GST and Central Tax, GST Bhavan, LB Stadium Road, Basheerbag, TS - 500004. 6. The Assistant Commissioner of Central Tax, Central Excise and Service Tax, Tarnaka Division, Hyderabad, Office at Assistant Commissioner, Central Taxes, Tarnaka Division, Elegant Edifice, 34418/2 NR, Ramanthapur, Hyderabad - 500013 ...REspoNDENrs Petition Under Arlicle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ of certiorari or any other appropriate writ, order or direction setting aside the lmpugned Order in Appeal No.HYD-GST-SC-AP2-002-21-22 dated 0910412021 (received on 21.04.2021) passed by the Respondent No-5 in confirming the Speaking Order No.19/ 2020-Refund daled 04.01.2021 passed by the Respondent No.6 for rejecting the claim for Refund of Rs.77,9'1,857/- liable to the Petitioner for the year April, 2019 to March, 2020. and b) This Honourable Court be pleased to issue a Writ or order declaring the Board Circular No.135lO5l2O2O - GST dated 3110312020 issued bythe Respondent No.2 as ultra vires of Section 54(3)(ii) of the CGST Act,2017 to the extent that it seeks to reject the refund of accumulated unutilized tax credit in cases where the input and output supplies are the same. and c) Consequently, Direct the Respondents and more particularly Respondent No.S and 6 to refund the amount of Rs.77,91,857/- under inverted tax structure in terms of Section 54 of CGST Act, 20'17 read with appropriate CGST Rules, 201 7 to the Petitioner. I THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY Petition Under Section 151 CPC praying that in the circumstanc3s staled in the affidavit filed in support of the petition, the High Court may be pleased to stay the operation and execution of the lmpugned Order in Appeal No.HYD-GST-SC- AP2-OO2-21- 22 daled 0910412021 (received on 2110412021) passed by the Respondent No.5 in confirming the Speaking Order No 19i 2020-Refund dated 0410112021 passed by the Respondent No.6 against the Petitioner lirm herein, pending disposal of the writ petition. Between: 1. The Union of lndia, Ministry of Finance, Represented by its Secretary, Department of Revenue GOl, North Block, New Delhi - 110 001. 2. The Chairman, Central Board of lndirect Taxes and Customs, Office at, Department of Revenue GOl, North Block, New Delhi - I10 001. 3. The State of Telangana, Represented by the Principal Secretary Finance Department, Government of Telangana. 4. The Chief Commissioner of GST and Customs, Hyderabad Zone, Office at, GST Bhavan, L B Stadium Road, Basheerbagh, TS - 500004. 5. The Joint Commissioner (Appeals - ll), Hyderabad, Office at, Office of Commissioner (Appeals - ll)GST and Central Tax, GST Bhavan, LU Stadium Road, Basheerbag, TS - 500004. 6. The Assistant Commissioner of Central Tax, Central Excise and Service Tax, Tarnaka Division, Hyderabad, Office at Assistant Commissioner, Central Taxes, Tarnaka Division, Elegant Edifice, 3-4418/2 NR, Ramanthapur, Hyderabad - 500013. ...PETITIONERS/RESPONDENTS 1,2,4,5&6 AND 1. Micro Systems and Services (Sole Proprietorship), Represented try its Sole Proprietor, Smt. Yeshala Prasuna Giri Having its office at, 12-5-35lA9/S'1 , Ballad Estate, Tarnaka, Secunderabad, TS - 500017. ...RESPONDENT/WRIT PETITIONER 2. State of Telangana, Represented by the Principal Secretary to Government, Finance Department, Govemment of Telangana. ......(REsPoNoENr lj3,ilt[i3 Petition Under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pieased to vacate the lnterim Order dated 31-'12-2021 in W.P. 37 465 of 2021 and dismiss the above referred writ petition. Counsel for the Petitioner : SRI.MADHOOR SAICHANORAHAAS NAIDU / SRI.SAI CHANDRA HAAS Counsel for the Respondent No.1 : SRI.B.NARASIMHA SARMA Counsel for the Respondent No.3 : G.P FOR FINANCE AND PLANNING Counsel for the Respondent Nos.2 & 4 to 6 : SRI.DOMINIC FERNANDEIS (senior standing counsel for CBIC)

The Court made the following ORDER l.A.NO:1 OF 2021 I.A.NO:1 OF 2022

THE HON'BLE THE CHIEF JUSTTCE UJJAL BHUYAN AND THE HON'BLD SRI JUSTICE C.V.BHASKAR REDDY Writ Petition No.37465 of 2O2l ORDER: t1'er tht ttot t)t, !tle t i .' , ' , i 'i,,i ilii:,i/,,n/ Hcard Mr. Sai Chandra IIaas, lcarncd counscl for thc petitioner and Mr. I)omilric licrnandcs, lcarned Scnior Standing Counscl for Cfll(l appcaring lor rcspondenl Nos.2 and 4 to6

2.

By fiting this u'rit pctitiorl, urrdcr Articlc 226 of nc Constitution of India, pctitioncr prays for the lollowing relief: "a) Thal this I Ion'ble Court bc plcased to issuc a writ of ccrtiorari or any othcr appropriate writ, order or dircction sctting asidc thc Impugncd Ordcr in Appeal No.lIYD-GST-SC A1>2-OO2 21.22 datcd 09.O4.2021 (received on 21 .O4.2O21) passcd by thc Respondent No.S in conlirming thc Spcaking Ordcr No. 19l2O2O- Refund dated O4.Ol.2O2l passed by thc Rcspondcnt No.6 for rejccting lhc claim for Rcfund of Rs.77 ,91,857 I - liablc to thc l)ctitioncr for the year April, 2O19 to March, 2O2O: and b) This I lon'ble Court be plcased to issuc a Writ or / ord.er dcctaring thc Iloard Circular No.135/O5/2020- GST dated 31.O3.2O2O issued by thc Respondcnt No.2 as ultra uires of Sccl.ion 54(3)(ii) of thc CGST Act,2017 to thc exlcnt that it sccks to rejcct thc rcfund of t) I

accumulatcd unutilizcd ta-r crcdit in cascs r.r'lrcrt-- thc input & output supplics are the samet arrrl c) Conscqucntly, l)irect thc llcspondcnts and rl()re particularly l?cspondent No.5 & 6 to rcfirnd the amount of 11s.77,91,857 I under in\'('rlcd t:L{ structurc in terms of Scction 54 of CGS'I Act. 2017 rcad with appropriatc CGS'I' llulcs, 2O l7 to the Petitioner, in thc intcrests ofjustice and d) Award costs to the l)etitioner; and c) Iror such further ernd other rcliefs, as tl'ris Flon'ble Court may deem fit and proper in thc nalure and circumstanccs of the case may rcquirc."

3.

Pctitioner is a proprictary concorn cst:rblishr:d in the yc?rr 2005 cngaged in thc busincss of asscmbling and supply of computcrs and computcr parts. lrr-titioncr is a registcrcd pcrson as per provisions ol thcr (lcntral (]oods and Scrviccs Tax Act, 2017 (briefly, 'thc CCST Act' hereinafter). It is also a rcgistered supplicr to a[1 the Dcfcncc, Rcscarch & Dcvclopmcnt Organisation (DRDO) Laboratorics and affiliates across the countrv

4.

On the matcrials supplicd by it, pt:titioner addod 5olo Goods and Services Tax (GST) as pcr the conocssionrd rate fixed by' thc Govcrnmcnt lor supplics to I)I? t)O. Petitione r filc<l application on 02.12.2O2O bcforc respondcnt No.6 cliriming rcfund of Rs.77,91,a57 I unclcr invcrted tax structure in tcrms of Scction 54 of thc CCSl' Act.

Rcspondcnt No.(r issucd shor.r' c:1Llsc noticc dalcd

5.

Notwithstanding thc rcpll' submittcd by the rvhy rcfund application slror-rld not bc rcjccted lor contravention of Scction 54(3)(ii) ol thc CGST Act. 28.12.2020 calling upon thc pctitioncr to shou, causc as to Thcrcafter pctitioncr submittcd rcplr- datcd 0 I .01 .202 I . petitioner, rcspondcnt No.6 rejcctcd lhr: rcfund application datcd 02. 12.2O2O try a spc:rl<irrg ordcr dated 04.01 .202 I While rcjccting thc rcfund application ol thc pctitioncr, responde nt No.6 rclicd u pon :r Circu lar of the Ccntral Board ol Indircct 'laxcs and Customs (bricfly, 'the Board' hercinaftcr) dated 3 1 .03.2020. 6. Aggricvcd by such rcjcction, pctitioner lilcd appeal undcr Section I 07 of thc CGST A<:t bcftrrc rcspondent No.5 on 04.O2.2021 . Howcvcr, rcspondcnt No.5 by ordcr dated 09.O4.2021 confirmcd thc rcjccLion ordcr datcd 04.O1.2021 and dismisscd thc appcal.

7.

Aggricvcd thcrcby, thc prcscnt writ pctition camc to bc lilcd. B. Lcarncd counscl for thc pctitioncr submits that thc 'Board has issucd a clarifi<:atorv Circular datcd 06.O7 .2022 clarifying paragraph 3.2 of thc Circular datcd 3 1 .O3.2O2O

rclurld application of thc pctitioncr. 'l'ht rc'lirr-c. in vicu oI rcliecl upon b1, rcspondent Nos.6 ancl .-; rr.hik: rcjcctirlg thc tht' <'hrrngcd circumstanccs, rcspondcnts nra-\ bc directed 8.I . [-carncd counscl appcaring for rr:spondcrrt Nos,.2 and 4 to 6 hor.r,cvcr submits that rcspondent Nos.5 and 6 had takcn thc decision on thc basis of thc c.xistirrg (lir<:ular of thc []o:rrd. 'lhcrcforc, such dr:cision of thc []oirrcl c:rnnot bc farrltcd. I Iowcvcr, as to applicabilit,t of the (lircrrlar clatcd 06.07.2022, hc submits that this Circular ca:not bt: appliecl rctrospcctively.

9.

Submissions madc by learned c<>unscl tbr thc partics have rcceivcd thc duc considcration of thc Cotrrt.

10.

From a pcrusal of the ordcr datcd O .Ctl.2021 , passcd by respondcnt No.6, it is secn tl'rat pctitioner had filed relund claim for Rs.77,9 1,857 / on 02.12.2O2O for the period lrom April, 2019 to March, 2020. Contention of the petitioner was that it had sold goods undcr concc ssional/ invcrtcd tax rate to DRDO u,hich had issucd thc rcquisitc ccrtificatcs. Petitioncr is cligible for rclund of thc trforcsaid amount of crcdit paid by it tor,i ards prrocuring rau, matcrials at fuli ratc of tzrx. Thcrcfore, thc request for to allo',r tl-rc rcfund application.

relund under thc invcrtcd t.1x structurc in torms of Scction 54 of thc CGST Act rcad u'itlr Rulcs B9(,i) and 89(5) ol the Ccntral (ioods and Scrviccs Tax Rulcs, 20 l7 (bricfly, 'the CGST Rulcs' hcrcinaftcr) u,as madc. Ilcspondcnt No.6 adverted to thc I-Joard Circular datcd il 1 -O3.2020 more particularly to para 3.2 thcrcof as pcr rvhic:h it was <:larificd that refund of accumulatcd Input Tax Crcdit (lTC) under clausc (ii) ol sub scction (3) oi Scction 5'l of thc CGST Act r.vould not bc applicablc in cascs u'hcrc thc input. and thc output supphcs arr: thc samc. 'lhc mairr thrust of thc above Board's Circular \vas that. t.hc inpul and thc output suppiies should bc invariably differcnt. On the above basis, thc relund claim of thc pc[itioncr ra,as rcjcctcd. This order of respondcnt No.6 rvas alfirmcd in appcal by respondent No.5 vidc thc ordcr dated 09.04.2O2 1 ll At this stagc, wc may advcrt to para 3.2 ol the Board's Circular datcd 3I .O3.2O2O rvhich rcads as under:- "Refund of accumulated ITC in tcrms of clause (ii) of sub-scction (3) ot scction 54 of rhc CGST nct is available whcrc thc crcdit has accumulalcd on account of ratc o[ tax on inputs being highcr t.han thc rate of tax on outpul supplics. lt is notcworthy that, the input and output bcing thc samc in such cascs, though attracting dilfcrent ta-\ ratcs at differcnt I

points in tirnc. do not gct co\ cr'('(l ult(l(,r thc i)ro\isi()11s of clausc (ii) of sub scction (.ll ol sectiorr 54 ol' tllc CCS'I' Act. It is hereby clarified that refund of accumulated ITC under clause {ii) of sub- section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same."

12.

From t-he above, it is scen that according to the []oard, rclund of acr:umulatcd ITC in tcrms of Scction :;4(3)(ii) ol thc CGST Act was availablc i,r,hcrc thc. crcdit accumulatcd on account of ratc of tax on inpr-rts \\ AS l-righer than thc ratc of t:ix on output sLlpplics. Cl.rrif-r'ing furthcr. it was held that refund of accumulatcd ITO undcr Scction 54(3)(ii) of thc CGS't Act would not bc applicablc in ('ascs \\rhcrc input and output suppiies arc lhe samc 1 3. Wc find that rcprcsentations wcrc received sccking <:lanfication o[ paragraph 3.2 of thc Board Circular dated 3l .O3.2O2O . Thc clarification was sought for in cases u,hcre the supplier is rcquired to supply goods at lorver rate undcr concessional notification issucd by thc Govct'nmcnt In ordcr to clarify the issuc and to cnsurc uniformity, l3oard exerciscd powcr under Section 168(1) of thc CCST Act and issued Circular No.173lOS12022-GST dated ()6.O7.2022. Board has clarificd that it u,as not thc intent l I

cascs \\'hcrc thc suppiicr is making suppl-1 of goods undcr a conccssional notifical.ion and thc ratc of tax ori output suppl.y is lcss than thc ralc of l.ax on inpul supplv (of thc SAMC goods) at thc samc point of timc duc to suppll' of goods by thc supplier undcr a <:onccssional notillcation Thercforc, it has bccn clarificd that ir-r such cascs, rcfund of paragraplr 3.2 of Circular d:rtcd 31.03.202O to <:ovcr tltc of accumulatcd input ta.x crcdit on account of invcrtcd structurc r,r,ould bc allowcd in cascs u'hcrc ac--cum u lation ol input tax credit is on account of raLc of tax on output suppll, being lcss than thc ratc of tax on inputs (samc goods) at l-hc samc point of timc as pcr somc r:onccssional notification issued by thc Govcrnmcnt providing for lowcr rate of tax for some spccificd supplics subjcct to fullilmcnt of other conditions. Conscqucnlly, paragraph 3.2 of thc Circular datcd 3 1 .O3.2O2O has non, bccn substit.ute d by the Circular datcd 06.O7.2022 as undcr: "3.2 lt rr.ay be notcd that refund of accumulated ITC in terms of clause (ii) of first proviso to sub-section (3) o[ section 5.4 of thc C(}ST Act is availablc whcrc the crcdit has accumulatcd on account of ratc of terx on inputs bcing higher than thc ratc of tax on output supplics. It is notcworthy that, thc input and output bcing thc samc in such cascs. though

s attracting diflcrcnt tax ratcs at diflercnt points ir] time. cftr not gct colcrcd under thc provrsions o[ claLrsc (ri) ol thc first proviso to sub scction (3) of scction 54 o[ thc C(iS'l' A(]1. 3.3 'l'hcre ma_v horvcvcr, be cascs u,here though inputs and output goods are samc but thc outpui supplics arc made undcr a conccssion:rI notihcatiorr duc to which thc ratc of tzrx on output supplics is lcss than thc ratc of ta-r on inputs. In such cases, a..r thc rate of la-\ o[ output supply is less than the rat(. o[ ta-x on inpuLs at thc samc point of time due tc, supply of goods by thc supplicr under such conccssi<;nal notilication, thc crcdit accumulated on account o[ thc satmc is admissiblc for rclund undcr thc provisions of clausc (ii) of thc flrst proviso to su b section (3) of section 54 of thc CGS'I' Act, other than thc cascs where output supply is cither Nil rated or lully cxcmptcd, aLrtd also providcd that supply of such goods or scrvices €rre not notified by the Govcrnment foi their exclusion from rcfund of accumulatcd l'['C under thc said clausc."

14.

The above Circular datcd 06.07.2022 is clalificatory in n:rturc 'whercby paragraph 3.2 of thc CirculzLr datcd 3 | .O3 .2020 has been substitutcd as supra. Bcing clarilicatory, Circular datcd 06.07.2022 inscrLing thc above clarilication would havc thc cffcct lrom thc dal c u,hcn Cir<:ular dated 3 t .O3.2O2O camc into effcct.

() I5. Il rhis bc thc posit.ion, thcn tlrc <:larim oI thc pctil-ioncr is liablc to bc rc considcrcd on thc basis of thc Cir<:ular dated 31.03.2020 as clarificd by thc Circular dated 06.07.2022. 16. Conscqucntly, wc sct asidc thc orders dated 04.O1 .2021 of respondcnt No.6 and datcd 09.O4.2021 <.,f respondcnt No.

5.

Thc mattcr is rcmanded back to respondent No.6 for rc-considcration in tcrms ol the Circular datcd 06.O7.2022 as cxtractcd above. I-et the above cxcrcisc on rcmand bc carried out by rcspondcnt No.6 within a pcriod of cight wccks from thc datc of rcccipt of a copy of this ordcr.

17.

Writ pctition is accordingly allowcd. Misccllancous applications pcnding, if any, shatt stand closed. Howcvcr, thcre sha.ll be no ordcr as to costs. .K.ONE M DEPUTY REGIS //// SECTIO OFFICER The Secretary, Union of lndia, Ministry of Finance, Department of Revenue GOI, North Block, New Delhi - 110 001. The Chairman, Central Board of lndirect Taxes and Customs, Office at, Department of Revenue GOl, North Block, New Delhi - 110 001 . The Principal Secretary, Finance Department, Government of Telangana, State of Telangana at Hyderabad. The Chief Commissioner of GST and Customs, Hyderabad Zone, Office at, GST Bhavan, L B Stadium Road, Basheerbagh, TS - 500004. The Joint Commissioner (Appeals - ll), Hyderabad, Office at, Office of Commissioner (Appeals - ll) GST and Central Tax, GST Bhavan, LB Stadium Road, Basheerbag, TS - 500004. 1. 2. 3. 4. 5. To

6.

The Assistant Commissioner of Central Tax, Central Excise and liervice Tax Tarnaka Division, Hyderabad, Office at Assistant Commissioner, Central Taxes, Tarnaka Division, Elegant Edifice, 3-4418/2 NR, Ramanthapur, Hyderabad - 500013. 7. Two CC to G.P FOR FINANCE AND PLANNING, High Court for:he State of Telangana at Hyderabad. (OUT)

8.

One CC to sRr.sAr CHANDRA HAAS, Advocate [OPUC]

9.

One CC to SRI.B.NARASIMHA SARMA, Advocate (OPUC) 10.One CC to SRI.DOMINIC FERNANDES (senior standing counse for CBIC) Advocate [OPUC] 1 1 . Two CD Copies

12.

One spare copy S.A p,5 I \

HIGH COURT DATED:0510912022 ORDER WP.No.37465 of 2021 ALLOWING THE W.P WITHOUT COSTS. )i \-- ; STA}; iJ I I :EP ?[fli- II b< _/

Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.