By Vinay Kumar Jain and Jay Chheda, Advocates
1. Whether refund of GST paid on notice pay recovery is eligible in view of the Department Circular dated 3.8.2022?
Facts and Pleadings: The Petitioner is a non-banking finance company which filed an application for refund of GST paid by them on notice pay recovery from its employees. Notice pay means the payment of money to the employer by the employee for leaving the employment before the agreed period of employment has expired. The refund claim pertained to period prior to 3.8.2022.
The claim for refund was rejected by the original Adjudicating authority as well as the Appellate authority. Thus, the petitioner filed a Writ Petition before the Kerala High Court under Article 226 of the Constitution of India.
Judgement passed by Hon’ble Kerala High Court: The Hon’ble Kerala High Court allowed the writ petition and set aside the orders of the Respondent which denied the refund of GST paid on notice pay. The Hon’ble High Court held that the Petitioner was covered under Circular No. 178/10/2022-GST dated 3.8.2022 issued by CBIC which clarified that the amounts received as notice pay from employees is not a taxable transaction for the purpose of GST.
The department contended that the case of the Petitioner was not covered under the said circular as the Circular did not apply retrospectively and the period of refund involved is prior to issuance of Circular. The High Court rejected this contention and stated that the said circular had a retrospective application as it clarified the position of law and the Petitioner was entitled to all the benefits of the said circular. The Hon’ble High Court further held that clarifications issued by the Board are binding on the department.
The Revenue had also contended that the Petitioner’s writ application is not maintainable, and they should approach the GST Appellate Tribunal and pursue appellate remedy available under GST Law. In this regard the High court held that since the GST Tribunal was yet to be constituted the petitioner had a right to approach the High Court under Article 226 of the Constitution.
Manappuram Finance Ltd vs. Assistant Commissioner, Central Tax and Excise, WP(C) NO. 27373 OF 2022.
2. Whether mandatory pre-deposit condition for filing an appeal before CESTAT be waived off?
Facts and Pleadings – The Petitioner is running a business under the name and style of “Taxi for Sure”, connecting customers to various taxi operators.
The issue was whether the Petitioner is required to pay service tax on the commission received or the gross amount collected for the taxi service. The Petitioner was not in a position to make payment of pre-deposit amounting to Rs.1.45 crores for filing an appeal before CESTAT. Thus, the petitioner filed a Writ Petition before the Hon’ble Delhi High Court for waiver / relaxation of pre-deposit condition which is mandatory for filling an appeal before the CESTAT.
Judgement passed by the Delhi High Court– The Petitioner had suffered huge losses and hardly generated any revenue. Thus, the Petitioner was not in a position to make payment of the mandatory pre deposit for filing an appeal before the CESTAT. The case of the Petitioner before the CESTAT was that since it had received only a commission on the gross amount charged for the taxi service, it was not liable to pay service tax on the gross amount. The Petitioner had already discharged service tax on the commission received.
The Hon’ble Delhi High Court held that given the mitigating circumstances and financial condition of the Petitioner, the Petitioner would be eligible to file an appeal before the CESTAT by depositing a lowered amount of Rs. 50 lakhs instead of the entire pre-deposit amounting to Rs. 1.45 crores. Thus, the High court lowered the pre-deposit amount considering the financial condition of the Petitioner.
MS ANI Technologies Pvt Ltd. v Union of India & ORS.W.P.(C) 16613/2022