Navigating GST Demands, Assessment Strategy, and Audit Defense with UBR Legal Advocates

JOURNEY FROM GST DEMANDS TO ASSESSMENT STRATEGY AND DEFENSE, INCLUDING PENALTIES Bharat Raichandani Advocate Manging Partner UBR Legal Advocates UBR Legal Advocates

GST DEMAND TRIGGERS Mismatch in returns (GSTR-1 vs. GSTR-3B vs. GSTR-2A/2B) Input Tax Credit (ITC) mismatches Suppression of turnover Wrong classification of goods/services Non-payment or short payment of tax Fake invoicing and fraud cases Fake invoicing and fraud cases

ASSESSMENT AND ADJUDICATION PROCESS Self-Assessment (Section 59) Provisional Assessment (Section 60) Scrutiny Assessment (Section 61) Best Judgment Assessment (Sections 62-63) Summary Assessment (Section 64)

AUDIT Notice of Audit-A plain reading of Section 65 does not suggest any bar in exercise of that power, if the assessee had faced any earlier proceeding under section 74. M/s. Rising India Vs. Commissioner Commercial Taxes and Ors.-2023-TIOL-557-HC-ALL-GST Whether the Proper Officer can initiate action under section 73 or 74 of the CGST Act after issue of Aduit Report? - ABT Limited Vs Additional Commissioner of GST & Central Excise (Madras High Court) CAG cannot conduct service tax audit of private agencies- Kiran Gems Pvt Ltd V. Union Of India & Ors 2021 (46) GSTL 14 (Bom) For being eligible under the SVLDRS Scheme, a written communication of amount of duty liability admitted by the person concerned during equiry , investigation or audit would be quantification K Raheja Pvt Ltd. V/s. Union of India & Ors. 2023-TIOL-154-hc-MUM-ST Petitioner due to untimely demise of his Auditor and on account of bona fide reasons could not making GST payment, file returns. Hon ble Court held set aside the impugned orders and directed the Revenue to restore the GST registration of the petitioner, subject to payment of all dues by the petitioner. INXL Digital Vs Addl Commissioner GST & CT - 2022-TIOL-1424-HC-KAR-GST HC dismisses Writ against SCN which was based on GST audit observation Shailmar Chemical Works (P) Ltd. v Commissioner of Commercial Taxes and Goods and Service Tax WP (C) No. 13540 of 2023 [Orissa HC] UBR Legal Advocates

INVESTIGATION ITC Cannot be denied to recipient without due investigation of supplier - Suncraft Energy Private Limited and Anr. Vs. Assistant Commissioner, State Tax- 2023-TIOL-917-HC-KOL-GST Amount paid voluntary during investigation to be considered as pre-deposit under section 107 M/s. Vinod Metal v The State of Maharashtra WPL No. 17026 of 2023 [Bom HC] Investigating Another Assessee s Records Doesn t Equate to Proceedings Against Proceeding against Assessee Metal Edge v Sales Tax Officer Class II & Anr WP (C) 8842 0f 2023 Del HC GST officials cannot resort to physical violence while conducting search, interrogation or investigation. M/s. Agarwal Foundries Pvt. Ltd. & Ors. v. Union of India & Ors. 2020-TIOL-1898-HC-TELANGANA-GST Payment towards tax, interest, penalty while investigation underway is not allowed. Deem Distributors Pvt Ltd. v. Union of India. 2021-TIOL-1654-HC-TELANGANA-GST UBR Legal Advocates

POWER OF INSPECTION, SEARCH & SEIZURE UNDER SECTION 67 Legal proceeding under Section 130 cannot initiated when Goods in transit is accompanied with invoice and E-way Bill. Shiv Enterprises Vs. State of Punjab. 2022 (58) GSTL 385 (P & H). Good and vehicle seized during transportation are to be released on ascertaining prima facie ownership and depositing total amount comprised in Section 130 notice. Shel Singh Purohit Vs. CTO. 2022 (56) GSTL 262 (Kar.) Amount deposited during search cannot taken to be voluntary Since no proceedings under section 74(1) have been initiated. Modern Insecticides Ltd and Anr. v/s. Commissioner Central Goods and Service Tax & Anr. 2023-TIOL-502-HC-P&H-GST Petitioner are unable to make challenge to the seizure and confiscation on account of the penalty imposed on them. Mohammed Akmam Uddin Ahmed & Ors. V/s. Commissioner Appeals Customs and Central Excise & Ors.-2023-TIOL-514-hc-DEL-CUS. No Confiscation without seizure-Once the goods are to be treated as seized u/s 67(2), the same would be liable to be provisionally released.-Dhanlaxmi Metals V/s. state of Gujarat & Ors.-2023-TIOL-113-HC-AHM-GST. Assessee cannot be indefinitely detained in custody Paresh Nathalal Chauhan V. State Of Gujarat. 2022-TIOL-09-SC-GST Complete investigation has been made in an irresponsible manner, without following due process of law. Union of India V/s. Magga Ram-2022-TIOL-1070-HC- RAJ-NDPS- 2022-TIOL-1070-HC-RAJ-NDPS. Without conducting any enquiry or investigation, the authority straight away proceeded to issue the Show Cause Notice. Satyam Iron and steel Company Pvt Ltd. V/s. The commissioner Central Excise and service Tax -2023-TIOL-475-HC-KOL-CX Investigation has been completed and charge sheet has been filed-Alligation are to be established based on evidence- Ratnambar Kaushik V/s. Union of India - 2022-TIOL-104-SC-GST UBR Legal Advocates

REASON TO BELIEVE UNDER SECTION 69 & SECTION 70 Reason to believe means having knowledge of facts (although does not mean having direct knowledge), that would make any reasonable person, knowing the same facts, to reasonably conclude the same thing. As per the Indian Penal Code, 1860, A person is said to have reason to believe a thing, if he has sufficient cause to believe that thing but not otherwise. The Hon ble HC examines validity of Reasons to Believe in mining lease case. Marjit Basumatary vs Union of India -2023-TIOL-657-HC-GUW-GST Mere suspicion cannot be sufficient evidence to invoke section 67 of CGST Act 2017.Tvl Rising International Co. Vs. Commissioner of Central GST and Central Excise WP (MD) No. 12152 of 2020 Search and seizure proceeding invalid in absence of reason to believe. Union of India & Ors. Vs. Mangnum steel Ltd. Civil Appeal Nos. 9597-9599 of 2011. ITC can be blocked under Rule 86A where Reason to believe that Fraudulent or Ineligible Credit is availed. Rajnandini Metal Ltd Vs. Union of India & ors. CWP No. 26661 of 2021 (O &M)(P&H) GST officers have no power to seize cash during search operations. Arvind Goyal CA Vs. Union of India & Ors. - 2023-TIOL-124-HC-DEL-GST. To invoke Section 67 of GST Act existence of reason to believe is mandatory. Sandip Kumar Singhal Vs Deputy Commissioner WPA 321 of 2023 (Culcutta High Court). UBR Legal Advocates

POWER TO ARREST UNDER SECTION 69 Illegal Arrest without notice for recovery of GST: HC Grants bail to accused. Ravinder Nath Sharma Vs. Union of India. Criminal Misc. (Allahabad HC)Bail Application No. 26376 of 2023. Person summoned u/s 69 of CGST Act,2017 cannot invoke section 438 of Code of Criminal Procedure. State of Gujarat Etc. V/s. Choodamani Parmeshwaran Iyer & Anr. Etc.(Supreme Court) SLP (Cri). No. 4212-4213 of 2019. Appellants was arrested for the offences punishable under Section 69, 132(1)(a) of the Central Goods and Services Act, 2017. Makhijani Pushpak Harish Vs. The State of Gujarat [2023-TIOL-39-SC GST]- Bail once granted cannot be cancelled on a request from the side of the investigating agency. Central Goods and Service Tax Delhi East Vs Sh. Naval Kumar & Ors. [2021-TIOL-1317-HC-DEL-GST] Delegation by officer under Section 69(1) is ought to be specific. Deep Suresh Gadhech Vs. State of Gujarat 2020 (43) GSTL 641(Guj.) Power of arrest should not be exercised at the whims and caprices of any officer, it should be exercised in exceptional circumstances during investigation. Akhil Krishan Maggu And Anr Vs Deputy Director Directorate General Of GST Intelligence And Ors-2019-TIOL-2615-HC-P&H-GST The requirement under Section 69 (1) is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. Daulat Samirmal Mehta Vs UoI-2021-TIOL-390-HC-MUM-GST UBR Legal Advocates

POWER TO ISSUE SUMMONS UNDER SECTION 70 No summons directly to be issued to Managing Director Century Plyboards (India) Ltd. & Anr. v. UOI & Ors TS-229-HC-2022-(GAUH)-CUST; INSTRUCTION No. 03/2022-23 (GST-Investigation) - CBIC dated 17.08.2022. Section 70 of the GST Acts, the proper officer has only power to issue summons whose attendance is requires.M/s. Sai Balaji Associates Vs. The State of Andhra Pradesh (W.P. No. 4663 of 2023) No bar on issue of Section 70 summons before final assessment. Prakash Chandra Purohit V/s. Union of India Civil WP No. 2750/2022 (Raj.) Issuance of summons after completion of adjudication proceedings not sustainable. Mohit Kirana Store Vs. CBIC. 2022 (57) GSTL 225 (Raj.) The Hon ble Bombay High Court directs GST department to issue norms for insurance of summons during Investigation. Shalaka Infra-Tech India Pvt. Ltd. Vs. The Union of India (WP No. 1745 of 2022 Bombay High Court) UBR Legal Advocates

PRE SHOW CAUSE NOTICE CONSULTATION Is mandatory before issuance of show cause notice. CBEC Circular No. 1053/02/2017-CX dated 10.03.2017 (Master Circular). Pre-Show cause Notice consultation not Mandatory but Directory & Discretionary. Jagdish Das Vs. Union of India WPA No. 281 of 2022 Pre-show cause notice consultation necessary even if same is preventive/ related to offence. L And T Hydrocarbon Engineering Ltd Vs Union Of India 2022 TIOL 403 HC AHM CX. Pre-show cause notice requirement under section 73 and 74 of the CGST Act, read with rule 142(1A) of CGST Act. Gulati Enterprise V/s. Central Broad of Indirect Taxes and Customs & Ors.2022-TIOL-750-HC-DEL-GST. Pre-show cause notice consultation mandatory before issuance of SCN. Dharamshil Agencies Vs. Union of India- R/SCA No. 8255 of 2019. Form GST DRC-01A is a pre-SCN intimation-principles of Natural Justice must be followed. Nanhey Mal Munna Lal Vs. state of U.P. (Allahabad High Court) - UBR Legal Advocates

SHOW CAUSE NOTICE Issue of mandatory pre-consultation before Issue of SCN. Rochem Separation Systems (India)Pvt. Ltd. V/s. Union of India & Ors. [2023-TIOL-416-HC-MUM-GST] Revenue Department cannot go beyond scope of SCN to create new ground at adjudication stage CJ Darcl Logistics Limited V/s Union of India [2023-TIOL-247 HC-JHARKHAND-GST] SCN issued without reasons/allegations violates principles of Natural Justice. Surendra Kumar Jain V/s. Principal Commissioner & Anr. W.P.(C) 17700/2022(Del HC) Sufficient time should be given to submit reply to SCN NTC Industries Ltd vs State Tax Officer [MAT 557 of 2022 with IA No. CAN 1 of 2022], Balaji Traders Vs STO [2021-TIOL- 2068-HC-MAD-GST] SCN to be issued before raising demand of penalty. D Rama Kotiah And Company Vs State Of Andhra Pradesh [2018-TIOL-3108-HC-AP-GST] UBR Legal Advocates

REPLY TO SHOW CAUSE NOTICE Assessee should get reasonable time to file reply. Wallem shipmanagment (India) Pvt Ltd. Vs. The Union of India & Ors. Bombay Hc Writ Petition No. 3460 of 2021 Mere no reply to SCN cannot be ground for cancellation of GST registration. Acambis Helpline Management Pvt. Ltd. V/s. Union of India (Allahabad High Court)(Writ Tax No. 185 of 2022) Multiple summons cannot be issued to assessee without giving time to assessee for submitting its reply to a summon before a second summon can be issued. Subway Systems India Pvt Ltd. vs. UOI [TS-639-HC(P&H)-2021-GST] HC slams VAT Commissioner for not granting time to Reply to SCN Harshit Construction V/s. Joint Commissioner of Commercial Taxes Legal (Tela Hc) (WP No. 32644 of 2022) Department to consider Assessee's representation w.r.t. simultaneous issuance of pre-show cause notice. Formative Tex Fax vs. State of Gujarat [TS-846-HC-2020(GUJ)-NT] Principles of natural justice violated when registration was cancelled without referring to SCN or response thereto: Brajesh Enterprises Vs. State of Bihar [2022 (57) GSTL 109 (Pat.)] UBR Legal Advocates

DEMAND Authority cannot confer themselves the jurisdiction which is not vested in them under the law M/s. Ram Textiles Ltd., Rampur Vs The Income Tax OfficeR, Rampur reported in AIR 1973 SC 1362, Kiran Gems Private Limited vs Union of India and Ors. (Writ Petition No. 1135 of 2019) passed by the Hon ble Bombay High Court, Matrix Traders vs. The Deputy Assistant Commissioner & Anr. [TS-224-HC(AP)-2022-GST] No suppression, if demand is based on interpretation of law. Vinoth Shipping Services v. Commr. of C.EX & ST, Tirunelveli 2021 (55) GSTL 313 (Tri- Chennai), Commr. Of S.T., New Delhi v. Melange Developers Private Limited - 2020 (33) G.S.T.L. 116 (Tri. - LB). Demand Order passed without considering reply to SCN is not sustainable. Engineering Aids V/s. State Tax Officer (Circle) (Mad. HC) W.P. No. 28124 of 2022 No demand can be raised merely by comparing STR-3 return with the balance sheet figures. M/s Go Bindas Entertainment Pvt Ltd vs. CST - 2020-TIOL-890-CESTAT-ALL, Karnataka Industrial Areas Dev. BOARD V. Commr. Of Central Tax, Bangalore North - 2020 (40) G.S.T.L. 33 (Tri. - Bang.) UBR Legal Advocates

RECOVERY PROCEEDINGS Recovery proceedings cannot be initiated for a period of three months from the date of service of the order in terms of section 78 of the CGST Act. Alkem Laboratories Ltd Vs Union of India [2021-TIOL-328-HC-AHM-GST] Recovery proceeding cannot be initiated when time to file a statutory appeal has not been expired Purulia Metal Casting Pvt. Ltd. Versus Assistant Commissioner of State Tax, Purulia Charge & Ors. - W.P.A. 14286 of 2022 No recovery based on presumption. Kush Constructions v. CGHST Nacin 2019 (24) GSTL 606 (Tri. All) Recovery cannot be made at the time of search/inspection. M/S Bharat Acid And Chemicals, Proprietor Kanubhai Manilal Patel v. Union Of India. 2021-TIOL-289-HC-AHM-GST Where seller collected tax from traders but failed to remit same while traders availed ITC, recovery action against trader without examining seller is bad in law. DY Beathel Enterprises Vs State Tax Officer. 2022 (58) GSTL 269 (Mad.) Payment made during investigation can be considered as ascertained tax. UoI Vs Bundl Technologies Pvt Ltd [2022-TIOL-333-HC-KAR-GST] UBR Legal Advocates

PROVISIONAL ATTACHMENT Officers cannot provisionally attach the Cash Credit Account of the assessee. Manish Scrap Traders Vs Principal Commissioner [2022-TIOL-54-HC-Ahm GST] The burden that lies upon the revenue is heavy and has to be seen to be discharged by them in a proper manner in each and every case where power under Section 83 is invoked. Mutharamman & Company Vs PR Addl. Director General DGGI [2021-TIOL-1984-HC-MAD-GST] No question of invoking Section 83 for the purpose of provisional attachment once the final order in form GST DRC-07 is passed. Mahavir Enterprise Vs State Of Gujarat [2021-TIOL-1929-HC-AHM-GST] Commissioner cannot pass attachment orders without any expert evidence. Monopoly Innovations Pvt Ltd Vs Union of India [2021-TIOL-1907-HC-MUM-GST] Just because a search has taken place, it does not ipso facto necessitate provisional attachment of properties. Valerius Industries Vs Union of India [2019 SCC OnLine Guj 6866] UBR Legal Advocates

APPEALS Assessee allowed to file an appeal after delay of a negligible period. Sikha Debnath V/s. Assistant Commissioner os State Tax (Culcutta High Court) WPA 304 OF 2023 GST refund cannot be withheld merly because dept decided to file appeal against order granting refund. G.S Industries V/s. Commissioner Central Goods and Services Tax (Del HC)(W.P.(C) 14719/2022) Gujarat HC issues notice to Central & State Government to know steps taken for constituting GST Tribunal. Firmenich Aromatics Production (India) Pvt. Ltd. Vs Union of India R/SCA/ No. 23522 of 2022 ITC can be utilized for making pre-deposit for filing appeal under GST M/s Oasis Realty vs. Union of India WP(ST) No. 23507 of 2022 (Bom HC) - ITC UBR Legal Advocates

PENALTY FOR CERTAIN OFFENCES Assessment order levying penalty passed in violation of natural justice principles quashed. Nandi PVC Products Pvt Ltd vs. UOI [TS-504-HC(AP)-2022-GST] Interest and penalty can be levied on the portion of delayed payment pertaining to surcharge, CVD and SAD. Mahindra & Mahindra Ltd. vs. Union of India & Ors. - 2022-TIOL-1319-HC-MUM-CUS (Bom. HC) Penalty Leviable could not exceed the amount for Compounding of offence under GST Act. Britt Worldwide India Pvt. Ltd. V/s. Commissioner of Service Tax VIII(TS-515-CESTAT-2022-ST) Whether authorities could advert Section 130 having first exercised the powers of seizure under section 129 of CGST Act,2017. M K Enterprises V/s. State of Gujarat (2023-TIOL-543-HC-AHM-GST) UBR Legal Advocates

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