Baccarose Perfumes And Beauty Products Pvt. Ltd. & Anr. Vs State of Gujarat

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. Heard learned advocate Mr. Uchit Sheth for the petitioners and learned Assistant Government Pleader Mr. Raj Tanna for the respondent No.1.

2. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the legality and validity of the order dated 05.02.2022 passed by the respondent No.2 in DRC-01 raising demand of Rs. 1,63,16,101/-.

3. The brief facts of the case are that the petitioner is having a Free Trade Warehousing Zone Unit in Kandla Special Economic Zone. The petitioner is also registered under the provisions of Central / State Goods and Services Tax Act, 2017 (for short ‘the GST Act’). The ordinary tax is required to be paid along with monthly return in Form GSTR-3B as per Rule 61 of the Central / State Goods and Services Tax Act, 2017 (GST Rule). If the goods are required to be cleared from SEZ Unit to Domestic Tariff Area Unit, then customs duty as well as Integrity Goods and Service Tax (IGST) is required to be paid before clearance of the goods in accordance with the provisions of the Special Economic Zone Act, 2005 (for short “the SEZ Act”).

4. It is the case of the petitioner that upon clearance of goods from Special Economic Zone Area, the petitioner paid the IGST through Treasury Challan (TR-6). However, the GST portal does not reflect tax paid with TR-6 challan on the portal, which has resulted into a situation of difference between the form GSTR-1 and GSTR-3B returns filed by the petitioner, as the petitioner did not show the out-put in form GSTR-3B, which was shown in the form GSTR-1.

5. As per Rule-61 (2) of the GST Rules, the out-put tax liability is to be discharged either by the electronic cash ledger or electronic credit ledger. However, as the petitioner discharged the liability of IGST through TR-6 challan, the same was not permissible to be shown in form GSTR-3B return.

6. Considering the difference between form GSTR-1 and GSTR-3B filed by the petitioner, notice was issued to the petitioner by the respondent in Form GST ASMT-10 on 20.08.2021 seeking explanation from the petitioner regarding difference between two forms GSTR-1 and GSTR-3B.

7. The petitioner by letter dated 08.12.2021 explained the details about the discrepancy of both the returns along with the copies of the amount of IGST paid by TR-6 challan. However, the respondents were not satisfied and intimation in Form GST DRC-1A was issued on 08.12.2021. The petitioner replied to the said intimation explaining the difference in both the returns. Thereafter, the notice under form DRC-01 was issued. The petitioner objected to the issuance of such show cause notice by filing detailed reply again explaining the difference between GSTR-1 and GSTR-3B. The respondent No.2 however, without considering the reply of the petitioner proceeded to pass the impugned order dated 05.02.2022 to demand tax with interest and penalty ignoring the IGST paid by the petitioner by TR-6 challan.

8. On perusal of the impugned order dated 05.02.2022, we are unable to find any reason assigned by the respondent No.2 to raise the demand of Rs. 1,63,16,101/- under Section 74 of the GST Act, except the bare statement that “but no reply or evidences has been provided from your side. Therefore, the order as per sub section (9) of Section 74 is being issued xxxxxxxx”

9. Affidavit-in-reply has been filed on behalf of respondent No.3- GST and Network, wherein it is averred as under :-

“(6) It is submitted that as per Customs Act and the SEZ Act, any goods removed from a Special Economic Zone to the DTA shall be chargeable to duties of customs which primarily includes basic customs duty, IGST and which can also include antidumping, countervailing and safeguard duties (under the Customs Tariff Act, 1975), wherever applicable. Supply from SEZ Unit to DTA is treated as import for DTA unit and therefore the DTA unit is required to pay IGST and other applicable duties on filing of bill on entry.”

10. From the above averments made by the GST and Network, it is apparent that the petitioner was not required to pay the IGST on the goods cleared from (Domestic and Tariff Area). Supply from SEZ Unit to DTA is treated as import for DTA Unit and therefore the DTA unit is required to pay IGST and other applicable duties on filing of the Bill on Entry.

11. Considering the above position of law, the petitioner was not required to pay to IGST on the goods supplied from SEZ unit to DTA. The petitioner has not claimed any refund for such IGST paid, which otherwise was payable by DTA Unit. Therefore, there is no liability of the petitioner to pay the IGST under the provisions of the Integrated Goods and Service Tax Act, 2017 read with GST Act. The respondent No.2 has failed to consider the same and passed the impugned order merely on account of the difference between in form GSTR-1 and GSTR-3B ignoring the provisions of Section 74 which provides the mechanism of adjudication of show cause notice by taking into consideration the reply filed by the petitioner as well as the provisions of the Act.

12. On perusal of the affidavit-in-reply filed on behalf of the respondent No.2, an attempt is made to justify the impugned order which lacks any reasoning. The deponent of the affidavit filed on behalf of the respondent No.2, has tried to improve upon the impugned order by referring to Section 37 of the GST Act to contend that as per Section 37 of the GST Act furnishing the details of the output supply is required to be declared in GSTR-1 and as per Section 39 of the GST Act, the payment of tax declared in GSTR-1 is to be same as to be paid in Form GSTR-3B return and therefore if there is any difference, the same would amount to non payment of tax resulting into demand, interest and payment. However, the deponent has failed to consider the explanation provided by the petitioner and merely referring to the provisions of the Integrated Goods and Service Tax Act, 2017 dehors to the facts on record and explanation tendered by the petitioner, has passed the impugned order, which is not tenable in the eyes of law.

13. The petition is allowed accordingly. The impugned order dated 05.02.2022 passed by the respondent No.2 is hereby quashed and set aside. No order as to costs.