Where there is a law there is litigation! 

Under the pre-GST regime, the CESTAT (Customs Excise and Service Tax Appellate Tribunal) played an important role when it came to dispensing indirect tax litigation. And the expectation continues.

Although GST has recently turned five, it has witnessed a myriad of burning issues – right from the transitional provisions to the constitutionality of certain GST provisions. While the Government is taking adequate steps to address various industry concerns and contain unnecessary litigation, the pressing need for the establishment of the Goods and Service Tax Appellate Tribunal (GSTAT) remains clouded even today.

In the present-day scenario, the majority of disputed matters are stuck at the First Appeal level. Very few have moved directly to the High Court, considering the cost and time involved. Given the interpretational issues and gap in self-assessment of tax liabilities due to a lack of understanding of the law, there has been a huge rise in litigation. Non-establishment of GSTAT till date has only resulted in a huge backlog of cases and is increasing each day. 

During the 47^th GST Council meeting in June 2022, a Group of Ministers (GoM) was constituted to address various concerns raised by the States in relation to the constitution of the GSTAT. While we do not know when the Tribunal will see the light of the day, through this article, we have tried to discuss the issues faced by taxpayers due to the piling up of litigation. 

In several cases, the Appellate authorities have rejected the export refund claims and in the absence of GSTAT, taxpayers have been left remediless against such adverse orders thereby blocking huge working capital for them. This is also leading to financial burden on the trade which earns precious forex through exports. As and when the refunds would be granted, it is likely to result in another tussle to obtain the interest of 6% on delayed refund, where the cost of capital is way too high.

Another concern for the taxpayers is interest exposure. The delay in formulation of GSTAT and in turn, settlement of the cases will eventually expose the taxpayers to heavy interest liabilities at 18% (which is much higher than the prevailing bank lending rate). Considering the best-case scenario wherein GSTAT gets established and fully functional even by July 2024, interest liability will be approximately more than 100% of the tax liability for demands pertaining to FY 2017-18! 

The challenges faced are not limited to adverse appeal orders but are even faced where the First Appellate authorities rule in favour of taxpayers. It is often noticed that when favourable orders are passed, the Revenue may delay the implementation on the grounds of their intention to further litigate the matter before GSTAT. 

However, in one of the cases, Delhi High Court has taken cognizance of this challenge and held that taxpayers cannot be asked to wait endlessly for the respondents to contest the order of the Commissioner (Appeals). 

While there is an alternative remedy of the filing writ petition before the High Courts, it is pertinent to note that these Courts of law are generally not inclined to entertain writs involving “disputed questions of fact”. The Tribunals are treated as ‘final fact-finding’ authorities and in the absence of GSTAT, most of the issues under litigation involving disputes on facts are stuck up.

It would be alarming to learn that as per a copy of letter of the Additional Chief Secretary, Tax and Registration dated 21 February 2019, around 320 writ petitions have been filed against the orders of the First Appellate Authority in the State of Uttar Pradesh alone, on account of non-establishment of the GSTAT. If this figure is extrapolated for all the States, it will be a huge number! This clearly demonstrates how undue pressure is added on the already occupied High Courts!

As the old adage goes, “Justice delayed is Justice denied”. Hence, to allay the concerns, GST Council should take up setting-up of GSTAT on top priority!