M/S. TOYOTA KIRLOSKAR MOTOR PVT. LTD., V. UNION OF INDIA

WP/22952/2023

AI Insights

The case involves M/s Toyota Kirloskar Motor Pvt. Ltd., the petitioner, challenging multiple Show Cause Notices issued by various GST authorities demanding input tax credit along with interest and penalties. The notices were issued under the Central Goods and Services Act, 2017 (CGST Act) and the Karnataka Goods and Services Act, 2017 (KGST Act). The petitioner argued that the State GST authorities lacked jurisdiction to issue notices after the Central GST authorities had already initiated proceedings on the same matter. The court found that the issuance of notices by State GST authorities was indeed without jurisdiction and quashed those notices. However, the court allowed the continuation of proceedings initiated by the Central GST authorities, provided the petitioner submits a response.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 723559 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 21-08-2024
• Assessment Year: misc
• Other Referred Cases: M/s. Bosch Limited Vs. the State of Karnataka and Deputy Commissioner of Commercial Taxes
• Laws Referred To: Central Goods and Services Act, 2017, Karnataka Goods and Services Act, 2017, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHANDRACHUD A; HEMA K; JEEVAN NEERALGI
• Assessee Lawyers: RAVI RAGHAVAN; ROHAN KARIA; NISCHAL
• Keywords: GST; Input tax credit; Jurisdiction; Reverse Charge Mechanism; Show cause notice
• Section: 226; 128A; 16(4); 6(2)(b); 13(3)(c)

Judgement Text

" - 1 - NC: 2024:KHC:33601 WP No. 22952 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF AUGUST, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO.22952 OF 2023(T-RES) BETWEEN: M/S TOYOTA KIRLOSKAR MOTOR PVT. LTD. PLOT NO.1, BIDADI INDUSTRIAL AREA BIDADI INDUSTRIAL AREA, BIDADI RAMANAGARA – 562 109 (REPRESENTED BY SHRI ARUN VELAYUDHAN) VICE PRESIDENT – FINANCE, INDIRECT TAXATION INCORPORATED UNDER THE COMPANIES ACT, 1956 …PETITIONER (BY SRI. RAVI RAGHAVAN., SRI. ROHAN KARIA, SRI. NISCHAL K.M., ADVOCATES) AND: 1. UNION OF INDIA REPRESENTED BY ITS UNDER SECRETARY, MINISTRY OF REVENUE, NORTH BLOCK NEW DELHI – 110 001. 2. STATE OF KARNATAKA THROUGH ITS PRINCIPAL SECRETARY, FINANCE DEPARTMENT, VIDHANA SOUDHA BENGALURU – 560 001. 3. PRINCIPAL COMMISSIONER OF CENTRAL TAX BENGALURU WEST COMMISSIONERATE, 1ST FLOOR, BMTC BUILDING, Digitally signed by LEELAVATHI S R Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:33601 WP No. 22952 of 2023 BANASHANKARI, BENGALURU – 560 070. 4. ADDITIONAL COMMISSIONER OF CENTRAL TAX ANTI EVASION, BENGALURU WEST COMMISSIONERATE, 1ST FLOOR, BMTC BUILDING, BANASHANKARI, BENGALURU – 560 070. 5. JOINT COMMISSIONER OF COMMERCIAL TAXES (VIGILANCE), VI FLOOR, A BLOCK, VTK-2 BUILDING, KORAMANGALA BENGALURU – 560 047. 6. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (VIGILANCE)-03, VI FLOOR, A BLOCK, VTK-2 BUILDING, KORAMANGALA, BENGALURU – 560 047. 7. DEPUTY COMMISSIONER OF COMMERCIAL TAXES (AUDIT)-2,3, DGSTO-2 RAJARAJESHWARI NAGARA, BENGALURU – 560 098. …RESPONDENTS (BY SRI. CHANDRACHUD A., ADVOCATE FOR R1; SRI. HEMA KUMAR K., AGA FOR R2, R5, R6 AND R7; SRI. JEEVAN J. NEERALGI, ADVOCATE FOR R3 AND R4) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED SHOW CAUSE NOTICES BEARING NO.JCCT (VIG)/ACCT-3/ GST/ADJN-14/23-24/1185 DTD 05.08.2023 AND IMPUGNED SHOW CAUSE NOTICES BEARING NOS.JCCT (VIG) /ACCT-3/GST/ADJN-15/ 23-24/1185 DTD 05.08.2023 ISSUED BY THE R6 IN FORM GST DRC- 01 ENCLOSED AT ANNEXURE-A AND A1 DEMANDING INPUT TAX CREDIT AVAILED BY THE PETITIONER ALONG WITH INTEREST AND PENALTY AND ETC. - 3 - NC: 2024:KHC:33601 WP No. 22952 of 2023 THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, the petitioner seeks the following reliefs: \"a) Issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ or order or direction under Article 226 of the Constitution of India quashing the impugned show cause notices bearing No. JCCT (VIG) / ACCT-3/GST/ADJN-14/23-24/1185 dated 05.08.2023 and impugned show cause notices bearing Nos.JCCT (VIG) / ACCT-3/GST/ADJN-15/23-24/1185 dated 05.08.2023 issued by the Respondent No.6 in FORM GST DRC-01 enclosed at Annexures – A and A-1 demanding input tax credit availed by the Petitioner along with interest and penalty; b) Issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ or order or direction under Article 226 of the Constitution of India quashing the impugned Show Cause Notice No. DCCT(Audit)2.3/ 456/2023-24 dated 06.10.2023 issued by the Respondent No.7 along with the four FORM GST DRC-01's dated 06.10.2023 enclosed at Annexures-A2 demanding input tax credit availed by the Petitioner along with interest and penalty; c) Issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ or order or direction - 4 - NC: 2024:KHC:33601 WP No. 22952 of 2023 under Article 226 of the Constitution of India quashing the impugned show cause notice bearing No. GEXCOM/AE/INV/GST/3318/2022-AE-IV(BW) dated 27.09.2023 issued by the Respondent No. 4 in FORM GST DRC-01 enclosed at Annexure B demanding input tax credit availed by the Petitioner along with interest and penalty; d) Hold that the Petitioner has rightly availed input tax credit of Rs.43,60,57,822/ in respect of the IGST paid on manpower supply services received by the Petitioner during the period 2017- 2022. e) Pass such further order(s) and other reliefs as the nature and circumstances of the case may require.\" 2. A perusal of the material on record will indicate that the petitioner is interalia engaged in business of assembly, manufacturing and trading in multi-utility vehicles and passenger cars in India. The petitioner is registered under the Central Goods and Services Act, 2017 (CGST Act) and the respondent Nos.1, 3 and 4 are the CGST authorities in the present petition. So also, respondent Nos.2, 5, 6 and 7 are the State GST Authorities under the Karnataka Goods and Services Act, 2017 (KGST Act). The petitioner seeks quashing of the impugned Show Cause Notice at Annexure — B dated 27.09.2023 issued by Central GST - 5 - NC: 2024:KHC:33601 WP No. 22952 of 2023 Authorities as well as the impugned Show Cause Notices at Annexures — A and Al both dated 05.08.2023 and also the impugned Show Cause Notice at Annexure — A2 dated 06.10.2023, all having been issued by the State GST authorities and for other reliefs. 3. The respondents have filed their statement of objections and have contested the petition. 4. Heard learned counsels for the parties and perused the material on record. 5. In addition to reiterating the various contentions urged in this petition and referring to the material on record, the learned counsel for the petitioner invited my attention to the impugned Show Cause Notices dated 05.08.2023 at Annexures — A and Al and impugned Show Cause Notice dated 06.10.2023 at Annexure - A2 issued by the State GST Authorities in order to point out that prior to issuance of the said Show Cause Notices, the Central — GST Authorities had already initiated proceedings in relation to the very same subject matter by issuing letters / notices on 11.08.2022 and 20.09.2022 onwards and consequently, in the light of the - 6 - NC: 2024:KHC:33601 WP No. 22952 of 2023 provisions contained in Section 6(2)(b) of the Karnataka Goods and Services Tax Act 2017 [for short, 'the KGST Act, 2017], the impugned Show Cause Notices at Annexure — A, Al and A2 are illegal, arbitrary and without jurisdiction or authority of law since parallel / dual proceedings cannot be initiated by the State GST Authorities after the Central GST Authorities had already initiated proceedings prior to issuance of the impugned Show Cause Notices, which deserve to be quashed. 6. It is submitted by learned counsel for the petitioners that insofar as the impugned Show Cause Notice at Annexure — B dated 27.09.2023 issued by the Central GST Authorities is concerned, denial of input tax credit in favour of the petitioner in terms of Section 16(4) of the CGST Act, 2017 having been allegedly taken belatedly is contrary to the Circular No.211/5/24- GST dated 26.06.2024 as well as the judgment of this Court in the case of M/s. Bosch Limited Vs. the State of Karnataka and Deputy Commissioner of Commercial Taxes, 2024 VIL-828- KAR. It is also submitted that insofar as the demand made in Annexure — B dated 27.09.2023 demanding interest on GST towards amounts paid in favour of the employees’ salary in view of - 7 - NC: 2024:KHC:33601 WP No. 22952 of 2023 Section13(3)(c) and Section 128A of the CGST Act 2017, the petitioner would not be liable to pay interest as demanded in the said Show Cause Notice, which deserves to be quashed. 7. Per contra, the learned AGA for respondent Nos.2, 5, 6 and 7 — Central GST Authorities would not dispute that the summons, Show Cause Notices and the proceedings have been initiated by the State GST Authorities subsequent to the Central GST Authorities already initiating proceedings as against the petitioner and Section 6(2)(b) of the KGST Act was applicable to the facts of the instant case. 8. The learned counsel for the Central GST Authorities submits that if the petitioner submits a reply along with necessary documents to the impugned Show Cause Notice at Annexure-B dated 27.09.2023, the concerned respondent Nos.1, 3 and 4 would consider the same and proceed further in accordance with law. 9. A perusal of the material on record and the submissions made by both sides will clearly indicate that prior to the State GST Authorities issuing the impugned Show Cause Notices at Annexures – A, Al and A2 is concerned, the Central - 8 - NC: 2024:KHC:33601 WP No. 22952 of 2023 GST Authorities had already initiated proceedings as against the petitioner and consequently, in the light of Section 6(2)(b) of the KGST Act, 2017 which contemplates a complete bar / embargo on the State GST Authorities to initiate proceedings in a situation where the Central GST Authorities had already initiated proceedings as against the petitioner in respect of the same subject matter. I am of the considered view that the impugned Show Cause Notices at Annexures — A, Al and A2 are clearly illegal, arbitrary and without jurisdiction or authority of law and contrary to the aforesaid statutory provisions and the same deserve to be quashed. 10. Insofar as challenge to the impugned Show Cause Notice at Annexure - B dated 27.09.2023 issued by the respondent Nos.1, 3 and 4, Central - GST Authorities is concerned, the decision of this court in the case of M/s. Bosch Ltd. V. State of Karnataka & Ors., supra, read with the Circular No 211/5/24-GST dated 26.06.2024 is squarely applicable. As can be seen from Paragraph Nos.2.5, 2.6 & 2.7 of Circular, the petitioner would be entitled to avail ITC and cannot be deprived of the same or - 9 - NC: 2024:KHC:33601 WP No. 22952 of 2023 fastened with liability to pay interest on account of his claim having filed belatedly as can be seen from the circular. 11. The relevant portions of the decision of this court in the case of M/s. Bosch Ltd. V. State of Karnataka & Ors., is reproduced hereunder: “5. Before adverting to the rival contentions, it is relevant to extract the aforesaid circular issued by the CBIC, which reads as under: \"2.5 It can be seen that section 16(4) of CGST Act links the time limit for ITC availment with the financial year to which the invoice or debit note pertains. As discussed in Para 2.3 above, in case of supplies where the supplier is unregistered and recipient is registered and the tax has to be paid by the recipient on RCM basis, the recipient is required to issue invoice in terms of the provisions of section 31 (3) (f) of CGST Act and pay the tax on the same in cash under RCM. Further, as discussed in Para 2.1 above, ITC cannot be availed by a registered person in respect of any supply of goods or services or both received by him, as per the provisions of section 16 (2) (a) of CGST Act, unless he is in possession of a tax invoice or debit note or such other tax paying documents as may be prescribed. 2.6 A combined reading of the above provisions leads to a conclusion that as ITC can be availed by the recipient - 10 - NC: 2024:KHC:33601 WP No. 22952 of 2023 only on the basis of invoice or debit note or other duty paying document, and as in case of RCM supplies received by the recipient from unregistered supplier, invoice has to be issued by the recipient himself, the relevant financial year, to which invoice pertains, for the purpose of time limit for availment of ITC under section 16(4) of CGST Act in such cases shall be the financial year of issuance of such invoice only. In cases, where the recipient issues the said invoice after the time of supply of the said supply and pays tax accordingly, he will be required to pay interest on such delayed payment of tax. 2.7 Accordingly, it is clarified that in cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM) and where invoice is to be issued by the recipient of the supplies in accordance with section 31 (3) (f) of CGST Act, the relevant financial year for calculation of time limit for availment of input tax credit under the provisions of section 16(4) of CGST Act will be the financial year in which the invoice has been issued by the recipient under section 31(3)(f) of CGST Act, subject to payment of tax on the said supply by the recipient and fulfilment of other conditions and restrictions of section 16 and 17 of CGST Act. In case, the recipient issues the invoice after the time of supply of the said supply and pays tax accordingly, he will be required to pay interest on such delayed payment of tax. Further, in cases of such delayed issuance of invoice by - 11 - NC: 2024:KHC:33601 WP No. 22952 of 2023 the recipient, he may also be liable to penal action under the provisions of Section 122 of CGST Act.\" 6. As can be seen from paragraph Nos.2.5, 2.6 and 2.7, the petitioner would be entitled to availment of ITC and cannot be deprived of the same or fastened with liability to pay interest on account of his claim having been filed belatedly as can be seen from the circular. The aforesaid circular completely supports the claim of the petitioner especially in the light of the judgment of the Apex Court in the K.P.VARGHESE Vs. INCOME TAX OFFICE, ERNAKULAM, AIR 1981 SC 1922 to the effect that a CBIC circular is binding upon the respondents. However, since the said circular was issued during the pendency of the present petition and the respondents did not have the benefit of the said circular at the time of issuance of the Show Cause Notice, I deem it just and appropriate to dispose of this petition and direct respondent No.2 to consider the objections to be filed by the petitioner and proceed further in accordance with law, bearing in mind the aforesaid circular and take appropriate decisions/pass appropriate orders in accordance with law.” 12. The challenge to the impugned Show Cause Notice at Annexure-B can be disposed of by directing the petitioner to submit a suitable reply together with the relevant documents and by directing the concerned respondent Nos.1, 3 and 4, Central — GST Authorities to consider the same and proceed further in accordance - 12 - NC: 2024:KHC:33601 WP No. 22952 of 2023 with law bearing in mind the observations made in this order and the provisions referred to supra (Section 13(3)(C) of the CGST Act, 2017, Section 128A of the CGST Act, 2017, Circular No. 211/5/24- GST dated 26.06.2024 etc.) . 13. In the result, the following: ORDER (i) The petition is allowed - in - part. (ii) The impugned Show Cause Notices at Annexures — A, A1 and A2 dated 05.08.2023, 05.08.2023 and 06.10.2023, respectively, are hereby quashed. (iii) The petitioner is reserved with liberty to submit reply along with documents to the impugned Show Cause Notice at Annexure — B dated 27.09.2023. (iv) The concerned respondent Nos.1, 3 and 4, Central GST Authorities shall consider the said reply and documents to be submitted by the petitioner and proceed further in accordance with law after providing - 13 - NC: 2024:KHC:33601 WP No. 22952 of 2023 sufficient and reasonable opportunity to the petitioner and hearing it bearing in mind the observations made in this order as well as the relevant statutory provisions, Circulars and judgments and contentions relied upon by the petitioner and pass appropriate orders within a period of four weeks from the date of receipt of a copy of this order. Sd/- (S.R.KRISHNA KUMAR) JUDGE RB / SV "