Writ or Appeal – Double Jeopardy in GST
The regime of Goods & Services Tax (GST) was introduced on 1.7.2017 with a consistent assurance that it will subsume taxes, ITC flow will be seamless and a throbbing ecosystem will under the working of GST Council and GSTN Portal to implement the GST scheme.
After the passage of more than 5 years and almost berthing to touch the 6th year, the GST Appellate Tribunals, under Section 109 of CGST Act,2017, are yet to do the parachute landing in the ecosystem of GST scheme.
Why No GST Appellate Tribunal?
Since the inception, the constitution of GST Appellate Tribunal has had been under challenge for some or the other reason in Constitutional Courts.
It started with a challenge in Madras High Court in case of Revenue Bar Assn. Vs. Union of India (WP No. 21147 of 2018), followed by challenge to the qualification Rules for appointment of members in GST Appellate Tribunal in Supreme Court of India in the matter of Rojer Mathews vs. Union of India in (A No. 8588 of 2019) resulting into the striking down of the same.
This led to introduction of Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020. However, the said Rules 2020 were also subjected to challenge before the Supreme Court of India and accordingly, the Apex Court in the case of Madras Bar Association Vs. Union of India, (WP(C) No. 804 of 2020) directed certain changes to be brought in the Rules.
Later, incorporating certain important aspects of the principles, Central Government promulgated the Tribunal Reforms Ordinance, 2021 which has now been replaced by the Tribunal Reforms Act 2021.Of late, GST Council has geared up for Constitution of GST Appellate Tribunal but a firm date for its establishment is still alien to the trade at large.
Two School Approach
In absence of the mechanism of GST Appellate Tribunal mechanism, two thought process have been adopted amongst the trade, as below:
First School – Hold the order and wait till GST Appellate Tribunal is constituted, or
Second School – Immediately challenge the impugned order by way of a writ in jurisdictional HC
The believers in the second school prefer to file a writ so that the order is challenged immediately at the first place and also the pain of pre deposit of additional 20% of the tax amount as required in terms of Section 112(8) of CGST Act,2017 is also dispensed with.
Fate of Writs
Irrespective of one’s strategy to deal with an order of first appellate authority, the recent orders of few High Courts have brought a new dimension to the advent of filing a writ before the jurisdictional High Courts.
Before dealing with the recent High Court orders, it is pertinent to note that the High Court is not an appellate body or equivalent to Appellate Tribunal so that the provisions of Section 112 of CGST Act can be applied in any given case.
With the above legality and factum , two interesting orders are being dealt herein below:
Bombay High Court
In the matter of Rochem India Pvt. Ltd. (WP No. 10883 of 2019) & Ors, the Court took a note of affidavit and CBIC Circulars and observed that;
10 The Chairman of the Board, in the affidavit, has indicated that no hardship would be caused to the taxpayers because of the non constitution of the Tribunal. Reading the affidavit along with Circular, it is clear that the Government does not intend that taxpayers are prejudiced for want of the Tribunal. With that intent, the period of limitation has been extended. As a corollary of the intention expressed in the affidavit and the Circular, it follows that the appealable orders (to the Tribunal) would not be implemented till the Tribunal becomes functional. That being the position, the writ petitions do not need to remain pending in this Court. Some time after the tribunal becomes functional as above can be given.
11 It would be advisable, to avoid further complications, that the Respondent-Board issues instructions to incorporate Clause 4.2 of the Circular dated 18 March 2020 in each order which is appealable to the Appellate Tribunal constituted under Section 109 of the Act. This would guide the aggrieved parties as to the future course of conduct and reduce needless litigation in the form of filing writ petitions such as the present ones. The Learned ASG states that this option would be considered.
Unquote – Ultimately, disposed all the petitions while emphasizing upon Clause 4.2 of the CBIC Circular dated 18.03.20 and refrained from dealing with the merits in the respective writs.
Hence, all those who had filed writs can only wait and challenge the impugned orders before the GST Appellate Tribunal as and when it shall be constituted within the stipulated time frame as provided under the CGST Act,2017 and additional time as per the order.
Orissa High Court
In a twist, in the matter of Pratap Kumar Pradhan (W.P (C) No. 9658 of 2023), the Orissa High Court though preferred to deal with the writ but held that:
Since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of four weeks from today, the rest of the demand shall remain stayed during the pendency of the writ petition.
Unquote – The Court though acknowledged the non constitution of GST Appellate Tribunal but then too has directed to pay the remaining tax amount within 4 weeks for staying the operation of the impugned order which is much higher than pre deposit provided under the enactment in the 2nd Appellate body.
Jurisprudence on Writs
It is a trite law that mere existence of an alternative remedy is not a bar for exhausting writ remedy in Constitutional Courts as held recently in Red Chilli International Sales Vs. Income Tax Officer & Anr reported in 2023 Livelaw (SC) 16 and Godrej Sara Lee Ltd. v. Excise & Taxation Officer, 2023 SCC OnLine SC 95.
Whereas, the alternative remedy where itself is not existing, the Constitutional Courts should entertain writs so that the justice meets its end.
The manner in which Rochem India Pvt. Ltd supra was dealt and writs were disposed by way of non entertaining of writs under the guide of no hardship of tax payer and those can be handled by the GST Appellate Tribunal as and when it shall be constituted cannot be called upon to be a sound law and practice at all.
With due respect, this stand of Bombay High Court departs from the jurisprudence laid down by Apex court and High Courts and hence can be expected to be differed in the times to come.
As regards to the interim order in Pratap Kumar Pradhan supra, it has resulted a double jeopardy in as much as by a direction to pay entire tax demand it has enhanced the quantum of pre deposit if one has to go to the 2nd appellate body, especially when the grievance was that the Appellate Tribunal is not in place. Then such a direction to make pre deposit of entire tax is causing further hardship.
This cannot be said to be aligned with the legislative intent of cap 20% towards pre deposit under Section 112 of CGST Act,2017 for granting a stay of rest of tax amount especially when High Court is not acting as an appellate body at the first place.
Till the time GST Appellate Tribunals are not in place the aforesaid orders cannot put an embargo in filing writs however, it is expected that jurisdictional High Courts may be showing reluctance to entertain writs unless there is a hardship or where orders are beyond jurisdiction or principles of natural justice has been deprived of or where any direction including stay is solicited.
The tax payers need to adopt meticulous approach while approaching the Constitutional Courts so that they can make out their case and justify their stand in writs till the time GST Appellate Tribunals are not functional.
Adv. Anandaday Misshra,
Tax Counsel & Author of “GST- Law & Procedure”
Founder & Managing Partner | AMLEGALS