Supplier challenges GST liability when BHEL failed to export goods within mandatory 90-day period

The HC addressed a dispute where the petitioner supplied goods to BHEL under GST exemption for export supplies. When BHEL failed to export within the mandatory 90-day period, tax authorities demanded differential tax, interest, and penalties from the petitioner. The petitioner contended that BHEL (recipient) should bear responsibility for the tax liability due to export delays, not the supplier. After making partial payments, the petitioner sought judicial intervention against further coercive actions. The court granted interim protection against coercive measures pending resolution, allowed time for counter-affidavits, and scheduled further hearings.

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Issues:
1. Exemption under notification No. 41/2017-Integrated Tax (Rate) for export supplies.
2. Extension of time limit for export by the recipient.
3. Liability of differential tax on the supplier due to delay in export.
4. Demand for payment of tax, interest, and penalty by the tax authorities.
5. Dispute regarding payment responsibility between the supplier and the recipient.
6. Request for interim protection from coercive actions during dispute resolution.

Analysis:
1. The petitioner supplied goods for export to respondent No.1-BHEL under an exemption notification. However, BHEL failed to export within the stipulated 90-day period as required by the exemption notification. The petitioner requested an extension of the export time limit citing delays caused by the implementation of the EDI system. The petitioner argued that the reduced rate of GST applicable for exporters should be considered. The petitioner corresponded with the tax authorities seeking an extension but received no response.

2. The tax authorities issued notices demanding payment of differential tax amounts for the years 2018-19, 2019-20, and 2020-21. The petitioner was asked to pay substantial tax amounts and provide various documents. The petitioner made partial payments against the tax liability but was also asked to pay interest and penalty. The petitioner contended that the delays in exports by BHEL should not make them liable for the differential tax, as BHEL, being the recipient, was responsible for paying the GST leviable on the supplies.

3. The petitioner sought interim protection from coercive actions by the tax authorities during the dispute resolution process. The petitioner argued that both respondent No.1 and respondent No.2 (tax authorities) are state entities, making the dispute within the ambit of writ jurisdiction. The petitioner emphasized that the demand for payment of differential tax was unjust as the responsibility for GST payment lay with the recipient, BHEL. The petitioner requested relief from further coercive measures until the dispute is resolved.

4. The court allowed time for the tax authorities to file a counter-affidavit and granted the petitioner a week to respond. Notices were to be issued to respondent No.1, and the petitioner was directed to serve the pleadings to respondent No.1 via email. The matter was scheduled for further hearing on 31st March 2022, with a directive to refrain from taking any coercive actions against the petitioner in the interim.

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