2024 (10) TMI 271 - HC - GST

Petitioner cannot pay GST under reverse charge mechanism when full tax already discharged to exchequer

Bangalore Electrical Supply Company Limited (Bescom) Versus The Assistant Commissioner Of Central Tax North Division -1 Bengaluru, The Assistant Director Of DGGI Directorate General of GST Intelligence Mangaluru.

Karnataka HC held that petitioner cannot be made liable to pay GST under reverse charge mechanism where entire tax amount discharge is undisputed and ... Liability of the petitioner to pay GST under reverse charge mechanism - HELD THAT:- The issue in controversy involved in the present petition as regards liability of the petitioner to pay GST under reverse charge mechanism is squarely covered by the decision of the Honb'le Division Bench of this Court in [2022 (4) TMI 774 - KARNATAKA HIGH COURT], wherein it has held 'Whatever the ratio, the tax in its entirety has reached the hands of the ex-chequer. Merely for the reason that there was no strict adherence to the ratio as envisaged during the relevant point of time for payment of tax insofar as the assessee and the service provider, the assessee cannot be made liable to pay the double tax. What is significant to note is that the discharge of entire tax amount is not disputed. Thus, the reverse charge mechanism would not lead to double taxation.' As can be seen from the finding recorded by this Court at paragraph No.9 of the order, so long the discharge of entire tax amount is not disputed and reverse charge mechanism would lead to double taxation, petitioner cannot be made liable to pay double tax as held in the aforesaid order. Thus, the judgment of this Court in M/s. Zyeta Interiors Pvt. Ltd., and Anr Vs. The Vice Chairman Settlement Commission and Anr. [2021 (10) TMI 233 - KARNATAKA HIGH COURT] is directly and squarely applicable to the facts of the case on hand and present appeal deserves to be disposed of in terms of the aforesaid judgment. Impugned order at Annexure-A is hereby quashed - petition allowed. Issues:Petition seeking writ of Certiorari to quash order-in-original and show-cause notice, liability to pay GST under reverse charge mechanism, applicability of previous judgments.Analysis:The petitioner sought relief through a writ petition to quash the order-in-original and show-cause notice issued by the respondents. The petitioner's liability to pay GST under the reverse charge mechanism was the primary issue. The petitioner received communication following an inspection, leading to a series of replies and notices culminating in the impugned order-in-original dated 21.03.2024. The petitioner contended that the liability issue was covered by a previous judgment of the High Court, which necessitated setting aside the assessment order for further verification by respondent No. 2.The respondents opposed the petition, arguing against its merit and supporting the impugned order. The petitioner's liability to pay GST under the reverse charge mechanism was deemed to be covered by a previous Division Bench decision of the High Court, which had remitted a similar matter to the Settlement Commission for reconsideration. The arguments presented by both parties revolved around the interpretation of relevant tax provisions and the applicability of previous legal precedents to the current case.The High Court, after considering the submissions of both parties and the material on record, addressed the two legal issues raised in the petition. Firstly, it ruled that the discharge of the entire tax amount without dispute precluded the imposition of double taxation under the reverse charge mechanism. Secondly, regarding the issue of photocopies of invoices for CENVAT Credit, the Court noted the readiness of the assessee to produce original invoices and remanded the matter for fresh consideration. The Court disposed of the appeal by directing the Settlement Commission to re-examine the case in accordance with the law, leaving all rights and contentions of the parties open.The Court relied on the previous judgment in M/s. Zyeta Interiors Pvt. Ltd. to support its decision, emphasizing its direct applicability to the current case. Consequently, the Court allowed the petition, quashed the impugned order, and remitted the matter back to respondent No. 1 for further verification regarding the payment of GST by the service provider.