2024 (12) TMI 1184 - HC - GST

SEZ units not liable for IGST on supplies to DTA units, demand order quashed under Section 74

The Gujarat HC quashed a GST demand order passed by the tax authority. The petitioner, a SEZ unit, supplied goods to a DTA unit. The tax authority raised ... Legality and validity of the order dated passed by the respondent No. 2 in DRC-01 raising demand - HELD THAT:- From the averments made by the GST and Network, it is apparent that the petitioner was not required to pay the IGST on the goods cleared from (Domestic and Tariff Area). Supply from SEZ Unit to DTA is treated as import for DTA Unit and therefore the DTA unit is required to pay IGST and other applicable duties on filing of the Bill on Entry. The petitioner was not required to pay to IGST on the goods supplied from SEZ unit to DTA. The petitioner has not claimed any refund for such IGST paid, which otherwise was payable by DTA Unit. Therefore, there is no liability of the petitioner to pay the IGST under the provisions of the Integrated Goods and Service Tax Act, 2017 read with GST Act. The respondent No. 2 has failed to consider the same and passed the impugned order merely on account of the difference between in form GSTR-1 and GSTR-3B ignoring the provisions of Section 74 which provides the mechanism of adjudication of show cause notice by taking into consideration the reply filed by the petitioner as well as the provisions of the Act. On perusal of the affidavit-in-reply filed on behalf of the respondent No. 2, an attempt is made to justify the impugned order which lacks any reasoning. The deponent of the affidavit filed on behalf of the respondent No. 2, has tried to improve upon the impugned order by referring to Section 37 of the GST Act to contend that as per Section 37 of the GST Act furnishing the details of the output supply is required to be declared in GSTR-1 and as per Section 39 of the GST Act, the payment of tax declared in GSTR-1 is to be same as to be paid in Form GSTR-3B return and therefore if there is any difference, the same would amount to non payment of tax resulting into demand, interest and payment. The impugned order dated 05.02.2022 passed by the respondent No. 2 is hereby quashed and set aside - Petition allowed. Issues:Challenge to legality and validity of order raising tax demand under GST Act.Analysis:The petitioner challenged the order dated 05.02.2022 passed by respondent No. 2 in DRC-01 raising a demand of Rs. 1,63,16,101 under the GST Act. The petitioner, having a Free Trade Warehousing Zone Unit in a Special Economic Zone, paid IGST through TR-6 challan upon clearance of goods. However, the GST portal did not reflect this payment, causing a discrepancy between GSTR-1 and GSTR-3B returns. The respondent issued notices seeking explanations, to which the petitioner responded with details and copies of the payment. Despite explanations, the respondent proceeded to pass the impugned order demanding tax with interest and penalty. The court noted that the respondent failed to provide any reason for the demand, except for a generic statement about lack of reply or evidence from the petitioner.The court considered the provisions of the SEZ Act and Customs Act, stating that goods cleared from a Special Economic Zone to the Domestic Tariff Area are chargeable to customs duties, including IGST. However, the petitioner, as a SEZ unit, was not required to pay IGST on goods supplied to the DTA. The court emphasized that the petitioner did not claim a refund for the IGST paid, which was the responsibility of the DTA unit. Therefore, the petitioner had no liability to pay IGST under the GST Act. The respondent's failure to consider this aspect and issuing the order based solely on discrepancies between GSTR-1 and GSTR-3B was deemed erroneous.The court analyzed the respondent's attempt to justify the order by citing provisions of the GST Act related to declaration of output supply and tax payment. However, the court found that the respondent failed to consider the petitioner's explanations and passed the order without proper reasoning. The court held that the impugned order lacked justification and was not in accordance with the law. Consequently, the petition was allowed, and the order dated 05.02.2022 was quashed and set aside, with no costs imposed.