TaxTMI 
TaxTMI 
2024 (6) TMI 479
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....respondent No. 1 confirming the demand of unpaid tax on Reverse Charge Mechanism (for short 'RCM') on purchase of cotton from agriculturist amounting to Rs. 3,73,95,300/- along with the penalty of equal amount under Section 122 (2) of the GST Act. 2. Brief facts of the case are as under : 2.1 The petitioner is a partnership firm engaged into the trading and supplying of the cotton bales on wholesale basis. It is the case of the petitioner that 80% of the total turn-over is earmarked for the purpose of export. 2.2 The petitioner purchases raw cotton from the registered dealers upon upfront payment of 5% GST on the invoice price. 2.3 According to the petitioner, pursuant to the Notification No. 41 of 2017 dated 23.10.2017 issued by the Ministry of Finance, Government of India, the petitioner collects tax at the rate of 0.10% on the value of goods which is exported overseas for the financial year. 2.4 The respondent No. 2 issued the notice dated 22.8.2022 in Form GST ASMT-10 to clarify the discrepancies in Form GSTR-1 and Form GSTR-3B on the ground that the petitioner has purchased the cotton from unregistered suppliers / agriculturists which requires payment of GST under RCM. Th....
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....unt of liability ascertained in the said notice amounting to Rs. 3,73,95,300/- so as to close the proceedings, failing which the respondent No. 1 informed the petitioner that the show cause notice shall be issued. 2.10 The respondent No. 1 thereafter issued the impugned show cause notice in Form GST DRC-01 dated 30.8.2023 calling upon the petitioner to show cause as to why the amount of Rs. 3,73,95,300/- towards unpaid tax under RCM of purchase of cotton from agriculturist should not be demanded and recovered under the provision of Section 74 (1) of the CGST Act along with the penalty under Sections 122 (2) and 125 of the Act. 2.11 Being aggrieved, the petitioner preferred this petition to quash and set aside the notice dated 30.8.2023. This Court (Coram : Honourable Mr. Justice Biren Vaishnav & Honourable Mrs. Justice Mauna M. Bhatt) by order dated 11.10.2023 issued the notice. 2.12 The petitioner thereafter preferred Civil Application No. 1 of 2023 for interim relief as the respondent issued the notice for personal hearing. 2.13 It appears that thereafter the respondent No. 1 passed the impugned order dated 28.12.2023 during the pendency of this petition as well as Civil Appl....
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....rusal of the notice dated 30.8.2023, the same refers to Section 9 (4) of the CGST Act for applying the RCM for the purchases made from the specific registered dealer only. It was submitted that the petitioner was never put to the notice of invoking the provision of Section 9 (3) of the Act under which the impugned order dated 28.12.2023 is passed by the respondent No. 1 determining the liability of GST under RCM for the cotton purchase made by the petitioner. 3.4 It was, therefore, submitted that the petitioner has replied to the notice dated 30.8.2023 taking into consideration the provision of Section 9 (4) of the CGST Act and no contention is raised by the petitioner on merits with regard to applicability of the provision of Section 9 (3) of the CGST Act. It was submitted that the respondent No. 1, therefore, without giving any opportunity of hearing to the petitioner to make the submissions on the applicability of provision of Section 9 (3) of the CGST Act, could not have applied the same and raised the demand under the said section giving a go-by to the provision of Section 9 (4) of the CGST Act referred in the show cause notice. 3.5 It was submitted that the impugned order d....
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....r Mills (P) Limited v. State of Gujarat, reported in (2018) 92 taxmann.com 337 (Gujarat). 4. On the other hand, learned advocate Mr. Ayaan Patel for the respondents submitted that the petitioner was given opportunity of hearing by the respondent No. 1 before passing the impugned order and the petitioner has also remained present and made submissions on merits on 18.12.2023, 20.12.2023 and 22.12.2023 as recorded in the impugned order passed by the respondent No. 1. Learned advocate Mr.Patel invited the attention of the Court to the notices issued in Form GST ASMT-10 as well as the notice issued in Form GST DRC-01A, wherein the petitioner was put to specific notice as to the default in making the payment of GST under RCM for purchase of the cotton from unregistered supplier / agriculturist. However, the petitioner first by letter dated 31.8.2022 did not clarify and simply submitted that the cotton purchased from 13.10.2017 to 13.10.2018 would not attract tax on RCM. 4.1 It was submitted that the respondent, after considering the reply of the petitioner, issued notice in Form GST DRC-01A under Section 73 (5) for the period 2017-18 from 15.11.2017 to 31.3.2018, on 19.10.2022 wherein....
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....ist under Section 9 (3) of the CGST Act. It was submitted that the respondent No. 1 has also reproduced the SCN as well as the reply filed by the petitioner containing the contentions which are raised before this Court and has passed the impugned order after considering the provisions of Section 74 read with Section 9 (3) read with Section 50 to determine the liability of Rs. 3,73,95,300/- and has also levied the penalty under Section 122 (2) of the CGST Act. It was submitted that the contentions raised by the petitioner are not tenable in view of clear provision of Section 9 (3) of the CGST Act. 5. Having heard the learned advocates for the respective parties and having considered the facts of the case, the petitioner has challenged the impugned order dated 28.12.20223 as the same was passed during the pendency of this petition and has proceeded to make submissions on merits in spite of the fact that the attention of the learned advocate for the petitioner was drawn to avail the alternative remedy under the provisions of Section 107 of the Act. As the impugned order was passed during the pendency of the petition where the petitioner has challenged the jurisdiction of the responde....
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....ovisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.] (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.' '73. Determination of tax ....
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.... Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017): Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.' 'Notification No. 38/2017 dated 13.10.2017 G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby makes the following amendment in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 8/2017-Central Tax (Rate), dated the 28th June, 2017, p....
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....ler, who purchases raw cotton falling in Tariff Item 5201 from an agriculturist, is liable to pay the GST on RCM with effect from 15.11.2017. The petitioner, who is dealing in purchase and sale of the cotton and is exporting 80% of the cotton, is liable to pay the GST on RCM basis on raw cotton purchased from agriculturist on RCM basis in view of the Notification No. 43 of 2017 dated 14.11.2017. 7. The contention raised on behalf of the petitioner that the petitioner is not liable to pay the GST would be contrary on face of the notification issued under Section 9 (3) of the CGST Act. By Notification No. 43 of 2017 dated 14.11.2017, Entry No. 4A is inserted in the Table of the Notification No. 4 of 2017, whereby the registered person is made liable to pay the GST on RCM under Section 9 (3) on the various description of supply of goods defining the supplier of goods and the liability of the person to pay the GST on RCM. 8. In view of the above provisions of law, when the respondent No. 1 has issued the notice since 2022 pointing out to the petitioner that the petitioner is liable to pay the GST on RCM on the raw cotton purchased from agriculturist, the petitioner has not shown any ....
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....for paying the tax. Whereas sub-section (4) of Section 9 refers to the issuance of the Notification by the Government on recommendation of council specifying a class of registered person who in respect of the supply of specified category of goods or services or both, received from unregistered supplier, is liable to pay tax on 'reverse charge' basis. Therefore, when the petitioner has admittedly purchased the raw cotton which is a specific category of supply of goods from the agriculturist, the provision of Section 9 (3) is applicable as per Notification No. 43 of 2017 with effect from 15.11.2017. Therefore, the contention raised on behalf of petitioner that the petitioner is not liable to pay the GST on RCM basis in absence of any notification under Section 9 (4) is not tenable because the petitioner is liable to pay tax on RCM basis as per provision of Section 9 (3) of the CGST Act. 12. On perusal of the impugned notice, the respondent has made reference to Section 9 (4) of the CGST Act. Therefore, it was contended by the petitioner that the case of the petitioner is covered by RCM as per Section 9 (4) of the CGST Act and not as per Section 9 (3) of the CGST Act. Such contention....