Petitioner | JSW Steel Ltd. |
Respondent | Union of India |
Decision by | Orissa High Court |
Date of order or Judgement | 17-May-2022 |
Citation no. | W.P. (C) No. 10052 of 2022 2022 (5) GSTPanacea 11 HC Orissa |
Hon’ble Judge | Justice Jaswant Singh Justice M.S. Raman |
Decision | In Favour of Revenue |
Tax Invoices For Inward Supply-The ISD as an office is required to receive tax invoices for inward supply.
Tax Invoices For Inward Supply-Facts of the Case
Tax Invoices For Inward Supply-The petitioner, JSW Steel, is engaged in the business of manufacturing and selling hot and cold rolled coils and sheets, galvanised coils and sheets, and plates. The petitioner has been allotted GSTIN in the State of Odisha and GSTIN in the State of Maharashtra.
The petitioner submitted that JSW Steel (Mumbai) participated in the tender process invited by the Government of Odisha. In Odisha, the company has been allotted four blocks.
It was claimed by the petitioner that iron ore extracted from the iron ore blocks is either supplied by JSW Steel (Odisha) to JSW Plants by way of stock transfer, or to the extent permissible, supplied to third parties. It has raised tax invoices towards both the supplies and claims to have paid applicable GST.
The scrutiny of returns filed for the tax periods in question revealed that JSW Steel (Odisha) has paid SGST and CGST under the reverse charge mechanism on bid premium, royalty, DMF, NMET, NPV, etc.
The order showed that having utilised a portion of the tax paid on RCM, the petitioner-company in Odisha has passed on to JSW Steel in Maharashtra. JSW Steel in Maharashtra was declared as ISD in the shape of IGST in the garb of outward supply of facilitation services to JSW Steel (ISD).
The modality of claiming adjustment of unutilized input tax credit was objected to by the Revenue.
A device to facilitate other units of JSW Steel located in other states to claim input tax credit arising in the State of Odisha is contrary to the statutory mandate.
Therefore, the ingredients for initiating proceedings under Section 74 were satisfied.
The Deputy Commissioner of State Tax has issued a notice which culminated in a demand of Rs. 901,48,27,137.
Argument before the Court
Tax Invoices For Inward Supply-Under Section 74 on the premise that there is element of fraud involved in claiming input tax credit by units located in other States being distributed by JSW Steel Ltd. GSTIN 27AAACJ4323N2ZF (in the State of Maharashtra) as ISD is unwholesome, arbitrary and without jurisdiction.
The transfer of unutilized ITC JSW Steel Ltd. in the State of Odisha to JSW Steel Ltd. in the State of Maharashtra to facilitate other units located in different States being not sham, the Deputy Commissioner of State Tax, CT&GST Enforcement Unit, Barbil is not competent to assume jurisdiction.
JSW Steel Ltd. in the State of Maharashtra being conduit, it is competent to distribute unutilised input tax credit in respect of tax paid in the State of Odisha by JSW Steel Ltd. to the units located in other States like Tamil Nadu, Maharashtra and Karnataka.
The Revenue Authorities in State of Odisha are incompetent to disallow the transactions depicted in the accounts and returns of units of other States.
The respondent submits that placing reliance on the manner of distribution of credit by Input Service Distributor (ISD) provided under Section 20 of the OGST Act, that the term “recipient of credit” has been defined to mean the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor. In such circumstance clause (viii) of Section 24 which begins with non-obstante clause requires compulsory registration of ISD (whether or not separately registered under the OGST Act). The term “this Act” used in said clause has significance.
The term “ISD” has been defined under Section 2(61) of the OGST Act. It would mean an office of the supplier of goods or services or both which inter alia:
- receives tax invoices issued under Section 31;
- such tax invoices must relate to receipt of input services.
Held by the Court
Tax Invoices For Inward Supply-Section 2(61) of the CGST Act defines the term “Input Service Distributor” (ISD). The ISD as an office is required to receive tax invoices for inward supply.
Since no such supply being shown to have been made by JSW Steel Ltd. of Odisha to JSW Steel Ltd. of Maharashtra, no prima facie case is made out by the Petitioner.
The transactions in question prima facie amount case is made out by the Petitioner. Thus transactions in question prima facie amount to syphoning of tax amounts,
Therefore, apparently warrant invocation of proceeding under Section 74 of the OGST/CGST Act.
The court declined to allow the prayer for restraining the department from effecting recoveries of the demand.
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