Case Title | GLOBUS REAL INFRA PVT LTD vs ADDITIONAL COMMISSIONER, CGST APPEALS II |
Court | Delhi High Court |
Honorable Judges | JUSTICE VIBHU BAKHRU JUSTICE AMIT MAHAJAN |
Citation | 2023 (02) GSTPanacea 237 HC Delhi W.P.(C) 2083/2023, CM Nos. 7918/2023, 7919/2023 & |
Judgment Date | 17-February-2023 |
The petitioner has initiated a writ petition to challenge an Order-in-Appeal No. 345/2021-2022 dated 31st March 2022, referred to as ‘the impugned order’, issued by the Commissioner of Central Tax Appeals-II in New Delhi, henceforth known as ‘the Appellate Authority’. This impugned order pertains to the dismissal of an appeal lodged by the petitioner.
The petitioner entered into a “Memorandum of Agreement for Lease” on April 1, 2015, with Bhushan Steel Limited (now Tata Steel BSL Limited), leasing their property, Farm House no. 20, 19th Avenue Mulsari, Village Rajokri, Tehsil Vasant Vihar, New Delhi (referred to as ‘the property’) to BSL.
On July 26, 2017, State Bank of India, a financial creditor of BSL, initiated Corporate Insolvency Resolution Process (CIRP) against BSL under Section 7 of the Insolvency and Bankruptcy Code, 2016 (referred to as ‘the Code’) due to its default in repayment of financial assistance. The petition was admitted, and an Interim Resolution Professional was appointed.
During the Corporate Insolvency Resolution Process (CIPR), the Resolution Professional identified the petitioner as a connected identity of BSL (the corporate debtor) because BSL employees were directors of the petitioner at that time. According to the Resolution Professional, the lease outlined in the Memorandum of Agreement for Lease dated April 1, 2015, was considered a preferential transaction under Section 43 of the Code.
Tata Steel Limited, a potential resolution applicant, put forth a resolution plan for Bhushan Steel Limited (BSL), which gained approval from the committee of creditors and subsequently from the National Company Law Tribunal in 2018. However, due to non-payment of lease rentals, the petitioner was compelled to sell property to settle bank dues, which occurred in September 2018.
In November 2020, Tata Steel filed a Refund Application under Section 54 of the CGST Act, seeking a refund of GST paid on lease rentals for the period between July 2017 and July 2018. The application was submitted to the Assistant Commissioner, Central Goods and Services Tax, South Delhi.
However, the Adjudicating Authority did not process the application and instead issued a show cause notice in January 2021, asking Tata Steel to justify why their refund claim should not be rejected under Section 54 of the CGST Act. Tata Steel was instructed to reply to the notice within 15 days using FORM-GST-RFD-09 and to attend a personal hearing on November 15, 2020.
Tata Steel responded to the show cause notice with a letter, but the details of the response are not provided in the summary.
On January 23, 2021, a significant legal battle unfolded regarding a petitioner’s application for a refund amounting to ₹4,24,16,574. The petitioner’s contentions were systematically disapproved by the Adjudicating Authority, resulting in the rejection of the refund application through an order dated April 6, 2021. Despite an appeal, the Appellate Authority upheld the decision, prompting the petitioner to escalate the matter by filing a petition.
The petitioner challenged the impugned order primarily on two grounds: first, alleging a violation of natural justice in the process leading to the order, and second, arguing that the Appellate Authority overlooked the nullification of the lease as per the resolution plan.
It’s crucial to understand that the Show Cause Notice (SCN) issued on January 11, 2021, proposed the rejection of the petitioner’s application based on the interpretation that the lease of the property should be considered a supply of services, subject to valuation under Section 15 of the CGST Act. The Adjudicating Authority reasoned that Section 15 of the CGST Act did not explicitly exclude the value of the supply concerning the “non-recovery of payments of bad debts.” Therefore, according to their interpretation, the petitioner’s failure to recover lease rentals, on which GST had been paid, did not warrant any refund.
Despite the petitioner’s arguments and contentions, the courts upheld the Adjudicating Authority’s decision, leading to the rejection of the refund application. The petitioner’s plea for natural justice and the nullification of the lease under the resolution plan failed to sway the authorities. This legal saga illustrates the complexities of tax law interpretation and the challenges petitioners face in seeking refunds under GST regulations.
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