Supreme Court Quarterly Digest on Tax [July - September, 2022]

Award of Tender - There is no public duty on the part of the State to indicate the HSN code for GST rates in the tender document - Para 56- We are at a loss to further understand how in the name of producing a level playing field, the State, when it decides to award a contract, would be obliged to undertake the ordeal of finding out the correct HSN Code and the tax applicable for the product, which they wish to procure. This is, particularly so when the State is not burdened with the liability to pay the tax. The liability to pay tax, in the case before us, is squarely on the supplier. (Para 47) Union of India v. Bharat Forge Ltd., 2022 LiveLaw (SC) 691

Constitution of India, 1950; Article 226 - Income Tax Act, 1961; Section 132 - Principles in exercising the writ jurisdiction in the matter of search and seizure under Section 132 restated. (Para 33) Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592

Constitution of India, 1950; Article 226 - Maharashtra Value Added Tax, 2002 - Central Sales Tax Act, 1956 - The Statute provide for the right of appeal against the assessment order passed by the Assessing Officer and against the order passed by the first appellate authority, an appeal/revision before the Tribunal - The High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India challenging the assessment order in view of the availability of statutory remedy under the Act - The question is not about the maintainability of the writ petition under Article 226 of the Constitution, but about the entertainability of the writ petition against the order of assessment by-passing the statutory remedy of appeal. (Para 6-8) State of Maharashtra v. Greatship (India) Ltd., 2022 LiveLaw (SC) 784

Constitution of India, 1950; Article 366 (29A) (d) - Transfer of right to use goods "deemed sale" - principles explained. (Para 52) Commissioner of Service Tax New Delhi v. Quick Heal Technologies Ltd, 2022 LiveLaw (SC) 660

Finance Act 1994; Section 65B (44) - Definition of "service" - does not include activities listed as "deemed" sale under Article 366(29A) of Constitution (Para 36) Commissioner of Service Tax New Delhi v. Quick Heal Technologies Ltd, 2022 LiveLaw (SC) 660

Finance Act, 1992 - Service Tax - Mega Exemption Notification no.25 of 2012–ST - Clause 5A - Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement - specified organisations - Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or 'Committee' or 'State Committee' as defined in section 2 of the Haj Committee Act, 2002 - Haj Group Organizers not specified organisation - not eligible for exemption [Para 46, 47, 50, 52] All India Haj Umrah Tour Organizer Association Mumbai v. Union of India, 2022 LiveLaw (SC) 632

Finance Act, 1992 - Service Tax - Mega Exemption Notification no.25 of 2012–ST - Clause 5(b) - Services by a person by way of conduct of any religious ceremony - It only exempts service provided by way of conduct of any religious ceremony - The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. [Para 51, 52] All India Haj Umrah Tour Organizer Association Mumbai v. Union of India, 2022 LiveLaw (SC) 632

Goods and Service Tax - Document Identification Number (DIN) System - Union of India / GST Council to issue advisory / instructions / recommendations to the respective States regarding implementation of the system of electronic (digital) generation of a DIN in the indirect tax administration - States to consider to implement the system for electronic (digital) generation of a DIN for all communications sent by the State Tax Officers to taxpayers and other concerned persons so as to bring in transparency and accountability in the indirect tax administration at the earliest - It would be in the larger public interest and enhance good governance. (Para 6-7) Pradeep Goyal v. Union of India, 2022 LiveLaw (SC) 654

Goods and Services Tax - Private Haj tour operators not entitled to claim GST exemption available for conducting religious ceremony - Haj Group Organizers are not performing any religious ceremony - HGOs can't claim parity with Haj Committee, which is a specified organization eligible for GST exemption for services in relation to pilgrimage. All India Haj Umrah Tour Organizer Association Mumbai v. Union of India, 2022 LiveLaw (SC) 632

Goods and Services Tax - Supreme Court allows 2 months additional window from September 1, 2022 to October 31, 2022 to claim transitional credit - Directions issued. Union of India v. Filco Trade Centre Pvt. Ltd., 2022 LiveLaw (SC) 628

Haj Pilgrims - Bifurcation of services rendered by the HGOs - cannot be bifurcated into two parts; services provided within taxable territory and those provided outside the taxable territory for the purpose of tax exemption - HGOs receive charges from Haj pilgrims for the entire package; it is not the case of the HGOs that they charge separately for different services forming a part of the comprehensive package - only a part of the package cannot be picked up for invoking exemption - for the purposes of levy of service tax, the service rendered cannot be dissected like this. [Para 54] All India Haj Umrah Tour Organizer Association Mumbai v. Union of India, 2022 LiveLaw (SC) 632

Income Tax Act 1961; Section 260A - Appeals against orders of Income Tax Appellate Tribunal (ITAT) will lie only before the High Court within whose jurisdiction the assessing officer is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s). (Para 33) Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686

Income Tax Act, 1961; Section 10B(8) - For claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. (Para 14) Principal Commissioner of Income Tax-III Bangalore v. Wipro Ltd., 2022 LiveLaw (SC) 583

Income Tax Act, 1961; Section 127 - by administrative order a 'case' can be transferred from one Assessing Authority to another Assessing Officer located in a different State - power of transfer under Section 127 relates to the jurisdiction of the Income Tax Authorities, not the ITAT of High Court - appellate jurisdiction of a High Court cannot dependent upon pure executive power exercised under Section 127 - transfer of a case from one judicial forum to another judicial forum, without the intervention of Court is against the independence of judiciary - even when cases of an assessee are transferred, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise appellate jurisdiction - this would be true even when the transfer is under Section 127 for the same assessment year. [Para Nos. 19, 25, 26, 28, 29, 31, 33] Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686

Income Tax Act, 1961; Section 132 - Appeal against the judgment of High Court of Gujarat whereby the warrant of authorization issued by Principal Director of Income Tax (Investigation) under Section 132 of the Income Tax Act was quashed - Allowed - The question as to whether such reasons are adequate or not is not a matter for the Court to review in a writ petition. The sufficiency of the grounds which induced the competent authority to act is not a justiciable issue. Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592

Income Tax Act, 1961; Section 132 - Sufficiency or inadequacy of the reasons to believe recorded cannot be gone into while considering the validity of an act of authorization to conduct search and seizure. The belief recorded alone is justiciable but only while keeping in view the Wednesbury Principle of Reasonableness. Such reasonableness is not a power to act as an appellate authority over the reasons to believe recorded. (Para 32) Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592

Income Tax Act, 1961; Section 260A - provides for a statutory appeal to the High Court against every order of the ITAT - does not specify the High Court before which an appeal would lie in cases where Tribunals operated for plurality of States - benches of the ITAT are constituted to exercise jurisdiction over more than one state; functions as the administrative discretion of the President - jurisdiction exercised by the benches of the ITAT do not follow the structure contemplated in Article 1 of the Constitution, which divides the Union into States and Union Territories - the appropriate High Court would be the one where the Assessing Authority is situated. [Para Nos. 13.3, 14, 15, 18, 30, 33] Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686

Interpretation of Statutes - Taxation Laws - In a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee - An assessee claiming exemption has to strictly and literally comply with the exemption provisions. (Para 8, 11) Principal Commissioner of Income Tax-III Bangalore v. Wipro Ltd., 2022 LiveLaw (SC) 583

Legislation - Amendment - When the legislature acts within its power to usher in a valid law and rectify a legal error, even after a court ruling, the legislature exercises its constitutional power to enact the law and does not overrule an earlier court decision - The power to amend, which includes the power to amend the statute with retrospective effect, is a constitutional power vested with the legislature, which is not confined and restricted to any particular type of statutes, namely, tax statutes. (Para 13, 22) Independent Schools Federation of India v. Union of India, 2022 LiveLaw (SC) 719

Motor Vehicles Taxation Act, 1976; Section 4(7), 4(8), 15 - Kerala Motor Transport Workers' Welfare Fund Act, 1985; Section 8A - Constitutional validity upheld -There is nothing wrong in State Legislature making it compulsory to pay outstanding welfare fund contribution first before accepting the vehicle tax which had become due and payable - These provisions are in no way in conflict with Motor Vehicles Act, 1988 - The real intent and purpose behind these provisions is to restate the mandate stated in the 1988 Act that the vehicle cannot be used on road without a valid permit and payment of vehicle tax up to date. (Para 40) All Kerala Distributors Association v. State of Kerala, 2022 LiveLaw (SC) 639

Service Tax - Finance Act 1994 - Held that for the period pre-Finance Act, 2007, service tax was not leviable on the indivisible/composite works contracts. Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes, 2022 LiveLaw (SC) 656

Service Tax - Finance Act 1994 - The contention of revenue to the effect that even prior to the 2007 amendment being made to the Finance Act, 1994 service tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a works contract till then. Hence, the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza) is not clarificatory in nature. (Para 12) Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes, 2022 LiveLaw (SC) 656

Service Tax - License to use software through End User License Agreement a "deemed sale" as per Article 366 (29A) (d) of the Constitution - Service tax not leviable merely because updates are given to the customer. Commissioner of Service Tax New Delhi v. Quick Heal Technologies Ltd, 2022 LiveLaw (SC) 660

Service Tax - Sale of software - whether service tax leviable - Once a lumpsum has been charged for the sale of CD (as in the case on hand) and sale tax has been paid thereon, the revenue thereafter cannot levy service tax on the entire sale consideration once again on the ground that the updates are being provided. We are of the view that the artificial segregation of the transaction, as in the case on hand, into two parts is not tenable in law. It is, in substance, one transaction of sale of software and once it is accepted that the software put in the CD is "goods", then there cannot be any separate service element in the transaction. We are saying so because even otherwise the user is put in possession and full control of the software. It amounts to "deemed sale" which would not attract service tax. (Para 55) Commissioner of Service Tax New Delhi v. Quick Heal Technologies Ltd, 2022 LiveLaw (SC) 660

Service Tax on Work Contracts - The judgment in Larsen and Toubro Ltd. (supra) has been correctly decided and does not call for a reconsideration insofar as the period prior to 1st June, 2007 is concerned. (Para 13) Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes, 2022 LiveLaw (SC) 656