GST Update

Desk of CA. Praveen Sharma – 842 Series (CAPS)

Delhi High Court in the case of Transformative Learning Solutions Pvt. Ltd.

Case Background:

The petitioner, an exporter of Ayurvedic cosmetic goods, challenged the CGST Department’s order dated 31 January 2025 confirming a tax demand of ?20.14 crore with equal penalty and interest, and appropriation of ?29.33 lakh reversed ITC.

Audit & Objections:

A departmental audit for FY 2017–18 to 2021–22 raised objections about unsubstantiated export proceeds, alleging the petitioner failed to provide Bank Realisation Certificates (BRCs/FIRCs) as proof of receipt of foreign currency.

Department’s Stand:

The department stated that the petitioner did not submit proper replies or discharge liabilities despite several notices. Consequently, a show cause notice dated 16 July 2024 was issued, and after hearings, the full demand was confirmed under Section 74 of the CGST Act.

Key Demand Composition:

The major portion of the demand—?15.94 crore—pertained to non-receipt of export proceeds, along with reversal of excess ITC, RCM liabilities, short payment, and wrong IGST refund claims.

Petitioner’s Contention:

The petitioner contended that the order lacked reasoning, ignored evidence already submitted (including export documents and remittance proofs), and wrongly rejected refund claims because of the large number of FIRCs and invoices.

Court’s Observation:

The Delhi High Court observed that FIRCs need not match each invoice individually; periodic reconciliation suffices if total remittances substantiate export claims.

Judicial Finding:

The Court held that the order was unreasoned and contrary to fair procedure, necessitating re-examination of the petitioner’s documentation.

Final Direction:

The Court set aside the order dated 31 January 2025 and directed the adjudicating authority to issue a fresh hearing notice, provide an opportunity of being heard, and pass a reasoned order after reviewing all evidence.

LINK: CA. Praveen Sharma on Linkedin

Regards
CAPS