{"id":2466,"date":"2025-07-15T06:58:46","date_gmt":"2025-07-15T06:58:46","guid":{"rendered":"https:\/\/www.rnm.in\/blog\/?p=2466"},"modified":"2025-07-15T09:59:38","modified_gmt":"2025-07-15T09:59:38","slug":"indirect-tax-updates-june-2025","status":"publish","type":"post","link":"https:\/\/www.rnm.in\/blog\/indirect-tax-updates-june-2025\/","title":{"rendered":"Indirect Tax Updates June 2025"},"content":{"rendered":"

Gujarat High Court \u2013 Addwrap Packaging Pvt. Ltd. & Anr. v. Union of India & Ors.<\/b><\/h2>\n

Facts:<\/b><\/h3>\n
    \n
  • Rule 96(10) restricted the ability of certain exporters to claim IGST refunds on exports made under LUT (Letter of Undertaking) or payment of tax, if they or their suppliers availed certain customs\/GST exemptions (e.g., Advance Authorization, EPCG, EOU).<\/span><\/li>\n
  • The petitioners had exported goods under payment of IGST and claimed refund, but the department denied refund citing violation of Rule 96(10).<\/span><\/li>\n
  • Show cause notices and adjudication orders were issued solely on the basis of Rule 96(10).<\/span><\/li>\n
  • However, Rule 96(10) was omitted by way of Notification No. 20\/2024\u2013CT, dated 8 October 2024, and no \u201csaving clause\u201d was provided \u2014 meaning the government did not specify what should happen to pending proceedings under this rule.<\/span><\/li>\n<\/ul>\n

    \u00a0Issue:<\/b><\/h3>\n
      \n
    • Whether the <\/span>omission (deletion)<\/b> of Rule 96(10) \u2014 <\/span>without any saving clause<\/span><\/i> \u2014 would: Automatically nullify <\/span>pending proceedings<\/b>, or Continue to apply to past periods due to its earlier existence.<\/span><\/li>\n<\/ul>\n

      Held:<\/b><\/h3>\n
        \n
      • \n
          \n
        • The Court held that deletion of a rule, without any saving clause, must be treated as a complete repeal.<\/span><\/li>\n
        • Under Section 6 of the General Clauses Act, 1897, when a law or rule is repealed:<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
            \n
          • Pending proceedings<\/span> can continue<\/span> only<\/span><\/i> if the repealing law includes<\/span> a <\/b>saving clause<\/span>.<\/b><\/li>\n<\/ul>\n
              \n
            • \n
                \n
              • In absence of such a clause<\/span>, <\/b>all rights, liabilities, and proceedings<\/span> under the repealed law\/rule cease to exist.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
                  \n
                • Since Rule 96(10) was completely omitted without a saving clause, any ongoing or pending refund denial cases under that rule automatically become invalid<\/span>.<\/b><\/li>\n
                • The court specifically quashed the show cause notices and orders issued to the petitioner under Rule 96(10).<\/span><\/li>\n<\/ul>\n

                  High Court of Sikkim – SICPA India Pvt. Ltd. & Anr. v. Union of India & Ors.<\/b><\/h2>\n

                  Facts<\/b><\/h3>\n
                    \n
                  • SICPA India, a security ink manufacturer, closed its manufacturing operations in Sikkim in January 2019.<\/span><\/li>\n
                  • During closure, it sold its assets and reversed relevant ITC as per GST rules.<\/span><\/li>\n
                  • However, an unutilized ITC balance (~\u20b94.37 crore) remained in its Electronic Credit Ledger.<\/span><\/li>\n
                  • The company applied for a refund of this balance under Section 49(6) of the CGST Act.<\/span><\/li>\n
                  • The refund was <\/span>denied<\/b> by the Adjudicating Authority, and the Appellate Authority, citing Section 54(3) which limits refund eligibility to: Zero-rated supplies (exports\/LUT), or Inverted duty structure.<\/span><\/li>\n
                  • SICPA filed a <\/span>writ petition<\/b> with the Sikkim High Court.<\/span><\/li>\n<\/ul>\n

                    Issue<\/b><\/h3>\n

                    Can a business that has ceased operations claim a refund of its unutilized ITC under Section 49(6), even though Section 54(3) doesn\u2019t expressly mention business closure as a valid reason.<\/span><\/p>\n

                    Held<\/b><\/h3>\n
                      \n
                    • Section 49(6) allows refund of the opening ledger balance after taxes, interest, and penalties are paid, referring to Section 54 for procedure\u2014but does not limit eligibility<\/span>.<\/b><\/li>\n<\/ul>\n
                        \n
                      • \n
                          \n
                        • Section 54(3) lists two specific refund scenarios, but does not expressly prohibit refunds in other situations like business closure.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
                            \n
                          • Retaining ITC after business closure without explicit legal authority<\/span> violates the basic principle that tax cannot be held without legal backing<\/span>.<\/b><\/li>\n<\/ul>\n

                            Section\u202f122 – Are Penalties\u00a0 Civil in Nature<\/b><\/h2>\n

                            Facts<\/b><\/h3>\n

                            A company (e.g., Patanjali Ayurved) received a Show Cause Notice under: Section\u202f74: for tax recovery and potential penalty, and Section\u202f122: for penalty due to allegations like fake invoicing or circular trading.<\/span><\/p>\n

                              \n
                            • The tax demand under Section\u202f74 was later<\/span> dropped by the authorities.<\/span><\/li>\n
                            • Despite that, the department continued with the Section\u202f122 penalty.<\/span><\/li>\n
                            • The company contested this, saying Section\u202f122 involves criminal-like penalties and therefore needed a separate criminal process.<\/span><\/li>\n<\/ul>\n

                              Issue:<\/b><\/h3>\n
                                \n
                              • Is the penalty under Section\u202f122<\/span> a<\/span> criminal offense<\/span>, <\/b>or a<\/span> civil liability<\/span><\/li>\n
                              • And if the Section\u202f74 case is closed, does that mean the Section\u202f122 case automatically ends too?<\/span><\/li>\n<\/ul>\n

                                \u00a0<\/span>Held:<\/b><\/h3>\n

                                Civil, Not Criminal:<\/span> The Court said penalties under Section\u202f122 are civil in nature, not criminal. You don’t need a criminal trial or a court\u2014these are civil penalties handled by GST officers.\u00a0<\/span><\/p>\n

                                Separate Proceedings<\/span>:<\/b> Closing a case under Section\u202f74 does not mean the Section\u202f122 case ends too.<\/span><\/p>\n

                                You can have two separate proceedings: one for tax recovery (74), and one for penalties (122).<\/span><\/p>\n

                                  \n
                                1. GST Officer Can Decide: The same GST officer can issue and decide Section\u202f122 penalties\u2014they don’t need to go to a criminal court.<\/span><\/li>\n
                                2. Mens Rea Not Required<\/span>:<\/b> A \u201cguilty intent\u201d (mens rea) is<\/span> not needed for Section\u202f122 penalties. The rules target behaviour like fake invoicing even if it wasn\u2019t intentional.<\/span><\/li>\n<\/ol>\n

                                   <\/p>\n

                                  Liability of Directors – Under Section 122(1A) CGST<\/b><\/h2>\n

                                  Facts<\/b><\/h3>\n
                                    \n
                                  • The company (Planman HR Pvt. Ltd.) claimed ineligible CENVAT credit (~\u20b922\u202fcrore), failed to file GST returns, and was found liable for short-paid GST (\u20b940\u202fcrore) and inadmissible ITC (\u20b935\u202flakh).<\/span><\/li>\n
                                  • Both the company and its directors (petitioners) were penalized under Sections <\/span>122(1)<\/b> and <\/span>122(1A)<\/b> (\u20b935\u202flakh each) and also faced provisional attachment under Section 83.<\/span><\/li>\n
                                  • Directors argued they weren\u2019t \u201ctaxable persons\u201d and thus couldn\u2019t be penalized under Section 122(1A), claiming no personal benefit or involvement.<\/span><\/li>\n<\/ul>\n

                                    \u00a0<\/span>Issue<\/b><\/h3>\n

                                    Can penalties under Section 122(1A<\/span>)<\/b> be imposed on individuals such as directors, even if they are not taxable persons, for fraudulent ITC claims or short payment of GST?<\/span><\/p>\n

                                    Held:<\/b><\/h3>\n
                                      \n
                                    1. \n
                                        \n
                                      1. Any Person vs. Taxable Person<\/b>\n
                                          \n
                                        • While Section 122(1) targets \u201ctaxable persons\u201d, <\/span>Section 122(1A)<\/b> explicitly applies to <\/span>\u201cany person\u201d<\/b> who retains benefit from specified illicit transactions.<\/span><\/li>\n
                                        • \u201cAny person\u201d includes non-registered individuals like directors and managers.<\/span><\/li>\n<\/ul>\n<\/li>\n
                                        • Director Liability<\/b>\n
                                            \n
                                          • Directors are responsible for the acts of the company and <\/span>can be liable<\/b> if they:<\/span>\n
                                              \n
                                            • Initiated or benefited from fraudulent transactions, and\/or<\/span><\/li>\n
                                            • Were involved in decision-making, invoicing, ITC claims, or GST non-compliance.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n
                                            • Requirement of Fact-Based Inquiry<\/b>\n
                                                \n
                                              • Liability depends on fact-specific inquiry: the Appellate Authority must examine whether the director actively participated or derived benefit.<\/span><\/li>\n<\/ul>\n<\/li>\n
                                              • Right to Appeal<\/b>\n
                                                  \n
                                                • Directors (even as non-taxable persons) are entitled to file appeals under Section 107.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n
                                                    \n
                                                  • The Court directed tax authorities to enable an appeal process (online or offline) and to not reject appeals on limitation grounds if delays resulted from unavailable systems.<\/span><\/li>\n<\/ul>\n

                                                     <\/p>\n","protected":false},"excerpt":{"rendered":"

                                                    Gujarat High Court \u2013 Addwrap Packaging Pvt. Ltd. & Anr. v. Union of India & Ors. Facts: Rule 96(10) restricted the ability of certain exporters to claim IGST refunds on exports made under LUT (Letter of Undertaking) or payment of tax, if they or their suppliers availed certain customs\/GST exemptions (e.g., Advance Authorization, EPCG, EOU). The petitioners had exported goods […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[253],"tags":[],"class_list":["post-2466","post","type-post","status-publish","format-standard","hentry","category-indirect-tax"],"yoast_head":"\nIndirect Tax Updates June 2025<\/title>\n<meta name=\"description\" content=\"Get latest Indirect Tax Updates for June 2025. 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