The GST Appellate Tribunal (GSTAT) has admitted an appeal concerning the effective date of a declaration required for claiming exemption on branded rice and the validity of invoking Section 74 of the Central Goods and Services Tax Act, 2017 for recovery of allegedly unpaid dues.

The Bench of Sushil Kumar Sharma (Judicial Member) and Duvvuri Krishna Srinivas (Technical Member) has issued notice to the department and directed them to file their counter within two weeks, with the matter to be listed after four weeks. 

The dispute arose from the appellant’s sale of rice in unit containers bearing its commercial name. According to the order, the appellant sought the benefit of the exemption framework under Notification No. 28/2017-CT(R) dated September 22, 2017.

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The notification required the taxpayer, in the circumstances contemplated by the notification, to furnish a declaration foregoing enforceable rights, remedies or actionable claims in respect of the relevant brand name for availing the exemption.

The appellant’s case was that it had filed the necessary declaration. However, a dispute arose over the date from which the exemption should be considered available. 

The central issue before the GSTAT concerns the Revenue’s interpretation of the effective date of the declaration.

The appellant argued that once the prescribed declaration had been furnished, the exemption should be available with reference to the exemption notification. According to the appellant, the department was instead taking the position that the exemption could operate only from the date on which the declaration was actually filed, rather than from the date of the exemption notification.

The department representatives, Assistant Commissioner S. Gouri Shanker and Ram Subba Reddy, maintained that the wording of the notification specifically contemplated applicability from the date of filing of the declaration. 

Thus, the Tribunal will have to examine the interplay between the exemption notification and the prescribed declaration, particularly whether the filing of the declaration constitutes a condition determining the point from which the exemption becomes operative.

Apart from the exemption issue, the appellant has also challenged the department’s decision to invoke Section 74 of the CGST Act for recovery of unpaid dues.

The appellant’s counsel contended before the Tribunal that invocation of Section 74 for recovery was unwarranted. The order records this contention separately from the dispute regarding the effective date of the exemption. 

Section 74 proceedings involve determination and recovery of tax where the statutory conditions for invoking that provision are alleged by the department to exist. The Tribunal has not, at this stage, recorded a final finding on whether Section 74 was correctly invoked in the appellant’s case.

After hearing the rival submissions, the GSTAT Bench concluded that the appeal deserved to be admitted.

The Tribunal expressly recorded: “After hearing the arguments, the Bench is of the considered opinion to admit the appeal.” It consequently directed issuance of notice to the respondents and granted them two weeks to file their counter. The matter has been directed to be listed after four weeks. 

The admission of the appeal means that the substantive dispute concerning the effective date of the exemption and the challenge to the Section 74 proceedings will now be examined further by the Tribunal. The order does not finally decide either issue.

The principal legal question emerging from the order is whether the benefit of the exemption under Notification No. 28/2017-CT(R) can be claimed from the date of the notification when the prescribed declaration was subsequently filed, or whether the exemption becomes available only from the date on which the declaration is furnished.

A connected issue is whether, on the facts and circumstances of the case, the department was justified in resorting to Section 74 for recovery of unpaid dues.

The department has defended its position by relying on the wording of the notification, while the appellant disputes both the department’s interpretation of the effective date and the invocation of Section 74.

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