The Karnataka High Court in the case of Bangalore Electrical Supply Company Limited Versus The Assistant Commissioner Of Central Tax North Division quashed the assessment order and held that the Reverse Charge Mechanism (RCM) could not make assessee liable to pay double tax.
The bench of Justice S.R.Krishna Kumar has observed that where discharge of entire tax amount was not disputed by petitioner-assessee and reverse charge mechanism would lead to double taxation, therefore, following judgment of Zyeta Interiors Pvt. Ltd., and Anr Vs. Vice Chairman Settlement Commission and Anr, assessment order was to be quashed and matter was to be remitted back.
Pursuant to inspection being conducted under Section 67(1) of the Central Goods and Services Tax Act, 2017, the petitioner received communication from the Senior Intelligence Officer, DGGI, to which the petitioner submitted a reply, in pursuance of which, a communication under Section 73(5)/74(5) was issued to the petitioner.
Petitioner submitted a reply, which was accepted by the department and Show Cause Notice was issued to the petitioner calling upon them to pay a sum of Rs.1,86,94,168 towards liability payable on the value of security services received by them. The petitioner submitted a reply dated 09.01.2024 and after taking necessary proceedings, respondent passed the order, which is assailed in the present petition.
It is submitted that the issue regarding the liability of the petitioner to pay GST under reverse charge mechanism is covered by the judgment of this Court in the case of M/s. Zyeta Interiors Pvt. Ltd., and Anr Vs. The Vice Chairman Settlement Commission and Anr, which is confirmed by the Division Bench. It is therefore submitted that the assessment order deserves to be set aside and the matter may be remitted back to the respondent department for verification of the payment made by the service provider and to proceed further in the matter.
The division bench of Karnataka High Court in the case of M/s. Zyeta Interiors Pvt. Ltd., and Anr Vs. The Vice Chairman Settlement Commission and Anr held that the reverse charge mechanism should not lead to double taxation. The tax amount being paid in full by the assessee under the service provider in the ratio 50:50, the same cannot be construed as shortage of payment of tax.
The court remitted the matter back to the department for verification as to whether the service provider has paid necessary GST and proceed further in accordance with law.
Case Details
Case Title: Bangalore Electrical Supply Company Limited Versus The Assistant Commissioner Of Central Tax North Division -1
Case No.: Writ Petition No. 17848 Of 2024 (T-Res)
Date: 03/09/2024
Counsel For Petitioner: Annamalai S
Counsel For Respondent: Jeevan J Neeralgi
