Page 20 - Banking Finance October 2022

LEGAL UPDATE

Under GST, when goods/services supplied space but against the rental value for erational debt) in terms of the proce-
in a bundle, either it could be composite the period of rent calculated for the dure laid down, in strict compliance of
or mixed supplies. Composite Supply period of lease and collected upfront." the time periods prescribed under the
means supply of two or more goods or IBC, before the adjudicating authority.
services or both. These are bundled and Customs department can't In any case, the IRP/RP/liquidator can
supplied in conjunction with each other immediately secure goods from the
sell assets of companies in
in the ordinary course of business and Customs authority to be dealt with
one of which is called principal supply. bankruptcy to recover appropriately, in terms of the IBC.
Rate for principal supply will be rate for Resultantly, we allow the appeal and
dues: SC
entire supply and if it is exempted, en- set aside the impugned order and judg-
In an important ruling, the Supreme
tire supply will be exempted. ment of the NCLAT."
Court said that once proceedings un-
der the Insolvency and Bankruptcy
Tax credit allowed on lease Code (IBC) are initiated against an im- SC tells HCs to write rul-
premium porter or exporter company, the cus- ings in language easy to
toms department authorities cannot
An Authority for Advance Ruling (AAR) understand
sell-off goods of that company for
judgement saying tax credit should be Supreme Court sent back an "incom-
realisation of dues.
allowed on goods and services tax prehensible" verdict to Himachal
(GST) paid on upfront lease premium A bench of Chief Justice N V Ramana Pradesh High Court for fresh consider-
could give a breather to companies and and Justices J K Maheshwari and Hima ation saying judgments must make
even corporate individuals. Tax authori- Kohli quashed an NCLAT order allowing sense to litigants.
ties have been disallowing the tax the customs authorities to dispose of
A bench of Justices D Y Chandrachud
credit up until now. goods in their warehouse belonging to
and A S Bopanna said use of complex
a company, ABG Shipyard, to realise
The AAR ruling means that many ten- and long sentences in judgments defeat
dues relating to customs duty on im-
ants would now be able to challenge the efficacy of justice delivery as they
ported items.
the taxman's stance, experts said. confuse litigants as to how and why a
Writing the judgment, the CJI said, "The court rendered a particular decision.
"Generally, tax authorities are disal-
IBC would prevail over the Customs Act,
lowing input credit on upfront lease Terming a judgment of a division bench
to the extent that once moratorium is
premium on the ground that same is of Himachal Pradesh HC "incompre-
imposed in terms of Sections 14 or 33(5)
in relation to immovable property, hensible" and "difficult to navigate
of the IBC, as the case may be, the re-
hence restricted, or where tenants through" even for the SC judges who
spondent authority only has a limited
undertake some renovation or con- have spent more than two decades as
jurisdiction to assess/determine the
struction work before they use the constitutional court judges, the bench
quantum of customs duty and other lev-
property, the credit is denied on the said, "A litigant for whom the judgment
ies. The Customs Authority does not
logic of input service of lease being is primarily meant would be placed in
have power to initiate recovery of dues
used for construction," said Harpreet an even more difficult position. Un-
by means of sale/confiscation, as pro-
Singh, partner at KPMG India. trained in the law, the litigant is con-
vided under the Customs Act."
fronted with language which is not
Input tax credit is a mechanism under
Allowing the appeal filed by the liqui- heard, written or spoken in contempo-
GST where part of the tax paid can be
dator of ABG Shipyard against the rary expression."
set off against future tax liability. Tamil
NCLAT judgment, the bench said, "The
Nadu AAR in a ruling on July 27 had Writing the judgment, Justice
respondent authority does not have
said, "The upfront premium made is Chandrachud said, "Language of the
the power to initiate recovery of dues
the lease rentals as per the allotment kind in a judgment defeats the purpose
by means of sale/confiscation, as pro-
order/letter of Chennai Port Trusts and of judicial writing. Judgment writing of
vided under the Customs Act."
it is nothing but lease rentals paid for the genre before us in appeal detracts
the services of 'renting of immovable It said the customs authorities could from the efficacy of the judicial process.
property' for business purposes. The assess the value of the goods and the The purpose of judicial writing is not to
upfront premium paid is not related to customs duty thereon and "submit its confuse or confound the reader behind
construction activity of such covered claims (concerning customs dues/op- the veneer of complex language."
20 | 2022 | OCTOBER | BANKING FINANCE