20.04.2024: When facts and circumstances in a subsequent assessment year are the same, no authority be allowed to take a contrary view: Allahabad High Court

The Allahabad High Court in the case of M/S SAMSUNG INDIA ELECTRONICS PRIVATE LIMITED VERSUS STATE OF U.P. AND OTHERS vide Writ Tax No. 777 of 2022 With Writ Tax No. 660 of 2023 dated 12.03.2024, has held that the department's sudden change treatment of refund claims for said period was not only inconsistent but also irrational, principle of consistency dictates that when faced with identical factual and legal circumstances, treatment should remain uniform.  It is incumbent upon authorities to take a consistent approach when dealing with similar factual and legal circumstances. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity.

Facts of the case: In this case, the petitioner is a company engaged in the export of Information Technology design and software development services pertaining to mobile devices (“IT Services”) to its overseas holding company. Such export of IT services is made by the Petitioner under Letter of Undertaking without payment of IGST which constitutes zero rated supply as per Section 16 of the Integrated Goods and Services Tax Act, 2017. For rendering such services, the Petitioner procures various inputs, input services, and capital goods and accordingly avails ITC of the CGST, SGST, and IGST paid thereon, in accordance with the applicable provisions of the GST laws.

Contention of the Petitioner:- The Petitioner had filed a refund claim of unutilised ITC of CGST, SGST, and IGST paid on various inputs and input services for the period of April 2019 to June 2019, which was duly sanctioned by the department. Subsequently, the Petitioner filed for the refund of the unutilised ITC of CGST, SGST, and IGST paid on various inputs and input services, for the period of July – September, 2019 amounting to Rs. 7,46,52,231/- and October – December, 2019 amounting to Rs. 8,20,59,875/-. However, the department Against the aforesaid refund applications, deficiency memos under FORM GST-RFD-03 and later show cause notices were issued by the Department proposing to reject the refund for the aforesaid periods.

The petitioner contended that the Department has adopted an inconsistent approach in dealing with the refund applications of the Petitioner, despite the fact that each of the refund applications arise out of the same set of facts and circumstances, which is grossly incorrect in law. Further, Department has travelled beyond the scope of show cause notices. The show cause notices and the refund rejection orders had rejected the refund on the ground that the specific goods are not consumed in the process of provision of output service and hence cannot be treated as inputs. However, the subsequent show cause notices (i.e. impugned orders) have proceeded on a completely different ground and have held that the expenses incurred on specific goods were required to be capitalised in the books of accounts as per Accounting Standard 10, and hence, the same are covered under the ambit of capital goods in terms of Section 2(19) of the Central Goods and Services Tax Act, 2017.

The Petitioner also contended that it is an settled principles of law that if an allegation or ground is not made at the time of issuance of show cause notice, the authority cannot go beyond the scope of show cause notice to create a new ground at the later stage of adjudication. 

Department's Contention:- The Department contended that the principle of res judicata does not apply in matters of taxation and merely because refund claims have been sanctioned previously, does not mean that the refund claims for subsequent period will also be sanctioned. Further, the Petitioner while preparing its financial statements has not adhered to the Accounting Standards. Specific goods have not been capitalised by the Petitioner in accordance with Accounting Standard 10.


The High Court held as under:

  • While the principle of res judicata does not apply to taxation matters, it is incumbent upon authorities to take a consistent approach when dealing with similar factual and legal circumstances. The principle of consistency states that when faced with analogous factual and legal circumstances, the treatment should remain uniform. Taxpayers have a legitimate expectation that similar factual and legal circumstances will be met with uniform treatment, and any deviations from this principle undermine the credibility and legitimacy of the actions taken by tax authorities.
  • Where facts and circumstances in a subsequent assessment year are the same, no authority, whether quasi-judicial or judicial can generally be allowed to take a contrary view. 
  • In no case, the Department can be allowed to traverse beyond the confines of the Show Cause Notice, since the same will trample upon the recipient’s right to defend itself. Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice.

Therefore order rejecting refund claim of assessee for said period was palpably erroneous and could not be sustained and same was to be set aside.

To read the complete judgment 2024 Taxo.online 463

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