In the case of M/s Samsung India Electronics Pvt Ltd v State of U.P and Others, the hon’ble Allahabad High Court addressed the petitioner's refund claim for unutilized Input Tax Credit (ITC) of CGST, SGST, and IGST paid on various inputs and input services.
The petitioner, M/s Samsung India Electronics Pvt Ltd, exported IT services to its overseas holding company, M/s Samsung Electronics Company Limited, Korea. They filed refund claims for unutilized ITC of CGST, SGST, and IGST paid on inputs and input services from April to June 2019, which was partially sanctioned. Subsequently, they applied for refunds for July to September 2019 and October to December 2019. The Department issued deficiency memos and show cause notices, alleging rejection of refunds for these periods. After replies and hearings, the Department partially allowed the refunds but rejected a portion, arguing certain goods were capital goods, not inputs. The petitioner appealed, leading to the present petitions before the Allahabad High Court.
The Hon’ble Allahabad High Court, while quashing the Order, held that while the principle of res judicata does not apply to taxation matters, tax authorities must maintain a consistent approach when faced with similar factual and legal circumstances. The court emphasized the importance of uniform treatment, as taxpayers have a legitimate expectation of fairness and equity from the tax authorities and deviations from this principle undermines the credibility of their actions.
The court also noted that withholding refund claims arbitrarily, despite past precedents and unchanged circumstances, is unfair. While drawing a distinction between capital goods and inputs, the hon’ble court affirmed that that the Petitioner’s case is not subject to capitalization.
The court stressed that show cause notices must clearly outline specific allegations, and the department cannot exceed their scope without violating natural justice. Any action beyond the show cause notice's confines was deemed void ab initio and unsustainable. The court found the impugned orders erroneous and allowed the writ petitions, with consequential reliefs to follow.
W&B Comments: It is a settled position of law that the Department cannot adopt a contradictory stance or inconsistent approach when dealing with the same facts and legal background. Altering their position would imply that their prior stance was incorrect. Therefore, tax authorities are required to adhere to uniform treatment when faced with similar factual and legal circumstances.