Failure To Mention Correct Value In GSTR-5A Filing Is Not Suppression U/S 74 CGST Act: Karnataka High Court

Justice S.R. Krishna Kumar stated that "...though the revenue alleged in the impugned SCN that the assessee failed to mention the value of services correctly in the GSTR-5A returns and apply the correct GST rate on the consideration received, the mere omission to mention the value of services correctly in the returns and/or apply the correct GST rate would not be tantamount to wilful suppression…"

The assessee/petitioner has a division “Pearson Vue” which is engaged in providing computer-based test administration solutions, and pursuant to its contract with GMAC, USA, the assessee conducts GMAT on behalf of GMAC for candidates in India.

The assessee entered into a contract with human scorers through their vendor ACT Inc., to ensure that appropriate human competency and knowledge are brought to bear while carrying out human scoring for GMAT tests.

It is contended that subsequent to the GST regime, the assessee applied to the Authority in Advance Rulings (AAR) seeking a Ruling on whether the services engaged by it would come under the ambit of online Information Data Base Access and Retrieval Services (OIDAR services) under GST Laws.

The AAR held in favour of the assessee that while Type–II tests of the assessee would come within the ambit of OIDAR services, but Type–III tests are outside the purview of OIDAR services, since it involves more than minimum human intervention.

Aggrieved by the aforesaid order passed by the AAR, the department/respondents filed an appeal before the Karnataka Appellate Authority for Advance Ruling (AAAR). The AAAR allowed the appeal filed by the department.

Aggrieved by the aforesaid order passed by the AAAR, the assessee has preferred a writ petition before the Karnataka High Court, which passed an interim order directing the respondents not to take any precipitative action for recovery against the petitioner.

Subsequently, the Directorate General of GST Intelligence/2^nd respondent issued the impugned show cause notice demanding payment from the petitioner for the period July 2017 to June 2021 under Section 74 of the CGST Act on the ground of wilful suppression.

The assessee submitted that the impugned show cause notice is wholly without jurisdiction as the foundational jurisdictional facts to trigger/invoke Section 74 of the CGST Act i.e., existence of wilful suppression to evade/avoid payment of GST in relation to Type – III tests, have not been satisfied by the revenue, and the impugned show cause notice deserves to be quashed.

The bench opined that the revenue had in their knowledge the complete gamut of transactions of supply of Type-III tests by the assessee, thereby leading to the sole conclusion that an intention to evade payment of tax could in no manner be imputed or attributable to the assessee.

The bench stated that ……initially the Type III tests were held to be outside the purview of OIDAR by the AAR, which was reversed in appeal by the AAR and therefore, the issue itself is not without doubt and when conflicting views are available with the revenue itself entertaining two views, it is impermissible to allege that the petitioner had suppressed any information with an intention to evade payment of taxes; the petitioner having approached the revenue for an advance ruling with all data available cannot be foisted with a demand alleging suppression of facts.

In view of the above, the bench partly allowed the petition and set aside the show cause notice.

Case Title: M/s NCS Pearson INC. v. Union of India

Case Number: WRIT PETITION NO. 7635 OF 2024 (T-RES)

Counsel for Petitioner/Assessee: Sujith Ghosh

Counsel for Respondent/Department: Timmanna Bhat, CGC, For R1, Jeevan J. Neeralgi, For R2 to R5, K. Hemakumar, AGA, For R6

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