HC Stays CBIC Circular on Corporate Guarantee; Allows Authority to Decide Case Without Being Influenced by Clarification

Case Details: M/S Acme Cleantech Solutions Pvt Ltd v. Union of India - [2024] 162 taxmann.com 151

Judiciary and Counsel Details

• • Sanjeev Prakash Sharma & Sukhvinder Kaur, JJ.
  • Sujit Ghosh, Sr. Adv. Abhinav Sood, Ms Mannat Waraich, Ms Anshika Agarwal & Anmol Gupta, Advs. for the Petitioner.

Facts of the Case

The petitioner filed a writ petition to challenge the Circular No. 204/16/2023-GST dated 27.10.2023 issued by the CBIC which clarified taxability of corporate guarantees on the ground that it seeks to take away the adjudicatory powers of the Assessing Authority as well as the Appellate Authority. It was contended that a circular can’t seek to take away the adjudicatory powers by clarifying provisions in the nature of adjudication.

High Court Held

The Honorable High Court noted that the petitioner preferred an appeal against the demand and the CBIC issued a clarification vide item No. 2 in the impugned Circular dated 27.10.2023. The Court further noted that the impugned Circular directly impinges upon the powers of Appellate Authority and the very purpose of filing of appeal stands negated.

Therefore, the Court held that the Appellate Authority shall be free to decide the case of the petitioner without being influenced by the impugned clarification. The Court also granted stay on the operation of the impugned Circular which provide clarification on taxability of corporate guarantee provided by companies.