Goods and Services Tax
1. In case of fraud committed by the seller, there cannot be an automatic cancellation of registration of purchaser, more so when there is no proof to substantiate that the purchaser has deliberately availed the input tax credit.
Bright Star Plastic Industries v. Additional Commissioner of Sales Tax (Appeal) & Others. [WP(C) No. 15265 of 2021 (Orissa High Court), decided on October 4, 2021]
Facts of the case:
The registration of the Petitioner was cancelled by the proper officer on the ground that the Petitioner had claimed input tax credit (“ITC”) against fake invoices issued by non-existent supplier, whose registration was cancelled by the authorities. The authorities contended that the registration was cancelled as a preventive measure to prevent future fraud & recurrence for regular claim of ITC, in the interest of Government revenue.
Judgment:
The Orissa High Court held that for the fraud committed by the selling dealer, which resulted in cancellation of such selling dealer's registration, there cannot be an automatic cancellation of the registration of the purchasing dealer. Further, the Department has failed to show that the Petitioner as a purchasing dealer deliberately availed the ITC of Goods and Services Tax (“GST”) knowing that such an entity was not in existence and that the Petitioner and selling dealer acted in connivance to defraud the revenue. Consequently, the petition was allowed, and the denial of ITC was set aside.
2. Pre-deposit of GST Appeals under Section 107(6) if the Orissa Goods and Services Tax Act, 2017 ("OGST Act") is required to be made via the electronic cash ledger.
Messrs Jyoti Construction v. Deputy Commissioner of CT & GST, Barbil Circle, Jaipur, [W.P.(C) No. 23508 of 2021 (Orissa High Court), decided on October 7, 2021].
Facts of the case:
Judgment:
Argus Comments:
The interpretation adopted by the Hon’ble Orissa High Court to restrict the utilization of credit while making pre-deposit has laid down a litigious position under the Goods and Services Tax (GST) Laws, which seems to be contrary to the settled legal position. We expect a clarification from the CBIC in this regard.
3. Damages claimed by the applicant due to the delay in making available possession of site, drawings & other schedules are consideration for tolerating an act or a situation arising out of the contractual obligation and liable to GST.
In Re: Messrs. Continental Engineering Corporation [A.R.Com/18/2020 TSAAR Order No.13/2021 (Authority for Advance Ruling, Telangana), decided on October 8, 2021].
Facts of the case:
Judgment:
The AAR held that the liquidated damages claimed by the applicant due to the delays in making available possession of site, drawings & other schedules beyond the milestones fixed for completion of project was consideration for tolerating an act or a situation arising out of the contractual obligation and liable to 18% GST.
Argus Comments:
The interpretation adopted by the AAR is in contravention with the settled precedents under the Service tax laws, including the decision of M/s. South-Eastern Coalfields Limited vs. Commissioner of CE&ST, Raipur [2020 (12) TMI 912 – CESTAT New Delhi]. It seems to trigger another round of litigation in the GST Regime as well.
Service Tax
1. Reimbursement charged to joint account by a co-venturer is for furtherance of the common objective of the Joint venture and not for provision of service.
B.G. Exploration & Production India Ltd. v. CCGST & CEX, Navi Mumbai [Final Order No. A/86962/2021 (CESTAT, Mumbai), decided on October 6, 2021].
Facts of the case:
Judgment:
2. Refund of service tax paid by mistake cannot be barred by limitation.
Base Educational Services Pvt. Ltd. v. CCT, Bengaluru [Final Order No. 20777 - 20780 /2021 (CESTAT, Bangalore), decided on October 7,2021].
Facts of the case:
The Appellant filed refund claim of Service tax inter-alia paid twice by mistake. The department denied such refund on the ground of it being barred by limitation under Section 11B of the Central Excise Act, 1944.
Judgment:
The CESTAT observed and relied upon the ruling of the Hon’ble Madras High Court in the case of 3E Infotech v. CESTAT [2018(18) GSTL 410 (Mad.)], wherein it was held that when Service tax is paid by mistake, a claim for refund cannot be barred by limitation, merely because the period of limitation under Section 11B had expired. Accordingly, the CESTAT allowed the appeal and set aside the order rejecting the refund claim.
Customs
1. Tariff entry cannot be given a static interpretation ignoring the evolution in technology.
Reliance Jio Infocomm Ltd. v. Commissioner of Customs (Import) [Final Order No. A/86960-86961/2021 (CESTAT, Mumbai), decided on October 6, 2021].
Facts of the case:
The Appellant was issued a show cause notice (“SCN”) alleging that the base stations of 4G Network technology imported by it had more than basic functionalities as present in 2G and 3G technology and also had additional specifications of Base Transceiver Station and accordingly, were classifiable under Tariff Entry 8517 62 90 (“Other”) instead of Tariff Entry 8517 61 00 (“Base Stations”) of the Customs Tariff Act, 1975 (“CTA”). Consequently, the exemption claimed by the Appellant on such goods under Notification dated 17.03.2016 was not admissible and the Appellant was liable to pay the differential duty, interest, and penalty under the Customs Act 1962 (“Customs Act”).
Judgment:
2. Additional Director General, DRI, is not a proper Officer to issue SCN under Section 28(4) read with Section 2 (34) of Customs Act, 1962.
Messrs Modern Insecticides Limited v. Commissioner of Customs, Ludhiana, [Final Order No. 60923/2021 (CESTAT, Chandigarh), decided on October 5, 2021].
Facts of the case:
The present dispute relates to the question whether Additional Director General, DRI, Ludhiana is having jurisdiction to issue SCN under Section 28(4) read with Section 2(34) of Customs Act, 1962 or not.
Judgment:
Central Excise, Sales Tax, VAT
1. CENVAT Credit availed for setting up of coal handling plant, which was used for evacuation of coal by rapid loading process cannot be denied.
Bharat Coking Coal Ltd. v. CCE & ST, Ranchi [Final Order No. 75645/2021 (CESTAT, Kolkata), decided on October 7, 2021].
Facts of the case:
The Appellant had availed CENVAT credit on its coal handling plant, which was set up for the purposes of evacuation of coal from its mining premises. The department alleged inadmissibility of such credit under the amended definition of “input services” in Rule 2(l) of CENVAT Credit Rules, 2004 (“CCR”), which omitted the words “setting up of factory” therefrom.
Judgment:
2. Amount of compensation received from the buyer on account of loss suffered due to cancellation of the contract was additional consideration flowing indirectly from the buyer and was liable to exceise duty.
Messrs Rajasthan Prime Steel Processing Center Private Limited v. C.C.E.& CGS.T. Alwar [Final Order No. 51868/2021 (CESTAT, New Delhi), decided on October 13, 2021].
Facts of the case:
The Appellant received an amount from M/s. Honda Siel Car India Ltd. (“Honda”), for loss suffered by the Appellant on account of the cancellation of the contract for supply of auto parts used in the manufacture of vehicles. The said auto parts were then sold as scrap to various scrap dealer. The authorities alleged that the consideration received by the Appellant from Honda under the guise of compensation was liable to be included in the transaction value of goods.
Judgment:
3. Input services used in manufacture of exempted goods and services supplied to SEZ Developers was not required to be reversed under Rule 6 of CCR.
Vijaya Steels Limited v. C.C.E – II, Bangalore [Final Order No. 20772/2021 (CESTAT, Bangalore), decided on October 1, 2021].
Facts of the case:
Judgment:
Recent Circulars and Notifications
No. |
Reference |
Particulars |
1. |
Circular No. 163/19/2021-GST dated October 6, 2021 |
Seeks to clarify the issues relating to GST Rates and classification of goods as under:
Exemption from GST to fresh fruits and nuts covers only such products which are not frozen or dried in any manner as specified or otherwise processed. Supply of dried fruits and nuts, falling under Chapter heading 0801 and 0802 attract GST at the rate of 5%/12% as specified in the respective rate Schedules.
With effect from October 1, 2021, tamarind and other seeds falling under heading 1209, (i.e., including tamarind seeds), if not supplied as seed for sowing, would attract GST at the rate of 5%.
Copra, classified under heading 1203, attracts GST rate of 5%, irrespective of use.
Pure henna powder and henna leaves, having no additives, is classifiable under Tariff item 1404 90 90 and shall attract GST rate of 5%. The GST rate on mehndi paste in cones falling under Chapter heading 1404 and 3305 shall be 5%
Scented sweet supari falls under Tariff item 2106 90 30 as “Betel nut product” known as “Supari” and attracts GST rate of 18%. Flavoured and coated illaichi is a value-added product and falls under sub-heading 2106 and attract GST at the rate of 18%.
BSG, DDGS and other such residues are classifiable under heading 2303, attracting GST at the rate of 5%.
All goods falling under heading 3006 attract GST rate of 12%.
Concessional GST rate of 12% is applicable on all goods falling under heading 3822.
The original/ import Essentiality certificate, issued by the DGH is sufficient and there is no need for taking a certificate every time on inter-state movement of goods within the same company / stock transfer so long as the goods are the same as those imported by the company at concessional rate.
Even if the UPS/inverter and external battery are sold on the same invoice, their price are separately known, and they are two separately identifiable items. Thus, this constitutes supply of two distinctly identifiable items on one invoice. In such supplies, UPS/ inverter would attract GST rate of 18% under heading 8504, while external batteries would attract the GST rate as applicable to it under heading 8507 (28% for all batteries except lithium-ion battery).
GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, for the period of July 1, 2017 to December 31, 2018 in the same manner as has been prescribed for the period on or after January 1, 2019.
Supply of Fibre Drums even if made at 12% GST (during the period from 1.7.2017 to 30.9.2021), would be treated as fully GST-paid. |
2. |
Circular No. 164/20/2021-GST dated October 6, 2021 |
Seeks to clarify the issues relating to GST Rates and classification of services as under:
Service provided by way of cooking and supply of food, by cloud kitchens/central kitchens are covered under ‘restaurant service?, as defined in Notification No. 11/2017- Central Tax (Rate) will attract 5% GST [ without ITC].
Where ice cream parlours sell already manufactured ice- cream and do not cook/prepare ice-cream for consumption like a restaurant, it is supply of ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it is clarified that ice cream sold by a parlour would attract GST at the rate of 18%.
Overloading charges at toll plazas would get the same treatment as given to toll charges, i.e., exempt from payment of GST.
The said service most appropriately falls under service code 997337, i.e., “licensing services for the right to use minerals including its exploration and evaluation” and will be chargeable to GST at the rate of 18%.
Services by way of job work in relation to manufacture of alcoholic liquor for human consumption are not eligible for the GST rate of 5% and will be chargeable at 18% GST. |
This newsletter has been contributed by the Indirect Tax team.
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