Appellate Authority for Advance Ruling
Advance RulingsCase Briefs

   

Appellate Authority for Advance Ruling (Maharashtra): In an appeal filed under Section 100 of the Central Goods and Services Tax Act, 2017 (‘CGST’) and the Maharashtra Goods and Services Tax Act, 2017 (‘MGST’) being aggrieved by the advance ruling passed by the Maharashtra Authority of Advance Ruling (MAAR), the two-member bench of Ashok Kumar Mehta and Rajeev Kumar Mital while setting aside the ruling passed by the MAAR, held that since the impugned activities undertaken by the appellant are not construed as “supply” in terms of section 7(1)(a) of the CGST Act, 2017 the reimbursement amount paid by the Maharashtra Government to the appellant for undertaking the activities specified under “One stop Crises Centre Scheme” floated by the Central Government, will not be subject to the levy of GST.

The appellant is a charitable trust registered under Maharashtra Public Charitable Trust Act, 1950 and undertakes services to orphans and homeless children by way of providing shelter, education, guidance, clothing, food and health, on behalf of the Women & Child Development Ministry of Government of Maharashtra. Further, the trust also renders services under “One stop crises centre” scheme introduced by the said Ministry to destitute women who are litigating divorce, or homeless, or the victims of domestic violence. Under the “One Stop Crises Centre” Scheme the appellant was selected as an implementation agency and a grant of amount up to Rs. 2,00,000/- per month was approved under the said scheme, wherein the trust will only act as an implementing agency and will use the grant amount in a specified manner. Since the appellant was not sure of the GST applicability of the “One Stop Crises Centre”, an application was made with the Maharashtra Authority of Advance Ruling (MAAR) for the purpose of ensuring if the aforementioned transactions are liable to GST or not. The MAAR passed an order confirming the GST applicability on the impugned transactions.

The issues before the Appellate Authority are:

  • Whether the impugned activities undertaken by the appellant as an implementing agency of the Government can be construed as services; If yes, whether the same can be construed as supply in terms of section 7(1)(a) of the CGST Act, 2017?

  • Whether the impugned activities undertaken by the appellant can be construed as “Charitable activities” in terms of the clause (r) of the definition section of the Notification No. 12/2017 of Central Tax (Rate)?

The Authority referred to the definition of “service” provided under Section 2(102) of the CGST Act, 2017, and observed that GST law has given a very wide connotation to the term “services”, which covers any activities other than those which involve goods. money and securities. Further, as the activities undertaken by the appellant do not entail supply of any goods, money, or securities to their recipient, that is the State Government, who is compensating for the activities undertaken by the appellant under the said scheme, thus, the activities of the appellant would aptly be construed as service.

The Authority further referred to the definition of the term “supply” as provided under section 7(1)(a) of the CGST Act, 2017, and observed that the term “supply” has got very wide connotation due to the presence of the clause “all forms of supply of goods or services or both”. Thus, for any transaction to be qualified as “supply” under CGST Act, 2017, the said transaction is required to satisfy the pre-requisites, that such supply should be made by a person for consideration and that such supply should be made in the course or furtherance of business. Moreover, the Authority examined the definition of the term “consideration” and observed that it shall not include any “subsidy” given by the Central Government or State Government. It was also observed that the term “subsidy” has not been defined under the CGST Act, 2017, thus, the Authority took note of the dictionary meanings of the term “subsidy” and noted that any amount granted by a government to any private person or company for undertaking any charitable activities, which are beneficial to the public, will be construed as subsidy.

Thus, it was observed that the appellant is being granted a fixed amount of money from the State Government under the said scheme for taking overall care of the destitute women who are litigating divorce, or homeless, or the victims of domestic violence and the said activities are clearly for the welfare of these destitute women, thereby, serving mankind in general, hence, the said amount of money reimbursed by the government to the appellant is nothing but subsidy, as the entire money is being spent in the activities which are advantageous to the public. Thus, it amounts reimbursed by the government to the appellant is a subsidy, and in absence of any consideration would not be construed as supply in terms of Section 7(1)(a) of the CGST Act, 2017.

[Jayshankar Gramin and Adivasi Vikas Sanstha, In re, 2022 SCC OnLine Mah AAAR-GST 2, decided on 21.09.2022]


Advocate who appeared in this case :

Chartered Accountant Durgesh Kalantri, Present for the Appellant.

AAR
Advance RulingsCase Briefs

   

Gujarat Authority for Advance Ruling: The two-member bench Milind Kavatkar and Amit Kumar Mishra has ruled that Goods and Service Tax (GST) is not leviable on the amount representing the employees portion of canteen and transportation charges, which is collected by the applicant and paid to the third party, and as the provision of services of transports and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment, thus such provision cannot be considered as supply of goods or services, and hence, cannot be subjected to GST.

The applicant has raised two questions:

1) Whether the GST would be payable on recoveries made from the employees towards providing canteen facility at subsidised rates in the factory and office?

The Authority noted that in terms of section 7 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), for a transaction to qualify as supply, it should essentially be made in the course or furtherance of business, and it was observed that the applicant is engaged in the business of developing, manufacturing and marketing a broad range of pharmaceutical products from its various manufacturing units, research and development centres and branch offices. Further, the provision of canteen facility to the employees is a welfare measure, mandated by the Factories Act and is not at all connected to the functioning of their business of developing, manufacturing and marketing pharmaceutical products, also the said activity is not a factor which will take the applicant’s business activity forward.

The Authority also noted that the applicant is not supplying any canteen service to its employees and such services are not the output service of the applicant, since it is not in the business of’ providing canteen service, and this canteen facility is provided by third party vendor, thus, the applicant is the receiver of such services.

The Authority referred to the ruling in Dishman Carbogen Amcis Ltd., In re, 2021 SCC OnLine Guj AAR-GST 21, wherein it was held that “GST, at the hands of the applicant, is not leviable on the amount representing the employees’ portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider”. Further, it relied on the ruling in Bharat Oman Refineries Limited, In re bearing no. MP/AAAR/07/2021, wherein it was held that “GST is not applicable on the activity of collection of employees’ portion of amount by the appellant, without making any supply of goods or service by the appellant to its employees”

Thus, the authority ruled that the canteen services provided by the applicant to its employees cannot be considered as a “supply” under the relevant provisions of the Central Goods and Services Tax (GST) Act, 2017 and therefore, the applicant is not liable to pay GST on the recoveries made from the employees towards providing canteen facility at subsidized rates, since the provision of canteen facility by the applicant to its employees is not a transaction made in the course or furtherance of business, and since in terms of section 7 of the CGST Act, 2017, for a transaction to qualify as supply, it should essentially be made in the course or furtherance of business.

2) Whether the GST would be payable on the recoveries made from the employees towards providing bus transportation facilities? If yes, whether the applicant is exempted under Notification No. 12/2017 Central Tax (Rate)?

The Authority observed that the applicant does not supply any bus transportation service to its employees, and such service is also not the output service of the applicant since they are not in the business of providing transport service, rather, the bus transportation facility is provided to employees by the third porty vendors, and the amounts recovered by the applicant from its employees in respect of use of such bus transportation facility are a part of the amount paid to the third-party vendors which has already suffered GST.

The Authority referred to the ruling in Tata Motors Ltd., In re, 2021 SCC OnLine Guj AAR-GST 36, wherein it was held that GST is not applicable on such nominal amounts recovered from its employees for usage of employee bus transportation facility. Further, it referred to the ruling in North Shore Technologies (P) Ltd., In re, 2020 SCC OnLine UP AAR-GST 9 wherein it was held that “the facility provided to their employees was not integrally connected to the functioning of their business and therefore, providing transport facility to its employees cannot said to be in furtherance of business”

The Authority also referred to the ruling in Integrated Decisions & Systems India (P) Ltd., In re, 2021 SCC OnLine Mah AAR-GST 37 wherein it was held that “part recovery of amounts from employees in respect of the transport facility provided to them would not be treated as ‘supply’as per provisions of GST Laws, therefore, GST would not be leviable on the same”.

Thus, the Authority ruled that arranging transport facilities for its employees is neither a supply of service or an activity which is incidental or ancillary to the activity of manufacturing the industrial and specialty intermediates and nor can it be called an activity done during or in furtherance of applicant’s business, as it is not integrally connected to the business in such a way that without this the business will not function.

[SRF Limited, In re, 2022 SCC OnLine Guj AAR-GST 20, decided on 28.09.2022]


Advocates who appeared in this case:

Present for the Applicant: DGM Taxation Shushanta Dutta

Senior V. P. Taxation Anandi Prasad.

Delhi High Court
Case BriefsHigh Courts

   

Delhi High Court: In a case filed by Loreal India Private Limited (petitioner) challenging the order dated 23-06-2022 passed by National Anti-Profiteering Authority (Respondent 2) and the notice dated 01-06-2022 seeking to examining whether there is any profiteering or not, also challenging Section 171 of Central Goods and Services Tax Act, 2017, (CGST Act), Chapter XV of the Central Goods and Services Tax Rules, 2017, (CGST Rules) more particularly, Rules 126, 127 & 133 of the CGST Rules as unconstitutional, ultra vires and violative of Articles 14, 19(1)(g), 265 & 300-A of the Constitution of India, a Division Bench of Manmohan and Dinesh Kumar Sharma, JJ., held that a supplier cannot claim that he has passed on more benefit to one customer therefore he could pass less or no benefit to another customer than the benefit which is actually due to that customer as under Section 171 CGST Act, any benefit of reduction in rate of taxes or benefit of input tax credit on any supply of goods or services can only be by way of commensurate reduction in prices.

Counsel for petitioner submitted that the National Anti-Profiteering Authority (NAA) has no suo moto powers and therefore, the application filed by the Secretary, NAA, to the Standing Committee seeking initiation of proceedings under Section 171 CGST Act, is not a valid initiation of proceedings against the petitioner for examining whether there is any profiteering or not.

The petitioner further submitted that even though in some products they have not been able to grant commensurate reduction in prices, yet they have tried to pass on the benefit by way of increase in grammage of the product.

NAA further submitted that the petitioner was only required to pass on the benefit of tax reduction by not increasing his base prices which he has not done and has instead increased them as well as also compelled them to pay additional GST on these excess base prices which they should not have paid.

The Court noted that Section 171 CGST Act is not a charging or a taxing provision, rather an incidental provision for the purpose of eliminating the cascading effect of taxation on the consumer and any benefit of rate reduction of taxes or input tax credit benefit being passed on to the recipient without the middleman taking advantage of the Governments forgoing their taxes for the end consumer, and thus, is in the nature of a consumer welfare provision and must be liberally construed directed towards furthering consumer and public interest.

Further, Rule 128 of CGST Rules, 2017 nowhere prescribes that the applicant who is making the written application/complaint must also be the recipient of the goods or services, on which commensurate reduction in prices have not taken place. Thus, the Secretary, NAA, would qualify to make an application under Rule 128 CGST Act, which permits ‘any other person’ to make such an application.

The Court also noted that Section 171 of CGST Act, 2017 casts an obligation of every supplier of goods and services/registered person to pass on the benefit of rate reduction of GST or the benefit of ITC on every supply and not on some supplies. Thus, a supplier cannot claim that he has passed on more benefit to one customer therefore he could pass less or no benefit to another customer than the benefit which is actually due to that customer.

The Court remarked that when a statute clearly provides for a manner in which something is to be done, and a duty is cast upon the supplier to extend the benefit of rate reduction by way of commensurate reduction in prices, the supplier cannot insist that instead of reducing prices, he will give extra grammage of the product.

The Court held that under Section 171 of CGST Act any benefit of reduction in rate of taxes or benefit of input tax credit on any supply of goods or services can only be by way of commensurate reduction in prices and thus, the post-sale discount does not qualify as commensurate reduction in prices.

The Court further directed the petitioner to deposit the principal profiteered amount after deducting the GST imposed on the net profiteered amount which has already been deposited by the petitioner with the Department in six equated installments commencing 10-10-2022.

[Loreal India Private Limited v. Union of India, 2022 SCC OnLine Del 3281, decided on 06-10-2022]


Advocates who appeared in this case:

Mr. Mukul Rohatgi, Sr. Advocate with Mr. V. Lakshmikumaran, Mr. Karan Sachdev and Mr. Agrim Arora, Advocates, for the Petitioner;

Ms. Uma Prasuna Bachu, Advocate, for the R-1;

Mr. Zoheb Hossain, Sr. Standing Counsel for the Revenue with Mr. Vivek Gurnani and Ms. Niharika Kuchhal, Advocates, for the R-2, 3 & 4/NAA and DGAP.


*Arunima Bose, Editorial Assistant has put this report together.

Telangana High Court
Case BriefsHigh Courts

   

Telangana High Court: While allowing the instant petition filed under Article 226 of the Constitution of India, for quashing the impugned order dated 03-06-2022 passed by Telangana State Authority for Advance Ruling (‘Authority') and to consider the application for advance ruling under Section 98 of the Central Goods and Services Tax Act, 2017 (‘CGST'), the division bench of Ujjal Bhuyan, C.J., and C.V. Bhaskar Reddy, J., held that the investigation post filing of the application will not debar the applicant from seeking an advance ruling.

Facts:

The petitioner is a private limited company incorporated under the Companies Act, 1956 and is engaged in the business of undertaking works contract mostly with the Central and State Governments. The petitioner is a registered supplier under the CGST Act .

As per the petitioner's counsel, the rate of Goods and Service Tax (‘GST') for work contracts undertaken with the Central Government Employees Welfare Housing Organization (‘Organization') will be 18%. But according to the Organization, GST will be 12%. Hence, the Organization paid GST to the extent of 12% and, after deducting the same, made a payment to the petitioner due to which the petitioner incurred a loss besides being susceptible to the charge of underpaying GST.

On 11-05-2019, the petitioner submitted an application for advance ruling on the question as to what would be the rate of tax on works contract services rendered by it to the Organization. However, there was inordinate delay in providing advance ruling.

On 15-02-2021, the respondent issued a letter to the petitioner alleging short payment of GST i.e., 12 % instead of 18% which was followed by summons to the Managing Director, directing his appearance before the respondent on 05-01-2022.

After 3 years, on 25-04-2022, the Authority issued notice to the petitioner scheduling a personal hearing on 27-04-2022. The petitioner requested the Authority to give a ruling on the application dated 11-05-2019. The Authority noted that the Directorate General of GST Intelligence (‘DGGI') had initiated an enquiry on the question raised by the petitioner. Through the impugned order dated 03-06-2022, the application was rejected and thereby, the present petition is filed.

Issue:

Whether investigation post- filing of an application for advance ruling would debar the applicant from seeking advance ruling?

Observation and Decision:

The Court observed that the word “proceedings” has neither been defined in Chapter XVII (deals in advance ruling) nor in the definition clause of the CGST Act. Therefore, the enquiry or investigation would not come within the ambit of the word “proceedings”.

The Court held that the Authority was not justified in rejecting the application of the petitioner. Further, the Court directed the Authority to take on the application filed on 11-05-2019 and pass an appropriate order after giving due opportunity oh hearing to the petitioner within a period of 2 months.

[Srico Projects (P) Ltd v. Telangana State Authority for Advance Ruling, decided on 17-08-2022]


Advocates who appeared in this case :

Dr. S.R.R. Viswanath, Advocate, for the Petitioner;

Ms. Sapna Reddy, Advocate, for the Respondent.

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

Tamil Nadu Authority for Advance Ruling: T.G. Venkatesh, Additional Commissioner, and K. Latha, Joint Commissioner held that concerning vessel support services provided to foreign vessels, the service provided falls under export of services as per provisions of the Integrated Goods and Services Tax Act, 2017 (IGST Act) as the place of supply is outside India.

Facts of the case

The applicant is engaged in providing support services related to vessel management to its group company, New Shipping Kaisha Ltd. (Japan).

An application was filed by the applicant, under Section 97 of the Central Goods and Services Tax Act, 2017 before the Tamil Nadu Authority for Advance Ruling to seek an Advance Ruling on the following:

  • Whether the vessel support services provided by the applicant to its group company outside India qualify as “Export of Services” under GST?

Analysis and Decision

The Bench stated that supply of services under Section 2(6) of the IGST Act includes the supply of any service which is provided outside India, the payment received by the supplier is in foreign currency, and the supplier and recipient are not merely the establishment of a distinct person. Therefore, the Bench opined that to determine whether the supply amounts to the export of service, the place of supply is to be determined.

Further, on a joint reading of Sections 13(3) and 13(6) of the IGST Act, the Bench observed that the statutes prescribe the location in the taxable territory where any support services requiring the physical availability of the vessel under management is supplied, then the place of supply is the location in the taxable territory in respect of that voyage of the vessel.

Therefore, the Bench held the following:

  • The vessel support services provided about foreign vessels sailing to other countries outside India, fall under export of services as per Section 2(6) of the IGST Act, as the place of supply in such cases is entirely outside India.
  • Vessels calling out at Port of India, then the place of supply in respect of that vessel is in India as per Section 13(6) of the IGST Act and the services rendered are not export of services.

[NSK Ship Management Pvt Ltd, 2022 SCC OnLine TN AAR-GST 7, decided on 30.06.2022]

Madras High Court
Case BriefsHigh Courts

   

Madras High Court: Anita Sumanth, J. set aside the impugned order which rejected a registration application filed under Section 22 read with Section 25 of Central Goods and Service Tax (‘CGST Act') and Rule 8 of CGST Rules, without assigning proper reasons and adhering to proper procedure.

The petitioner filed an application seeking registration in accordance with Section 22 read with Section 25 of the CGST Act, 2017 and Rule 8 of the CGST Rules, 2017 in respect of a rice mandi which was duly acknowledged, and physical verification was also duly undertaken. A notice was issued by the respondent officer seeking clarification as the application did not enclose the details of the principal place of business of the petitioner. Pursuant to which, a copy of the rental / lease deed was uploaded however, registration was refused by way of a monosyllabic order simply mentioning ‘rejected’ without assigning any reasons or explanation for rejection. Aggrieved by this, the present petition was filed.

Rule 9(4) of the Central Goods and Services Tax Rules, 2017 states:

‘9. Verification of the application and approval

………….(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he [may], for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.’

The Court noted that the word ‘may’ only refers to the discretion to reject and not to blatantly violate the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process.

Thus, the Court allowed the petition and set aside the impugned order.

[B C Mohankumar v. Superintendant of Central Goods and Service Tax, WP No. 13272 of 2022, decided on 16-06-2022]


Advocates who appeared in this case :

Adithya Reddy, Advocate, for the Petitioner;

Prakash for Mr. Rajendran Raghavan Senior Standing Counsel, Advocates, for the Respondent.


*Arunima Bose, Editorial Assistant has reported this brief.

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

   

Appellate Authority for Advance Ruling, Punjab: Arun Narayan Gupta Chief Commissioner, CGST Commissionerate, and Kamal Kishor Yadav, Commissioner of State Tax held that the distribution of match tickets to related persons for the promotion of business attracts GST.

The factual background of the case

The appellant entered into a Franchise Agreement in April 2008 with the Board of Control for Cricket in India (BCCI) to establish and operate a cricket team in the Indian Premier League (IPL) under the title of ‘Punjab Kings’. The Appellant intended to distribute match tickets free of cost as a goodwill gesture for the promotion of business. These tickets were distributed without any consideration by the Appellant. The Appellant approached the Authority for Advance Ruling, Punjab (AAR Punjab) to clarify the treatment of GST liability on the supply of complimentary tickets.

AAR Punjab held the act of Appellant of issuing complimentary tickets displayed an act of forbearance. Aggrieved with the judgment the Appellant filed an appeal under Section 99 of the Punjab GST Act and Central Good and Services Act, 2017 (CGST) before the Appellant Authority of Advance Ruling to seek advance ruling for the following:

  • Whether the activity of providing “Complimentary tickets” by the appellant falls within the definition of supply under the Punjab GST Act, 2017 /CGST Act, 2017?

  • Whether the appellant would be required to pay tax on such complimentary tickets?

Analysis and Decision

The Bench stated that the two key elements that are required to be present for any activity or transaction to fall within the ambit of supply are “consideration” as well as “furtherance of business”. Therefore, the Bench opined that if any activity or transaction mentioned in Schedule II of the CGST the same has to fulfill the two key parameters i.e., presence of “consideration” as well as “furtherance of business” for it to be treated as supply under the Act.

The Bench observed that even for the consideration in the form of payment in kind, it should not be vague or illusory and there should be an element of reciprocity, and the expression “exempt supply” as defined under the CGST means the supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services Tax Act, 2017 and includes the non-taxable supply.

Therefore, the Bench held that the activity of providing complimentary tickets is an exempt supply, and there shall be no availment of Input Tax Credit according to Section 17 (2) of the CGST.

Hence, complimentary tickets provided by the Appellant fall within the ambit of supply on account of Schedule I of the CGST, and the Appellant would be liable to pay tax on the same.

[KPH Dream Cricket Pvt. Ltd., 01/AAAR/CGST/KPH/2022, decided on 01-06-2022]

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

Ahmedabad Authority for Advance Ruling: Members Atul Mehta and Arun Richard, has held that 18% GST is payable on value for intended supply on the sale of a car by a company after using it for business purposes.

Factual Background of the case

The applicant purchased a new SUV (i.e., sports utility vehicle) for Rs. 80 Lakhs on 16-02-2018 for use in its business. It did not use GST Input Tax Credit at the time of purchase as it is restricted under Section 17(5) of the Central Goods and Services Tax Act, 2017 (CGST Act). The depreciation on the car was claimed under the Income Tax Act, 1961. The Applicant intends to sell the used car for Rs 55,00,000/-. The written down value of the car as per books of accounts is Rs 47,00,000/-.

An application was filed by the applicant, under Section 97(2) of the CGST Act before the Ahmedabad Authority for Advance Ruling to seek an Advance Ruling on the following:

  • At what rate of GST, the new car purchased by the company is sold after using it for business purposes, shall the GST be charged?
  • Whether the value of the old and used car, sold by the company as mentioned above, can be taken as the value that represents the margin of the supplier, on the supply of such car, and whether the GST can be charged on such margin?
  • The value that represents the margin of the supplier, on supply of such old and used goods/Car will be inclusive of GST or exclusive?

Decision and Analysis

The bench opined that concerning the submissions made on behalf of the applicant, the used car falls under the category of Serial No. 3 of the Notification 8/2018- CT dated 25-01-2018.

As per the notification, 9% CGST is payable on old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as SUVs including utility vehicles. According to the notification, an SUV includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm. and above.

The relevant part of the notification which forms the subject matter of the case is as follows-

Explanation- for the purpose of this notification –

In case of a registered person who has claimed depreciation under Section 32 of the Income-Tax Act, 1961 (43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored.

Hence, the bench applied the abovementioned provisions and held that 18% (9% CGST and 9% SGST) GST shall be levied upon the difference between the consideration received for the supply of the car and the depreciated value of the car on the date of supply i.e., the value intended for supply.

[Dishman Carbogen Amcis Ltd., 2021 SCC OnLine Guj AAR-GST 19, decided on 01-06-2022]

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

Maharashtra Authority for Advance Ruling: Rajiv Mangoo, Additional Commissioner of Central Tax & T.R. Ramani, Joint Commissioner of State Tax held that the stipend amount is given to the trainees by the training institutes for the duration of their training is not a part of taxable value.

Factual Background of the case

The applicant is indulged in the business of human resource and skill development and had enrolled as a facilitator under the National Employability Enhancement Mission (NEEM) scheme and provides trainees to various institutes for which service charges were collected in addition to the reimbursement of the stipend payable to trainees.

An application was filed by the applicant, under Section 97 of the Central Goods and Services Tax Act, 2017 (CGST Act) before the Maharashtra Authority for Advance Ruling to seek an Advance Ruling on the following:

  • Whether the applicant, in the capacity of being a NEEM facilitator, acts as a ‘Pure Agent’ while receiving reimbursement of stipend amounts from the various trainer institutes and remitting the same to the trainees?

  • If not, whether such a stipend amount forms a part of the taxable value?

Analysis and Decisions

The bench defined ‘advance ruling’ as a decision given by the authority to an applicant on matters or issues specified in sub-section (2) of Section 97, concerning the supply of goods and services. Therefore, the bench refrained from answering the first issue of the case as the matters specified in clauses (a) to (g) of Section 97 sub-clause (2) of the CGST Act as it was not applicable to the facts of the case.

Further, the bench observed that in regard to payment of stipend to the trainees, the actual service was provided by the trainees for which stipend was payable, the applicant was only acting as an intermediary in collecting the stipend from the training institutes and disbursing the same to the trainees in full without making any deductions.

At this juncture, the bench referred to the case of Yashaswi Academy for Skills 2019 SCC OnLine Mah AAR-GST 78 wherein the bench held that “the reimbursement by industry partner to the applicant, of the stipend paid to the trainees, does not attract tax under the GST Act.”

Hence, the bench applied the same principle as laid down in the aforementioned case and held that the stipend paid by entities/ training institutes to the trainees through the applicant does not attract GST and need not be added to the taxable value.

[Patle Eduskills Foundation, In Re. 2022 SCC OnLine Mah AAR-GST 13, decided on 08-06-2022]

Op EdsOP. ED.

While the country is still adapting to the new indirect taxation regime, even a slight change in the current injects uncertainty and sometimes inconvenience into the landscape. In the decision rendered by the Supreme Court in Union of India v. VKC Footsteps India (P) Ltd.[1], the settlement of an important legal proposition has brought a lingering issue to a halt, although to the dismay of the taxpayers.

This case concerns the question of refund of unutilised ITC in the inverted duty structure. The Court found substance in the justification of the discriminatory treatment of input goods and input services in amended Rule 89(5) of the Central Goods and Services Tax Rules, 2017 and in pursuance of the same, drew a line of distinction between the both.[2]

It affirmed the stance taken by the Madras High Court in Tvl Transtonnelstroy Afcons Joint Venture v. Union of India[3] and took a dim view of the Gujarat High Court’s decision in VKC Footsteps India (P) Ltd. v. Union of India.[4]

Understanding the subtleties of the judgment can be apprising in light of the resultant impact on the stakeholders.

Distinction between goods and services: A necessity or a redundancy?

Rule 89(5) prescribes a formula for ITC to ascertain the maximum refund amount. This rule was amended with a prospective effect in April 2018 which eliminated the component of input services from the formula. Resultantly, this action bereaved several taxpayers who found themselves incapable of availing refund for unutilised ITC in case of input services.

The mainstay of this issue pertains to the distinction between input goods and input services in the first place. It has been averred by the petitioner that goods and services not only differ on the constitutional level itself but input goods and input services are also defined separately in the CGST Act, thereby highlighting the inherent distinction. Treating them at par is not conceivable owing to the difference in the tax rates, benefits, exemptions and other relevant policies. Since refund is a form of exemption, it must receive a literal interpretation and should not have its compass laxly widened.

On the other hand, it was contended by the assessees that there must exist a reasonable nexus with the object sought to be achieved, in order to lawfully discriminate between the two. Such a differential treatment may be justified for the reason of revenue harvesting, however, that does not find a place in the present case. The bone of contention was that where on one hand, goods and services are conferred an equal treatment so far as levy is concerned, their prejudicial treatment for the purpose of refund is rather inequitable.

Apropos of this issue, the Court held that Parliament holds the power to exercise this latitude, which is not constricted to merely revenue harvesting purposes. It expressed disapproval of the discriminatory treatment being unfair as unfairness and inequality arise in situations wherein equals are treated unequally and unequals are treated equally. It was observed that the present case concerns itself with two different species altogether which are brought under the same pool only for the purpose of ITC utilisation. With there being no constitutional or statutory guarantee of refund, it was held that such classifications can justifiably exist in tax legislations.

Understanding the confines of Section 54(3)

Section 54(3) of the Act lays down the provision for refund of unutilised ITC at the end of a tax period.[5] This refund is allowed in two cases, namely:

(i) zero-rated supplies; and

(ii) inverted duty structure.

The latter being relevant to this case, this situation arises when the rate of tax on input supplies is higher than the rate of tax on output supplies and resultantly, there is accumulation of unutilised ITC in the electronic credit ledger.

Here, the issue arises owing to the applicability of Rule 89(5) on this section, which does not make room for expressly accommodating input supplies in the formula of net ITC to deduce the refund amount.

The assessee emphasised to overlook this lopsidedness, since giving effect to it would hinder the very objective behind the introduction of GST i.e. to further smooth inflow of credit and prevent cascading effect of taxes. In disagreement with this, the Court elucidated on the restrictive nature of Section 54(3). The negative format embodied in the provision bearing the terms “no refund” and “in cases other than” signify the intent of the legislature to make this non-inclusive.

Broadening the scope of the same would therefore amount to encroachment of the powers of the Parliament. The Court further observed that persons having unutilised ITC do not fall into a homogenous class as ITC can be unbundled in view of a fiscal measure.

Challenge to the validity of Rule 89(5)

Rule 89(5) of the CGST Rules, 2017 prescribes a formula for the computation of the maximum refund of ITC in the inverted duty structure.

As aforementioned, currently the amended rule stands such that it takes into account “inputs” while computing the net ITC, without defining the scope of the term “inputs”.  This has evidently stirred up a hornet’s nest in the system, where different interpretations are arising out of different authorities.

On one hand, the absence of an express mention of “input services” is considered reason enough to exclude the same for ascertaining the refund amount. On the other hand, a literal interpretation is realised to be detrimental to the interests of the taxpayers and to the nature of GST being a consumption-based tax. Perusing Section 54(3) in isolation would not indicate towards the omission of input services, owing to which, the assessee pleaded to apply the doctrine of severability and strike down Rule 89(5).

The application of this rule is by virtue of Section 164 of the CGST Act which confers a rule-making power on the Government to carry out the provisions of the Act.[6] However, it is contended that exercising this power to give effect to the objective of Section 54(3) is unnecessary and unwarranted. In fact, it is said to offend the section inasmuch as it bifurcates goods and services, without there being a necessity to do so. This was however, not entertained by the Court, which was of the opinion that the rule does not transgress the section, especially when proviso (2) provides that the Government holds the power to exempt such supplies of goods and services.

Another noteworthy contention was with respect to the anomaly arising in the formula prescribed by the rule, which was acknowledged by the respondent, petitioner and the intervenor alike. This inconsistency results in an inequality between taxpayers in the following circumstances:

– taxpayers dealing with a single line of goods i.e. outward supplies involving inverted rate structure; and

– taxpayers dealing with goods having both inverted duty structure and otherwise.

In the first scenario, the taxpayer would not be able to use either the unutilised ITC or get a refund. Whereas, in the second context, utilisation of ITC availed on input services for payment of output supplies is possible in the paradigm not having an inverted rate structure.

There was therefore a consensus among all the parties as far as the presence of an aberration was concerned. Nevertheless, that was not considered to be reason enough to strike down the rule altogether. Hence, in conclusion, the Court refrained from reading down or reframing the provision, however, the Court urged the Council to take a policy decision by reconsidering the formula. In essence, the baton was passed to the legislature.

Concluding comments

It is undisputed that goods and services are inherently of two different natures, which are identified separately both in the Constitution and the GST statutes. They, however, are broadly referred to as “supplies” in common trade parlance, especially for the purpose of taxation, unless a demarcation is required. Now, at what juncture do we draw the line of distinction and which circumstances call for affording a separate treatment to them, is often disputed since this distinction requires necessity, reasoning and justification.

Given the significance it holds, this judgment is undoubtedly a watershed moment in the regime. Upholding the application of Rule 89(5) on Section 54(3), the Court gave a nod to allowing refund only on input goods in the inverted duty structure. While technically, it may be within the vires of the powers of the authorities to exclude input services from refund, it is evidently proving to be counterproductive to the objective of the statute altogether. Assessees are right in questioning the skewed nature of this paradigm, wherein a business having a single line of products in the inverted duty structure would have no recourse. Hence, the focus must be shifted from taking a literal interpretation to taking cognizance of the straits of the taxpayers as allowing the refund would have eliminated the cascading effect of taxes in the truest sense.


5th year Law student, Symbiosis Law School, Pune. Author can be reached at  17010125203@symlaw.ac.in.

[1] (2022) 2 SCC 603.

[2] Central Goods and Services Tax (CGST) Rules, 2017, R. 89(5).

[3] 2020 SCC OnLine Mad 2570.

[4] 2020 SCC OnLine Guj 3206.

[5] CGST Act, 2017, S. 54(3).

[6] CGST Act, 2017, S. 164.a

Case BriefsHigh Courts

Rajasthan High Court: Narendra Singh Dhaddha rejected bail and dismissed the petition being devoid of merits.

The present bail application has been filed under Section 439 Criminal Procedure Code i.e. Cr.P.C. relating to offence punishable under Sections 132 (1)(A), (F),(H),(I),(L) of Central Goods and Services Tax Act, 2017 i.e. CGST Act.

Counsel for the petitioner submitted that in initial complaint, allegation was against the Vinaykant Ameta not against the petitioner and the respondent’s department does not have adequate data for evasion of tax of Rs.869 Crores. It was further submitted that the case against the petitioner is on surmises and conjectures and that the maximum punishment in this case is 5 years and case against the petitioner is triable by Magistrate. It was further submitted that offence against the petitioner is compoundable and the provision of Section 173(8) Cr.P.C. is not applicable in this case and Department had not taken leave from concerned Court for further investigation. Hence, the petitioner be enlarged on bail.

Counsel for respondent submitted that the petitioner and Vinay Kant Ameta were working as Director in M/s Miraj Products Private Limited and is responsible for the tax evasion. It was further submitted that as per Investigation, total tax evasion of Rs.869 Crores wherein M/s Miraj Products Private Limited had created the fake firm for tax evasion. It was also brought forth that the Supreme Court granted the bail of Vinay Kant Ameta on depositing of Rs.200 crores and if the petitioner is ready to deposit evasion of tax with penalty then he has no objection in granting the bail. However it was submitted that department had summoned the various persons of the M/s Miraj Products Private Limited Group for investigation but they had not turned up for investigation till today. So, on account of gravity of offence, bail be dismissed.

The Court observed that the petitioner and Vinaykant Ameta were Director in M/s Miraj Products Private Limited. As per the prosecution story, they had evaded tax of Rs. 869 Crores. GST department had seized one truck which was being unloaded at their premises. The Supreme Court in various pronouncement held that the economic offender should not be dealt as general offender because economic offenders run parallel economy and they are serious threat to the national economy.

The Court thus held “in the facts and circumstances of the present case and also looking to the seriousness of the offence(s) alleged against the petitioner without expressing any opinion on the merits of the case, I do not consider it a fit case to enlarge the petitioner on bail under Section 439 Cr.P.C.”[Sohan Singh Rao v. Union of India, S.B. Criminal Miscellaneous Bail Application No. 2555/2022, decided on 24-03-2022]


Appearance:

For Petitioner(s): Mr. V. R. Bajwa, Senior Adv. With Mr. Rishabh Sancheti, Adv. & Mr. Snehdeep Khyaliya, Adv.

For Respondent(s): Mr. Kinshuk Jain for DGGI


Arunima Bose, Editorial Assistant has reported this brief.

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: The Division Bench of Ajay Tewari and Pankaj Jain, JJ., contemplated the appeal where the interest on refund of excise duty was rejected by the authorities. The main question before the Court was whether the assessee was entitled to interest.

Factual Matrix of the case:

  • The assessee had registered office in Sonepat and applied for central excise duty along with interest before Deputy Commissioner, Central Excise, (Panipat) in 2017, eventually, the refund was sanctioned however claim w.r.t. interest was rejected.
  • An appeal was filed before the Commissioner of Central Excise, (Panchkula) against the rejection of interest, which was dismissed in 2018.
  • Again an appeal was filed before CESTAT, (Chandigarh), the decision of CESTAT was in favour of the assessee and he was entitled to interest on delayed refund from the date of deposit till its realization. An application was forwarded regarding the said claim.
  • While the application of the Assessee was pending before the authorities, the Commissioner of CGST and Central Excise, (Panchkula) filed rectification of mistakes application before the CESTAT.
  • The rectification application was dismissed in 2021.
  • Hence, the present appeal is filed by the Revenue i.e. Commissioner of Central Excise (Panchkula) against the orders passed by CESTAT, (Chandigarh).

Submissions:

Revenue Authority questioned the change of jurisdiction of the Authorities after the new CGST regime. It was contended that the assessee has impleaded wrong authorities for the claim of refund and interest as after the new regime from June 2017, division Sonepat was brought within the jurisdiction of Rohtak Commissionerate. Hence the proper authority would have been Rohtak.

Another contention of the Revenue Authority was that the tribunal has erred in granting interest as per the amended provisions of Section 35FF of the Central Excise Act, 1944.

Findings:

The Court rejected the contention of the Revenue Authority in the light of Section 142 of CGST Act, 2017. The Court held that, “Section 142 of the Act when read with Section 2(48) of the Act is a complete answer to the plea raised by the appellant qua the issue of jurisdiction.” The Court observed that the Sec explicitly provides that every claim of refund shall be dealt under the existing law i.e. Central Excise Act, 1944 and not by the provisions of the Act. Thus the plea of transfer of jurisdiction due to GST regime is not available to the appellant.

Further adjudicating whether the claim of interest was justified, the Court relied upon the judgment of Supreme Court in Sandvik Asia Ltd v. CIT, (2006) 2 SCC 508, where the Supreme Court answered that the Act provided for payment of compensation for delayed payment of amounts due to an assessee in case where the amounts included the interest and the appellant was entitled to interest u/Ss. 244 and 244-A of the Income Tax Act, 1961.

The Court applied the law laid down in Sandvik Asia Ltd in the case of the present assessee and dismissed the instant appeal.  [Commissioner of Central Excise, Panchkula v. Rabi Textiles Ltd. CEA No.8 of 2022 (O&M), decided on 14-03-2022]


Appearances:

Mr. Sourah Goel, Senior Standing Counsel and Mr. Tej Bahadur, Advocate for the appellant.


Aastha Sharma, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Akil Kureshi CJ and Sudesh Bansal J ranted interim relief and stayed the provisional attachment order.

 

The facts of the case is such that the petitioner’s bank account was placed under provisional attachment by an order dated 03-12-2020 in exercise of powers under Section 83 of the Central Goods and Services Tax Act (for short ‘CGST Act’) by the respondents. Hence petition was filed seeking interim relief of stay of such order.

Counsel for petitioner submitted that in terms of sub-section (2) of Section 83 of CGST Act such provisional attachment cannot survive beyond a period of one year.

The Court observed that Section 83 of the CGST Act pertains to provisional attachment to protect the revenue in certain cases. In sub-section (1) of Section 83 the commissioner is empowered to order provisional attachment of the property of the assessee including bank account where proceedings under Chapters XII, XIV and XV are pending and the commissioner is of the opinion that for the purpose of protecting the interest of government revenue it is necessary so to do. Sub-section (2) of Section 83 provides that every such provisional attachment shall cease to have effect after expiry of period of one year from the date of order made under sub-section (1).

The Court further observed that CBIC’s circular dated 23-02-2021 has also clarified that every provisional attachment shall cease to have effect after expiry of period of one year from the date of attachment order.

The Court observed and held the “order of attachment was passed more than a year back and would therefore be ceased to be effective upon completion of period of one year. By way of interim relief therefore it is provided that the provisional attachment order stands stayed.”

[BR Construction Company v. Additional Director, D.B. Civil Writ Petition No. 2086/2021, decided on 22-02-2022]


Appearances

For Petitioner(s): Mr. Jatin Harjai and Mr Mohit Kumar Soni

For Respondent(s): Ms. Mahi Yadav


* Arunima Bose, Editorial Assistant has reported this brief. 

Case BriefsSupreme Court

Supreme Court: While addressing the appeal against Telangana High Court’s order imposing costs of Rs. 10,000 on Asst. Commissioner of Sales Tax, the Division Bench of Dinesh Maheshwari and Hrishikesh Roy, JJ., refused to interfere with well-considered and well-reasoned order of the High Court and instead proceeded to enhance the cost by Rs. 59000. The Bench remarked,

“…error, if any, on the part of the High Court, had been of imposing only nominal costs of Rs. 10,000 on the respondent…”

The Bench held that the attempted inference on the part of the respondent that the writ petitioner was evading tax because the e-way bill had expired a day earlier was not only baseless but also the intent behind the proceedings against the petitioner were questionable per se, particularly when it was found that the goods in question, after being detained were strangely kept in the house of a relative of the respondent for 16 days and not at any other designated place for their safe custody.

The respondent-petitioner, a Private Limited Company had made an intra-State supply of paper to M/s. Sri Ayappa Stationery and General Stores and had also generated an e-way bill dt.04-01-2020. The goods were delivered to a transporter for making delivery to the consignee by an auto trolley however, due to Anti CAA protest traffic was blocked and the auto trolley driver could not make the delivery, next day being Sunday the driver took the trolley for delivery on the next working day, i.e. 06-01-2020.

It was the case of the petitioner that the auto driver was wrongfully detained by the Deputy State Tax Officer alleging that the validity of the e-way bill had expired proposing to impose tax and penalty. The petitioner revealed that the paper boxes were unloaded by the appellant-respondent at a private premises in the house of respondent’s relative without tendering any acknowledgment of receipt of detention of the goods in his custody, and subsequently, the auto trolley driver was released.

Considering that there was no material before the appellant-respondent to come to the conclusion that there was evasion of tax by the petitioner merely on account of lapsing of time mentioned in the e-way bill because even the appellant-respondent did not say that there was any evidence of attempt to sell the goods to somebody else on 06.01.2020, the High Court had held that on account of non-extension of the validity of the e-way bill by petitioner or the auto trolley driver, no presumption could be drawn that there was an intention to evade tax.

The High Court had set aside the levy of tax and penalty of Rs. 69,000 and imposed costs of Rs. 10,000 on the appellant-respondent payable by the petitioner within four weeks. Deprecating the conduct of the appellant-respondent and blatant abuse of power in collecting from the petitioner tax and penalty both under the CGST and SGST and compelling the petitioner to pay Rs.69,000, the High Court remarked,

“We deprecate the conduct of respondent in not even adverting to the response given by petitioner to the Form GST MOV-07 in Form GST MOV-09 and his deliberate intention to treat the validity of the expiry on the e-way bill as amounting to evasion of tax without any evidence of such evasion of tax by the petitioner.”

Approving the reasoning of the High Court, the Bench said,

“The analysis and reasoning of the High Court commends to us, when it is noticed that the High Court has meticulously examined and correctly found that no fault or intent to evade tax could have been inferred against the writ petitioner.”

However, on the amount of costs the Bench opined that it was rather on the lower side considering the overall conduct of the respondent and the corresponding harassment faced by the writ petitioner. Accordingly, the Bench imposed a further sum of Rs. 59,000 on the appellant-respondent toward costs, to be paid to the writ petitioner over and above the sum of Rs. 10,000 already awarded by the High Court.

Lastly, opining that even the instant appeal was misconceived, the Bench made it clear that the State would be entitled to recover the amount of costs, after making payment to the writ petitioner, directly from the person/s responsible for the entirely unnecessary litigation.

[CST v. Satyam Shivam Papers (P) Ltd., 2022 SCC OnLine SC 115, decided on 12-01-2022]


Appearance by:

For Appellants: P. Venkat Reddy, Prashant Tyagi, P. Srinivas Reddy, Advocates and M/S. Venkat Palwai Law Associates, AOR


Kamini Sharma, Editorial Assistant has out this report together 

Case BriefsHigh Courts

Karnataka High Court: S. Sunil Dutt Yadav J. disposed off the petition and reinstated an observation “If any money is due to the Government, the Government should take steps but not take extra steps or maneuver…”

Factual Background

The facts of the case are such that the petitioner operates an e commerce platform under the name ‘Swiggy’ and is registered under the Central Goods and Services tax Act, 2017. Due to spike in food orders during holidays and festive season, third party service providers i.e. Greenfich in the present case, are engaged who charge consideration for the same along with GST which is paid by the petitioner as Input Tax Credit. An investigation was conducted by the respondent Department on the ground that Greenfich was a non existent entity and ITC availed are fraudulent. The petitioner alleged that a sum of Rs. 27 crores was illegally collected from the petitioner during the investigation proceedings under threat of arrest and coercion. Hence the instant petition was filed seeking a writ of mandamus directing the respondents to refund the amount illegally collected.

 Submissions

Counsel for the petitioners Mr. Lakshmikumaran and Mr. Ravi Raghavan submitted that payment has been collected under duress and coercion which is clear from a letter presented before the Court dated 30-11-2019. It was further submitted that the manner in which the investigation was conducted and payments were made reflects an unfair and arbitrary treatment of a bonafide tax payer as petitioner’s credibility as tax payer could never have been doubt by presenting documents for the same.

Counsel for the respondents Mr. M B Naragund and Mr. Amit Despande submitted that according to letter dated 30-11-2019 it is clear that the payments were made as a goodwill gesture and are to be construed as payment of tax in furtherance of self ascertainment as contemplated under section 74(5) of the CGST Act. It was further submitted that the petitioner has exercised its statutory right of refund and is bound to follow the procedure to its logical end by invoking the remedies available under the statutory scheme of the Act, thus invoking writ jurisdiction is impermissible.

Observations

The Court observed that the mere fact that application has been made for refund does not in anyway take away the right of the petitioner to seek for appropriate direction in the present proceedings, as the application for refund has merely been deferred and in effect no decision is taken, even otherwise, the question of alternate remedy is of no significance, when the eventual direction in the present writ is only for consideration of the refund application.

The Court further observed that the letter dated 30-11-2019 is clear and unambiguous wherein it is stated that the amount is made in furtherance of their goodwill conduct and bonafide during the pendency of the inspection proceedings and seeking necessary refund should not be regarded as an admission of liability.

The Court observed that the scheme of self ascertainment as contained in sub sections (5) (6) (7) (8) of Section 74 of CGST Act does not call for making of payment and continuance of investigation. “Upon payment of tax after collection of the same with penalty, if the same is accepted even before the issuance of notice under Section 74 (1) during investigation, there ends the matter and there is nothing further to be proceeded with.”

The Court observed that while considering the time at which the amount was deposited and the date of the deposit, it would indicate that amounts were paid during times when there was no legal obligation to make payment. It was further observed that the matter regarding wrongful availment of input tax credit was pending investigation and the Department acted in undue haste to ensure that taxes are paid during the process of investigation instead of allowing the investigation to proceed and conclude in accordance with law.

The Court relied on judgment Dabur India Limited v. State of Uttar Pradesh, (1990) 4 SCC 113 and observed that This is unfortunate. We would not like to hear from a litigant in this country that the Government is coercing citizens of this country to make payment of duties which the litigant is contending not to be leviable. Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to play dirty games with the citizens of this country to coerce them in making payments which the citizens were not legally obliged to make.”

The Court further observed that it does not desire to place any sort of fetter on the power of investigation and it would be unwise to impose any kind of time limit, for it is the authority which should be permitted to complete its investigation in a manner as may be desired by it as is permissible.

The Court thus held “the consideration of right of refund in the present factual matrix would be independent of the process of investigation and two cannot be linked together”

“Accordingly refund applications are to be considered and suitable orders be passed within a period of four weeks from the date of the release of the order.

[Bundl Technologies Private Limited v. Union of India, 2021 SCC OnLine Kar 14702, decided on 14-09-2021]


Arunima Bose, Editorial Assistant has reported this brief.

AAR
Advance RulingsCase Briefs

Gujarat Authority for Advance Ruling, GST: Addressing the matter with regard to purchase of scrap/used vehicles by composition dealer from unregistered dealer, Division Bench of Sanjay Saxena and Arun Richard (Members) held that, in the said circumstance, no Reverse Charge Mechanism liability will be there.

Applicant sought Advance Ruling on the following questions:

  • Can Composition Dealer Purchase Scrap/Used vehicles from Unregistered Dealers? RCM on these purchases applicable or not?
  • Any Reverse Charge Mechanism exemption limit amount from purchase of Scrap and used vehicles from unregistered dealers?

Findings

Bench stated that in view of Section 9(3) of the CGST Act, Government may specify the categories of supply of goods or service or both on which the tax shall be paid on reverse charge mechanism by the recipient.

Vide Section 9(4) of the CGST Act, Government may specify a class of registered persons who shall, in respect of supply of specified categories goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both.

Notification No.7/2019-Central Tax (Rate) dated 29-3-19 notifies that the specified registered persons shall, in respect of supply of goods or services or both, received from an unregistered supplier shall pay tax on reverse charge basis as recipient of such goods or services or both. However, subject goods are not notified vide said Notification 7/2019-CT(R).

Ruling

Composition Dealer purchasing Scrap/Used vehicles from the following Suppliers, namely: Central Government, State Government, Union Territory or a local authority are liable to pay tax on RCM basis.

No RCM tax liability for purchase of subject goods from unregistered dealers.[Ahmedraza Abdulwahid Munshi (Nadim Scrap), In Re., GUJ/GAAR/R/18/2021, decided on 30-06-2021]


Advocate before the AAR:

For the applicant: Shabbir Motiwala, Consultant

Legislation UpdatesRules & Regulations

On September 24, 2021, the Central Government on the recommendations of the Council, makes the Central Goods and Services Tax (Eighth Amendment) Rules, 2021 to amend the Central Goods and Services Tax Rules, 2017.

Key Amendments:

(a) after the words ―details of bank account, the words ―which is in name of the registered person and obtained on Permanent Account Number of the registered person‖ shall be inserted;

After a certificate of registration in FORM GST REG-06 has been made available on the common portal and a Goods and Services Tax Identification Number has been assigned, the registered person, except those who have been granted registration under Rule 12 or, as the case may be Rule 16, shall as soon as may be, but not later than forty five days from the date of grant of registration or the date on which the return required under Section 39 is due to be furnished, whichever is earlier, furnish information with respect to details of bank account which is in name of the registered person and obtained on Permanent Account Number of the registered person, or any other information, as may be required on the common portal in order to comply with any other provision.

(b) the following proviso shall be inserted, namely:
Provided that in case of a proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhaar number of the proprietor;

  • Rule 10B shall be inserted:

10B. Aadhaar authentication for registered person . The registered person, other than a person notified under subsection (6D) of section 25, who has been issued a certificate of registration under rule 10 shall, undergo authentication of the Aadhaar number of the proprietor, in the case of proprietorship firm, or of any partner, in the case of a partnership firm, or of the karta, in the case of a Hindu undivided family, or of the Managing Director or any whole time Director, in the case of a company, or of any of the Members of the Managing Committee of an Association of persons or body of individuals or a Society, or of the Trustee in the Board of Trustees, in the case of a Trust and of the authorized signatory, in order to be eligible for the purposes as specified in column (2) of the Table.

  • In rule 45 of the said rules relating to Conditions and restrictions in respect of inputs and capital goods sent to the job worker, in subrule (3), with effect from the 1st day of October, 2021,  
    (i) for the words ―during a quarter, the words ―during a specified period shall be substituted;

    (ii) for the words ―the said quarter, the words ―the said period shall be substituted;

(iii) after the proviso, the following explanation shall be inserted, namely:

Explanation. For the purposes of this subrule, the expression ―specified period‖ shall mean

(a) the period of six consecutive months commencing on the 1st day of April and the 1st day of October in respect of a principal whose aggregate turnover during the immediately preceding financial year exceeds five crore rupees; and
(b) a financial year in any other case.

  • In rule 89 of the said rules relating to Application for refund of tax, interest, penalty, fees or any other amount:
    (i)
    after subrule (1), the following subrule shall be inserted, namely:

(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intraState supply, which is subsequently held to be an interState supply, may, before the expiry of a period of two years from the date of payment of the tax on the interState supply, file an application electronically in FORM GST RFD01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner: Provided that the said application may, as regard to any payment of tax on interState
supply before coming into force of this subrule, be filed before the expiry of a period of two years from the date on which this subrule comes into force.

  • Following rule shall be inserted:

96C. Bank Account for credit of refund. For the purposes of subrule (3) of rule 91, subrule (4) of rule 92 and rule 94, bank account shall mean such bank account of the applicant which is in the name of applicant and obtained on his Permanent Account Number:

Provided that in case of a proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhaar number of the proprietor.

Case BriefsHigh Courts

Delhi High Court: The Division Bench of Manmohan and Navin Chawla, JJ. directed that proceedings against Subway Systems (India) Private Ltd. be dropped in a case against its franchisee Dough Makers (India) Private Limited.

Instant appeal was filed challenging the final order passed by the National Anti-profiteering Authority where it had been held that M/s Dough Makers India (P). Ltd. had profiteered to the extent of Rs 78,41,754/-

Petitioner also sought direction to NAPA to drop the proceedings against the petitioner as a respondent in the case of DGAP v. Dough Makers (P) Ltd., [Case No. 1 of 2021]

Analysis, Law and Decision

 Bench opined that it is settled law that in order to have the locus standi to invoke the extraordinary jurisdiction under Article 226 of the Constitution of India, the applicant should ordinarily be one who has a personal or individual right in the subject matter of the application.

Infringement of some legal rights or prejudice to some legal interest inhering in the petitioner is necessary to give him a locus standi in the matter. [Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed, (1976) 1 SCC 671]

Further, the Court stated that in the present matter, petitioner had not been held guilty of the violation of the Central Goods and Services Tax Act, 2017 and NAPA had no objection if the petitioner was deleted from the array of parties, this Court opined that the petitioner had no locus standi to maintain the present petition.

Hence, the notice referred by the petitioner’s counsel is deemed to have been withdrawn.

 Present writ petition along with pending applications were disposed of by dropping the proceedings against the Petitioner as a Respondent in the case of DGAP v. Dough Makers India (P) Ltd., Case No. 1 of 2021. [Subway Systems India (P) Ltd. v. Union of India, 2021 SCC OnLine Del 4094, decided on 16-08-2021]


Advocates before the Court:

For the Petitioner: Abhishek A. Rastogi with Pratyushprava Saha, Advocates.

For the Respondents: Zoheb Hossain with Tulika Gupta and Vivek Gurnani, Advocates for Respondents-NAA and DGAP

Case BriefsHigh Courts

Gujarat High Court: Paresh Upadhyay, J., allowed the petitions which were filed apprehending detention under PASA in connection with the Complaint filed by the State Tax Department in the Court of the Chief Judicial Magistrate, under different sub-sections of Section 132 of the Gujarat Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 read with Section 120B of the Penal Code, 1860.

On 15-06-2021 it was informed to the Court that, atleast one of the petitioners could be detained under PASA, and while granting protection in favour of the petitioners, this Court had passed an order.

There was no response from the Finance Department of the State of Gujarat to the above-quoted query of this Court. Instead, affidavit in replies – all dated 22-07-2021 were filed on behalf of the Gujarat Goods and Services Tax Department, wherein, over and above giving details of the allegations against the petitioners, in the concluding part it was stated that, no proposal was made to detain the petitioners under PASA so far, by the State GST Department.

The Court was of the view that not only the query raised by the Court qua the citizen – the trader community, in this case, was not responded by the competent Authority from the Finance Department of the State, the sword kept hanging over the head of the traders, because it was replied by the GST Department that no proposal was made to detain the petitioners under PASA so far. Citizen can not be left in lurch like this.

When the State on the whole and the economy, in particular, is trying to regain the momentum post COVID, such hanging sword situation can not be permitted to continue.

The Court while allowing the petitions found that in the facts like this, the State Authorities can not be permitted to resort to the stringent provisions like detention under the Prevention of Anti Social Activities Act against the petitioners.[Amitkumar Rameshbhai Patel v. State of Gujarat, R/Special Civil Application No. 6465 of 2021, decided on 18-08-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


For the Petitioners: Mr Tejas M Barot

For the Respondent: Mr Hardik Soni

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): S.S. Garg (Judicial Member) allowed appeals which were filed against the impugned order passed by the Commissioner of Central Tax (Appeals) whereby Commissioner had rejected the appeal for not depositing the mandatory pre-deposit under Section 35F.

Appellant had filed four rebate claims before AC Yelahanka Division under Rule 18 of CER 2002 read with Notification No. 19/2004-CE (NT) dated 06/09/2004, as amended read with Section 11B of Central Excise Act, 1944 on the ground that they had manufactured and exported the same as per the documents submitted. The adjudicating authority after due process found that the respondent had paid excess duty from their Cenvat credit account as the duty was paid on CIF value basis and further, re-determined the values as per Section 4 of Central Excise Act and held that duty was paid in excess partly and was not admissible and had re-determined Section 4 value and arrived at the allowable amounts. The Jurisdictional Deputy Commissioner had examined Section 142(3) of the CGST Act, 2017 and allowed the entire rebate claimed by the respondent in cash. The Department filed appeal before the Commissioner (Appeals) on the ground that the Adjudicating Authority has erred in sanctioning the rebate. Further, Commissioner (Appeals) had allowed the appeals in favour of the Department. Aggrieved by the same, the appellant had filed Revision applications. Jurisdictional Assistant Commissioner of Central Tax issued protective show-cause notices and demanded the rebate sanctioned in all the four cases and adjudicated the same as erroneously refunded amount liable for recovery under the provisions of Rule 14 of CCR, 2004 read with Section 11A (1) of CEA, 1944 with applicable interest under the provisions of CCRs 2004 read with Section 11AA of CEA, 1944. Aggrieved by the said order of the Assistant Commissioner, the appellant had filed appeal before the Commissioner who rejected the appeal for not depositing the mandatory pre-deposit under Section 35F of Central Excise Act, 1944 without going into the merits of the case.

The Tribunal after perusal of records found that the appellant had already filed Revision application challenging the decision of the Commissioner (Appeals) whereby the Commissioner (Appeals) had accepted the Department’s appeal and that Revenue has now attached the copy of the notice issued by the Revisionary Authority which shows that the whole issue is pending with the Revisionary Authority, Government of India. Since the issue was pending before the Revisionary Authority, it was incumbent on the original authority not to adjudicate the protective notices issued by them and should have waited till the decision of the Revisionary Authority. The Tribunal allowed the appeals setting aside the impugned order with a direction to keep the whole matter in abeyance till the decision of the Revisionary Authority.[Indo Us Mim Tec (P) Ltd. v. Commr. of Central Tax; 2020 SCC OnLine CESTAT 396    ; decided on 11-12-2020]


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