Case BriefsHigh Courts

Gujarat High Court: The Division bench of J.B. Pardiwala and Nisha M. Thakore, JJ., allowed the petition in a matter related to furnishing of the GSTR – 6 return for recording and distributing the ISD credit.

Writ applicant was a public limited company engaged in the business of manufacture of chemical products like H-Acid, Vinyl Sulphone, Dyes etc. It was not in dispute that the writ applicant was registered as the Input Service Distributor (ISD) under the Cenvat Credit Rules read with the Central Excise Rules.

Writ applicant was availing the credit of various input transactions as the ISD for distributing proportionate credit to each of the business premises in accordance with Rule 7 of the Cenvat Credit Rules.

The Central Goods and Services Act, 2017 along with the CGST Rules came into force with effect from 01-07-2017. The un-utilized credit lying in the credit register of the assessees was allowed to be transferred and carried forward to the electronic credit ledger under the CGST Act by filing a return in the Form STR – 3 detailing therein the un-utilized credit and other relevant information. A declaration in Form GST TRAN – 1 was also required to be filed by the registered person under the CGST Act by 27-12-2017.

In November, 2017, the writ applicant filed GST TRAN – 1 wherein the balance of the Cenvat Credit lying with the writ applicant on 30-06-2017 including the un-utilized balance of ISD Cenvat Credit was Rs.20,52,989/-. The writ applicant filed  return in Form CGST – 06 with details of balance of Cenvat Credit lying on 30.06.2017 for transferring such credit to the GST regime. However, on account of an error in the GST network, the Cenvat Credit balance in the return was shown at Rs.2,96,528/-. The ISD balance of Rs.20,52,989/- was not added or included in the balance of the ISD credit in the return.

Court opined that respondents cannot raise their hands in despair saying that it was not possible to correct or take care of the technical glitches. The writ applicant was running from pillar to post requesting the respondents to provide a solution and take care of the technical error and glitch that occurred as regards furnishing the GSTR – 6 return for recording and distributing the ISD credit of Rs.20,52,989/-. As usual, there was no response at the end of the GSTN. The writ applicant was not allowed to distribute the ISD credit of Rs.20,52,989/- as the same was not recorded, reported and declared in the GSTR – 6 return.

Credit was a tax paid by the registered person on input transactions and such tax already paid to the credit of the Central Government was a vested right of the person. Such vested right cannot be defeated on account of any irregularity in the system evolved by the Government.

The petition was allowed and respondents were directed to allow the writ applicant to furnish manually the GSTR – 6 return with details of the ISD credit of Rs.20,52,989/- and also permit distribution of such credit to the constituents of the writ applicant.[Bodal Chemicals Ltd. v. Union of India, 2022 SCC OnLine Guj 297, decided on 11-02-2022]

for the Petitioner(s) 1,2: Mr Amal Paresh Dave, Mr Paresh M Dave

for the Respondent(s) 1: Ms Priyank P Lodha

Suchita Shukla, Editorial Assistant has reported this brief.

Legislation UpdatesRules & Regulations

The Central Board of Indirect taxes and Customs has notified the Electronic Duty Credit Ledger Regulations, 2021 on September 23, 2021. Key features of the regulations are:

  • Issuance of duty credit in the scroll – Any bill of export under section 50 of the Customs Act, 1962 on or after the January 1, 2021 and having a claim of duty credit under the Scheme shall be processed in the customs automated system. The claim shall be allowed by Customs according to the conditions and restrictions notified for the Scheme. Once the claim is allowed, a scroll for duty credit will be generated separately for each Scheme. The scroll details shall be visible in the customs automated system to the exporter who is the recipient of such duty credit.
  • E-scrip creation – The exporter shall have the option to combine the duty credits under a particular Scheme to carry forward the said duty credits to create an e-scrip for that Scheme in the ledger within a period of one year from the date of generation of the scroll in the customs automated system.
  • Registration of e-scrip – The customs station of export shall be the customs station of registration for an e-scrip, which shall be automatic and separate application for the same shall not be required to be filed.
  • Validity of e-scrip – The e-scrip shall be valid for a period of one year from the date of its creation in the ledger and any duty credit in the said e-scrip remaining unutilized at the end of this period shall lapse.
  • Transfer of duty credit in e-scrip – The duty credit in e-scrip can be transferred within the customs automated system from the ledger of a person to the ledger of another person who is a holder of an Importer-exporter Code Number issued in terms of the Foreign Trade (Development and Regulation) Act, 1992.
  • Suspension or cancellation of duty credit – In contravention of any of the provisions in relation to the exports to which the duty credit relates, or in relation to the e-scrip, the said duty credit or e-scrip may be suspended or cancelled in the ledger in the manner as notified by the Central Government under section 51B of the Customs Act, 1962.


*Tanvi Singh, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ashok Jindal (Judicial Member) allowed an appeal which was filed against the impugned order wherein credit had been denied on the premise as per Notification No.02/14-CE (N.T.) dt. 20-01-2014, the appellant was not entitled to credit prior to the Notification No.01/10-CE dt. 6-02-2010.

The appellant was located in the State of Jammu & Kashmir and was availing the benefit of exemption Notification No.01/10-CE dt.6-02-2010. The appellant procured certain inputs and availed credit of duty paid on these inputs. The Revenue stated that an assessee is not entitled to avail credit against the inputs issued by the units, who were availing exemption under Notification No.01/10-CE dt. 6-02-2010 and after the introduction of Notification No.02/14-CE (N.T.) dt. 20-01-2014, the notification No.01/10-CE dt. 6-02-2010 was amended thereafter the credit was available to the assessee. After adjudication, the credit availed by the appellant was denied. Counsel for the appellant also submitted that the period involved in this case was 01-08-2012 to 19-01-2014 whereas the show cause notice had been issued on 31-08-2017 by invoking the extended period of limitation.

The Tribunal observed that similarly placed assessee was allowed the credit although against those orders, the appeals had been filed by the Revenue before the Commissioner (Appeals), in that circumstance, when the Revenue was having divergent views on the issue, the extended period of limitation was not applicable.

The Tribunal allowed the appeal stating that the denial of credit was barred by limitation as the show cause notice was issued by invoking the extended period of limitation.[Pioneer Pesticides (P) Ltd. v. Commr. of CGST, 2021 SCC OnLine CESTAT 8, decided on 12-01-2021]

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Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of P.V. Subba Rao (Technical Member) and P. Dinesha (Judicial Member) allowed an appeal which filed to decide whether the appellant was entitled to distribute the Cenvat Credit including Education Cess and SHE cess taken on the Research & Development services received to their manufacturing units in terms of Rule 7 of Cenvat Credit Rules, 2004.

A show-cause notice was issued by the Revenue and the same was adjudicated by the Principal Commissioner.

The Tribunal considered the decision relied on by the counsel of the appellant, Mr S. Thirumalai in Final Order of the Tribunal Bench in No. A/30883- 30885 of 2020 in respect of the Dr Reddy’s Laboratories Ltd., wherein it had been observed as under:

“2. ………The appellant herein is a major manufacturer of bulk drugs (Active Pharmaceutical Ingredients or API) and formulations in India. Manufacture of pharmaceutical requires a lot of Research & Development in terms of product development, testing, process improvements, cost reduction and meeting the legal certification requirements of various authorities such as Drugs Controller of India and his counterparts in other countries.

  1. The appellant has created a single Integrated Product Development Organisation Unit

(IPDO) at Bachupally to undertake research and development activities of their products. It caters to the requirements of various manufacturing units of the appellant. The appellant had taken CENVAT Credit on the services used in the IPDO. Revenue is of the opinion that the IPDO not being a manufacturer of excisable goods nor provider of taxable services, no CENVAT Credit is admissible on the input services used in the IPDO. The appellant’s position is that various input services and inputs used in the IPDO are intrinsically linked to the manufacture of the final products in their manufacturing units and therefore is a direct corelation between the services used in the IPDO, which is their R&D unit and the manufacture. Therefore, they are entitled to CENVAT Credit on such services. The question before us is whether the appellant is entitled to CENVAT Credit on the input services used in the IPDO or otherwise. The appellant had taken registration as Input Service Distributor and has distributed the credit taken in their IPDO to their units. 

  1. We have considered the arguments on both sides and perused the records. Pharmaceutical industry is a specialised industry distinct from other industries. Not only is the manufacturer required to manufacture the correct drug but is also required to make it of the requisite quality and standards. Further, a manufacturer is also required to obtain the necessary clearances and certifications from the authorities before the product can be marketed. Without any of these activities, the product cannot be manufactured and sold. Therefore, for a marketable pharmaceutical product to come into existence, the certifications and quality control are absolutely essential. Further, pharmaceutical industry is one which involves a lot of research and development which distinguishes the product of the manufacturer from those of others. In fact, a large proportion of the cost of any pharmaceutical product is on account of the amounts spent on research and development both in terms of discovery of a new molecule and also in terms of developing an appropriate formulation containing various quantities of different drugs. Once a product is developed, the product has to be necessarily certified by the Drugs Controller for it to be marketable and this involves requisite paper work, clearances and obtaining the certificates without which the product cannot be marketed. We, therefore, find that as far as pharmaceutical industry is concerned, research & development is an essential part of the entire manufacturing process. Therefore, the services used in the R&D have a direct nexus with the manufacture of the final products. It is not necessary that the pharmaceutical industry has a complete R&D facility in each of its manufacturing units. In order to economise and benefit from the economies of scale, R&D units are set up as independent units for serving various manufacturing units of the manufacturer. In such a case, the services availed in the R&D units have a direct nexus to the manufacture of the products in various units. If the assessee is registered as an input service distributor, the CENVAT Credit availed on the services used in the R&D unit can be distributed to various manufacturing units. The appellant has just done that.
  2. Our view in this regard is consistent with the view taken by the Tribunal Allahabad in the case of Jubiliant Life Sciences Ltd. (supra) and upheld by the Hon’ble Apex Court. It is also consistent with the decision of this Bench in the case of Aurobindo Pharma Limited (2019- TIOL-3415- CESTAT HYDERABAD)] and CESTAT Chennai (2018-TIOL-1661-CESTATMAD).
  3. In view of the above, we find that the issue is no longer res integra and stands decided in favour of the appellant by various case laws cited above. We, therefore, find that the impugned orders are unsustainable and need to be set aside and we do so.”

The Tribunal allowed the appeal keeping in mind the findings of the Bench in the above case.[Aurobindo Pharma Ltd. v. Commr. of CT, 2020 SCC OnLine CESTAT 335, decided on 09-12-2020]

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Case BriefsTribunals/Commissions/Regulatory Bodies

Authority for Advanced Ruling, Madhya Pradesh: The Bench comprising of Manoj Choubey (Joint Commissioner) and Virendra Jain (Joint Commissioner), ruled evenly in the matter brought by Atriwal Amusement Park under Section 98(4) of Central Good and Services Tax, 2017.

Atriwal Amusement Park was incorporated on 13th March, 2018. Applicant proposed activity of construction of water park for which various components and services would be used that are taxable under GST. Thus, applicant has approached the Tribunal for admissibility of input tax credit of tax paid or deemed to have been paid.

There were four major issues before the court, which dealt with instances of where input tax credit may be paid. First, whether applicant was eligible for credit on input tax of water slides. Second, whether steel and civil structure which is a support structure for slides, will be available for credit. Third, whether input tax be available on development and preparation land where slides are constructed. Fourth, whether applicant will get credit for construction of swimming pools as water slides directly run into pool.

Bench addressed each point individually, and initially dwelled specifically into the definition of ‘Plant & Machinery’. It included support structure and foundation as part of plant & machinery, and excluded buildings and civil structure from the definition. The bench found the applicant to be eligible for Input tax credit on water slides as they were included under the term ‘plant & machinery’ due to them being foundation and structural support.  For the second issue, bench found steel and civil structure to be a part of ‘plant & machinery’, therefore, they found it eligible for credit. For the third issue, bench found land to be excluded from the definition of ‘plant & machinery’ and hence, ousted the applicability for credit on land. For the final issue, bench decided swimming pool is a ‘civil structure’ and cannot be called a ‘support structure’, hence, credit was not available for swimming pool. [Atriwal Amusement Park, In re, Case No. 29 of 2019, decided on 09-06-2020]