Case BriefsHigh Courts

Orissa High Court: S.K. Paigrahi, J., while addressing a matter, observed that,

One cannot lose sight of the fact that GST regime is relatively new and is still evolving.

“…attempts to dampen the spirit of GST proper implementation are already assuming huge proportions and need to be curbed with an iron fist so that the contours of fiscal compass will be extended to the advantage of the people.”

Petitioner filed the bail application under Section 439 of the Criminal Procedure Code, 1973 for being punishable under Section 132(1)(b)(c) and (1) of the OGST Act, 2017.

Business transactions were made using several fictitious firms including G.S Unitrade,  G.S. Steels and Alloys Co., B.B Associates, Om Shri Ganesh Traders. Petitioner, Ronak Beriwal, Subhash Chandra Swain and Basanta Kumar are the proprietors of GS Unitrade, G.S. Steels & Alloys Co, B.B. Associates and Omm Shree Ganesh Traders respectively.

Above persons, individually and in collusion with each other alleged to have created several dummy and non-existent entities to avail bogus Input Tax Credit (ITC), for the purpose of defrauding the Revenue.


Creation of dummy and non-existent firms was the matter of concern.

Fake and fraudulent transactions have, among others, caused huge loss to the State exchequer at least to the tune of Rs 122.67 crores.


After intensive analysis of data from GSTN/e-way bill portal and inputs from various sources, the Joint Commissioner of State Tax, CT & GST Enforcement Range, Sambalpur detected the fraud committed by the accused.

Several incriminating documents, containing business transactions of such business entities, were unearthed and seized.

Petitioner, in his capacity as the proprietor of G.S. Unitrade, had shown to have purchased goods from many bogus firms and has availed ITC on the strength of fake invoices, without actual transfer of goods.

“…manner in which the accused, in collusion with other accused, had been operating would suggest that there are certain inherent flaws in the GST system, which is prone to such abuse.”

“Fraudsters are taking advantage of the inadequacy of electronic trails of all transactions by employing ingenious methods.”

The search and inspection conducted by the State Authorities revealed that no business was actually being conducted by the declared place of business.

Fictitious firms were created in the name of many daily labourers, private tutors, housewives etc., with the help of their identity documents like PAN, Aadhaar Card, Mobile phone, Voter Card, etc.

Hence accused was alleged to have committed of offences under Section 132(1)(i) read with Section 132(5) of the OGST Act, 2017, which are a non-bailable and cognizable.


In the instant case, the alleged GST fraud committed by the petitioner is having humongous ramification on the revenue collection by the State.

Further the bench added that, the possibility of the accused tampering the evidence and/or influencing/intimidating the witnesses also cannot be ruled out.

Moreover, the Courts cannot lose sight of the adverse impact such activities would have in the economy.

Bench stated that a large number of cases emerged in different parts of the country where such persons, with vested interests, have created a host of unscrupulous and bogus entities.

Fake entities are then used for the purpose of indulging in issuances of false and fabricated invoices, without actual movement or supply of goods and services and without payment of any GST to the public exchequer, but for the purpose of claiming ITC, by defrauding the Revenue.

Enormity of such devious activities touch the raw nerve of the economic system and strike at the root of the proper and effective functioning of the GST regime, which has been set up with the laudable object of “One Nation, One Tax, One Market”.

High Court stated that a countrywide cartel specializing in defrauding the GST system is operating to bring the economy to its knees.

High Court declined the release of the accused petitioner on bail at this stage. Accordingly, the bail petition filed on behalf of the accused/petitioner was rejected. [Amit Beriwal v. State of Odisha, 2020 SCC OnLine Ori 546 , decided on 27-07-2020]

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]

Business NewsNewsTreaties/Conventions/International Agreements

A Memorandum of Understanding (MoU) was signed between the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC) for data exchange between the two organisations.

This MoU supersedes the MoU signed between CBDT and the erstwhile Central Board of Excise and Customs (CBEC) in the year 2015. Significant developments have taken place since the signing of earlier MoU in 2015 including introduction of GST, incorporation of GSTN and change in the nomenclature of Central Board of Excise and Customs (CBEC) to Central Board of Indirect Taxes and Customs (CBIC). Changed circumstances, including advancements in technology, are duly incorporated in the MoU signed today.

This MoU will facilitate the sharing of data and information between CBDT and CBIC on an automatic and regular basis. In addition to regular exchange of data, CBDT and CBIC will also exchange with each other, on request and spontaneous basis, any information available in their respective databases which may have utility for the other organisation.

The MoU comes into force from the date it was signed and is an ongoing initiative of CBDT and CBIC, who are already collaborating through various existing mechanisms. A Data Exchange Steering Group has also been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the data sharing mechanism.

The MoU marks the beginning of a new era of cooperation and synergy between the CBDT and CBIC.

Ministry of Finance

[Press Release dt. 21-07-2020]

[Source: PIB]

Advance RulingsCase Briefs

Goa Advance Authority Ruling: A Division Bench of J.K. Meena and Sarita S. Gadgil (Members), while addressing an application held that,

“mere classification of goods as essential commodity will not bring it under the category of exempted goods from GST.”

Applicant is a registered partnership firm manufacturing Hand Sanitizers.

Officer concerned commented that,

Hand sanitizers are primarily used for disinfecting/ sanitizing hands.

Further he opines that following factors may be considered for classifying the said product:

  • Curative effect of the product (therapeutic use)
  • Preventive effect of the product (prophylactic use)
  • Period of usage i.e., to be used for limited period or regularly,
  • Product contains curative/preventive ingredients
  • Trade parlance, i.e., how it is known in the market.

Applicant in the present application has asked for Advance ruling on the issue as to classification of the Goods namely “Hand Sanitizer” and rate of GST to be applied.

Opinion was also sought on whether Hand Sanitizers supplied by them are classifiable as essential commodity and to be exempt from GST.

In Applicant’s opinion, Hand Sanitizers are covered under HSN 30049087 and to be taxed @ 12% under GST.


Hand Sanitizers manufactured by the applicant are of the category of Alcohol based hand sanitizers and are classifiable under heading 3808 of HSN to which rate of GST applicable is 18%.

Merely classifying any goods as essential commodity will not be the criteria for exempting such Goods from GST.

In view of the above ruling sought by applicant was answered. [Springfields (India) Distilleries, In Re., GOA/GAAR/1 of 2020-21, decided on 17-06-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

West Bengal Authority for Advance Ruling (WB AAR): A Division Bench of Susmita Bhattacharya and Parthasarathi Dey, (Members) held that the supply of composite printing service to recipients located in India, is  taxable for GST.

The question dealt in the present application is:

Whether the activities undertaken by procuring orders from a foreign buyer to print texts and thereafter deliver them to various places in India is a taxable transaction?

Applicant’s submissions

Applicant is awarded a contract for printing booklets in various Indian languages. For the said contract applicant arranges physical inputs like paper, ink and other physical inputs, prints the content and binds the printed material into booklets and delivers the same.

For the above contract, applicants receives consideration in US Dollars.

Applicant argued that the recipient was not providing any goods for performing the printing service. Provisions under Section 13(3)(a) of the IGST Act, 2017 are not, therefore, applicable.

Further adding to the above submissions, applicant stated that recipient being located outside India and consideration received in convertible foreign exchange, the activity should be considered as export of service.

Observation and Decision

Bench observed that, applicant prints booklets that are classifiable under heading 4901 of the Tariff Act.

The recipient provides the content usually on a digital media and retains usage right on such intangible inputs. The applicant prints the content on physical media, binds them into booklets and supplies the printed material. The goods so supplied have no utility other than displaying the printed content. Service of printing, therefore, is the predominant element of the composite supplies the applicant is making.

The place at which the printed booklets are delivered is the place of supply of the composite printing service.

Applicant fails to appreciate the true meaning of the terms ‘recipient’, as defined under Section 2(93) of the GST Act. It is an exhaustive definition, implying it can neither be expanded or reduced.

Hence, AAR states that applicant supplies the composite printing service to the recipient located in India. Such supplies are not, therefore, export of services within the meaning of Section 2(6) of the IGST Act, 2017.

Thus, applicant’s supply of the composite printing service is taxable under Sl No. 27(i) of Notification No. 11/2017 – Central Tax (Rate) dated 2810612017 (corresponding State Notification No. 1135 – FT dated 2810612017) or Sl No. 27 of Notification No. 8/2017 – lntegrated Tax (Rate) dated 2810612017, as the case may be.[Swapna Printing Works (P) Ltd., In Re., 45/WBAAR/2019-20, decided on 06-03-2020]

Image credits: Global Banking and Finance

Advance RulingsCase Briefs

West Bengal Authority for Advance Ruling: A Division Bench of Susmita Bhattacharya, Joint Commissioner, CGST & CX and  Parthasarathi Dey, Additional Commissioner, SGST, while addressing a matter, with regard to liability of tax on the applicant, held that,

Applicant’s activities do not amount to ‘supply’ of service, neither is it a recipient of the services for which it often provides financial assistance to the women survivors of sexual and other violence, therefore, not liable to pay GST on the activities described.

Applicant in the present application is a charitable trust under Section 12 A of the Income Tax Act, 1961.

It is involved in extending legal, medical, psychological and financial support to the women and their children surviving violence and abuse along with facilitating training programmes and workshops for the survivors.

Applicant in the present application approached the AAR in order to know whether it is liable to pay tax on its activities or not?

The above-stated question is admissible under Section 97(2)(e) and (g) of the GST Act.

Adding to its submissions, it also states that it does not charge anything on the survivors for the services it extends and the payments for aiding the services are done through donations.


Applicant is assisting the women survivors in various ways to get back on their feet. Survivors of sexual and other violence need services like legal aid, medical assistance, and vocational training. Recipient of such services is, therefore, not the applicant but the survivor woman.

Hence, the AAR concluded that the applicant makes payments not to the supplier of the services, but as financial support in the form of reimbursement to the recipient survivor. It is, therefore, not liable to pay GST based on reverse charge mechanism on such payments.

Applicant does not charge any consideration for facilitating the legal aid and other assistance. Such activities of the applicant, therefore, does not result in ‘supply’ of service as defined under Section 7 (1) of the GST Act. The applicant is not, therefore, liable to pay tax thereon. [Swayam, In Re., 03/WBAAR/2020-21, decided on 29-06-2020]

Advance RulingsCase Briefs

Karnataka Authority of Advance Ruling (Goods and Services Tax):  In the instant application the question was that whether the preparation of “Whole Wheat Parota” and “Malabar Parota”  can attract GST at the rate of 5% under Chapter Heading 1905, the AAR (GST Department) comprising of Ravi Prasad M.P., (Additional Commissioner of Commercial Taxes) and Mashhood- ur- Rehman Farooqui (Joint Commissioner of Central Tax), held that the product “parota” requires further processing for human consumption and is completely different from products like ‘roti’, ‘chapatti’ etc.; furthermore ‘parota’ also falls under the category of ‘food preparations not elsewhere specified or included’, thus the product can be classified under Chapter Heading 2106, upon which 18% GST will be applicable.

The applicant stated that the ‘parota’ is available in ambient and frozen form, with a shelf life of 3-7 days. The ingredients for the product include refined flour, RO purified water, edible vegetable oil, fat and salt. After adding the said ingredients, the product is then subjected to heat on a pan for making it available for consumption. With this description, the applicant contended that the product should be classified under Chapter Heading 1905 under the description of “Khakhra, Plain Chapatti and Roti”.

Perusing the contention and the nature of the product in question, the AAR observed that under Rule 3(c) of the General Rules of Interpretation under the Customs Tariff Act, 1975, where goods are not classifiable under appropriate heading then, the product is to be classified under the heading which occurs last in the numerical order among those headings which equally merit consideration. Since, Heading 2106 occurs last in the numeric order and the impugned product does not fall under any category enumerated in Rule 3(a) and Rule 3(b) General Rules of Interpretation under the Customs Tariff Act, 1975, thus the product ‘parota’ shall fall under Heading 2106 by the virtue of aforementioned Rule 3(c). It was further observed that unlike ‘khakhra’, ‘roti’ and ‘plain chapatti’ which are completely cooked preparations requiring no processing before human consumption and are thus ‘ready to eat food preparations’; the same cannot be said for ‘parota’ which is to be heated before consumption.[ ID Fresh Food (India) Pvt. Ltd., 2020 SCC OnLine Kar AAR-GST 1 , decided on 22-05-2020]

Case BriefsCOVID 19High Courts

Public interest must outweigh private gain.

Delhi High Court: Najmi Waziri, J., has capped the price of the COVID-19 Rapid Test Kit at Rs 400 per unit which is 40% lesser than the price of Rs 600 per unit approved by ICMR.

The Court was considering a petition filed by Rare Metabolics Life Sciences Pvt. Ltd., the exclusive distributer of medical products imported into India by the respondent, Matrix Labs. The petitioner was seeking the release of 7.24 lakh COVID-19 Rapid Test Kits and other COVID-19 related materials imported by the respondent from People’s Republic of China. On 25th March, the petitioner had desired to import 10 lakh WONDFO SARS CoV-2 Antibody test kits, for which proforma invoice was requested from the respondent. Subsequently, on 27th-28th March, ICMR placed an order with petitioner’s distributor for 5 lakh COVID-19 Rapid Test Kits at the rate of Rs 600 per unit. The total order was for Rs 30 crores. Of the said 5 lakh kits, 2.76 lack kits have already been delivered to ICMR and the remaining 2.24 lakh kits were expected to be delivered very shortly.

The petitioner submitted that it has already paid Rs 12.75 crores to the respondent, which amount covers the cost of 5 lakh kits. It was submitted that it will pay the balance when payment is received from ICMR. Whereas, the respondent contended that the entire amount was to be paid upfront. The Court stated that be as it may, since the kits are required in the country on urgent basis, the remaining 2.24 lakh kits shall be delivered to ICMR the moment it lands in India and the balance payment due to respondent shall be paid by the petitioner within 24 hours of receiving payment from ICMR.

The Court was informed that the actual cost paid to the supplier of these 5 lakh test kits is Rs 11.25 crores and ICMR will pay Rs 30 crores for purchasing the same, which means that Rs 18.75 crores will be shared by intermediaries without any value addition to the goods.

The Court was of the view that the profit mark-up of 61% on the landed cost of these kits is much on the higher side. It stated that

“The country is going through an unprecedented medical crisis affecting public order. People have been cloistered in their homes or constrained to stay wherever they were on 24th March 2020. The economy is virtually at a standstill for the last one month. There is an element of disquiet apropos one’s safety. For people to be assured that the pandemic is under control and for governments to ensure and for agencies engaged in the frontline battle to safeguard people’s health, more kits/tests should be made available urgently at the lowest cost, for carrying out extensive tests throughout the country. Public interest must outweigh private gain. The lis between the parties should give way to the larger public good.”       

In view of the above, the Court ordered that the kits should be sold at a price not beyond Rs per kit, inclusive of GST.

The Court was also informed that State of T.N. had placed an order of Rs 50,000 test kits with the respondent at the rate of Rs 600 per unit.

Accordingly, the Court directed that from the other 5 lakh kits (apart from those 5 lakh to be delivered to ICMR), 50,000 shall be excluded for the State of T.N. and the remaining 4.5 lakhs would be available to the respondent to be disposed of in the terms mentioned above. [Rare Metabolics Life Sciences (P) Ltd. v. Matrix Labs, 2020 SCC OnLine Del 569 , decided on 24-4-2020]

New releasesNews

Milind Kumars Goods and Services Tax: Law and Practice is a crisp introduction on the implementation of GST which heralded a simplified indirect taxation regime in the country. This book gives an overview of the road to GST and the pre-GST era explaining why the change was needed. This follows a chapter on the constitutional amendment which brought the law into force.

The author has compared the GST regime of India with the rest of the world. Chapters on understanding GST and GST slab rates have been included. GST Council, GSTN, DGGSTI, GSPs have their own dedicated chapters. The various sections and their corresponding rules have been discussed together in this book.

The notable features of this book are:

  • Short, accessible chapters so that you can navigate through the book with ease.
  • Fully updated with latest legislative and case law developments.
  • Relevant and interesting facts and information are provided in each chapter.
  • Includes a companion  web  resource  EBC  ExplorerTM (, providing access to important statutes related  to  GST,  indicated  by  Book  ResourcesTM

This book will be useful to entrepreneurs, managers, students, academicians as well as to judges and lawyers.

Table of Contents

1. Road to GST

2. Indirect Taxation — Pre-GST

3. Constitution (101st Amendment) Act, 2016

4. Goods and Services Tax Council (GST Council)

5. GST Around the World

6. Understanding GST

7. GST Rate Slabs and Compensation Cess Rates

8. Goods and Services Tax Network (GSTN)

9. Directorate General of Goods and Service Tax Intelligence (DGGSTI)

10. GST Suvidha Providers (GSPs)/GST Seva Kendra

11. Central Goods and Services Tax Act, 2017

12. E-way Rules

13. Integrated Goods and Services Tax Act, 2017

14. Union Territory Goods and Services Tax Act, 2017

15. Goods and Services Tax (Compensation to States) Act, 2017

Subject Index

Get Your Copy soon!

Here is the link to buy: Goods and Services Tax: Law and Practice by Milind Kumar

New releasesNews

Jaya Vasudevan’s Indirect Taxes (GST & Other Indirect Taxes) is a textbook for law students. It explains the principles of indirect tax law in general and GST in particular with a special emphasis on the legislative shift from an origin-based system of taxation to a destination-based system.

This book is the first of its kind work. It elucidates the various concepts under indirect tax law, right from customs law to goods and services tax law under one umbrella. It critically analyzes various  Supreme Court, High Courts  and  Tribunal decisions.

The author throws light on the provisions of GST in relation to manufacture and consumption. The book elaborates on the scenarios that brought together the taxation of goods and services under a uniform system of taxation with a detailed account of the Constitutional amendment leading to the introduction of GST.

Written in a lucid and easy to understand style, the book provides complete clarity and understanding of the subject. The detailed explanation of the existing laws and the newly introduced GST law makes it a ready referencer for the study of integrated tax in an all-inclusive manner.

Notable Features:

  • Topic-wise discussions on all topics related to GST.
  • Fully updated with the latest legislative and case law developments.

Also included are additional learning resources on

l   Provides access to important case law as indicated by Case PilotTM , a Discussion ForumTM  to post comments, discuss and explore ideas and a Useful LinksTM feature to get access to a compilation of articles on GST, updates and other learning resources.

This book will be immensely useful to law students, law teachers, Managers, entrepreneurs and tax professionals, lawyers and judges.

Table Of Contents:

1. Concept of Indirect Taxation and GST

2. GST on Manufacture and Consumption

3. Customs Law

4. Tax on Services

5. GST and Sale of Goods

6. Transitional Provisions

Grab your copy here: Indirect Taxes by Dr. Jaya Vasudevan Suseela

Case BriefsHigh Courts

“Constitution of GST Appellate Tribunal is unconstitutional.”

Madras High Court: A Division Bench comprising of S. Manikumar and Subramonium Prasad, JJ., while deciding a writ petition in respect to declaring Sections 109 and 110 of the Central Goods and Services Tax Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017 held that,

  • Section 110(1)(b)(iii) of the CGST Act which states that a Member of the Indian Legal Services, who has held a post not less than Additional Secretary for three years, can be appointed as a Judicial Member in GSTAT, is struck down.
  •  Section 109(3) and 109(9) of the CGST Act, 2017, which prescribes that the tribunal shall consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State), is struck down.
  •  The argument that Sections 109 & 110 of the CGST Act, 2017 and TNGST Act, 2017 are ultra vires, in so far as exclusion of lawyers from the scope and view for consideration as members of the tribunal, is rejected. Parliament must consider to amend section for including lawyers to be eligible to be appointed as Judicial Members to the Appellate Tribunal in view of the issues which are likely to arise for adjudication under the CGST Act and in order to maintain uniformity in various statutes.

Facts pertaining to the present case:

Present writ petition was filed for the issuance of a writ declaration in order to declare Sections 109 and 110 of the Central Goods and Services Tax Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017 as void, defective and unconstitutional.

The above-said sections relate to the constitution of the Goods and Services Tax Appellate Tribunal and the qualification and appointment of members.

Section 109 of the CGST Act, 2017 and the TNGST Act, 2017 lays down the constitution of the Appellate Tribunal and the benches thereof and Section 110 prescribes the qualification of the President and the members of the Appellate Tribunal.

Section 109 of the CGST Act, states that the Government shall on the recommendations of the Council, constitute an Appellate Tribunal, known as the Goods and Services Tax Appellate Tribunal, for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority.

Section 110 of the Act prescribes the qualification, appointment and conditions of service, etc., of the President and the Members of the Appellate Tribunal. President of the Appellate Tribunal is a retired judge of the Supreme Court of India or a sitting or retired Chief Justice of any High Court or a Judge of a High Court or a retired Judge of a High Court, with not less than five years of service.

 Section 110 (2) prescribes that the President and the Judicial Members of the National Bench and Revisional Benches shall be appointed by the Government of India after consultation with the Chief Justice of India or its nominee.

The present writ petition challenges the validity of Sections 109 and 110 of the CGST Act, 2017 and TNGST Act, 2017, particularly the composition and qualification of the members to the Goods and Services Tax Appellate Tribunal.

Challenges laid down:

 First Challenge – It is to the vires of Section 110 (1) (b) of the CGST Act on the ground of exclusion of lawyers from being eligible to be appointed as a Judicial Member of the Tribunal. The exclusion of lawyers from the zone of consideration as a Judicial Member is violative of Article 14 of the Constitution of India.

Advocates are eligible to be considered as members of various tribunals and there is no justification or reason as to why they should be excluded from the zone of consideration of being appointed as Judicial members under the CGST and TNGST Act.

There has been no valid explanation as to why the CGST Act, 2017 and TNGST Act, 2017 exclude Advocates having more than 10 years of experience, from being considered as Judicial Members of the Tribunal.

Another Challenge- Challenge to the consideration of a Member of the Indian Legal Services who is eligible for being appointed as a member of the Appellate Tribunal has also been placed.

Next Challenge- It is in respect to the Composition of the Appellate Tribunal.

Composition of the Appellate Tribunal of CGST or TNGST, as the case may be, under Sections 109(3) and 109(9) of the CGST Act, 2017 prescribes that the tribunal will consist of one Judicial Member, one Technical Member (Centre) and one Technical Member (State). Thus, there are two Technical Members as against one Judicial Member. The two Technical Members, therefore, can overrule the Judicial Member who will be in minority.

Contentions of the Senior Counsel, Arvind Datar, representing the petitioners:

 He submitted that Section 110 (1) (b) of the CGST Act, 2017 lays down the qualification for appointment of a Judicial Member for Appellate Tribunal excludes advocates.

It is a departure from the existing practice of making Advocates with ten years experience at Bar and Advocates qualified for appointment as a Judge of a High Court, being considered as a Judicial Member of the tribunal.

Senior Counsel, Arvind Datar, placed reliance on the Supreme Court Judgment in R.K. Jain v. Union of India, (1993) 4 SCC 119, wherein the emphasis was on the need for recruitment of members f the Bar to man the tribunal.

“…Judicial review and remedy are fundamental rights of the citizens. The dispensation of justice by the tribunals is much to be desired. We are not doubting the ability of the members or Vice- Chairmen (non-Judges) who may be experts in their regular service. But judicial adjudication is a special process and would efficiently be administered by advocate Judges…”

Further substantiating his submissions, he stated that a lawyer with 10 years of experience in the subject would be in a better place to understand, appreciate and adjudicate the matters, which would be placed before the tribunal compared to a District Judge, who would not have experience at all for selection as a Judicial Member.

Reliance was placed on the decision of the Supreme Court in Madras Bar Association v. Union of India, (2014) 10 SCC 1, wherein it was that,

“…where the prescription of qualification was found by the court, to be not proper and conducive for the proper functioning of the Tribunal, it will result in invalidation of the relevant provisions relating to the constitution of the Tribunal. If the qualifications/eligibility criteria for appointment fail to ensure that the members of the Tribunal are able to discharge judicial functions, the said provisions cannot pass the scrutiny of the higher Judiciary.”

 Section 110 (1) (b) which excludes lawyers from being considered eligible for appointment as Judicial Member of the Tribunal is arbitrary of Article 14 of the Constitution of India.

Counsel for the petitioner reiterated that a District Judge even though be fit to be a Judge of High Court, might not be as oriented to deal with subjects, without having any expertise in the taxation laws.

An officer of the Indian Legal Services would also have no training in law or judicial expertise. Excluding lawyers from the ambit of consideration without any reason whatsoever makes the Section 110(1) (b) as violative of Article 14 of the Constitution of India.

Practice of considering advocates for appointments to specialised tax tribunals have been continued without break from 1941 with the advent of the Income Tax Appellate Tribunal.

 Denying the Advocates even the right of being considered will fall foul of the constitutional protection under Article 14 of the Constitution of India, as it would be capricious and irrational and more so, when there is no reason forthcoming from the respondents as to why lawyers are being excluded and why is there a departure from the norm of considering lawyers eligible to be appointed as Judicial Members of the tribunal.

For challenge in respect to the eligibility of a member of the Indian Legal Service for being considered as Judicial Member, reliance was placed on the Supreme Court decision in Union of India v. R. Gandhi, (2010) 11 SCC 1, to state that persons who have held a Group A post under Central or State Government with experience in the Indian Company Law Service (Legal Branch) and the Indian

Legal Service (Grade I) cannot be considered for appointment as judicial members while dealing with Section 10-FD(2)(c) and (d) of the Companies Act, 2013.

Adding to the above, he stated that Section 110(b)(iii) is per se contrary to the law laid down by the Supreme Court in the said judgment and must be struck down.

Further the Counsel for the petitioner submits that composition of the Benches in which the Technical Members would be in majority is unconstitutional and Section 109 of the CGST Act, 2017 which prescribes that two administrative members as against one judicial member is contrary to mandate of Article 50 of the Constitution of India and such a composition would seriously affect the independence of the judiciary.

Article 50 of the Constitution of India, provides that State shall take steps to separate the judiciary from the executive in the public services of the State.

 If the majority members on the bench are administrative members then Article 50 stands diluted.

In all the cases, which come to the tribunal, the revenue is either respondent or the appellant and that any assessee would not be confident of getting justice because the composition of the tribunal is such, it would give a genuine impression that the tribunal might not be an independent body and that it will only carry out the orders of the Government.

It was also pointed by the Counsel for the petitioner that it is for the first time that a statute provides for a composition of a tribunal where the administrative members exceed the judicial members.

 Judgments of the Supreme Court in Supreme Court Advocates-on-Record Assn. v. Union of India, (1993) 4 SCC 441 and Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 was relied on.

Rajagopalan, Additional Solicitor General and Aparna Nandakumar, appeared on behalf of the Union of India:

They contended that there is no fundamental right for an Advocate to be considered for appointment as a Judicial Member of the tribunal.

Advocates Act, 1961 does not give any right to an Advocate, to be considered to be appointed as a Judge in a Tribunal and it is for the Government to decide as to whether an Advocate must or must not be considered to be eligible to be appointed as Judicial Member of the tribunal.

Union of India submitted that, since the minimum quorum of two members has already been prescribed under the GST Act, the apprehension entertained by the petitioner herein that there would be preponderance of technical members over judicial member is wholly untenable.


 Bench considered the following issues:

  • Whether the exclusion of advocates from being considered for appointment as a Judicial Member in GST Appellate Tribunal, is violative of Article 14 of the Constitution of India.
  • Whether Section 110 (b)(iii) which makes a member of the Indian Legal Service, eligible to be appointed as a Judicial Member of the appellate tribunal, contrary to the law laid down by the Supreme Court in Union of India v. R. Gandhi, (2010) 11 SCC 1.
  • whether the composition of the National Bench, Regional Benches, State Bench and Area Benches of the GST Appellate Tribunal, which consists of one Judicial Member, one Technical Member (Centre) and one Technical Member (State), by which the administrative members outnumber the judicial member is violative of Articles 14 and 50 of the Constitution of India and the judgments of the Supreme Court of India.

High Court on perusal of the facts and submissions, has put its analysis and observation below:

Even though the constitutional validity of Section 110(1) (b) cannot be struck down on the ground of non-inclusion of advocates as being eligible for being considered for appointment as Judicial Member to the Appellate Tribunal under the CGST or TNGST, yet this court is of the opinion that the Union of India must evaluate as to why it is making a departure from the existing practice. Advocates are eligible to be appointed as Judicial Members in the ITAT which is the oldest Tribunal in the country.

 Senior Counsel Arvind Datar is justified in contending that when the constitution provides that lawyers are eligible to be appointed as Judges of the High Court, then there is no reason to exclude them from being considered for appointment as Judicial Officers.

Judgment of the Supreme Court case in R.K. Jain v. Union of India, it was held that

“…the Members of the tribunal must have a judicial approach and also knowledge and expertise in the particular branch of law.”

 A lawyer practising for 10 years in Taxation would definitely be well-equipped to grapple with the legal issues arising under the Act.

High Court recommends that the Parliament should reconsider the issue regarding the eligibility of lawyers to be appointed as Judicial Members in the Appellate Tribunal.

Further, the Court added in respect to the other challenge of appointment of a person, who is or has been a member of Indian Legal Service and has held a post not less than Additional Secretary for a period of 3 years, is no longer res integra. The issue stand settled.

 In Union of India v. R. Gandhi, (2010) 11 SCC 1, it has been categorically stated that a person who has held a position under the Indian Legal service cannot be considered for appointment as judicial members.

Court agreed with Counsel for the petitioner’s submission that the GSTAT is replacing the CESTAT, Sales Tax/ VAT Tribunals. The composition of GSTAT, therefore, has to be on the same lines.

 Article 50 of the Constitution of India which provides for separation of the judiciary from the executive, must be interpreted in such a way that the dominance of the departmental/technical members, cannot overwhelmingly outweigh the judicial members.

 Tribunals that primarily decide disputes between the State and citizens cannot be run by a majority consisting of non-judicial members.

 Supreme Court in L. Chandrakumar v. Union of India, (1997) 3 SCC 261, after analysing the provisions in S.P. Sampath Kumar v. Union of India, 1987 (1) SCC 124 and M.B.Majumdar v. Union of India, (1990) 4 SCC 501, went on to hold that the tribunals created under Articles 323 and 323-B would not be a substitute for the High Court for the purpose of exercising Articles 226 & 227 of the Constitution of India. If that being so, then and in such cases, in order to maintain the independence of the judiciary, the expert members cannot outnumber the judicial members.

Supreme Court in L. Chandrakumar v. Union of India, (1997) 3 SCC 261 adverted to the Report of the Arrears Committee (1980-90), popularly known as the Manlimath Committee, which has made recommendations regarding functions of tribunals.

It specifically stated that tribunals have not inspired confidence in the public mind and the foremost reason being lack of competence, objectivity and judicial approach.

 High Court added to its observation that in all GST related issues, the litigation shall be between an Assessee and the Govt. and this is yet another reason, that the presence of two members from the Government would create a further apprehension of bias, and lead an Assessee to believe, that perhaps the remedy itself is non-existent.

The issue regarding dominance of the technical members and constitutional validity of the same shall have to be examined keeping in mind the Judgments of the Supreme Court, relating to the importance of the independence of the Judiciary, as well as the manner in which the Parliament could establish Tribunals, to discharge what is essentially a Judicial Function.

Following cases were noted by the Court with respect to the independence of judiciary:

“… To preserve the doctrine of separation of powers, it is necessary that the provisions falling in the domain of judicial field are discharged by the judiciary and that too, effectively.”

Thus, the law has been settled by the Supreme Court, insofar, as the creation of alternative institutions that would exercise judicial function, would be that the alternative institutional mechanism must not be less effective than the High Court.

To be effective as a High Court, would not be limited to having powers akin to High Court, it would also include the ability to exercise judicial function akin to a High Court, in the sense of being impartial and independent.

Even though the judgment of the State Bench or the Area Benches is subject to an appeal to High Court, it is well settled that while giving judicial decisions, Judges should be able to act impartially, objectively and without any bias.

Supreme Court in Manak Lal v. Prem Chand Singhvi, 1957 SCR 575 has observed that when a tribunal or a court decides the matter, the test is not whether, in fact, a bias has affected the judgment. The test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the Tribunal might have operated against him in the final decision of the tribunal.

The Court also stated the fact that the appellate tribunal is constituted also to see whether the legal principles and the decision-making process are correct and fair. The expert members, who are not well trained in the law, cannot be permitted to overrule the judicial member on these aspects.

Hence, the principle which emerges is that while deciding issues as to whether the decision making process by the adjudicating authority or the appellate authority was just, fair and reasonable and to decide issues regarding the interpretation of notifications and sections under the CGST Act a properly trained judicially mind is necessary which the experts will not have. The number of expert members, therefore, cannot exceed the number of judicial members on the bench. [Revenue Bar Assn. v. Union of India, 2019 SCC OnLine Mad 8910, decided on 20-09-2019]

Legislation UpdatesNotifications

Earlier, guidelines have been given to the departmental officials for verification of TRAN-1 credit by Internal Circulars referred above. In most of the cases, verification must have been done. However, some queries have been received from the departmental officials and tax payers and hence firther guidelines are being given in this circular. For the sake of consistency in the terminology, the term “dealer” is used for tax-payers.

2. Credit as per revised return under MVAT:

Earlier by Internal Circular No. 1A of 2018 and 23A of 2018, instructions had been given to allow credit in TRAN-1, as per original MVAT return for the period ending on 30th June 2017 and not to allow credit as per the revised MVAT return for the said period.

It has been brought to our notice that there are some cases, in which the credit in TRAN-1 u/s 140(1) of the MGST Act is being denied. In this regard, following guidelines are being issued, for different situations, to allow TRAN-1 credit u/s 140(1):

i. Situation 1: A dealer has mentioned an amount in his MVAT original return field “excess credit claimed as refund in this return” for the period ending on 30th June 2017. Actually, this dealer desired to carry forward the excess MVAT credit in TRAN-1 and hence was required to mention such amount in MVAT return field “excess credit carried forward to subsequent tax period”.

Realising the mistake, the dealer corrects the mistake and :

a) files revised MVAT return and mentions same amount in the field “excess credit carried forward to subsequent tax period”.

Clarification: In this situation, the credit claimed in TRAN-1 may be allowed.

b) files revised MVAT return and mentions higher amount in the field “excess credit carried forward to subsequent tax period”.

Clarification: In this situation, the credit may be allowed to be claimed in TRAN-1, equal to the amount of refund claimed as per the original return.

The difference in amount of such credit as per the original return and the revised return can be considered during MVAT assessment proceedings of the said dealer. In case, such dealer has not applied in e-501 for MVAT refund, then the dealer may make a request in writing to the nodal authority. The nodal authority, after verification of such request, shall send it to the Zonal Selection Committee through proper channel.

c) files revised MVAT return and mentions lesser amount in the field “excess credit carried forward to subsequent tax period”.

Clarification: In this situation, the credit may be allowed to be claimed in TRAN-1, as per the revised return.

ii. Situation 2: A dealer has carried forward credit in revised MVAT return for the period ending on 30th June 2017 but such amount is more than amount of credit carried forward by him in his original MVAT return.

Clarification: In this situation, the credit, carried forward in original return, shall be allowed to be taken in TRAN-1.

As explained on page 2, difference in credit claimed and credit allowed can be considered during MVAT assessment.

iii. Situation 3: A dealer has carried forward credit in revised MVAT return but such amount is less than amount of credit carried forward by him in his MVAT original return for the period ending on 30th June 2017.

Clarification:  In this situation, the amount of excess credit carried forward by him in the revised MVAT return (i.e. lesser amount), for the period ending on 30th June 2017 should be considered for the purpose of allowing TRAN-1 credit claim.

iii. Situation 4: A dealer has claimed refund and has also carried forward balance credit in his original MVAT return for the period ending on 30th June 2017. Subsequently, he files a revised return for the period ending on 30th June 2017, claiming refund as well as carrying forward credit but the amounts so claimed as refund and carried forward as excess credit are different.

Clarification: In this situation, the amount of credit carried forward by him in his original return and the amount of credit carried forward in his revised return shall be compared and the lesser of these two amounts shall be allowed to be claimed in TRAN-1.

It goes without saying that in no case, the dealer shall be  eligible for MVAT refund of excess credit as well as to claim  it in TRAN-1, in respect of the same credit and hence the MVAT refund application shall not be considered for the grant of refund. In any case, the nodal authorities shall ensure  avoidance of such duplicate claims.

3. Verification of CST declarations:

Verification of CST declarations is necessary to determine the credit eligible to be taken u/s 140(1) and u/s 140(4)(a) of the MGST Act.

A. Periods for which verification to be done: A dealer, who has carried forward credit in his MVAT return for the period ending on 30th June 2017 in his TRAN-1, is expected to furnish details of CST declarations received for the periods starting from 1st April 2015 to 30th June 2017.

Nodal authorities are expected to verify CST declarations, only for the years or periods for which credit is being carried  forward.

Illustration 1: A dealer has carried forward credit in his return for the period ending on 30th June 2017 and has also claimed 0edit TRAN-1 u/s 140(1). He has claimed MVAT refund for the year 2015-16 and 2016­17. In this case, CST declarations for the period 1st April 2017 to 30th June 2017 must be verified however, CST declarations for the years 2015-16 and 2016-17 need not be verified during TRA1V-1 verification proceedings. Illustration 2: A dealer has can-led forward credit in his MVAT return for the period ending on 30th June 2017 and has accordingly claimed credit in TRAN-1 u/s 140(1). He has claimed MVAT refund for the year 2015-16, but has carried forward excess MVAT credit for the year 2016-17. In this case, CST declarations for the year 2016-17 and for the period 1st April 2017 to 30th June 2017 must be verified, however CST declarations for the year 2015-16 need not be verified during TRAN-1 verification proceedings.

B. CST declarations received after filing of IRAN-1:

It is also noticed that some dealers have claimed lesser credit in TRAM-1 u/s 140(1) than the amount of credit carried forwaixi in their MVAT returns for the period ending on 30th June 2017 because they were not in possession of all CST declarations. Subsequently, such CST declarations may have been received by them.

Clarification: In such cases, credit claimed in TRAN-1 u/s 140(1), supported by valid CST declarations, should only be allowed. However, in any case, as provided in the proviso to sec. 140(1), such dealers may ask for MVAT refund, if otherwise eligible. In case, such a dealer has not filed an application for refund in e-501, then he may make a request in writing for taking up his case for MVAT/CST assessment to grant MVAT refund. The nodal authority, after verification of such request shall send the application to the Zonal Selection Committee through the respective Jt. Commissioner.

4. Verification of MVAT Credits:

A. Mismatch of VAT credit: Earlier, by Internal Circular No 23A of 2018, the nodal authorities had been asked to verify MVAT set­off on the basis of the EIU data and the SAP portal data [BI Launch pad]. In case of mismatch, instructions were given to issue notice in FORM-603. Such verification may have already been done. In case, any such verification is pending in any case, then it need not be done now by the nodal authorities. Instead, EIU would communicate such reports to the nodal authorities after data analysis and recommend suitable cases for MVAT assessment etc.

B. Verification of MVAT credit, in respect of cases, allotted to central tax authorities: Earlier, administrative instructions, had been given that after verification of MVAT credit in TRAN-1 is completed, in respect of a dealer, allotted to the central tax authorities, a report should be submitted to the respective central tax authority and the central tax authority was expected to complete further process by issuing notice in DRC-01 etc. and vice versa.

5. TRAN-1 verification process:

A.Issuing of DRC-01A & DRC-01 Proceedings u/s 73 must have been initiated by issuing show cause notice along with summary in DRC-01 [Rule 142(1)(a)]. Rule 142 has now been amended by notification No. 49 dated 9th Oct. 2019. In view of thsi amendment, it is now necessary to communicate details of any tax and interest, as ascertained by the nodal authority, in Part A of the newly introduced Form DRC-01A before issuing show cause notice and summary in DRC-01. Such communication in DRC-01A may be made physically to the dealers till this functional utility becomes available on the GSTN BO System.

B. Intimation in DRC-03: Dealers must have been informing about the payments made by them in Form DRC-03 [rule 142(2)]. Now, by virtue of the amendment to rule 142 [Notification No. 49 dated 9th Oct. 2019] , where a dealer, on whom DRC-01A has been served, makes partial payment of the amount communicated to him or desires to file any submissions against the liability proposed in DRC-01A, then he may make such submission in Part B of FORM GST DRC-01A. Normal compliances are expected to be filed by dealers in DRC-03, instead of GSTR-3B.

C. Issuing of DRC-07: In case, an order in DRC-07 has already been issued earlier physically, then such orders in DRC-07 should now be issued through the system. In this case, the actual date of service of DRC-07, which was physically served on the dealer, should be entered in the system.

6. Interest u/s 50 on excess credit availed in TRAN-1:

Clarification has been sought by the nodal authorities as regards the applicability of interest under Section 50 of the MGST Act on excess credit in TRAN-1.

In this regard, clarification is given as follows:

  1. Interest on excess credit “availed”: Interest under Section 50 is payable in case excess credit has been “availed” in TRAN-1 by a dealer. In other words, mere availment of excess credit in TRAN-1 is sufficient to attract interest u/s 50 of the MGST Act and such excess credit need not have been “utilized” to discharge GST liability. Thus, interest u/s 50 shall become payable, in respect of such excess credit claim, from the date of iling of TRAN-1 till the date the dealer reverses such excess credit in GSTR-3B (as per earlier instructions) or makes payment and informs either in DRC-03 or in Part B of DRC-01A.
  2. Revised TRAN-1: In case, a dealer has filed a revised TRAN-1 and has increased the amount of MVAT credit, which is found to be inadmissible, then interest shall be payable u/s 50 from teh date of submission of such revised TRAN-1, in respect of such inadmissible credit alimed in revsied TRAN-1.

[Circular dt. 19-10-2019]

Legislation UpdatesNotifications

G.S.R (E ).-In exercise of the powers conferred by sub-section (1) of Section 6 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, and on the recommendations of the Council, hereby exempts any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist, from the whole of the integrated tax leviable thereon under Section 5 of the Integrated Goods and Services Tax Act, 2017.

Explanation. – For the purposes of this notification, the expression “outgoing international tourist” shall mean a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

2. The notification shall come into force with effect from the 1st day of July, 2019.

Ministry of Finance

Hot Off The PressNews

Goods and Services Tax (GST) was launched on the 01-07-2017 in a majestic ceremony held in the Central Hall of Parliament on the midnight of 30-06-2017.

As we enter the third year in the GST regime, let’s look at some of the advantages of this system along with the developments that have taken place since the year 2017.

Some advantages of GST:

  • Simplified Tax Structure:- Reduction in cascading effect of taxes, transparent and has harmonization of laws and procedures.
  • Easy Compliance:- compliance burden has come down with one pan-India tax replacing multiple taxes and automated processes.
  • Promoting Trade and Industry:- Seamless flow of tax credit.
  • Spurring Economic Growth:- Creation of unified common national market

Some developments during the GST journey since 2017:

  • Subsuming of taxes:- It was a new experience of subsuming 17 different types of taxes under GST. Pre – GST, Trade & Industry had to undergo compliances under Central Excise, Service Tax & VAT and doing business in multiple states involved adhering to different VAT laws, compliance through different portals and answering to different authorities. All that has been unified into a single robust online system. Starting up has become simple with one-stop online GST registration for wanting to do business anywhere in the country.
  • Formalization of the economy:- More and more businesses moving in the formal economy is evident from the significant increase in the GST taxpayer base. Moving to the formal economy has brought in more visibility and hence more opportunities for Trade and Industry.
  •  State borders:- The State boarders’ glitches and delays have come down significantly. Due to different VAT laws in different states, inter-state transactions were a pain for Trade and Industry. CST charged on inter-state transactions were an additional cost with no input-credit available and thousands of productive hours were wasted at state border crossings. Cost and time of doing inter-state transactions have come down significantly after the implementation of E – waybill.
  • Rate Rationalization:- Major changes in the Tax rates of various items whereby 28% items pulled to 18%, 18% items pulled to 12% & 12% items pulled to 5%. Further various essential goods were made tax free. Mostly goods are unbranded and manufactured by MSMEs. The reduction in almost all the cases has been from the higher to the immediately lower tax slab (whether from 12% to 5% or 18% to 12%) and involves indigenously processed foods, man-made textile yarn, stationery and other job-work items.
  • Return filing:- The original concept of four Tax returns in a month (GSTR3B, 1, 2 & 3) was gradually curtailed to two tax returns viz: GSTR-3B & 1. Further the Govt. extended due dates for filing tax returns as and when felt necessary. Quarterly Returns were also prescribed for small taxpayers. Reduction in the late fee payable for delay in filing tax returns from Rs 200/- per day to Rs 50/-per day /Rs 20/- per day. For the Trade and Industry whose turnover was turnover below five crores, quarterly return filling system is proposed. This will benefit 93% of the taxpayers, reduce their compliance burden and increase ease of doing business.
  • Exports & Refunds:- Exports are made possible on the basis of Bond/LUT and without payment of IGST tax. A major package for exporters/merchant exporters has been announced after discussions with various Export Promotion Councils & organizations like FIEO, APEC, GJEPC, EEPC, Handicraft EPC etc. Refund Fortnights were conducted on 15th March to 31st March, 2018, 31st May to 14th June, 2018 and 16th July to 30th July, 2018.
  • GST Law Amendment Act, 2018:- In its 28th meeting of GSTC held in New Delhi on 21.07.2018, the GST Council recommended certain amendments in the CGST Act, IGST Act, UTGST Act and the GST (Compensation to States) Act. In order to ensure that the changes in the Centre and the State GST laws are brought into force simultaneously, these amendments are made effective from 01.02.2019.
  • MSME support and outreach programme:- With effect from 2nd November 2018 GST Help desks were created by CBIC at 80 places all over India to support MSMEs and hand-holding of MSMEs was done with regard to GST Registration / Return Filing / Refunds / E – way bill etc.

Reforms in current fiscal (2019-20):

  • New return system:- Introduction of New Return System on trial basis from 01-07-2019 and on mandatory basis from 01-10-2019. SAHAJ & SUGAM Returns for small taxpayers are proposed
  • Single Cash Ledger: – Rationalization of Cash Ledger in such a manner that earlier 20 heads are merged into 5 major heads. There is only one Cash Ledger for Tax, interest, penalty, fee & others.
  • Single Refund Disbursing:- The Central or State Government which sanctions refund disburses all four major heads of refunds namely CGST, SGST, IGST and Cess.
  • Threshold limit for goods: – Threshold Limit of Rs. 40 Lacs is offered of suppliers of goods as per the choice of States.
  • Composition Scheme for Services: – Composition Scheme for small service providers up to annual turnover of Rs 50 lacs with a tax rate of 6%
  • E-invoicing system: – electronic invoicing system in a phase-wise manner for B2B transactions is proposed to be introduced.
  • GSTAT: – GST Appellate Tribunals are being established at various State Headquarters and area benches also.

[Press Release]

[Source: Central Board of Direct Taxes and Customs]

[Image Credits: The Hindu]

Recommendations to read more on GST:

Case BriefsTribunals/Commissions/Regulatory Bodies

Authority for Advance Ruling, Chhattisgarh: The Members comprising of Kalpana Tiwari, Joint Commissioner of State Tax and Rajesh Kumar Singh, Additional Commissioner of CGST and Central Excise, held that a supplier is required to charge GST upon service recipient on the total amount including cost of diesel provided by recipient company for transportation of its goods.

Applicant herein (supplier) had an agreement for transporting cement of a company named Shree Raipur Cement (service recipient). It was agreed that the diesel required for said transportation would be provided by the service recipient. The applicant sought clarification as to whether the supply of diesel by the service recipient would be included or excluded while charging GST on freight amount to be charged by the applicant.

The Authority noted that in the instant case, the service recipient, i.e., cement company was providing diesel to the vehicles used by the applicant for transporting cement/clinker in the course of business of cement by the service recipient. Diesel so provided by it to the applicant, was an important and integral component of this business process, without which the process of supply of cement could not be materialised.

It was opined that as per Sections 7(1) and 15(2)(b) of the Central Goods and Services Tax Act, 2017 which define ‘supply’ and ‘value of supply’ respectively, any amount that the supplier is liable to pay in respect of supply but which has been incurred by the recipient of supply and not included in the price actually paid or payable for the goods or services or both, is includible in value of supply of goods/ services.

Thus, the applicant was required to charge GST upon Shree Raipur Cement on the total amount including the cost of diesel, i.e., on the total freight amount inclusive of the cost of diesel so provided by the service recipient.[Advance Ruling No. STC/AAR/10 A/2018, In an application filed by M/s Shri Navodit Agarwal, Order dated 26-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Authority for Advance Rulings (GST), Uttarakhand: Vipin Chandra and Amit Gupta (Members), addressed an application stating the following question:

“Whether “Business Transfer Agreement” as a going concern on slump sale basis is exempted from the levy of GST?”

The present application was filed by Innovative Textiles Limited under sub-section (1) of Section 97 of the CGST/SGST Act, 2017 and the rules made thereunder in respect of the question stated above.

While deciding the stated question of “Whether “Business Transfer Agreement” as a going concern on slump sale basis is exempted from the levy of GST in terms of serial No. 2 of the Notification No. 12/2017-Central Tax (rate) dated 28-06-2017”, the relevant portion of the notification was reproduced and on perusal of the same it was observed that,

“services by way of transfer of a going concern, as a whole or an independent part thereof is to be treated as supply of service and covered under Chapter 99 of the Service Code (Tariff) and is exempted from GST.”

The members of the tribunal observed that, a transfer of a business as a going concern is the sale of a business including assets. In terms of financial transaction, ‘going concern’ has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation.

Further, they added that, internationally accepted guidelines are also applicable in the present cases which are issued by His Majesty’s Revenue & Customs to treat the transfer of a business as a going concern. The guidelines are as under:

  1. The assets must be sold as a part of a ‘business’ as a ‘going concern’.
  2. The purchaser intends to use the assets to carry on the same kind of business as the seller.
  3. Where only part of a business is sold, it must be capable of separate operation.
  4. There must not be a series of immediately consecutive transfers.

Therefore, in view of the above, applicant intends to sale the ongoing Sitarganj business along with all the assets and liabilities and stated that it is live/ operating and purchaser has purchased the business to carry on the same kind of business and applicant has supplied services by way of transfer as a going concern, the same is exempted from levy of GST. [Innovative Textiles Ltd., In re, Ruling No. 20/2018-19, Order dated 26-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Authority on Advance Rulings (GST), Karnataka: A Bench of Harish Dharnia, Additional Commissioner of Central Excise (Member-Central Excise) and Dr Ravi Prasad M.P., Joint Commissioner of Commercial Tax (Member-State Tax) ruled that the long-duration Post-Graduate Diploma/Degree Programmes offered by the India Institute of Management, Bengaluru, other than those specifically mentioned in SI. No. 67 of the Notification no. 12 of 2017 – Central Tax (Rate) dated 28-06-2017 as amended by Notification No.2 of 2018 dated 25-1-2018, are not exempted from Goods and Services Tax liability on education. So also, the supply of online educational journals or periodicals to IIM-B is not exempted from the reverse charge liability under SI. No. 66 of the said notification.

The occasion for the above ruling arose when IIM-B filed an application for an Advanced Ruling under Section 97 of the CGST Act, 2017 and the Karnataka GST Act, 2017 read with rule 104 of the Rules thereof. The advance ruling was sought in relation to the two questions enquiring whether the above-noted two heads were exempt from the liability under GST. It was contended that the services which were not exempted under Entry 67, should be treated as exempted under Entry 66.

The Authority noted that Entry 66 is a general entry in relation to exemption of services provided by an educational institution and/or to the educational institution. Entry 67  also relates to educational services, however, it was seen that Entry 66 was carved out specifically and only for the educational services provided by IIMs. In other words, IIMs have been segregated from other educational institutions services.

It was concluded that when the Notification provides for specific entry for IIMs at SI. No. 67, the provisions of Serial No. 66 shall not apply to them. On such a conclusion, both the questions referred to the Authority by IIM-B were answered in the negative. It was clarified that the ruling is valid subject to the provisions under Section 103(2), until and unless declared void under Section 104(1) of the GST Acts.[Indian Institute of Management, Bengaluru, In re, Advance Ruling No. Kar ADRG 25 of 2018, dated 25-10-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

West Bengal Authority for Advance Ruling (AAR): The Bench of Sydney D’Silva and Parthasarathi Dey (Members) addressed an application sought on the classification of the services provided in a way of packing of tea bags and rate of GST thereon.

In the present application, it has been submitted that the process of service undertaken by the applicant (Contract Packer of Tea) involves assembly of materials on machine, including blended tea leaves and other inputs received from the recipient of service. Applicant used to classify it as “packaging service”.

Applicant received a communication from Hindustan Unilever Ltd., one of its recipients of services informing that the service should be taxed under Sl No. 26 (f) of the Rate Notification, which applies to “manufacturing service”.

The issue to be addressed in this application was “Whether the applicant’s services to HUL are classifiable as packaging service or manufacturing service or both?”

The Applicant used to classify it as packaging service under SAC 998540 and charged 18% GST.

“The flow chart as mentioned in the “Agreement” between the applicant and HUL, has the processes undertaken at applicants manufacturing unit and shows that the blended tea received from HUL, after quality control procedure, is passed through hoppers, magnetic grill and mesh, and ends with filling tea leaves into the tea bag pouches and stitching. The tea bags are then subjected to quality control before being packed in cartons, wrapped and put into boxes, stored and delivered to HUL after sample testing.”

In accordance to Section 2(72) of CGST Act, 

“Manufacture” is the processing of raw materials or inputs in any manner that results in the emergence of a new product having a distinct name, character and use.

Consuming tea contained in a tea bag does not require the tea leaves to be taken out of the bag. The tea bags are porous and filled with tea leaves, therefore, are distinct from tea leaves which excludes them from the category of “packaging material”.

Thus, it is evident that the applicant’s service to HUL for manufacturing of tea bags is service for manufacturing a product classified under Tariff item 0902 40 40, where physical inputs are owned by the recipient.

Ruling of the Authority:

Applicant makes a composite supply to Hindustan Unilever Ltd. where the service of manufacturing tea bags from the physical inputs owned by the latter is the principal supply. It is classifiable under SAC 9988 and taxable at 5% rate under Sl No. 26(f) of Notification No. 11/2017-CT (Rate) dated 28/06/2017, as amended from time to time. [Application of Vedika Exports Tea (P) Ltd., In Re,  Case No. 41 of 2018, dated 10-12-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Anti-Profiteering Authority (NAA): The Quorum of B.N. Sharma, Chairman and J.C. Chauhan, R. Bhagyadevi and Amand Shah, Technical Members, dealt with an application alleging profiteering on the supply of “Paint” by not passing on the benefit of reduction in the rate of tax of GST.

For the above-stated issue, the application was examined by the Standing Committee on Anti-Profiteering and was further referred to Director General of Anti-Profiteering (DGAP).

DGAP in its report on investigating the issue in a detailed manner stated in its report that vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, the rate of GST was reduced from 28% to 18% on the said product. Respondent had reduced the selling price (including GST) of the above product from Rs 175.40 to Rs 161.70 by maintaining the base price of Rs 137.03 (after discount) and charging GST at a lower rate of 185 on the said price.

DGAP on the analysis of the scenario stated that, there was no contravention of Section 171 of the CGST Act, 2017 relating to profiteering.

On careful consideration of the DGAP’s report and the documents placed on record, the Authority stated that it is evident that the respondent had maintained the same base price post reduction in the rate of tax resulting in the cum-tax price from Rs 175.40 to Rs 161.70. Since the benefit of reduction has been passed on by the respondent by a commensurate reduction in his price, he cannot be held guilty under Section 171 of the CGST Act. [Kerala State Screening Committee on Anti Profiteering v. Asian Paints Ltd., 2019 SCC OnLine NAA 15, Order dated 13-03-2019]

Legislation UpdatesNotifications

Various representations have been received seeking clarification on issues raised with respect to tax treatment of sales promotion schemes under GST. To ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under Section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the said Act”) hereby clarifies the issues.

Some of the promotional schemes have been examined and clarification on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier (hereinafter referred to as the “ITC”) in relation to the said schemes are detailed hereunder:

A. Free samples and gifts:

(i) It is a common practice among certain sections of trade and industry, such as, pharmaceutical companies which often provide drug samples to their stockists, dealers, medical practitioners, etc. without charging any consideration. As per sub-clause (a) of sub-section (1) of Section 7 of the said Act, the expression “supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, the goods or services or both which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act). Accordingly, it is clarified that samples which are supplied free of cost, without any consideration, do not qualify as „supply? under GST, except where the activity falls within the ambit of Schedule I of the said Act.

(ii) Further, clause (h) of sub-section (5) of Section 17 of the said Act provides that ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Thus, it is clarified that input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. However, where the activity of distribution of gifts or free samples falls within the scope of “supply” on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC.

B. Buy one get one free offer:

(i) Sometimes, companies announce offers like ‘Buy One, Get One free’ For example, “buy one soap and get one soap free” or “Get one tooth brush free along with the purchase of tooth paste”. As per sub-clause (a) of sub-section (1) of Section 7 of the said Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as “supply? under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like “Buy One, Get One Free”, one item is being “supplied free of cost” without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one.

(ii) Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of Section 8 of the said Act.

(iii) It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.

C. Discounts including ‘Buy more, save more’ offers:

(i) Sometimes, the supplier offers staggered discount to his customers (increase in discount rate with an increase in purchase volume). For example- Get 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-. Such discounts are shown on the invoice itself.

(ii) Some suppliers also offer periodic / year ending discounts to their stockists, etc. For example- Get an additional discount of 1% if you purchase 10000 pieces in a year, get additional discount of 2% if you purchase 15000 pieces in a year. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year-end. In commercial parlance, such discounts are colloquially referred to as “volume discounts”. Such discounts are passed on by the supplier through credit notes.

(iii) It is clarified that discounts offered by the suppliers to customers (including staggered discount under “Buy more, save more? scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in sub-section (3) of Section 15 of the said Act, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier.

(iv) It is further clarified that the supplier shall be entitled to avail the ITC for such inputs, input services and capital goods used in relation to the supply of goods or services or both on such discounts.

D. Secondary Discounts:

(i) These are the discounts which are not known at the time of supply or are offered after the supply is already over. For example, A supplies 10000 packets of biscuits to B at Rs 10 per packet. Afterwards, A re-values it at Rs 9 per packet. Subsequently, A issues credit note to B for Rs 1 per packet.

(ii) Provisions of sub-section (1) of Section 34 of the said Act provides as under:

“Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.”

(iii) Representations have been received from the trade and industry that whether credit notes(s) under sub-section (1) of Section 34 of the said Act can be issued in such cases even if the conditions laid down in clause (b) of sub-section (3) of Section 15 of the said Act are not satisfied. It is hereby clarified that financial/commercial credit note(s) can be issued by the supplier even if the conditions mentioned in clause (b) of sub-section (3) of Section 15 of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties.

(iv) It is further clarified that such secondary discounts shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in clause (b) of sub-section (3) of Section 15 of the said Act are not satisfied.

(v) In other words, value of supply shall not include any discount by way of issuance of credit note(s) as explained above in para 2 (D)(iii) or by any other means, except in cases where the provisions contained in clause (b) of sub-section (3) of Section 15 of the said Act are satisfied.

(vi) There is no impact on availability or otherwise of ITC in the hands of the supplier in this case.

[Circular No. 92/11/2019-GST]

Ministry of Finance