Case BriefsTribunals/Commissions/Regulatory Bodies

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

Factual Background of the case

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

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

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

Decision and Analysis

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

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

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

Explanation- for the purpose of this notification –

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

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

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

Case BriefsSupreme Court

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

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

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

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

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

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

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

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

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

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

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

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

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

Appearance by:

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

Kamini Sharma, Editorial Assistant has out this report together