Tax Vista Your weekly tax recap Edn. 34 - 8 February 2021 By Dr. G. Gokul Kishore

Light Dues paid twice due to system error - Refund not deniable on limitation

Light Dues are payable based on tonnage of vessel as per Lighthouse Act, 1927. Excess payment of such levy is liable to be refunded based on claim filed with Customs officers. The petitioner before the Kerala High Court had paid such amount before arrival of the vessel but the portal did not give any indication for the same. Therefore, the amount was paid physically again but the next day, online payment receipt was also received. Refund of the amount paid twice was sought and the petitioner was advised to approach Customs authorities. The claim was rejected on the ground that for such excess payment, refund claim was filed beyond the prescribed time-limit of six months.

While the Customs authorities argued that the appeal lies before CESTAT, the Director General of Lighthouses and Lightships contended that they have no role in this matter. Relying on precedent judgments on refund of amount paid by mistake of law, the High Court held that excess payment arises only if the tonnage is incorrectly adopted and in the present case, dual payment cannot be termed as excess payment. It noted that the petitioner was forced to make such dual payment due to the failure of the portal / system to generate receipt and therefore, limitation for such refund claim under Customs Act is not applicable.

The High Court had a few noteworthy observations - "The State and its authorities are not expected to act in a Shylochian (sic) manner and squeeze money from its citizens. Levy of any tax/dues should have the authority of law. If the petitioner calculated Light Dues in respect of the vessel correctly and remitted the correct amount, then Section 19 of the Act, 1927 cannot be resorted to withhold an erroneous double payment or dual payment made by a citizen due to a system error or failure. The State is not expected to get itself unduly enriched by erroneous or forced or inadvertent payments of money made by its citizens. The State is not expected to bring in defence of limitation in respect of such payments resulting in unjust enrichment."

The term "Shylockian" refers to the method adopted by extortionist moneylender. The kind of amendments brought by Budget 2021 may compel use of such or similar terms more frequently in the future [2021-VIL-65-KER-CU]

Undue delay in release of goods - Tribunal grants partial relief

It is not uncommon for the Customs authorities to suspect the value declared by the exporter and to doubt the export benefits obtained. But what is uncommon is the delay in finalization of proceedings after the goods were detained / seized for almost two years by Mumbai Customs. CBIC's instructions are clear that detained goods should be released based on bond equal to value of the goods so that fulfilment of export orders is not delayed and congestion is avoided in ports. However, such instructions are hardly complied with by field formations.

The goods were exported in the present case in October, 2018 but were later ordered to be recalled by directing the shipping lines to bring back the container which was complied with. After such recall, the department sought bond and bank guarantee, the amount of which was found to be too onerous by the exporter. The department went into slumber for a few months and the exporter had to obtain interim directions from the High Court. Based on High Court's directions, the CESTAT heard the matter and expressed dismay at the manner in which the case has been handled and delayed by the department. It noted that such delay in completion of the proceedings affects both the exporter and the revenue's interest. Exporters and importers, in their urgency to get the proceedings completed owing demurrage, seek waiver of SCN also as has happened in this case also. The Tribunal has reduced the bank guarantee amount, directed the department to provisionally release of goods and complete the proceedings in one month. Waiver of demurrage was also directed to be considered.

This case is being covered in this column only to highlight the fact that Indian Customs takes pride in having reduced dwell time and transaction time with electronic clearances and faster approvals. Such claims are hardly convincing when the ground reality is seen as in this case [2021-VIL-36-CESTAT-MUM-CU].

GST payable on wages - CBIC takes a nap

In this column, advance rulings holding that salary cost reimbursed to manpower agencies should also form part of taxable value have been discussed to point out the need for an amendment to Section 15 of CGST Act. While CBIC is busy advising the GST Council on the urgency to amend retrospectively definition of supply to tax clubs and associations and restrict credit in various situations, such issues are conveniently sidelined. In yet another advance ruling, the Authority for Advance Rulings (AAR), Karnataka has held that wages billed by the manpower contractor to his customers will form part of taxable value along with service charges and the entire bill amount will be subject to GST. The AAR has made the complex exercise of valuation and taxing salaries a very simple affair as the ruling is cryptic with a mention of Section 15, parties being not related and transaction value i.e. the bill amount being the taxable value.

The transaction value is to be seen in the context of supply of services. Salary or wages reimbursed by the manpower-supplier is not a consideration for supply of such services and it is the service charge alone which can be treated as consideration for the services supplied. The vast amount of jurisprudence under Service Tax law is either not relied on or even if relied on, is rejected as not relevant in GST regime. Making taxpayers to go through the same ordeal of litigation on the same issue does not advance the reputation of GST being a progressive system [2021-VIL-130-AAR].

Business support in healthcare services by doctor is liable to GST

Healthcare services by clinical establishments are exempted under GST as per Notification No. 12/2017-Central Tax (Rate) and it amply covers the services provided by doctors and hospitals. However, when a doctor provides support services to a foreign entity in development of new clinical centres (typical laboratories collecting samples for testing), management of projects related to diagnosis / testing and development of business of such foreign entity, liability to GST becomes doubtful. Advance ruling was, therefore, sought and the AAR has held that these are business promotion services and not healthcare services, they are provided to the foreign entity though such entity would be providing healthcare services to ultimate customers. When Indian service provider is present and service recipient abroad is available, then in most such cases, the service is treated as covered under "intermediary" so that place of supply is in India and the activity gets excluded from export of service. This case is no different [2021-VIL-131-AAR].

Support services to medical research liable to GST

In another ruling somewhat similar to the above but on different set of facts, the AAR has held that when the applicant is providing support services relating to medical research to foreign college / institution, healthcare services are not provided by such applicant per se but by the investigators engaged by the applicant who actually undertake the research activity and therefore, exemption would not be available. After delineating the scope of work of various parties, the AAR notes that as per the tripartite agreement, the applicant is required to identify trial sites (hospitals), provide equipment to enable conduct of research, engage research staff, manage the safe conduct of research and liaise with the investigators. According to the ruling, the services provided are not in connection with diagnosis or treatment or care for illness and is related to support services for research and not covered under healthcare services. As usual, since the applicant arranges or facilitates supply of research services, he is an intermediary and therefore, place of supply is in India. This means export of service benefit would not be available [2021-VIL-129-AAR].

This ruling relates to research on prevention of epilepsy among babies by studying the foetus as birth asphyxia related brain injury is seen as precursor to developing epilepsy later. These are international projects intended for public welfare in developing countries and taxing them at 18% cannot be the intention of any tax law. Research organisations or those supporting such research should represent to the GST Council so that along with healthcare services, research undertaken to prevent diseases is also exempted.

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal)