Tax Vista Your weekly tax recap Edn. 81 - 3rd January 2022 By Dr. G. Gokul Kishore

New tax rates on textile items - GST Council defers implementation

In the GST Council meeting convened urgently on the last day of last year with the single point agenda, implementation of the new GST rate of 12% for textile items attracting 5% has been deferred. The change was to come into effect from New Year's Day. The rate changes were made ostensibly to correct inversion in the tax structure but the hike was felt as too high and the time was not seen as right for placing such burden on the industry. As per FM's press briefing, the committee concerned will study this issue along with other issues and come with its findings which will be discussed by the GST Council in February - March. This means the new rate may not come into force during this financial year.

CGST Rules amended - Annual return date extended

CGST Rules have been amended by Notification No. 40/2021-Central Tax dated 29-12-2021. Major amendments include extension of last date for filing annual return and self-certified reconciliation statement (GSTR-9 and GSTR-9C) for the FY 2020-21 to 28-2-2022. In line with the amendment of Section 16 of CGST Act, Rule 36(4) has also been amended whereby input tax credit can be availed only if the suppliers have filed GSTR-1 return and the details of invoice are reflected in GSTR-2B at the end of recipients.

GST Tribunal not in sight - High Court grants relief

The goods were seized and proceedings were initiated way back in 2018. The reason - a form was not carried by the driver. The conclusion of adjudicating and appellate authorities - the goods were to be unloaded at a non-declared place and evasion of tax was suspected. After almost 4 years, the taxpayer has been granted relief by the High Court on the ground of non-application of mind by the authorities who passed the order since no discrepancy was noted in the orders. There was no finding on evasion as such in the orders. The form was TDF-1 and the period was just before implementation of e-way bill and there was all-round chaos. The High Court quashed the impugned order and ordered release of bank guarantee and other security furnished at the time of provisional release of goods and the truck. The petitioner argued in this case that the petition may not be dismissed on the ground of alternative remedy since GST Appellate Tribunal has not been constituted yet [2021-VIL-894-ALH].

Non-application of mind is not something new. High Courts providing relief on such cases is also not new. However, even after many such orders, non-constitution of GST Appellate Tribunal is inexplicable. The provision on composition was set aside long ago. It should not take so much of time to rectify the defective portion the CGST Act. Creating and populating quasi-judicial bodies with retired or about to retire officers is one of the dysfunctions of bureaucracy and a judgment having contra effect on such expansionism is yet to be reconciled.

Hearing not required when opportunity to file reply provided

Section 75(4) of CGST Act reads - "An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person." A writ petition was filed in High Court against adjudication order on the grounds of lack of jurisdiction and failure to provide personal hearing. While jurisdiction may not be questionable, not providing hearing is clear-cut violation of natural justice and order passed consequently is not sustainable. Since the taxpayer is aggrieved over the order, it must be an adverse decision. Therefore, adjudicating authority is mandatorily required to give opportunity of hearing before passing the order. However, the High Court has held that the petitioner did not request for such hearing and opportunity of hearing may be provided by either permitting the taxpayer to file written representation or by hearing them.

In this case, since petitioner filed detailed reply to the notice, the requirement of natural justice is met and therefore, not providing personal hearing does not render the order unsustainable. It is not clear as to how hearing will include reply to SCN. Even if a person does not seek hearing, when such person is sought to be punished, he must be heard and such hearing is personal hearing. The Court has noted that Section 75(4) talks about hearing and not personal hearing. Such provisions require purposive interpretation. Since appellate remedy is available, the Court did not accept the petitioner's plea to quash the order [2021-VIL-890-CAL].

Upfront amount paid for mining lease liable to GST on date of allotment

Advance amount is received towards goods or services to be supplied in future whereas deposit is received only as a security and it is generally not used by the supplier in the course of supply. Based on such interpretation, AAR has held that upfront payment made by mining lessee is adjusted towards the services to be supplied in future after commencement of excavating minerals and therefore, it is an advance and not a deposit. Clause on refund of such upfront amount after allotment of mines was absent in the tender document and therefore, such amount is not advance after allotment. The so-called upfront amount is payable in three instalments and only after payment of all such instalments, mining lease will be granted. Therefore, from the date of allotment, the amount is to be treated as advance against revenue share and GST is payable on such date of allotment [2021-VIL-486-AAR].

The amount involved is over Rs. 200 crores. The ruling may be perceived as correct in so far as time of supply is concerned. But the issue could have been discussed more elaborately and the ruling could have clearly held that upfront amount paid before allotment is a deposit. For such a complex issue and amount involved, it is advisable to seek clarification from GST Council instead of adopting the route of advance ruling.

Children's learning kit in loose sheets attracts 5% GST

Book means it should be bound and loose sheets of printed matter cannot be called a book. This appears to be the reasoning for an advance ruling holding that children's picture book in sheets (called a learning kit) and not bound, is not classifiable under Heading 4903 and not entitled to NIL rate. The ruling holds it will be appropriately classifiable under Heading 4901 which covers brochures, leaflets, etc., whether or not in single sheets attracting 5% GST [2021-VIL-487-AAR].

Classification is based on the form in which the goods are presented for assessment but essential character test is also important. The goods in this case were in loose sheets because children cannot carry bulky books and it will be easier to hold and use. It is a common practice that activity charts, maps, etc., are in loose form though they are all intended to achieve the same purpose as a book. Rate rationalization is a buzz word dominant in media but the tariff remains immune in several cases.

Seizure, time-barred SCN, second SCN - CESTAT orders release of imported goods

Due to pandemic, due date for various actions like notices, etc., was extended last year. The extension got over on the last day of 2020. In a case involving import of perishable goods (dry dates), the Customs authorities had seized them on the ground of absence of phytosanitary certificate. As per Section 110(2) of Customs Act, seized goods are required to be returned if notice is not issued within six months and this period can be extended by another six months by Commissioner. If provisional release has been ordered, then such time-limit will not apply. Customs authorities did not release the goods provisionally in this case and the notice was issued a day after six months from seizure without extending such the time period. Therefore, the SCN has been held as time-barred by the Tribunal. This case is mentioned in this column for the reason that the department has taken shelter under the pandemic induced extended due dates though not with success. Another SCN has also been issued in this case demanding duty as the first one was for absolute confiscation. It is not clear as to how the department can issue two SCNs to the same importer in respect of same imports [2021-VIL-748-CESTAT-CHD-CU].

Disposal of seized goods - Customs Act to prevail and Cr. P. C. has no application

Country of origin was suspected as mis-declared since Pakistani dates attract higher customs duty than Iranian. The goods were seized, the importer was arrested but later released on bail. The Customs department filed application under Section 451 of Cr. P. C. before a criminal court seeking disposal of the goods. The importer contended that such court does not have jurisdiction as Customs Act being special enactment has provisions for the same and Cr. P. C. is not applicable. However, the Judge concerned ordered release of the goods. The High Court observed that Disposal Manual has been relied on for passing such order but there is no provision in it to invoke Cr. P. C. Relying on precedent judgement, the High Court quashed the order passed by the Judge on disposal of goods [2021-VIL-893-DEL-CU].

Generally, tax department does not approach courts seeking permission to dispose perishable goods as the law coupled with department instructions / manual are relied on. Except prosecution for specified offences, regular judiciary at the lower level does not have any role in tax matters.

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. Two books authored by him have been published - Cross-border Transactions under Tax Laws & FEMA (July 2021) and GST - Investigation, Demands, Appeals & Prosecution (August 2021))