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Tax Vista Your weekly tax recap Edn. 234 - 16th December 2024 By Dr. G. Gokul Kishore |
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Budgetary Support Scheme applicable even if constitution / ownership changes
In Tax Vista dated 18-9-2023, order by Single Judge Bench of Sikkim High Court rejecting the prayer for extension of relief under Budgetary Support Scheme was analysed [2023-VIL-618-SIK]. Now, Division Bench has reversed this decision. The earlier order was based on the reasoning that the constitution of the entities was changed and they became new units and therefore, were not eligible units with residual period for availing the benefit. The Division Bench posed the question as to whether the benefit under BSS is owner specific or unit specific. Starting with the emphasis on purposive interpretation, the High Court noted that the objective of the notification / scheme was to bring the specified geographical areas on par with others in terms of industrialisation. It held that "the mere fact of expansion, acquisition or change of name did not do away with the primary requirement that these were existing units, prior to migration to the GST and thereby eligible units under the BSS". Eligible unit does not cease to become eligible unit on expansion, etc., as per definition of eligible unit. An important point taken note of by the Court was minutes of a particular meeting where the proposal to exclude units (by amending the notification) where there is change in ownership was included in the agenda, was not pursued further though CBIC communication holding them as not eligible was considered.
The Court said - "to avail of the BSS, the concerned Unit is to be located in the areas specified in the notifications of 2007 and 2017, producing specified goods which were to be cleared from the self-same Units. The intent of the BSS, pivoted around the geographical location of the Unit and the benefit that was to accrue to the said Units for the residual period, as already discussed. We are constrained to observe that by change of names or acquisition of a new Unit within the State of Sikkim, there is no change in respect of the geographical location of the Unit, which were in existence in Sikkim prior to the GST regime." The Court directed the authorities to decide on the claim of the petitioners. Area-based exemption is specific to area and any contra view is bound to be rejected as seen in this case [2024-VIL-1343-SIK].
Audit under GST permissible even after issuance of SCN for the same period
For a particular period, investigation was conducted by GST authorities and certain amounts towards tax and interest were paid. Subsequently, audit was sought to be conducted and this was challenged by the taxpayer contending that the proceedings have been concluded and initiation of fresh proceedings was not correct. The High Court perused Section 65 of CGST Act dealing with audit and noted that there was no restriction on conduct of audit and no time has been prescribed and the Commissioner has the discretion to choose the same. Audit is like preliminary inquiry and no prejudice can be said as caused by such exercise. GST authorities are not restrained from undertaking audit only because action under Section 73 of CGST Act has been taken before. The petition was dismissed. It appears that harassment was the reason behind such petition but the writ court can hardly be expected to intervene in such subjective situations or issues when the action is not proved to be arbitrary or illegal. The department should ideally refrain from auditing a taxpayer when it has already issued SCN and the taxpayer had also paid the amounts for the same period [2024-VIL-1342-P&H].
ITC cannot be availed on goods used for sales promotion
Tax credit was never free and GST law by way of Section 17(5)(h) places particular restriction on availment of input tax credit (ITC) in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. The nexus with business which qualified for a more lenient and logical approach to ITC on sales promotion under erstwhile laws was relied upon by the taxpayer. The department relied on legal position expounded in advance ruling in another case to contend that the impugned order was correct and ITC was not available. The High Court held that ITC could not be availed on gold coins and T-shirts purchased by the petitioner for sales promotion of the goods manufactured by them in view of the clear bar in Section 17(5)(h) of CGST Act covering gifts and free samples. The Court said - "The expression goods disposed by way of gift or free samples will specifically apply to the goods whether manufactured or traded by an assessee under the provisions of the respective GST enactments." However, this issue may get settled only after a prolonged battle on exhaustive interpretation of the provision. Though the present order is clear in interpreting the provision, it does not contain elaborate arguments that might have been raised by the taxpayer and therefore, taxpayers may have to wait for an authoritative pronouncement [2024-VIL-1319-MAD].
Additional court fee payable under State legislation for GST appeal valid
Though law applies to all equally, fortune may yet throw in an anomaly. The petitioner assailed the levy of additional court fee @1% of the disputed amount in terms of Section 76(1) of the Kerala Court Fees and Suits Valuation Act, 1959 which was required to be paid by him for GST appeal filed with SGST authority. He argued that for appeals preferred against orders of the adjudicating / assessing authorities under the CGST Act / SGST Act, the taxpayers did not have an option of choosing between the Central authorities and the State authorities in the matter of registration and preferring of appeals under the statute and since this levy did not apply to appeals to CGST authorities it was discriminatory. However, the High Court held that there was no challenge to the levy as such which was constitutionally valid and the state legislation by itself did not create any class so as to discriminate one against another and declined to interfere with the order of the Single Judge. It noted that there was no challenge to any particular statutory provision or government order which resorted to such classification. The taxpayer ought to have submitted the minutes of GST Council meeting whereby allotment of taxpayers was made between Centre and States but the same being non-statutory, might not have been accepted by the Court [2024-VIL-1338-KER].
Registration cannot supply jurisdiction to assail denial of refund - Port of export relevant
The petitioner's claim of IGST refund was denied for claiming higher drawback. Goods had been exported from Mundra and the petitioner was registered in Rajasthan. The department argued that writ petition could not filed before High Court of Rajasthan since no cause of action arose therein and that the refund claim process was handled by customs authorities at the port. The High Court dismissed the petition for want of jurisdiction noting that as per Rule 96(3) of CGST Rules, 2017 the claim of refund upon receipt of information of applicant having filed valid return in FORM GSTR-3B shall be processed by the system designated by the Customs or the Proper Officer of the Customs and claim of refund if not dealt by the system electronically has to be considered by the Customs Authorities of the port wherefrom the goods have been exported. Also, since in the past the petitioner had approached the customs authority from where goods were exported, it could not plead ignorance of the statute either. The fact of petitioner being registered in Rajasthan was held as not giving rise to any cause of action when exports were made from ports in other States [2024-VIL-1327-RAJ].
Transport by air - Freight expenses in excess of 20% not includible in AV
Customs valuation issues sometimes tend to get complicated even when the rules are clear. Due to Covid, certain goods which were to be transported by sea, were imported by air. This necessitated payment of additional freight charges. Customs duty was paid but the importer later realised that the freight amount cannot be more than 20% for duty payment and they had paid more. This is as per Rule 10 of Customs Valuation Rules - fifth proviso providing for capping of freight amount to 20% of FOB value of the goods when the goods are imported by air. The department rejected the challenge to self-assessment on the ground that there was no evidence provided for FOB value and the basis adopted for CPT (Carriage Paid To). The Tribunal held that in this case, CPT price became the de facto FOB price since the goods were to be transported by sea but were actually transported by air for which additional amount was paid. It agreed with the appellant and directed the original authority to re-determine the duty payable. One of the strange arguments of the department was that the additional freight paid was not actually air freight and the Tribunal said if this is to be accepted, then this amount would not be includible in transaction value resulting in much higher refund [2024-VIL-1641-CESTAT-DEL-CU].
(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. E-mail - advgokulsubha@gmail.com)