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Customs - Conversion of Free Shipping Bills into Advance Authorization Shipping Bills - Time limit prescribed by Board's Circular - Appellant obtained Advance Authorization for import of specified items for manufacture and export of goods and fulfilled the export obligation, but the Customs House Agents had filed Free Shipping Bills instead of Advance License Shipping Bills - Appellant's request for amendment of the Shipping Bills was rejected and the Tribunal remanded the matter to the Commissioner to examine afresh - The Commissioner again rejected the request on the grounds that there was no further examination of the g... [Read more]

Customs - Conversion of Free Shipping Bills into Advance Authorization Shipping Bills - Time limit prescribed by Board's Circular - Appellant obtained Advance Authorization for import of specified items for manufacture and export of goods and fulfilled the export obligation, but the Customs House Agents had filed Free Shipping Bills instead of Advance License Shipping Bills - Appellant's request for amendment of the Shipping Bills was rejected and the Tribunal remanded the matter to the Commissioner to examine afresh - The Commissioner again rejected the request on the grounds that there was no further examination of the goods at the port, the endorsements on ARE were contradictory, no examination report endorsed by the Central Excise Officer was submitted and the request was filed with delay as against the time limit in the Board's Circular - Whether the rejection of the request for conversion of Shipping Bills is in order - HELD - There is no dispute as to the availability of the Advance Authorization or the fulfilment of the export obligation. The co-ordinate Bench, in the Appellant's own case relating to the very same Advance Authorization, examined similar factual matrices and allowed the conversion of Shipping Bills - There is no reason to take a different view on the very same factual matrices. The time limit prescribed by the Circular relied upon by the authorities below has been held to be ultra vires the statute, and the rejection of the request on the ground of delay cannot be sustained - The impugned order rejecting the request for conversion of Shipping Bills is set aside and the appeal is allowed [Read less]

GST - Concessional rate on works contract services to co-operative societies - Sl. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - Appellant, a Government contractor and builder, executed works contracts for the construction of factory buildings of co-operative spinning mills under projects sanctioned and monitored by the State Textile Department, and discharged tax at 12% treating the recipients as Government Entities - SCN was issued after audit and the proper officer confirmed the differential tax at 18% with interest and penalty, which the FAA partly upheld - Whether the supplies to the societies were liable... [Read more]

GST - Concessional rate on works contract services to co-operative societies - Sl. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate) - Appellant, a Government contractor and builder, executed works contracts for the construction of factory buildings of co-operative spinning mills under projects sanctioned and monitored by the State Textile Department, and discharged tax at 12% treating the recipients as Government Entities - SCN was issued after audit and the proper officer confirmed the differential tax at 18% with interest and penalty, which the FAA partly upheld - Whether the supplies to the societies were liable to tax at the concessional rate under Sl. No. 3(vi) - HELD - The burden lies on the Appellant who claims the concession to bring the supply within the entry, which turns on the status of the recipient and the use for which the works are meant. The rate is fixed by notification under Section 9(1) and no department of the State can alter it by administrative decision. The minutes and letters of the Department settling the GST component of the contract price are decisions on price and not a determination of the rate. The presumption that official acts are regularly performed cannot give a departmental minute the force of a notification - The first limb of the definition of ‘Government Entity’ is not attracted as a body registered under the Co-operative Societies Act is not set up by an Act of Parliament or State Legislature. The second limb requires a body established by any Government with 90 per cent or more participation by way of equity or control, and a society formed under a scheme and registered under the general law is not established by the Government. Government sponsorship cannot take the place of the tests prescribed in the definition - Independently, the test under item (a) is the use for which the structure is meant, judged objectively. Either finding is sufficient to deny the concession and the supplies are taxable at 18% under item (xii) - The differential tax is rightly confirmed. The appeal is dismissed - Interest and penalty on differential tax - Sections 50(1) and 73(9) of the CGST Act - Appellant contended that the dispute was one of classification, that it acted on written directions of the Textile Department, and invoked promissory estoppel and legitimate expectation to seek waiver of interest and penalty - Whether bona fides displace interest under Section 50(1) and penalty under Section 73(9) - HELD - Section 50(1) charges interest for the period for which the tax payable remains unpaid and makes no reference to the state of mind of the taxpayer - Interest is compensatory in character and is computed on tax payable and not paid, and not on tax collected. Section 73 applies to cases without fraud, wilful misstatement or suppression and the circumstances relied upon by the Appellant are what bring the case within it. The penalty is fixed at ten per cent of the tax or ten thousand rupees, whichever is higher, and sub-section (8) provides the route to avoid it by payment of tax with interest within thirty days of the notice, which the Appellant did not make. Sub-section (9) leaves no discretion to reduce or waive the penalty on a finding of bona fides. Promissory estoppel fails as no document purported to fix the rate of tax, any representation was made by the sanctioning department and not by the authorities administering the tax, and there can be no estoppel against a liability imposed by statute. Section 50(1) makes no provision for waiver. Interest and penalty are sustained - Computation of differential tax on cum-tax basis - Section 15(1) of the CGST Act, 2017 - Appellant prayed in the alternative that the receipts be treated as inclusive of tax since it collected no amount beyond 12% - Whether the differential tax is to be recomputed on a cum-tax basis - HELD - Under Section 15(1) the value is the transaction value, being the price actually paid or payable for the supply. The invoices of the Appellant state the contract receipts as exclusive of taxes and charge central tax and State tax over and above them, and the sales register records the receipts as exclusive with nil under inclusive. Where the tax is charged over and above the price, there is no occasion to treat the price as inclusive of tax - The prayer for recomputation on a cum-tax basis is rejected - Disallowance of input tax credit not reflected in FORM GSTR-2A - Section 16(2)(c) and Section 155 of the CGST Act, 2017 - Input tax credit claimed in FORM GSTR-3B was disallowed as it was not reflected in FORM GSTR-2A, the Appellant having produced no ledger confirmation or supplier certificate as required by the Circular - Appellant contended that the transactions were genuine, that the mismatch was due to supplier-side reporting, and that denial would result in double taxation - Whether the disallowance of input tax credit with interest under Section 50(3) calls for interference - HELD - The burden of proving the claim of input tax credit lies on the person claiming it under Section 155. The Circular does not alter the conditions of Section 16(2), and for a supplier-wise difference up to the prescribed limit it called for a certificate from the supplier that the supplies were made and the tax paid in its return. The Appellant had ample opportunity but did not produce such certificates, and the documents filed did not identify the invoices making up the difference or establish that the supplies were declared in the supplier's return and tax paid thereon - A printout showing that a supplier filed a return says nothing about whether the supplies to the Appellant were declared in it. The disallowance does not rest on a finding that the purchases were fictitious but on failure to show that the tax charged was paid to the Government as required by Section 16(2)(c). The denial is not double taxation as the credit is denied because the fact of payment has not been established. Remand for verification is declined as the evidence is in the hands of the Appellant or obtainable from its suppliers and it had every opportunity to produce it. The interest under Section 50(3) rests on the disallowance, which has failed - The disallowance with interest and penalty is upheld and the appeal is dismissed. [Read less]

Central Excise - Interest on refund of amount deposited during investigation and pre-deposit - Rate of interest under Section 35FF of Central Excise Act, 1944 - Reference to Larger Bench - Appellant deposited amounts during investigation and made a pre-deposit under Section 35F in appeal before the Tribunal, which allowed the appeal with consequential relief. The Adjudicating Authority sanctioned refund of the pre-deposit with interest at 6 percent under Section 35FF read with the notification, and the FAA rejected the claim for interest at 12 percent from the date of deposit. Appellant contended that the amount was a depo... [Read more]

Central Excise - Interest on refund of amount deposited during investigation and pre-deposit - Rate of interest under Section 35FF of Central Excise Act, 1944 - Reference to Larger Bench - Appellant deposited amounts during investigation and made a pre-deposit under Section 35F in appeal before the Tribunal, which allowed the appeal with consequential relief. The Adjudicating Authority sanctioned refund of the pre-deposit with interest at 6 percent under Section 35FF read with the notification, and the FAA rejected the claim for interest at 12 percent from the date of deposit. Appellant contended that the amount was a deposit under protest and not duty, and prayed for reference to a Larger Bench in view of divergent views - Whether the Appellant is entitled to interest at 12 percent from the date of deposit on the refund of amounts deposited during investigation and as pre-deposit - HELD - A coordinate Bench has held that interest under Section 35FF is statutory and mandatory. The High Court has held that where the statute creates the right to interest and prescribes the rate, the entitlement cannot travel beyond the statute, and the notified rate of 6 percent cannot be enhanced in the absence of challenge to the provision or the notification. Though the issue is squarely covered against the Appellant by the decision of the High Court, another Bench of the Tribunal has taken note of divergent views and referred questions to the President for a Larger Bench. These relate to refund of voluntary and involuntary deposits, applicability of Section 11B and the general law of limitation, interest under Section 11BB, the date from which interest is payable, the rate of interest, and the power of the Tribunal to apply equity beyond the statute - The questions framed are referred to the President for constitution of a Larger Bench, to be tagged along with the earlier reference on the same questions of law [Read less]

Central Excise - Condonation of delay in filing appeal before the FAA - Section 35(1) of the CEA, 1944 - Appellant, a manufacturer, challenged the disallowance of CENVAT credit on input services, and its appeal before the FAA was rejected on the ground of limitation without examining the merits, the delay being only a few days - Appellant explained that it attempted to file the appeal within the prescribed period at the appellate sub-office mentioned in the Order-in-Original but was informed that the office had been shifted, and the appeal was then filed at the new location - Whether the FAA was justified in refusing to co... [Read more]

Central Excise - Condonation of delay in filing appeal before the FAA - Section 35(1) of the CEA, 1944 - Appellant, a manufacturer, challenged the disallowance of CENVAT credit on input services, and its appeal before the FAA was rejected on the ground of limitation without examining the merits, the delay being only a few days - Appellant explained that it attempted to file the appeal within the prescribed period at the appellate sub-office mentioned in the Order-in-Original but was informed that the office had been shifted, and the appeal was then filed at the new location - Whether the FAA was justified in refusing to condone the short delay in filing the appeal - HELD - Section 35(1) provides a period of 60 days for filing an appeal before the FAA, with a further period of 30 days within which the delay may be condoned upon sufficient cause being shown. The appeal was filed within the condonable period, and the FAA is empowered to condone the delay where sufficient cause is shown. The explanation that the appellate sub-office mentioned in the Order-in-Original had been shifted was specific and plausible. The mere absence of an official record of the attempted filing cannot by itself be treated as conclusive evidence of absence of bona fides. The expression sufficient cause must receive a justice-oriented interpretation so that substantial justice is not defeated by a technical approach to limitation. There was nothing to indicate that the delay was deliberate or mala fide. The discretion conferred by the statute must be exercised judiciously, and the FAA adopted an unduly technical approach in declining to condone such a short delay - The order rejecting the appeal on limitation is set aside, the delay is condoned, the matter is remanded to the FAA to decide the appeal afresh on merits after affording a reasonable opportunity of hearing, and the appeal is allowed by way of remand. [Read less]

Central Excise - Special additional duty exemption on imported components - Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - Appellant, a manufacturer of computers, imported components without payment of special additional duty under exemption notifications subject to the procedure of the 1996 Rules - A portion of the components was cleared as such from the factory to service centres for free warranty replacement, while the quarterly returns declared that all components were consumed in the factory - Department demanded the duty foregone with interest and... [Read more]

Central Excise - Special additional duty exemption on imported components - Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - Appellant, a manufacturer of computers, imported components without payment of special additional duty under exemption notifications subject to the procedure of the 1996 Rules - A portion of the components was cleared as such from the factory to service centres for free warranty replacement, while the quarterly returns declared that all components were consumed in the factory - Department demanded the duty foregone with interest and penalty - Whether the Appellant lost the benefit of the exemption on components transferred to service centres for free warranty replacement - HELD - An exemption may be made subject to a condition that is to be fulfilled after clearance, and the obligation that the goods be actually put to the intended use comes from the procedure of the 1996 Rules. The intended purpose under the scheme is the manufacture, in the registered factory, of the excisable goods for which registration was granted. Use of the components as replacement parts under warranty is not use in the manufacture of computers. The inclusion of goods used for free warranty in the definition of input in the CENVAT Credit Rules, 2004 was made through a distinct limb for the limited purpose of credit and cannot be transposed into a customs exemption governed by its own conditions. An exemption notification is to be interpreted strictly - The doctrine of intended use protects a bona fide importer against accidents of transit and process but cannot protect a deliberate allocation of exempted goods to a purpose outside the exemption. The end use certificates were issued under rules made under the Customs Act and certified only a fact on the basis of the Appellant's own incomplete returns, and they cannot bar recovery under Rule 8. The levy of SAD is attracted on importation and does not depend on whether tax is later payable on a sale of the goods. Revenue neutrality does not efface a liability that has arisen under the statute - The duty foregone on the components transferred to service centres is recoverable under Rule 8 of the 1996 Rules and the demand is upheld - Limitation for recovery under Rule 8 - Section 28 of the Customs Act, 1962 - SCN invoked Section 28(4) of the Customs Act for recovery of the duty foregone, and the Appellant contended that the extended period was unavailable and the demand was barred - Whether the demand under Rule 8 is governed by the periods in Section 28 of the Customs Act or is barred by limitation - HELD - Rule 8 of the 1996 Rules does not prescribe any period of limitation and provisions of Section 28 cannot be resorted to for this purpose. The notice must therefore be issued within a reasonable period, judged on the facts, bearing in mind that actual use takes place much after import. Earlier Tribunal decisions treating Section 28 as the only route of recovery and Rule 8 as having no independent operation cannot survive the binding law declared subsequently. The reference to Section 28(4) in the SCN does not vitiate the demand since a wrong reference to the power does not vitiate an action which can be justified under the power actually available. The transfers came to the knowledge of the Department through the audit query and the Appellant's reply, the duty was paid thereafter, and the SCN was issued within a year of the Department learning of the actual use. The SCN was issued within about five years even when measured from the earliest transfer - The demand was raised within a reasonable period and is not barred - Suppression with intent to evade duty - Revenue neutrality - The allegation in the SCN was that the Appellant misdeclared in its quarterly returns that all components were consumed in the factory and secured end use certificates and cancellation of bonds - Appellant contended that the entire exercise was revenue neutral as the duty would have been available as credit - Whether the non-levy was occasioned by collusion, wilful misstatement or suppression of facts with intent to evade duty - HELD - The burden of establishing intent lies on the Revenue. Mere non-payment of duty is not equivalent to wilful misstatement or suppression, and suppression means deliberate withholding of correct information to escape payment of duty. The Appellant stood to gain nothing from the omission since credit of the additional duty was available under Rule 3(1) of the CENVAT Credit Rules, 2004, goods used for providing free warranty are inputs under Rule 2(k)(ii), and the second proviso to Rule 3(5) dispensed with any payment on removal of inputs for free warranty. The exercise was therefore wholly revenue neutral. The components transferred formed a small proportion of the imports, the clearances were declared in the monthly returns, the credit of countervailing duty on them was reversed, and the Appellant admitted the transfers when queried and paid the duty before the SCN. The incorrect returns were the product of a mistaken understanding of the end use condition and not of any design to escape duty. A finding of intent to evade cannot rest on facts assumed against the assessee and contrary to the record - The Revenue has not established collusion, wilful misstatement or suppression of facts with intent to evade duty - Admissibility of CENVAT credit on SAD paid - Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - Appellant paid the duty on the components through challans and took credit of the same, and the Department denied the credit on the ground that the duty had become recoverable by reason of misdeclaration, also seeking payment under Rule 3(5) on inputs removed as such - Whether the credit taken on the duty so paid is admissible - HELD - The challans evidencing payment of additional duty are documents on which credit may be taken under Rule 9(1)(b) in terms of the Explanation to that clause. The exception in the clause is attracted only where the additional duty became recoverable by reason of fraud, collusion, wilful misstatement, suppression or contravention with intent to evade payment of duty. Since no such intent is established, the exception is not attracted and the credit of the duty paid on inputs received in the factory is admissible under Rule 3(1). The alternative ground of payment under Rule 3(5) is answered by its second proviso which dispenses with payment where inputs are removed outside the factory for providing free warranty for final products - The denial and recovery of credit along with interest are set aside and the credit is held admissible - Interest on duty foregone - Rule 8 of the 1996 Rules - The Appellant contended that interest could not survive without the principal, should run from the date of removal to service centres, and that proceedings stood concluded under Section 28(2) of the Customs Act - Whether interest is payable on the duty foregone - HELD - The liability to interest arises from Rule 8 itself and is part of the price of the conditional exemption availed. Rule 8 fixes the date of importation as the starting point and the reference to the Section under which the rate is fixed only determines the rate. The reference to a different Section for interest in the SCN makes no difference to the source of the liability. Since the principal is payable and Section 28 does not govern a recovery under Rule 8, the objections fail - Interest under Rule 8 is sustained subject to adjustment of the amount already paid - Penalty on special additional duty - Section 114A of the Customs Act, 1962 - Penalty equal to the duty was imposed under Section 114A on the allegation of wilful misstatement and suppression - Whether penalty under Section 114A is sustainable - HELD - Section 114A applies where duty has not been levied by reason of collusion, wilful misstatement or suppression of facts, and these ingredients a [Read less]

Customs - Exemption under Notification No. 26/2023-Cus. for capital goods imported under EPCG Authorization - Eligibility irrespective of classification under Customs Tariff - Appellant imported spools for rolling mill under EPCG Authorization, classifying them under CTH 8455 9000 and claiming the exemption. Revenue held that the spools, being made of steel, were classifiable under CTH 7326 9099, which was not mentioned in the Authorization, and alleged misdeclaration. The Adjudicating Authority denied the exemption, confirmed differential duty, and imposed penalty under Section 114A and redemption fine - Whether the diffe... [Read more]

Customs - Exemption under Notification No. 26/2023-Cus. for capital goods imported under EPCG Authorization - Eligibility irrespective of classification under Customs Tariff - Appellant imported spools for rolling mill under EPCG Authorization, classifying them under CTH 8455 9000 and claiming the exemption. Revenue held that the spools, being made of steel, were classifiable under CTH 7326 9099, which was not mentioned in the Authorization, and alleged misdeclaration. The Adjudicating Authority denied the exemption, confirmed differential duty, and imposed penalty under Section 114A and redemption fine - Whether the difference between the tariff heading in the EPCG Authorization and the Customs Tariff disentitles the Appellant to the exemption, and whether duty, penalty and redemption fine can be sustained - HELD - The goods are described as spools for rolling mill both in the Authorization issued by DGFT and in the Bill of Entry. Explanation (A) to the notification adopts the definition of capital goods in paragraph 11.08 of the Foreign Trade Policy, which turns on the requirement for manufacture or production and not on tariff classification, and Revenue did not allege that the spools fall in the negative list. When the authority issuing the Authorization has treated the goods as capital goods, Customs cannot take a different view merely because of a different classification. If Customs wished to deny the exemption, it had to seek clarification from DGFT or get the Authorization modified, rectified or annulled, which it did not do. Since the exemption is available irrespective of classification, the classification of the spools need not be decided, the allegation of misdeclaration with intent to evade duty is nullified, and the demand, penalty and redemption fine are not warranted - The impugned order is set aside and the appeal is allowed [Read less]

GST - Cancellation of registration without notice of the ground - Rule 21(d) read with Rule 10A of the CGST Rules, 2017 - Petitioner was granted GST registration, filed returns for a period and thereafter discontinued business for financial constraints - The registration was cancelled by an order passed after an SCN on the allegation that the Petitioner violated Rule 21(d) by not furnishing bank account details as required under Rule 10A - Petitioner sought restoration of the proceedings with an opportunity to respond, undertaking to produce the bank statement, file the pending returns and pay tax, interest and penalty - W... [Read more]

GST - Cancellation of registration without notice of the ground - Rule 21(d) read with Rule 10A of the CGST Rules, 2017 - Petitioner was granted GST registration, filed returns for a period and thereafter discontinued business for financial constraints - The registration was cancelled by an order passed after an SCN on the allegation that the Petitioner violated Rule 21(d) by not furnishing bank account details as required under Rule 10A - Petitioner sought restoration of the proceedings with an opportunity to respond, undertaking to produce the bank statement, file the pending returns and pay tax, interest and penalty - Whether the order cancelling the registration can be sustained and the proceedings restored with opportunity to the Petitioner - HELD - The Petitioner has been out of business from the stated month and is now willing to offer all taxes, pay penalty and interest and file the necessary returns. The Respondent itself fairly submitted that the Petitioner was not put on notice regarding the alleged failure to furnish bank account details under Rule 10A. In these circumstances the proceedings are to be restored with an opportunity to the petitioner to file a reply to the SCN - The order of cancellation is quashed, the petitioner is to file its response with documents by the stipulated date, and the Respondent is directed to consider the response, the returns filed and the willingness of the Petitioner to pay tax, penalty and interest and pass just orders – The petition is allowed [Read less]

GST - Maintainability of writ petition against SCN and order under Section 74, Secondment of employees by overseas company - Alternate statutory remedy under CGST Act, 2017 - Petitioner, a subsidiary of an overseas company, had employees seconded from the overseas company under a dispatch agreement, with part of the salary paid in India and the foreign part paid abroad and recovered from the Petitioner through quarterly debit notes - Department treated the secondment as import of manpower supply service, and the order confirmed the tax under reverse charge, denied input tax credit and imposed penalty and interest by invoki... [Read more]

GST - Maintainability of writ petition against SCN and order under Section 74, Secondment of employees by overseas company - Alternate statutory remedy under CGST Act, 2017 - Petitioner, a subsidiary of an overseas company, had employees seconded from the overseas company under a dispatch agreement, with part of the salary paid in India and the foreign part paid abroad and recovered from the Petitioner through quarterly debit notes - Department treated the secondment as import of manpower supply service, and the order confirmed the tax under reverse charge, denied input tax credit and imposed penalty and interest by invoking Section 74 - Respondents objected to maintainability on the ground of the statutory remedy of appeal - HELD - The power under Article 226 is wide but discretionary, and an alternate remedy does not take it away, but courts restrain themselves where the statute provides an effective remedy. A writ may lie despite an alternate remedy only for enforcing a fundamental right, for breach of natural justice, against an order wholly without jurisdiction, or to challenge the vires of a statute, and the Petitioner must show that its case truly falls within one of these exceptions - The CGST Act is a self-contained code providing for adjudication, first appeal, appeal to the Tribunal and appeal on a substantial question of law to the High Court. Whether a secondment is a supply depends on the whole arrangement read with the actual conduct of the parties and is a mixed question rooted in facts - The statutory authorities have the tools to examine the facts and further inquiry by the appellate authority - The scheme is a legislative choice under which facts are found by the adjudicating authority, the appellate authority and the Tribunal, and the High Court comes in only on a substantial question of law. The scheme also protects the taxpayer as recovery of the balance stands stayed on payment of the pre-deposit - The writ petition is dismissed on the ground of an efficacious alternate remedy - Notice and order issued by the same officer - Sections 74(1) and 74(9) of the CGST Act, 2017 - Petitioner contended that the SCN and the order were signed by the same officer, who was thus accuser and judge and that the appeal would be futile as the appellate authority would follow the earlier decision mechanically - Whether the issue of notice and passing of order by the same officer is a breach of natural justice bringing the case within the exception to the rule of alternate remedy - HELD - Section 74(1) empowers the proper officer to serve the SCN and Section 74(9) directs the same proper officer to consider the representation and determine the tax, interest and penalty. The statute itself places both functions on the proper officer, and this is the design of the law and not a lapse by the officer - The rule against bias strikes at personal interest or a real likelihood of prejudgment, and no personal interest or malice was alleged. An officer who issues a notice forms only a prima facie view, which is what the statute requires before any person is called upon to answer, and the question is whether the officer kept his mind open to the reply. The Petitioner was heard, filed replies and further submissions, and its real grievance that the submissions were not accepted or not dealt with well enough is a complaint about the quality of reasoning, which is a ground of appeal and not a denial of hearing - The fear that the appellate authority will not apply its mind is speculative, as the appeal lies to a separate authority which must give reasons under Section 107(12), with further remedies before the Tribunal and the High Court - The ground of breach of natural justice is rejected and the writ petition is dismissed. [Read less]

Service Tax - Refund to SEZ Unit - Tax distributed through ISD invoices - Condition of one claim for every quarter under paragraph 3(III)(f) of Notification No. 12/2013-ST - Appellant, a unit in a Special Economic Zone, claimed refund for two quarters of service tax on specified services distributed to it by its corporate office registered as Input Service Distributor, including tax paid under reverse charge. The Adjudicating Authority and the FAA rejected a substantial part of the claims as the tax was paid in quarters other than the quarter of the claim - Whether refund of tax distributed through ISD invoices could be de... [Read more]

Service Tax - Refund to SEZ Unit - Tax distributed through ISD invoices - Condition of one claim for every quarter under paragraph 3(III)(f) of Notification No. 12/2013-ST - Appellant, a unit in a Special Economic Zone, claimed refund for two quarters of service tax on specified services distributed to it by its corporate office registered as Input Service Distributor, including tax paid under reverse charge. The Adjudicating Authority and the FAA rejected a substantial part of the claims as the tax was paid in quarters other than the quarter of the claim - Whether refund of tax distributed through ISD invoices could be denied on the ground that the tax was not paid during the quarter of the claim - HELD - Paragraph 3(III)(f) provides that only one claim of refund shall be submitted for every quarter. It limits the number of claims and does not provide that a claim for a quarter may comprise only tax paid during that quarter. The Appellant filed one claim for each quarter, so the lower authorities read into the clause a condition which its words do not bear. The amount refundable under paragraph 3(III)(b)(ii) is the amount distributed to the SEZ unit, which comes into being only when the ISD distributes it by an invoice under Rule 7 of the Cenvat Credit Rules, 2004. No such amount existed to be included in any earlier claim, and there was no finding of an earlier refund, so the objection is one of form and not of double refund. Even otherwise, a condition in a notification issued under Section 93 of the Finance Act, 1994 cannot cut down the exemption conferred by Section 26(1)(e) and protected by Section 51 of the SEZ Act, 2005, as held by the High Court in the decision affirmed by dismissal of the Special Leave Petition. Tax paid under reverse charge stands on the same footing - The refund could not be denied on this ground, the impugned order is set aside and the appeals are allowed with consequential relief including interest, subject to verification that no part of the amounts was refunded earlier - Refund to SEZ Unit - Denial for want of Form A-1 and approval of services - Ground not raised in SCN - Appellant claimed refund of tax paid on accommodation, air travel agent and club membership services. The SCN proposed rejection only on the ground that these were not specified services. The Adjudicating Authority rejected the claim for want of approval by the Unit Approval Committee, and the FAA found the services in the approved list but denied refund for want of Form A-1 verified by the Specified Officer - Whether the refund could be denied for want of Form A-1 or of approval of the services - HELD - The finding of the FAA that the services find place in the approved list was not assailed by the Respondent. No authority alleged that the services were not used for the authorised operations. The only ground of the SCN, that the services were not specified, failed on the finding of the FAA himself. The ground of Form A-1 did not figure in the SCN or the order in original, and the Appellant was never called upon to meet it. The Supreme Court has held that proceeding on a basis different from that of the notice makes a new case, which is impermissible, and this binds the FAA as he sits in appeal on the case set up in the notice. The ground is also unsound on merits, since the High Court held that the SEZ exemption cannot be denied for not filing Forms A-1 and A-2 as Rule 22 of the SEZ Rules does not prescribe them - Once the services are approved by the Unit Approval Committee and used for the authorised operations, the refund cannot be withheld and the rejection is set aside - Refund to SEZ Unit - Limitation under paragraph 3(III)(e) of Notification No. 12/2013-ST - Reckoning from date of ISD invoice - Appellant claimed refund of tax paid by its corporate office to service providers in an earlier period and distributed to the SEZ unit by an ISD invoice. The Adjudicating Authority held the amount barred by limitation under paragraph 3(III)(e) and Section 11B of the Central Excise Act, 1944, reckoning one year from payment by the corporate office. The FAA declined to extend time on the premise that the power extends only to amounts of the present quarter - Whether the refund of tax distributed through the ISD invoice is barred by limitation - HELD - Paragraph 3(III)(e) speaks of the month in which the SEZ unit actually paid the tax to the registered service provider. Where common services are paid for by the head office and distributed under Rule 7, the SEZ unit has paid nothing to the provider and its entitlement under paragraph 3(III)(b)(ii) is to the amount distributed, which arises on the date of the ISD invoice. Reckoning from payment by the head office would make the period begin, and possibly end, before the refundable amount is ascertained, and a notification which prescribes distribution before refund cannot be read so as to defeat the refund it grants. The same answer follows under Section 11B, as what is refunded is not a duty paid by the SEZ unit but the amount distributed to it. Rule 7 prescribes no time limit for issue of ISD invoices, so delay at the ISD level cannot be laid at the door of the SEZ unit. The limitation that the power to extend time covers only amounts of the present quarter is nowhere found in paragraph 3(III)(e) - The period runs from the date of the ISD invoice, the claim was filed within one year of it, the rejection as time barred cannot be sustained, and the refund is to be sanctioned with applicable interest. [Read less]

Service Tax - Taxability of target based and non-target based incentives received by car dealer from manufacturer - Declared service under Section 66E(e) of Finance Act, 1994 - Appellant, an authorised dealer of a car manufacturer, received target based and non-target based incentives, claims and bonus from the manufacturer, including incentive on spares and oil. The Department alleged that these were consideration for sales related services covered as a declared service, and the Adjudicating Authority confirmed the demand with interest and penalty, which the FAA upheld - Whether incentives and claims received by a dealer ... [Read more]

Service Tax - Taxability of target based and non-target based incentives received by car dealer from manufacturer - Declared service under Section 66E(e) of Finance Act, 1994 - Appellant, an authorised dealer of a car manufacturer, received target based and non-target based incentives, claims and bonus from the manufacturer, including incentive on spares and oil. The Department alleged that these were consideration for sales related services covered as a declared service, and the Adjudicating Authority confirmed the demand with interest and penalty, which the FAA upheld - Whether incentives and claims received by a dealer from the manufacturer are liable to service tax as consideration for a declared service - HELD - The issue of leviability of service tax on target based and non-target based incentives is no more res integra, as it has been decided in a series of cases. The Tribunal has held that trade discounts, quantity discounts, target linked incentives and sales claim reimbursements received by an authorised dealer, who purchases and sells goods on principal to principal basis, are not liable to service tax. Such incentives are known only post facto and amount to reduction of the purchase price, so they cannot be treated as consideration for any service - The demand is not sustainable, the impugned order is set aside and the appeal is allowed - Penalty on General Manager of dealer company under Section 78A of Finance Act, 1994 - The General Manager of the Appellant company was penalised under Section 78A for non-payment of service tax on incentives received by the company. He contended that he was an employee who discharged his responsibilities and did nothing in his personal capacity - Whether penalty under Section 78A can be sustained on the General Manager when the service tax demand against the company does not survive - HELD - When the main appellant itself is not liable to pay any service tax, the employee cannot be faulted with any violation or contravention of the provisions of the Finance Act, 1994. The Tribunal had earlier taken the same view where penalty on the Accounts Manager of a dealer company was held unsustainable once the demand against the company failed - The penalty is set aside and the appeal is allowed. [Read less]

Sales Tax – ‘Tax on Tax’, Levy of surcharge on sales tax - Survival of a reference to a larger Bench after subsequent developments in law - The reference arose from a perceived conflict between two earlier decisions on the legislative competence of a State Legislature, under Entry 54 of List II, to levy a surcharge or cess computed on the basis of sales tax payable by a dealer, and was enlarged to consider a Constitution Bench decision on the same subject - While the reference remained pending, a Nine Judge Bench held that royalty is not a tax and overruled the earlier Seven Judge Bench decision to that extent, and t... [Read more]

Sales Tax – ‘Tax on Tax’, Levy of surcharge on sales tax - Survival of a reference to a larger Bench after subsequent developments in law - The reference arose from a perceived conflict between two earlier decisions on the legislative competence of a State Legislature, under Entry 54 of List II, to levy a surcharge or cess computed on the basis of sales tax payable by a dealer, and was enlarged to consider a Constitution Bench decision on the same subject - While the reference remained pending, a Nine Judge Bench held that royalty is not a tax and overruled the earlier Seven Judge Bench decision to that extent, and the sales tax regime under which the impugned levies were imposed was replaced first by VAT legislation and then by the GST regime - Whether, in view of the developments subsequent to the orders making the reference, the question referred continues to survive for adjudication - HELD - The continued survival of a reference depends upon the continued existence of the doubt which occasioned it, and where the doubt has been authoritatively dispelled by a subsequent decision of a Bench of greater strength, by a legislative or constitutional amendment, or otherwise, the reference ceases to serve its purpose - The law declared by a Bench of larger strength binds a Bench of lesser or co-equal strength, and a larger Bench is a scarce institutional resource which should not be occupied in restating settled law. The conflict was more apparent than real, as the earlier Seven Judge Bench decision concerned a cess on royalty in a field covered by a Central enactment, and it did not hold that every levy computed on another levy is beyond legislative competence. Its premise that royalty is a tax was overruled by the Nine Judge Bench, so no decision of equal or greater strength conflicts with the Constitution Bench decision, which continues to hold the field - Entry 54 of List II in its earlier form no longer exists, and the question referred is of no prospective significance. The questions regarding the validity of the surcharge on units otherwise exempt from sales tax and the crediting of cess proceeds to a Social Security Fund without first forming part of the Consolidated Fund of the State were never the subject of the reference and are left open - The reference is answered as rendered infructuous, the competence of the State Legislatures to levy the impugned surcharges is governed by the Constitution Bench decision. The matters are directed to be listed before regular Benches for disposal on merits – Ordered accordingly - Legislative competence of State Legislature to levy surcharge computed as a percentage of sales tax payable - Entry 54 of List II - The Appellants challenged surcharges imposed on dealers whose turnover exceeded a prescribed threshold, computed as a fixed percentage of the sales tax payable, contending that the levy is a tax on tax which no entry in List II authorises or, in substance, a levy on the income or fiscal burden of the dealer, while the Respondents contended that the surcharge is an enhancement of the rate of sales tax for a class of dealers - Whether a surcharge computed as a percentage of the tax payable and not of turnover falls within the legislative competence of the State Legislature under Entry 54 of List II - HELD - The Constitution Bench decision in S. Kodar squarely holds that an additional tax or surcharge computed as a percentage of the sales tax payable is an enhancement of the rate of sales tax and a tax on the sale or purchase of goods, and that the fact that its quantum is determined with reference to the sales tax imposed does not alter its character. A sales tax is itself computed as a percentage of taxable turnover, so a surcharge on that tax is by simple arithmetic a further percentage of the same taxable turnover, and the measure of a tax does not determine its character - The levy is not a tax on income because it is payable even where the dealer has made no profit or has suffered a loss so long as turnover exceeds the threshold, and it escalates with turnover and not with income. The binding force of the proposition rests on the Constitution Bench decision, in which competence was squarely raised and decided, and not on the concession recorded in the later Three Judge Bench decision. No feature of the impugned surcharges distinguishes them from the levy upheld in that decision - The pending curative petition and the subsequent amendment to the mining statute do not affect these findings. In a concurring opinion, it is held that the Constitution Bench decision was correctly decided, continues to be good law and needs no reconsideration - The question referred stands answered by the Constitution Bench decision, which continues to hold the field. [Read less]

GST – Reporting of Input Tax Credit under incorrect tax head - Demand on account of excess availment of ITC - Appellant inadvertently reported IGST ITC under the CGST and SGST heads while filing Form GSTR-3B for the relevant financial year, which resulted in a mismatch with the credit reflected in Form GSTR-2A - Proceedings under Section 73 of the CGST Act, 2017 resulted in a confirmed demand with penalty - Whether the Appellant wrongly availed IGST ITC under the CGST and SGST heads due to an inadvertent clerical error and whether such incorrect reporting resulted in excess availment or utilisation of ITC - HELD - The cl... [Read more]

GST – Reporting of Input Tax Credit under incorrect tax head - Demand on account of excess availment of ITC - Appellant inadvertently reported IGST ITC under the CGST and SGST heads while filing Form GSTR-3B for the relevant financial year, which resulted in a mismatch with the credit reflected in Form GSTR-2A - Proceedings under Section 73 of the CGST Act, 2017 resulted in a confirmed demand with penalty - Whether the Appellant wrongly availed IGST ITC under the CGST and SGST heads due to an inadvertent clerical error and whether such incorrect reporting resulted in excess availment or utilisation of ITC - HELD - The claim regarding availability of eligible IGST credit cannot be accepted or rejected merely on the basis of figures appearing in the annual return, and the actual availability, admissibility and utilisation of the credit must be verified from the original records and electronic credit ledger. The figures discussed in the Order-in-Original were not entirely identical to those in the ITC statement furnished by the Appellant, which required proper reconciliation and verification. The Hon'ble High Court considered a similar issue where IGST credit was inadvertently reported by splitting it into CGST and SGST in Form GSTR-3B, and treated the electronic credit ledger as a pool of funds for IGST, CGST and SGST, where the entire balance is to be considered and not individual compartments. The clarification is relevant where the Appellant asserted that the aggregate balance of ITC under all heads was sufficient and that the discrepancy was revenue neutral. The demand cannot be sustained merely because the credit was reflected under an incorrect tax head, and once the principal demand of excess ITC is found unsustainable, the consequential levy of interest and penalty cannot independently survive - The matter is remanded to the proper officer to verify the relevant figures and particulars on the GST portal and extend the consequential benefit – The appeal is allowed on this issue - Eligibility of ITC on purchases where supplier furnished NIL returns - Section 16(2)(c) of the CGST/UPGST Act, 2017 - Appellant claimed ITC on purchases made from a supplier in a particular month and contended that the purchases were genuine, the invoices were reflected in Form GSTR-2A, the supplier was registered and had filed its returns, and payment was made through banking channels - The Respondent contended that verification on the GST portal revealed that the supplier had furnished NIL returns for the disputed period without discharging any corresponding tax liability - Whether ITC on such purchases is admissible when the corresponding invoices are stated to be reflected in Form GSTR-2A - HELD - Mere reflection of an invoice in Form GSTR-2A cannot by itself be treated as conclusive proof of fulfilment of all statutory conditions for availment of ITC. The claim cannot be rejected without examining the invoice, the GSTR-2A details, the genuineness of the transaction, the payment particulars and the applicable statutory conditions. The Hon'ble High Courts held that the clauses of Section 16(2) are cumulative and have to be read conjointly and not independently, that entitlement to ITC is established only after receipt of goods or services and upon the tax charged being actually paid to the Government, and that under Section 155 the burden of establishing entitlement lies on the person claiming credit. The Hon'ble Supreme Court upheld the view that no grounds were made out to declare Section 16(2)(c) unconstitutional or to read it down. The Appellant failed to establish that the tax charged in respect of the supplies was actually paid to the Government, and non-payment of tax by the supplier defeats the entitlement in the absence of fulfilment of the statutory conditions - The appeal is rejected on this issue [Read less]

GST - Withdrawal of departmental appeal filed before the Tribunal in breach of CBIC monetary limit, Imposition of cost – Appellant-Department, at the stage of final hearing, filed an application for withdrawal on the ground that the amount involved was below the monetary limit fixed for filing appeals - Whether the withdrawal can be allowed when the appeal was filed in contravention of the CBIC circular - HELD - The Appellant-Dept violated the directions in the Circular No. 207/1/2024-GST dated 26.06.2024 and provided no valid explanation or exceptional circumstance for breaching the threshold. By filing the appeal, the ... [Read more]

GST - Withdrawal of departmental appeal filed before the Tribunal in breach of CBIC monetary limit, Imposition of cost – Appellant-Department, at the stage of final hearing, filed an application for withdrawal on the ground that the amount involved was below the monetary limit fixed for filing appeals - Whether the withdrawal can be allowed when the appeal was filed in contravention of the CBIC circular - HELD - The Appellant-Dept violated the directions in the Circular No. 207/1/2024-GST dated 26.06.2024 and provided no valid explanation or exceptional circumstance for breaching the threshold. By filing the appeal, the Appellant wasted the valuable time of the Tribunal and the Respondent-assessee had to incur the expense of litigation unnecessarily, which is in no way justified. Indiscriminate litigation runs directly counter to the objectives of the National Litigation Policy and the mandatory directions of the CBIC - The application for withdrawal is allowed with costs of 25,000/- payable by the Dept to the Respondent as litigation expenses. The appeal is dismissed as withdrawn [Read less]

Service Tax - Denial of CENVAT credit on common input services - Rule 14 of the CCR, 2004 - Appellant, a manufacturer with three manufacturing units, availed CENVAT credit on common input services at one unit, which was also its registered office - Department alleged that the credit attributable to the other two units ought to have been distributed through the Input Service Distributor mechanism and confirmed the demand with interest and penalty - Appellant had already reversed the credit attributable to the other units along with interest and had informed the Department - Whether the Appellant was entitled to avail CENVAT... [Read more]

Service Tax - Denial of CENVAT credit on common input services - Rule 14 of the CCR, 2004 - Appellant, a manufacturer with three manufacturing units, availed CENVAT credit on common input services at one unit, which was also its registered office - Department alleged that the credit attributable to the other two units ought to have been distributed through the Input Service Distributor mechanism and confirmed the demand with interest and penalty - Appellant had already reversed the credit attributable to the other units along with interest and had informed the Department - Whether the Appellant was entitled to avail CENVAT credit on common input services at a unit not registered as an ISD - HELD - There was no finding that the services were not received, that service tax was not discharged by the service providers or that credit was availed in excess of the tax paid. The dispute concerned only the manner of accounting for and distribution of credit amongst the units of the same legal entity and not the substantive eligibility of the credit. Rule 7 of the CCR, 2004, as it stood during the relevant period, did not restrict the quantum of credit that could be distributed. The requirement of proportionate distribution was introduced subsequently and cannot be applied retrospectively to the earlier period. Absence of Input Service Distributor registration is a procedural irregularity and cannot convert genuine and admissible credit into inadmissible credit where the services were received, the credit was supported by documents and no excess or double benefit was established. The reversal made without prejudice to the Appellant's contention is not an admission of liability - The demand confirmed by the lower authorities is set aside – The appeal is allowed - Extended period of limitation - Section 11A of the Central Excise Act, 1944 - SCN was issued after the normal period of one year and the extended period was invoked on the allegation that the Appellant failed to disclose availment of common input service credit at that unit - Appellant contended that the credit was reflected in its records and that its accounts were audited by the Department earlier - Whether the extended period of limitation and the penalty under Rule 15(2) of the CCR, 2004 read with Section 11AC of the CEA, 1944 are sustainable - HELD - The credit was reflected in the Appellant's records and supported by invoices. Where the relevant records were available to the Department, the Revenue must establish the particular material fact which was deliberately withheld or suppressed. There was no allegation of fabricated invoices, parallel records or concealment of receipt of services. The reversal of credit had been intimated to the Department before issuance of the SCN. Mere omission or wrong availment does not by itself amount to suppression, and deliberate suppression, wilful misstatement or intent to evade was not established. The extended period was therefore not invocable and the entire demand is barred by limitation - The demand, consequential interest and penalty are set aside. [Read less]

Service Tax - Classification of services as Consulting Engineer Service or Real Estate Agent Service - Appellant, registered under Consulting Engineer's Service, provided services of preparation of bills of quantities, quantity take-off, verification of specifications and analysis of rates to an overseas associated enterprise for a project in India - Department classified the services as Real Estate Agent Service, treated them as provided in India, and confirmed the demand - Whether the services are classifiable as Consulting Engineer Service or Real Estate Agent Service - HELD - The services were advice, consultancy or te... [Read more]

Service Tax - Classification of services as Consulting Engineer Service or Real Estate Agent Service - Appellant, registered under Consulting Engineer's Service, provided services of preparation of bills of quantities, quantity take-off, verification of specifications and analysis of rates to an overseas associated enterprise for a project in India - Department classified the services as Real Estate Agent Service, treated them as provided in India, and confirmed the demand - Whether the services are classifiable as Consulting Engineer Service or Real Estate Agent Service - HELD - The services were advice, consultancy or technical assistance in relation to design, development and construction of real estate, and sale, purchase or leasing is not necessary for a service to fall within real estate agent service. The same services also fall within consulting engineer service as technical assistance in a discipline of engineering. Since the service is prima facie classifiable under two sub-clauses, Section 65A(2) applies. Clause (a) does not resolve the dispute because the services are specific both from the engineering view and from the real estate view, and clause (b) does not apply as there is no composite service. Under clause (c) the sub-clause which occurs first among those equally meriting consideration is to be adopted, and Consulting Engineer Service under Section 65(105)(g) occurs before Real Estate Agent Service. The place of provision of service is therefore the location of the service recipient outside India and no service tax is payable - The demand on this count is set aside - Service tax on reimbursable expenses - Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - Department alleged short payment of service tax on reimbursable expenses in terms of Rule 5(1) - Entire period of dispute was before the amendment of Section 67 - Whether service tax is payable on reimbursable expenses for the period of dispute - HELD - During the relevant period Section 67 provided for service tax only on the consideration received for the services. Rule 5(1) which provided for levy on reimbursable expenses was ultra vires the Act. Section 67 was amended to make reimbursable expenses taxable only with effect from 14.05.2015. Since the entire period of dispute was before that date, no service tax was payable on reimbursable expenses - The demand on this count is set aside - Short payment of service tax on debtors reconciliation difference - Section 73(1) of the Finance Act, 1994 - Department, on audit, reconciled the debtors under the mercantile system of accounting and alleged unreported income on the basis of a difference between opening balance plus billing less receipts and the closing balance - Appellant contended that service tax was considered in the balances and in billing but was ignored in receipts, and that accounting adjustments were not considered - Whether the demand on the reconciliation difference is sustainable - HELD - Under the mercantile system the opening balance, billings, receipts and closing balance must tally, but the figures must be correctly considered. The difference arose because the service tax received from the service recipients was not considered among the receipts while the service tax billed was considered. Service tax law does not stipulate any manner of maintenance of accounts apart from the statutory returns and records. If the Department seeks to establish short payment on the basis of reconciliation, it must establish that the Appellant received greater consideration than what it declared. It is not open to the Department to ignore some figures or to insist on the records being maintained in any particular fashion - The demand on this count is set aside - Extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - SCN invoked the extended period alleging deliberate misclassification, non-inclusion of reimbursable expenses and incorrect value in the ST-3 returns, which came to light only on reconciliation of records - Appellant was registered, maintained its accounts and filed ST-3 returns regularly - Whether the extended period of limitation was correctly invoked - HELD - The Revenue's case is essentially that the Appellant did not correctly self-assess and pay service tax. Section 72 provides that where a person fails to assess the tax correctly the Central Excise Officer may call for accounts and records and make the assessment. All the data on which the SCN was based was in the records of the Appellant, and had the officer scrutinised the returns the SCN could have been issued within time. The extended period can be invoked only if one of the elements of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade is established, and it cannot be presumed merely because the assessee operates under self-assessment. Incorrect self-assessment by itself does not establish wilful suppression with intent to evade. There was no evidence of any such element and the responsibility for time bar rests with the officer who failed to scrutinise the returns in time - The extended period is not invocable, the Appellant succeeds on merits and on limitation, and the appeal is allowed. [Read less]

Service Tax - Invocation of extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - Appellant, a trade and industry organisation, was proceeded against for alleged short payment or non-payment of service tax under Mandap Keeper Service, Commercial Training or Coaching Service, Club or Association Service and Business Exhibition Service, and the Department alleged suppression with intent to evade - Department had earlier issued successive SCNs on Club or Association Service covering overlapping periods - Whether the demand is barred by limitation - HELD - The extended period can be invoked only i... [Read more]

Service Tax - Invocation of extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - Appellant, a trade and industry organisation, was proceeded against for alleged short payment or non-payment of service tax under Mandap Keeper Service, Commercial Training or Coaching Service, Club or Association Service and Business Exhibition Service, and the Department alleged suppression with intent to evade - Department had earlier issued successive SCNs on Club or Association Service covering overlapping periods - Whether the demand is barred by limitation - HELD - The extended period can be invoked only in cases of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of service tax, and the burden lies on the Department. Limitation must be examined with reference to the respective return periods in terms of Section 73(6). Mere non-payment or non-inclusion of a receipt in the ST-3 return does not establish suppression. Non-filing of returns may be relevant for determining the relevant date but does not by itself establish intent to evade. The Department was already aware of the Appellant's activities through the earlier proceedings, the liability was being contested in continuing litigation, and the differential liability was worked out from the Appellant's own financial records. No new concealed activity or receipt was shown. The Department has therefore not established deliberate suppression and the demands beyond the normal period cannot be sustained - The demands beyond the normal period are set aside and the remaining questions on taxability are not examined as they are academic - Penalty under Section 78 - Section 78 of the Finance Act, 1994 - Penalty was imposed under Section 78 along with the demand invoking the extended period - Whether penalty under Section 78 is sustainable - HELD - The penalty under Section 78 is consequential upon the invocation of the extended period and is founded upon the circumstances specified in the proviso to Section 73(1). Since the Department failed to establish fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of service tax, the statutory foundation for the penalty is absent - The penalty imposed under Section 78 is set aside - Penalty for failure to obtain registration - Section 77(1)(a) of the Finance Act, 1994 - SCN alleged that the Appellant failed to obtain registration for Club or Association Service, Commercial Coaching or Training Service and Business Exhibition Service, contravening Section 69 read with Rule 4 of the Service Tax Rules, 1994 - Appellant was already registered for certain other services - Whether penalty under Section 77(1)(a) is sustainable when the extended period is not available - HELD - The allegation was not of complete non-registration but of failure to obtain registration for the additional taxable services. The penalty under Section 77(1)(a) has to be examined independently of the extended period invoked for recovery of service tax. Unavailability of the extended period does not obliterate an independently established failure to obtain registration. The Department specifically identified the services for which registration was not obtained and the contravention of Section 69 read with Rule 4, and the ingredients of Section 77(1)(a) stood established - The penalty under Section 77(1)(a) is sustained - Penalty for failure to file returns - Section 77(2) of the Finance Act, 1994 - SCN alleged that the Appellant failed to assess the tax due and to furnish the prescribed ST-3 returns under Section 70 read with Rule 7 of the Service Tax Rules, 1994, and the FAA recorded a specific finding of non-filing of returns - Whether penalty under Section 77(2) is sustainable - HELD - The default under Section 77(2) is a procedural contravention distinct from the substantive liability to service tax. The absence of material to invoke the extended period cannot erase the separate obligation under Section 70 to furnish the prescribed returns. The Appellant did not demonstrate that the prescribed returns for the relevant periods were filed, and the contravention attracting Section 77(2) stood established - The penalty under Section 77(2) is sustained - Service tax on advances received for Mandap Keeper Service - Section 73(1) of the Finance Act, 1994 - The demand on advances received for a period falling within the normal period of limitation survived for examination on merits - Appellant had paid part of the tax before issuance of the SCN and produced payment particulars for the balance along with interest, which were brought to the notice of the adjudicating authority - Whether any service tax remains recoverable on the advances - HELD - The dispute was essentially regarding the timing of payment of service tax on such advances. The Appellant did not dispute the liability and demonstrated by specific payment particulars that the tax demanded had been discharged. The Department cannot recover the demand again without giving credit for the amounts already paid. The payments are to be appropriated against the tax demand and the interest paid is to be appropriated against the corresponding interest liability - The demand stands discharged and is set aside, and the appeal is partly allowed. [Read less]

Service Tax - Inclusion of reimbursed cost of diesel in taxable value - Section 67 of the Finance Act, 1994 - Assessee provided Management, Maintenance or Repair Service to telecom companies under contracts for procuring diesel, transporting it to sites and filling it into mobile towers, and claimed reimbursement of the cost of diesel from the service recipients - Department alleged that the cost of diesel was includable in the taxable value in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 and the Commissioner confirmed a part of the demand with penalty - Both the Assessee and the Revenue filed... [Read more]

Service Tax - Inclusion of reimbursed cost of diesel in taxable value - Section 67 of the Finance Act, 1994 - Assessee provided Management, Maintenance or Repair Service to telecom companies under contracts for procuring diesel, transporting it to sites and filling it into mobile towers, and claimed reimbursement of the cost of diesel from the service recipients - Department alleged that the cost of diesel was includable in the taxable value in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 and the Commissioner confirmed a part of the demand with penalty - Both the Assessee and the Revenue filed appeals - Whether the cost of diesel reimbursed to the Assessee is includable in the gross amount charged for the taxable service under Section 67 of the Finance Act, 1994 - HELD - Service tax is leviable on the value of the taxable services actually rendered, and Section 67 refers to the gross amount charged for providing such taxable service. Any amount which is not calculated for providing such taxable service cannot be a part of that valuation. Rule 5 went beyond the mandate of Section 67 and the Department cannot go beyond the contract value merely because of the use of the word gross in Section 67. The word charged refers to the amount billed by the service provider to the service recipient. The value of diesel was in the nature of reimbursement, the service tax had been paid on the element of service involved, and no service was rendered corresponding to the value of diesel. Diesel cannot be considered an input for the service for which a separate consideration was provided in the contract - The impugned order is modified, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed [Read less]

Customs - Bank Guarantee condition in Provisional Release - Section 110A read with Section 110 of the Customs Act, 1962 - Appellant imported goods declared as Distillate Marine Oil, which were seized on the basis of a laboratory report stating that the sample is most akin to High Flash High Speed Diesel, an item restricted for import - The Respondent permitted provisional release subject to end use bond, bond for the full assessable value and Bank Guarantee for ten percent of the assessable value to cover fine, penalty and differential duty that may arise - Appellant challenged the Bank Guarantee condition - Whether the Ba... [Read more]

Customs - Bank Guarantee condition in Provisional Release - Section 110A read with Section 110 of the Customs Act, 1962 - Appellant imported goods declared as Distillate Marine Oil, which were seized on the basis of a laboratory report stating that the sample is most akin to High Flash High Speed Diesel, an item restricted for import - The Respondent permitted provisional release subject to end use bond, bond for the full assessable value and Bank Guarantee for ten percent of the assessable value to cover fine, penalty and differential duty that may arise - Appellant challenged the Bank Guarantee condition - Whether the Bank Guarantee condition is sustainable - HELD - The Respondent himself recorded that the sample is not identical to High Flash High Speed Diesel for the limited purpose of provisional release, that deliberate mixing could not be ascertained, and that the sample matches fully with Distillate Marine Fuel and only partially with High Flash High Speed Diesel for the tested parameters. The second laboratory described the product only as diesel fraction and did not endorse the conclusion that it is most akin to High Flash High Speed Diesel - The Bank Guarantee was sought to cover a contingent liability, while the Appellant had already executed the bond and agreed to the end use conditions. Seeking Bank Guarantee in similar circumstances is against the directions of the jurisdictional High Court, which held that the test reports were not definitive and that cloud point cannot be the sole basis for seizure, and against the Tribunal's decision in a similar matter - The Bank Guarantee condition is set aside, the Bank Guarantee shall be returned on production of the end use certificates and a bond, and the appeal is allowed [Read less]

Customs - Confiscation of Gold under Section 111(b) and Section 111(d) of the Customs Act, 1962 - Reasonable belief under Section 110 and burden under Section 123 - Respondents were intercepted in a town seizure with gold pieces which did not bear any foreign markings, and the Department alleged that the gold was of foreign origin and smuggled. The Commissioner (Appeals) set aside the confiscation and penalties, and Revenue is in appeal - Whether the gold recovered in a town seizure without foreign markings is liable to confiscation when its foreign origin is not established - HELD - The seizure was neither made at an inte... [Read more]

Customs - Confiscation of Gold under Section 111(b) and Section 111(d) of the Customs Act, 1962 - Reasonable belief under Section 110 and burden under Section 123 - Respondents were intercepted in a town seizure with gold pieces which did not bear any foreign markings, and the Department alleged that the gold was of foreign origin and smuggled. The Commissioner (Appeals) set aside the confiscation and penalties, and Revenue is in appeal - Whether the gold recovered in a town seizure without foreign markings is liable to confiscation when its foreign origin is not established - HELD - The seizure was neither made at an international border nor within a notified customs area, and the gold did not bear any foreign markings. The expression reasonable belief under Section 110 cannot be equated with mere suspicion or conjecture, and it must be founded upon tangible material and objective circumstances available at the time of seizure. The purity of the gold cannot by itself be a determinative circumstance, as gold of comparable purity is also available in the domestic market - In the absence of reasonable belief, the burden under Section 123 cannot be shifted to the person from whose possession the goods were recovered. The initial burden to establish the foreign origin and smuggled character of the gold continues to rest on the Department - The Department failed to discharge this burden, and the order setting aside the confiscation is upheld - Evidentiary value of retracted statements recorded under Section 108 of the Customs Act, 1962 - The Department relied on the statements of the Respondents stating that the gold was of foreign origin and smuggled. The Respondents contended that the statements were recorded under duress and coercion, and that one statement was retracted at the earliest opportunity - Whether the confiscation of gold can be sustained on the basis of the retracted statements - HELD - A retracted statement has no evidentiary value unless it is corroborated by independent evidence. Apart from the statements, no independent material was brought on record, and the follow-up searches yielded no incriminating material - The alleged confession was very general in nature. The officers did not ask how the gold was smuggled, the place of crossing or the mode of transport. As the gold had no foreign markings, the onus was on the Department to prove its smuggled nature, which was not discharged. Section 138B was not complied with and the sanctity of the statements recorded under Section 108 was lost - The statements cannot be the sole basis to hold that the gold is smuggled, and the finding of the Commissioner (Appeals) on their non-reliability is upheld - Legal procurement of gold supported by invoices - Allegation of fabricated documents - The Respondents maintained that the gold was purchased from domestic sources, and produced tax invoices and bank account details. The Department alleged that the invoices were fabricated as the copy recovered from the supplier's office differed in printed layout from the copy produced by the Respondents - Whether the documentary evidence of legal procurement can be rejected on the basis of the alleged discrepancies - HELD - The allegation of fabrication of invoices is baseless and unsubstantiated. The statement of the third party relied upon by the Department is self-serving and lacks independent corroboration. Every material particular of the two copies of the invoice was identical, and the difference was confined to the printed layout, which is attributable to the internal billing practice and software configuration of the supplier. The absence of stock registers at a particular point of time cannot constitute evidence of illicit activity - The Respondent was in legal possession of the gold, and the finding of the Commissioner (Appeals) is upheld - Penalty under Section 112(b) of the Customs Act, 1962 - Commissioner (Appeals) set aside the penalties imposed on the Respondents - Whether penalty is imposable when the confiscation of gold is not sustained - HELD - There is no evidence on record to implicate the Respondents in the alleged offence of smuggling of gold. As the confiscation has not been sustained, no penalty is imposable on the Respondents - The setting aside of the penalties is upheld and the appeals filed by Revenue are rejected. [Read less]

Customs - Provisional release under Section 110A of Customs Act, 1962 - Quantum of Bank Guarantee in addition to bond - Appellant imported walnuts with Afghanistan declared as country of origin and claimed exemption from Basic Customs Duty under Notification No. 99/2011-Cus., furnishing Certificates of Origin and other documents. DRI seized the goods on allegations relating to transit documents and verification of the premises. The Adjudicating Authority permitted provisional release on a bond for the full value and a Bank Guarantee covering the alleged differential duty, estimated redemption fine and penalties, which the ... [Read more]

Customs - Provisional release under Section 110A of Customs Act, 1962 - Quantum of Bank Guarantee in addition to bond - Appellant imported walnuts with Afghanistan declared as country of origin and claimed exemption from Basic Customs Duty under Notification No. 99/2011-Cus., furnishing Certificates of Origin and other documents. DRI seized the goods on allegations relating to transit documents and verification of the premises. The Adjudicating Authority permitted provisional release on a bond for the full value and a Bank Guarantee covering the alleged differential duty, estimated redemption fine and penalties, which the FAA upheld without any final finding on origin, forgery or confiscation. The Appellant challenged only the Bank Guarantee, which was about 132 percent of the value of goods - Whether the requirement of Bank Guarantee in addition to a full value bond is onerous and liable to be reduced - HELD - Interest of Revenue and of the party whose perishable goods have been seized must be balanced pending adjudication, as goods held in custody for long are likely to decay, serving the purpose of neither party. The bond for the full value is appropriate, but the Bank Guarantee in addition to it is clearly onerous. The Appellant has produced Certificates of Origin and other documents required to claim the lower duty benefit, and it is inappropriate to pronounce on merits at this stage. The Department is free to establish its case in investigation and adjudication. The decisions cited show that Bank Guarantee has mostly ranged from nil to 20 percent. Where verification is pending and the Certificate of Origin is not yet proved to be not genuine, reducing the Bank Guarantee to 20 percent of duty while retaining a full value bond is more appropriate - The Bank Guarantee is reduced to 20 percent of the duty involved along with bond for the whole duty amount, and the appeal is allowed [Read less]

Customs - Penalty under Sections 112(a)(iii) and 114AA of Customs Act, 1962 on person who handled import documents and obtained Delivery Orders - Requirement of knowledge and mens rea - Goods imported in containers under several Bills of Entry were found to be old, used and rejected, with shortage in quantity and without requisite authorisation, and were confiscated. Appellant, at the request of a third party, delivered the import documents to the shipping line, obtained the Delivery Orders and handed them over, while the Bills of Entry were filed by another person on behalf of the importer. The Adjudicating Authority impo... [Read more]

Customs - Penalty under Sections 112(a)(iii) and 114AA of Customs Act, 1962 on person who handled import documents and obtained Delivery Orders - Requirement of knowledge and mens rea - Goods imported in containers under several Bills of Entry were found to be old, used and rejected, with shortage in quantity and without requisite authorisation, and were confiscated. Appellant, at the request of a third party, delivered the import documents to the shipping line, obtained the Delivery Orders and handed them over, while the Bills of Entry were filed by another person on behalf of the importer. The Adjudicating Authority imposed penalty on the Appellant under Sections 112(a)(iii) and 114AA, and the FAA upheld it holding that participation in the documentary and delivery process of repetitive character attracted penalty - Whether handling of documents and delivery of the consignments, without proof of knowledge of the offending nature or misdeclaration of the goods, attracts penalty under Sections 112(a) and 114AA - HELD - The FAA sustained the penalty mainly on the ground that participation in the documentary and delivery process of repetitive character was established. Nowhere is there any culpatory statement showing that the Appellant knew the offending nature of the goods or that they were misdeclared. Merely repetitive handling of documents does not bring the Appellant within the ambit of the penal provisions. Penalty under Sections 112(a) and 114AA requires knowledge and mens rea, and handling of documents on the strength of which goods are imported, without proof of knowledge, cannot attract penalty under either provision - The penalties are not sustainable and the appeal is allowed [Read less]

GST - Computation of limitation for appeal under Section 107 of the CGST Act, 2017 - Petitioner filed an appeal against an order which was communicated to it in August 2025, and the appeal was filed in December 2025 - The Appellate Authority rejected the appeal as delayed by two days, treating the period of four months under Section 107(1) and 107(4) as equivalent to a fixed aggregate of 120 days from the date of communication - Whether the period of limitation under Section 107 is to be computed in calendar months or as 120 days - HELD - Section 107(4) does not provide for a further period of 30 days, nor does it prescrib... [Read more]

GST - Computation of limitation for appeal under Section 107 of the CGST Act, 2017 - Petitioner filed an appeal against an order which was communicated to it in August 2025, and the appeal was filed in December 2025 - The Appellate Authority rejected the appeal as delayed by two days, treating the period of four months under Section 107(1) and 107(4) as equivalent to a fixed aggregate of 120 days from the date of communication - Whether the period of limitation under Section 107 is to be computed in calendar months or as 120 days - HELD - Section 107(4) does not provide for a further period of 30 days, nor does it prescribe an aggregate period of 120 days. The Sections 107(1) and 107(4) provide for calculation of the period of limitation in months - There is a clear distinction between a period expressed in days and a period expressed in months. The period must be computed as calendar months and not by mechanically treating the combined period of limitation with condonation as an inflexible period of 120 days. The Appellate Authority treated the expression months as days - The appeal was filed within the period of limitation. Accordingly, the impugned order is quashed and set aside. The Appellate Authority is directed to hear the appeal on merits in accordance with law. The petition is allowed [Read less]

GST - Admission of appeal before the Appellate Tribunal where the tax or ITC involved is below the monetary threshold - Whether the Tribunal can refuse to admit the appeal at the threshold on the ground that the amount involved is below the prescribed threshold - HELD - Section 112(2) empowers the Appellate Tribunal, in its discretion, to refuse admission of an appeal where the tax or ITC involved, the difference in tax or ITC involved, or the amount of fine, fee or penalty determined by the order does not exceed the prescribed limit. Having regard to the amount involved and the statutory provision, the appeal does not war... [Read more]

GST - Admission of appeal before the Appellate Tribunal where the tax or ITC involved is below the monetary threshold - Whether the Tribunal can refuse to admit the appeal at the threshold on the ground that the amount involved is below the prescribed threshold - HELD - Section 112(2) empowers the Appellate Tribunal, in its discretion, to refuse admission of an appeal where the tax or ITC involved, the difference in tax or ITC involved, or the amount of fine, fee or penalty determined by the order does not exceed the prescribed limit. Having regard to the amount involved and the statutory provision, the appeal does not warrant admission and deserves to be refused at the threshold in exercise of the discretion conferred under Section 112(2). The order is confined solely to the question of admission, and the grounds raised by the Appellant and the substantive issues have not been examined on merits - The appeal is refused for admission [Read less]

GST - Maintainability of Revenue appeal - Monetary limit under the litigation policy Circular No. 207/01/2024-GST - Revenue preferred an appeal against the order of the FAA quashing the penalty imposed under Section 129(3). The Respondent contended that the penalty was below the monetary threshold prescribed for departmental appeals - Whether the appeal is maintainable despite the penalty being below the monetary limit - HELD - Paragraph 4 of the Circular provides that the monetary limits shall not apply where the matter relates to any other issue which is recurring in nature or involves interpretation of the provisions of... [Read more]

GST - Maintainability of Revenue appeal - Monetary limit under the litigation policy Circular No. 207/01/2024-GST - Revenue preferred an appeal against the order of the FAA quashing the penalty imposed under Section 129(3). The Respondent contended that the penalty was below the monetary threshold prescribed for departmental appeals - Whether the appeal is maintainable despite the penalty being below the monetary limit - HELD - Paragraph 4 of the Circular provides that the monetary limits shall not apply where the matter relates to any other issue which is recurring in nature or involves interpretation of the provisions of the Act or Rules, and the decision to file appeal is to be taken on merits - The dispute involves a legal question of a recurring nature affecting the enforcement jurisdiction of the mobile squad. Since the issue arises repeatedly in transportation checks, it falls within the exclusions of the litigation policy - The preliminary objection is overruled and the Revenue appeal is held to be maintainable - Penalty under Section 129(3) of CGST Act for non-updation of Part-B of e-way bill - The mobile squad intercepted a vehicle carrying goods with valid tax invoices and Part-A of the e-way bills, while Part-B was not filled - Penalty was imposed under Section 129(1)(a) and paid under protest. FAA order quashed the penalty - Revenue contended that the exemption of fifty kilometers did not apply as the final destination was in another district - Whether movement of goods from the consignor to the transporter's depot within a short distance without a vehicle number in Part-B violates Section 68 read with Rule 138 or is protected by the fifty kilometers exemption - HELD - The third proviso to Rule 138(3) waives the requirement to furnish conveyance details in Part-B where the goods are transported for a distance of up to fifty kilometers within the State from the place of business of the consignor to the place of business of the transporter for further transportation. The movement was limited to about five kilometers to the depot of the declared transporter for onward carriage, and the e-invoices were generated before the shipment departed. An automated system stamp on the portal cannot override the Rules, and under Explanation 2 to Rule 138(3) the e-way bill remains valid without Part-B details if the movement fits within the third proviso. The goods matched the invoices, the physical verification report showed no variance, and the transaction was fully transparent. A minor procedural omission, decoupled from an intent to evade tax, cannot sustain the penal mechanism under Section 129(3). A mere deviation in the transit path cannot be equated with an intention to evade tax, as the burden of proof is on the Revenue to produce concrete evidence. The driver's statement contained no admission of any route manipulation, and the detention documents were silent on route discrepancy. The theory of route divergence was therefore an afterthought raised at the SCN stage - The order of the FAA is upheld and the appeal of the Revenue is dismissed [Read less]

GST - Payment of tax under CGST and SGST heads instead of IGST - Invocation of Section 74 of the CGST Act, 2017 - Petitioner discharged the entire GST under the heads CGST and SGST on amounts received from foreign group companies for warranty support services - Show cause notice issued under Section 74 proposing recovery of GST under the head IGST on the same transaction for the same period - The Revenue contended that the Petitioner should have applied for refund and paid under IGST and misclassification of inter-State supplies as intra-State supplies amounted to suppression - Whether payment of GST under a wrong head is ... [Read more]

GST - Payment of tax under CGST and SGST heads instead of IGST - Invocation of Section 74 of the CGST Act, 2017 - Petitioner discharged the entire GST under the heads CGST and SGST on amounts received from foreign group companies for warranty support services - Show cause notice issued under Section 74 proposing recovery of GST under the head IGST on the same transaction for the same period - The Revenue contended that the Petitioner should have applied for refund and paid under IGST and misclassification of inter-State supplies as intra-State supplies amounted to suppression - Whether payment of GST under a wrong head is sufficient to invoke Section 74 to recover the amount under the head IGST and to impose penalty - HELD - The deposit of the amount under CGST and SGST was not denied by the Revenue. Considering Section 77 of the CGST Act, Section 19 of the IGST Act and Rule 4(1) of the GST Refund Rules, the Respondents could have transferred the amount from the heads CGST and SGST to the head IGST, and it cannot be said that Section 74 could be invoked - The Hon'ble High Court of Kerala in a similar case held that the officials should have allowed the request to transfer the amount from SGST to IGST - The Hon'ble Supreme Court has held that for a notice under Section 74 the officer must be satisfied that fraud, wilful misrepresentation or suppression led to the mismatch or short payment, and the foundational facts must be evident from the notice itself and not mechanically recited. This was not a case of deliberate attempt to evade tax, and invoking Section 74 was uncalled for - The Order-in-Original is quashed, the petitioner is to apply with proof of payment for transfer of the amount to the head IGST and the Respondents are to transfer it forthwith – The petition is disposed of [Read less]

GST - Demand of cess on clerical error in FORM GSTR-1 - Short payment alleged on comparison of FORM GSTR-1 with FORM GSTR-3B - Appellant declared in FORM GSTR-1 for a month an amount of cess which was higher than the cess actually paid in FORM GSTR-3B – Demand of the differential cess with interest and penalty - Appellant contended that the amount in FORM GSTR-1 was wrongly entered through a clerical mistake, which can be verified from the supply value and the GST liability - Whether the differential cess is recoverable as short payment where the higher amount was declared in FORM GSTR-1 on account of a clerical error - ... [Read more]

GST - Demand of cess on clerical error in FORM GSTR-1 - Short payment alleged on comparison of FORM GSTR-1 with FORM GSTR-3B - Appellant declared in FORM GSTR-1 for a month an amount of cess which was higher than the cess actually paid in FORM GSTR-3B – Demand of the differential cess with interest and penalty - Appellant contended that the amount in FORM GSTR-1 was wrongly entered through a clerical mistake, which can be verified from the supply value and the GST liability - Whether the differential cess is recoverable as short payment where the higher amount was declared in FORM GSTR-1 on account of a clerical error - HELD - The Appellant declared the taxable value along with Central tax and State tax in FORM GSTR-1, and the same amounts of Central tax and State tax were declared and paid in FORM GSTR-3B. The cess paid in FORM GSTR-3B corresponds to the declared taxable value and tax, while the higher amount entered in FORM GSTR-1 does not correspond to any taxable value, central tax or State tax. The claim of a clerical error is therefore believable - There is no allegation or evidence of suppression of the quantity or value of outward supply or of short payment of central tax or State tax. Bald allegations of short payment of cess cannot be accepted when the explanation of clerical mistake is supported by the figures on record - The adjudicating authority should have dealt with the issue on facts and could have condoned the mistake as there was no material to suggest any short payment of tax or cess - The order of the FAA is quashed and the appeal is allowed [Read less]

GST - Penalty for non-sequential invoice numbering during transit - Section 129 of the CGST Act, 2017 read with Rule 46(b) of the CGST Rules, 2017 - Goods were dispatched by a registered supplier to a registered recipient in another State, and the vehicle was intercepted in transit with a tax invoice, e-way bill and consignment note - On verification, earlier tax invoices of the supplier were found to be not in sequential order as required under Rule 46(b), and the proper officer detained the vehicle and goods and imposed penalty under Section 129(3), which was deposited under protest - Whether non-consecutive issuance of ... [Read more]

GST - Penalty for non-sequential invoice numbering during transit - Section 129 of the CGST Act, 2017 read with Rule 46(b) of the CGST Rules, 2017 - Goods were dispatched by a registered supplier to a registered recipient in another State, and the vehicle was intercepted in transit with a tax invoice, e-way bill and consignment note - On verification, earlier tax invoices of the supplier were found to be not in sequential order as required under Rule 46(b), and the proper officer detained the vehicle and goods and imposed penalty under Section 129(3), which was deposited under protest - Whether non-consecutive issuance of tax invoices detected during transit verification warrants detention, seizure and penalty under Section 129(3) or is a mere technical breach attracting at most the general penalty under Section 125 - HELD - The movement of goods between two registered dealers was genuine and backed by valid documents, and the quantity and description of goods matched perfectly. Section 129 applies only when goods are transported in contravention of the provisions of the Act and the Rules, and it is intended to penalise tax evaders, clandestine removal and movement of goods without proper documentation. Where the e-way bill, quantity and goods match and the transaction is fully recorded in the books of both registered entities, there is no intention to evade tax or mens rea. A clerical or sequential error in invoice numbering is a technical irregularity and does not transform a legitimate transaction into an illegal or untaxed transit movement, and the transaction was revenue neutral. Venial and technical breaches should not be visited with severe financial penalties unless a substantive contravention or loss of revenue is established - If the Department wished to penalise a technical infraction of Rule 46, the appropriate recourse was Section 125 and not detention and seizure under Section 129, and even under Section 125 deliberate non-compliance must be established, which is absent. The authorities of the recipient State also have no jurisdiction to adjudicate a violation of Rule 46(b) by a supplier registered in another State - The order of the FAA quashing the penalty under Section 129(3) is upheld and the appeal of the Department is dismissed [Read less]

GST - Demand on the basis of e-way bill data - Section 73 of CGST Act – Issue of SCN on the basis of a report of the Directorate General of Analytics and Risk Management showing that the tax liability in GSTR-3B was less than the tax liability computed on the value of e-way bills. The demand with interest and penalty was confirmed under Section 73 on the grounds that the Appellant did not produce work orders or delivery challans of the principal and that the mismatch established outward movement of goods - The Appellant contended that the e-way bills were generated by the principal manufacturers for goods sent for job wo... [Read more]

GST - Demand on the basis of e-way bill data - Section 73 of CGST Act – Issue of SCN on the basis of a report of the Directorate General of Analytics and Risk Management showing that the tax liability in GSTR-3B was less than the tax liability computed on the value of e-way bills. The demand with interest and penalty was confirmed under Section 73 on the grounds that the Appellant did not produce work orders or delivery challans of the principal and that the mismatch established outward movement of goods - The Appellant contended that the e-way bills were generated by the principal manufacturers for goods sent for job work and that it had invoiced and paid tax only on job work charges. Whether tax can be demanded merely on the value of goods covered by e-way bills as supply by the Appellant, along with interest and penalty - HELD - There is no evidence in the SCN that the goods covered by the e-way bills were supplied by the Appellant. The SCN was issued only on the basis of information showing a difference in value and was not the outcome of any investigation that the goods constituted a taxable supply - The Appellant established with documents for a sample case that the e-way bills were generated for movement of goods sent by the principal manufacturer for job work and for their return after job work. The trail consisted of a delivery challan marked for job work only, an e-way bill with the reason as outward job work, a consignment note, an invoice for job work charges and an e-way bill for job work returns - In the absence of any other evidence which clearly establishes evasion or non-payment of tax, there is no legal basis for demanding tax merely on the basis of the value of goods declared in the e-way bills - The demand of tax, interest and penalty is set aside and the appeal is allowed - Generation of e-way bill for job work - Rule 138 of CGST Rules - The FAA held that the e-way bill for movement of goods for job work has to be generated by the job worker if registered and that the e-way bills were generated by the Appellant - Whether an e-way bill for movement of goods for job work can be generated only by the registered job worker - HELD - Under Rule 138, the e-way bill has to be generated by a registered person who causes movement of goods where the value of goods exceeds the prescribed limit. In case of inter-state movement, it has to be generated irrespective of value either by the principal manufacturer or by the registered job worker. An unregistered person cannot generate the e-way bill. In case of movement of goods for job work, there is no bar to generating the e-way bill either by the principal manufacturer or by the job worker, as the phrase causes movement of goods provides that flexibility. It makes no difference who generates the e-way bill so long as the details of the consignor and the consignee are correctly declared. The conclusion of the FAA that the e-way bills were generated by the Appellant is factually incorrect, as is evident from the documents submitted by the Appellant - The view taken by the FAA is not correct and it is of little relevance who generated the e-way bills. [Read less]

GST - Validity of proceedings for penalty under Section 129(1) of CGST Act - Vehicle carrying goods with a tax invoice and e-way bill was intercepted while unloading the goods at the premises of a dealer different from the place of delivery shown in the e-way bill. The notice under Section 129(3) alleged only that the person in charge failed to produce documents for unloading - Whether penalty under Section 129(1) can be proposed without specifying the provisions of the Act or Rules that have been contravened - HELD - Section 129(1) can be invoked only when there is a contravention of the Act or Rules, and such contraventi... [Read more]

GST - Validity of proceedings for penalty under Section 129(1) of CGST Act - Vehicle carrying goods with a tax invoice and e-way bill was intercepted while unloading the goods at the premises of a dealer different from the place of delivery shown in the e-way bill. The notice under Section 129(3) alleged only that the person in charge failed to produce documents for unloading - Whether penalty under Section 129(1) can be proposed without specifying the provisions of the Act or Rules that have been contravened - HELD - Section 129(1) can be invoked only when there is a contravention of the Act or Rules, and such contravention is a sine qua non for its invocation. The SCN did not mention any specific provision of the Act or Rules that was contravened. The order-in-original relied on Sections 143(1) and 31 and Rules 45(1), 46 and 55, none of which was cited in the SCN. The Appellant was thus left to defend charges which were not intimated to him in the notice. The SCN delineates the scope of the proceedings, and any ground, reasoning or claim which does not figure in it cannot be permitted to adversely affect the noticee. The proceedings are void ab initio and are vitiated by a breach of the principles of natural justice - The order in appeal is set aside and appeal is allowed - Penalty on goods sent for job work - The adjudicating authority recorded that evidence of transfer of goods to the job worker and an e-way bill for job work were furnished after the interception. The authority nevertheless held that a taxable supply could not be ruled out because the recipient was also a trader - Whether penalty under Section 129(1) is leviable on goods that have been sent for job work - HELD - The adjudicating authority conceded that the transaction was one of job work. The only reason for the penalty was that the documents were not available at the time of detention. The later observations on the possibility of tax suppression were contrary to the earlier finding and rested on conjectures, apprehensions and speculation without any evidence - Once a transaction is accepted as job work, its nature cannot be altered merely because of a discrepancy in the time of generation of the e-way bill. Penalty under Section 129(1) is leviable only in terms of the tax payable on such goods. Under Section 143(1), goods are sent for job work without payment of tax, so no tax is payable on the goods. Once tax on the goods is non est, penalty under Section 129(1) is not leviable - The levy of penalty is not sustainable and the appeal is allowed [Read less]

GST - Classification of Rice Husk Board - Heading 4410 and Heading 4411 of the Customs Tariff - Applicant manufactured a board by mixing fibre obtained from rice husk with PVC resin as binding agent, calcium carbonate and additives. The mixture was processed through extrusion, sizing and cutting - Applicant contended that the product is a Natural Fibre Composite Board and not a particle board - Whether the board is classifiable as particle board under Heading 4410 or as fibre board under Heading 4411 - HELD - The Applicant framed a different question and named the product differently in its fresh submission. The manufactur... [Read more]

GST - Classification of Rice Husk Board - Heading 4410 and Heading 4411 of the Customs Tariff - Applicant manufactured a board by mixing fibre obtained from rice husk with PVC resin as binding agent, calcium carbonate and additives. The mixture was processed through extrusion, sizing and cutting - Applicant contended that the product is a Natural Fibre Composite Board and not a particle board - Whether the board is classifiable as particle board under Heading 4410 or as fibre board under Heading 4411 - HELD - The Applicant framed a different question and named the product differently in its fresh submission. The manufacturing process, the submissions and the sales invoices show that the product is Rice Husk Board. The reference to Natural Fibre Composite Board is therefore considered as a reference to Rice Husk Board - The test reports from an accredited laboratory, read with the laboratory's clarification that the term "Rice Husk Ash" denotes rice husk fibre, establish the constituents of the product. Rice husk is a ligneous material. Heading 4410 covers particle board, made from particles of wood or ligneous material, and the HSN notes state that the organic binder in particle board generally does not exceed a prescribed share of the weight of the board - The PVC binder in the Applicant's product is much higher than that share. Fibres are first extracted from rice husk before being mixed with PVC resin and additives. Only if rice husk were directly added with binders without extracting the fibres would the product be a particle board. Heading 4411 covers fibre board of wood or other ligneous materials, whether or not bonded with resins or other organic substances - The manufacturing process and the properties of the product match the HSN notes to Heading 4411. Indian Standard specifications are not mandatory for determining classification, which is governed by the General Rules of Interpretation, Section Notes and the HSN, based on composition, material and essential character. The product is a fibre board classifiable under Heading 4411 – Ordered accordingly - Rate of GST on Rice Husk Board - Serial No. 92 of Schedule II to Notification No. 01/2017-Central Tax (Rate) and Serial No. 292 of Schedule I to Notification No. 09/2025-Central Tax (Rate) - Applicant sought a ruling on the applicability of the rate under the earlier notification and the benefit of the reduced rate effective from 22.09.2025 - Whether Rice Husk Board is covered by the said entries and the rate of tax applicable for the period before and after 22.09.2025 - HELD - Rice Husk Board is specifically mentioned at item (c) of Serial No. 92 of Schedule II of Notification No. 01/2017-Central Tax (Rate) for goods falling under Chapter 44 or any Chapter. Notification No. 01/2017 was superseded by Notification No. 09/2025 with effect from 22.09.2025. Rice Husk Board is mentioned at item (c) of Serial No. 292 of Schedule I of Notification No. 09/2025 - The board attracts GST at the rate of 12% for the period prior to 22.09.2025. It attracts GST at the rate of 5% with effect from 22.09.2025. [Read less]

GST - Supply of tea along with ancillary items - Composite supply or mixed supply under Section 2(30), Section 2(74) and Section 8 of the CGST Act, 2017 - Applicant, a manufacturer of tea, proposed to pack in a single retail pack various types of tea with items such as a stainless steel spoon, plastic spoon, glass tea cup, wooden honey dipper and plastic honey spoon. The Applicant submitted that there would be a single price, a single invoice and no separate consideration for the item packed with the tea, and that the items were included only to facilitate consumption of tea. Tea attracts GST at 5%. The spoons, cup and pla... [Read more]

GST - Supply of tea along with ancillary items - Composite supply or mixed supply under Section 2(30), Section 2(74) and Section 8 of the CGST Act, 2017 - Applicant, a manufacturer of tea, proposed to pack in a single retail pack various types of tea with items such as a stainless steel spoon, plastic spoon, glass tea cup, wooden honey dipper and plastic honey spoon. The Applicant submitted that there would be a single price, a single invoice and no separate consideration for the item packed with the tea, and that the items were included only to facilitate consumption of tea. Tea attracts GST at 5%. The spoons, cup and plastic honey spoon attract 18% while the wooden honey dipper attracts 5% - Whether the supply of tea along with the said items is a composite supply or a mixed supply, and the rate of tax applicable - HELD - A composite supply requires two or more taxable supplies which are naturally bundled and supplied in conjunction with each other in the ordinary course of business. The indicators of natural bundling are the perception of the customer, the practice of other suppliers in the same line of business, the nature of the supplies, and whether the elements are integral to one overall supply. None of these indicators apply - The customer does not expect such bundling when buying tea, and majority of similar businesses do not bundle such items as a matter of course. The items are not required to enjoy tea, and they are not integral to the overall supply such that their removal would affect its nature. The Applicant itself stated that the items were included to facilitate consumption and to test the market. The supply is therefore not a composite supply - A mixed supply requires that the supply is not a composite supply, that it is for a single price, and that the items can be supplied separately and are not dependent on each other. The tea and the other items are sold separately in the market and are not dependent on each other. All ingredients of a mixed supply are present. Under Section 8(b), a mixed supply is treated as the supply which attracts the highest rate of tax. Tea packed with a spoon, tea cup or plastic honey spoon is taxable at the higher rate of the two items. Tea packed with the wooden honey dipper attracts the same rate for both items - The supply is a mixed supply. It is taxable at 18% where tea is packed with the stainless steel spoon, plastic spoon, glass tea cup or plastic honey spoon, and at 5% where tea is packed with the wooden honey dipper – Ordered accordingly - HSN code to be mentioned in a mixed supply - Section 8(b) of the CGST Act, 2017 - Applicant sought to know the HSN code to be used for the bundled supplies - Whether the HSN code of tea or of the ancillary item is to be mentioned - HELD - In a mixed supply, the supply is treated as that particular supply which attracts the highest rate of tax. The HSN code of that supply is therefore to be mentioned. Where the rate of tax of both the supplies is equal, the CGST Act is silent as to the HSN code. In such instances, the HSN code of any of the supplies in the mixed supply can be mentioned - The HSN code of the supply attracting the highest rate is to be mentioned. Where the rates are the same, the HSN code of any of the supplies can be mentioned. [Read less]

GST - Classification of ophthalmic medical chairs, tables and trolleys - Heading 9018 and Heading 9402 of the Customs Tariff - Applicant manufactured motorized surgeon's chairs, doctor's sitting stools, ophthalmic instrument tables, ophthalmic refraction chair units, eye operating tables and ophthalmic instrument trolleys. These were supplied to eye hospitals and clinics. The Applicant submitted that the products were integral components of ophthalmic diagnostic and surgical systems and not general-purpose furniture - Whether the products are classifiable under Heading 9018 of Chapter 90 as ophthalmic apparatus or under He... [Read more]

GST - Classification of ophthalmic medical chairs, tables and trolleys - Heading 9018 and Heading 9402 of the Customs Tariff - Applicant manufactured motorized surgeon's chairs, doctor's sitting stools, ophthalmic instrument tables, ophthalmic refraction chair units, eye operating tables and ophthalmic instrument trolleys. These were supplied to eye hospitals and clinics. The Applicant submitted that the products were integral components of ophthalmic diagnostic and surgical systems and not general-purpose furniture - Whether the products are classifiable under Heading 9018 of Chapter 90 as ophthalmic apparatus or under Heading 9402 of Chapter 94 as medical or surgical furniture - HELD - The photographs and description of the products show that they are furniture used in the medical and surgical fields. Heading 9018 covers instruments and appliances used in medical, surgical, dental or veterinary sciences, and the products are not mentioned in it. The HSN notes to Heading 9018 specifically exclude medical or surgical furniture such as operating tables, examination tables and hospital beds, which are covered by Heading 9402. The products therefore do not fall under Chapter 90 or Heading 9018. The HSN notes to Heading 9402 cover operating tables, beds and seats for use in eye treatment, special seats for doctors and surgeons, and small tables and trolleys specially designed for instruments. A plain comparison shows that the products are undoubtedly covered by Heading 9402 - The motorized surgeon's chairs, doctor's sitting stools and ophthalmic refraction chair units are classifiable under sub-heading 94021090. The eye operating tables, ophthalmic instrument trolleys and ophthalmic instrument tables are classifiable under sub-heading 94029090 – Ordered accordingly - Rate of GST on medical and surgical furniture - Serial No. 611 of Schedule II to Notification No. 09/2025-Central Tax (Rate) - Applicant contended that the products being instruments and appliances under Heading 9018 would attract GST at 5% - Whether the products attract GST at 5% or at the rate applicable to Heading 9402 - HELD - Serial No. 611 of Schedule II of the Notification covers Heading 9402, which comprises medical, surgical, dental or veterinary furniture and parts thereof. Since the products are classified under Heading 9402, they are covered by Serial No. 611 - The products are liable to GST at the rate of 18%. [Read less]

GST - Classification of biodegradable carry bags - Chapter 39 of the Customs Tariff - Applicant manufactured Bio Carry Bags from compostable polymers or biodegradable plastic substitutes. The Applicant claimed that the bags were made in compliance with the standard for compostable plastics. It also relied on certificates and a test report - Whether the bags are classifiable under Chapter 39 as plastic articles or under Chapter 48 as paper-based bags - HELD - The primary raw materials of the bags are compostable polymers or biodegradable plastic substitutes, which are plastic materials. The bags should therefore be covered ... [Read more]

GST - Classification of biodegradable carry bags - Chapter 39 of the Customs Tariff - Applicant manufactured Bio Carry Bags from compostable polymers or biodegradable plastic substitutes. The Applicant claimed that the bags were made in compliance with the standard for compostable plastics. It also relied on certificates and a test report - Whether the bags are classifiable under Chapter 39 as plastic articles or under Chapter 48 as paper-based bags - HELD - The primary raw materials of the bags are compostable polymers or biodegradable plastic substitutes, which are plastic materials. The bags should therefore be covered under Chapter 39 which covers plastics and articles thereof. Articles of compostable polymers or biodegradable plastic substitutes are not covered under any of the headings 3901 to 3925. They fall under the residual heading 3926 covering other articles of plastics. There is no specific entry for such bags in the sub-headings of heading 3926 - The bags are classifiable under sub-heading 39269099 – Ordered accordingly - Applicability of Serial No. 319 of Schedule I to Notification No. 09/2025-Central Tax (Rate) - Paper sacks and bags and biodegradable bags - Applicant claimed that the bags are covered by the entry for paper sacks, bags and biodegradable bags. Heading 3926 is otherwise covered by Serial No. 127 of Schedule II - Whether the bags are covered by Serial No. 319 of Schedule I attracting GST at 5% - HELD - Serial No. 319 is a newly inserted entry. The minutes of the 54th meeting of the GST Council show that the discussion concerned paper sacks and bags, with a request to include biodegradable bags made from starch which resemble plastic. The entry therefore covers both paper sacks and bags as well as biodegradable bags. Its purpose is to promote eco-friendly products. Chapter 39 is included in the entry to encourage production of plastic bags which are biodegradable in nature - The Interim Report indicates that the sample conforms to the standard for compostable plastics in the disintegration and biodegradation tests. However, the report is issued in the name of a sister concern which supplies the raw material. Further tests were still in progress, and the report is valid only till the issuance of the final Test Report. Since Serial No. 319 applies, there is no need to discuss Serial No. 127 of Schedule II - The bags are covered by Serial No. 319 of Schedule I and are liable to GST at the rate of 5%. The ruling is strictly subject to the validity of the Applicant's claim that the bags are biodegradable. [Read less]

GST - Writ jurisdiction against order under Section 74 - Alternative remedy of appeal - Petitioner challenged an order-in-original confirming demand under Section 74 in relation to alleged availment and passing on of ineligible Input Tax Credit through invoices unsupported by genuine supplies, in a network of firms investigated by the Department. The Petitioner contended that the SCN was non-speaking and omitted vital particulars required to invoke Section 74 - Whether the writ petition against the order can be entertained when a statutory remedy of appeal is available and the SCN is alleged to be non-speaking - HELD - The... [Read more]

GST - Writ jurisdiction against order under Section 74 - Alternative remedy of appeal - Petitioner challenged an order-in-original confirming demand under Section 74 in relation to alleged availment and passing on of ineligible Input Tax Credit through invoices unsupported by genuine supplies, in a network of firms investigated by the Department. The Petitioner contended that the SCN was non-speaking and omitted vital particulars required to invoke Section 74 - Whether the writ petition against the order can be entertained when a statutory remedy of appeal is available and the SCN is alleged to be non-speaking - HELD - The existence of an alternative statutory remedy does not bar the exercise of jurisdiction under Article 226, but where the statute provides a mechanism to challenge orders, the writ court ordinarily exercises restraint. The mere use of expressions such as fraud, wilful misstatement or suppression of facts is insufficient to invoke Section 74, and the factual basis must be discernible from the SCN itself - The SCN in the present case is a common notice running into nearly eighty pages and contains a detailed account of the alleged transactions and the modus operandi involving multiple firms. The fact that the notice is common to several noticees does not render it deficient, and the number of noticees by itself does not establish the liability of any individual noticee. The Adjudicating Authority passed the order after considering the reply of the Petitioner. The Petitioner can urge before the appellate authority that the notice or the material relied upon does not satisfy the requirements of Section 74 - The Court does not interfere in writ jurisdiction, the Petitioner is relegated to the statutory remedy of appeal and no final opinion is expressed on the merits – The petition is disposed of [Read less]

GST - Refund of unutilised Input Tax Credit accumulated due to inverted tax structure - Section 54(3)(ii) of the CGST Act, 2017 - Respondent was awarded a contract for construction of elevated structures, including viaduct and stations, for a metro rail project, where the supply attracted a lower rate of GST while most inputs carried higher rates, due to which ITC accumulated – Dept rejected the refund claim, holding that the supply fell under sub-item (b) of Item 5 of Schedule II of the CGST Act, being construction of a complex, building or civil structure, in respect of which refund of unutilised ITC was not permissibl... [Read more]

GST - Refund of unutilised Input Tax Credit accumulated due to inverted tax structure - Section 54(3)(ii) of the CGST Act, 2017 - Respondent was awarded a contract for construction of elevated structures, including viaduct and stations, for a metro rail project, where the supply attracted a lower rate of GST while most inputs carried higher rates, due to which ITC accumulated – Dept rejected the refund claim, holding that the supply fell under sub-item (b) of Item 5 of Schedule II of the CGST Act, being construction of a complex, building or civil structure, in respect of which refund of unutilised ITC was not permissible by notification - Whether the supply made by the Respondent is a composite supply of works contract under Item 6 of Schedule II or construction service under Item 5(b) of Schedule II, and whether refund could be denied on that ground - HELD - Works contract as defined in Section 2(119) is a composite supply under Item 6 of Schedule II. There was no dispute that the activities of the Respondent are covered under the definition of works contract, as neither the Adjudicating Authority nor the Appellate Authority disputed it; the averments in the appeal did not dispute it, and the Appellate Authority itself recorded that the Respondent undertook works contract services - The Revenue's contention that the contract was not examined was at variance with its own case in the appeal. There is no doubt that the Respondent is engaged in providing composite supplies under Item 6, and the refund claim could not be denied on the ground that the services fell within clause (b) of Item 5 of Schedule II to CGST Act - The view of the learned Single Judge is upheld and the appeal is dismissed on merits - GST - Condonation of delay in filing writ appeal by Revenue - The Revenue filed a writ appeal against the order of the learned Single Judge after a delay of 402 days, and sought condonation on the ground that the certified copy was received in April 2025, the file was placed before the concerned officer only in December 2025, and the opinion of the law office, the Government Order and the finalisation of the appeal took further months - Whether the delay can be condoned - HELD - There was no explanation why the judgment was not even placed before the concerned officer for more than ten months after the copy was available with the Department. The delay exceeded a reasonable period, and there were no grounds to justify that the appellant was prevented from filing the appeal within the stipulated period - The appeal is dismissed on account of delay. [Read less]

GST - Penalty for mismatch in place of dispatch - Section 129 of the CGST Act, 2017 - Vehicle carrying areca nuts was intercepted and the driver produced e-invoices and e-way bills showing the place of dispatch in Assam, while the driver's statement and the transporter's goods receipt mentioned Kolkata as the place of dispatch - The goods were seized and penalty was imposed under Section 129 on the ground of breach of law, and the FAA dismissed the appeal - Appellant, the recipient, contended that the discrepancy was minor and that the goods had been dispatched by rail from the supplier's location to Kolkata and thereafter... [Read more]

GST - Penalty for mismatch in place of dispatch - Section 129 of the CGST Act, 2017 - Vehicle carrying areca nuts was intercepted and the driver produced e-invoices and e-way bills showing the place of dispatch in Assam, while the driver's statement and the transporter's goods receipt mentioned Kolkata as the place of dispatch - The goods were seized and penalty was imposed under Section 129 on the ground of breach of law, and the FAA dismissed the appeal - Appellant, the recipient, contended that the discrepancy was minor and that the goods had been dispatched by rail from the supplier's location to Kolkata and thereafter transported by road, the transporter having mentioned Kolkata in the goods receipt - Whether a mere mismatch in the place of dispatch without intention to evade tax amounts to violation or breach attracting penalty under Section 129 - HELD - The recipient is based in Uttar Pradesh and the tax in respect of the transactions accrued to that State. The documents produced at the time of interception, read with the returns filed by the supplier and the recipient, establish that both consignments were duly accounted for and the applicable tax had been discharged. The transactions were reflected in GSTR-2A and there was no basis to allege any intention to evade tax. A mere technical error in the dispatch location mentioned in the e-way bill, in the absence of intent to evade tax or discrepancy in goods, does not warrant seizure or imposition of penalty under Section 129. Procedural lapses without substantive irregularities should not lead to punitive consequences - The orders of the adjudicating authority and the FAA are quashed, the penalty if paid is to be refunded, and the appeal is allowed [Read less]

Central Excise - Eligibility to CENVAT credit on General Insurance Service - Rule 2(l) of the CENVAT Credit Rules, 2004 - Respondent, a manufacturer of excisable goods, availed CENVAT credit of service tax paid on General Insurance Service for the period from January 2010 to January 2015 - Department alleged that after deletion of the words activities relating to business from the definition of input service with effect from 01.04.2011, General Insurance was not used directly or indirectly in relation to the manufacture of final products, and the Order-in-Original confirmed the demand with interest and penalty - The Tribun... [Read more]

Central Excise - Eligibility to CENVAT credit on General Insurance Service - Rule 2(l) of the CENVAT Credit Rules, 2004 - Respondent, a manufacturer of excisable goods, availed CENVAT credit of service tax paid on General Insurance Service for the period from January 2010 to January 2015 - Department alleged that after deletion of the words activities relating to business from the definition of input service with effect from 01.04.2011, General Insurance was not used directly or indirectly in relation to the manufacture of final products, and the Order-in-Original confirmed the demand with interest and penalty - The Tribunal set aside the Order-in-Original and the Appellant-Revenue filed an appeal under Section 35G of the Central Excise Act, 1944 - Whether the Respondent is eligible to avail CENVAT credit on General Insurance Service and whether any substantial question of law arises from the order of the Tribunal - HELD - A comparison of Rule 2(l) before and after the amendment shows that the only difference is the deletion of the words activities relating to business. The Department's own clarification records that the definition of input service was aligned with the definition of input so that services related to goods excluded from inputs are also excluded from input services, and that the expression activities relating to business was deleted while specific services were added to the list. The amendment was thus brought only with a view to harmonise the definition of input and input service. The services excluded by the amended definition do not include General Insurance Service of the kind availed by the Respondent. The clarification on activities relating to business concerned services such as sale of dutiable goods on commission basis and did not extend to the service availed by the Respondent. The Tribunal, following consistent decisions, held that General Insurance Service is directly or indirectly related to the manufacture of the final product and is admissible as input service, and no substantial question of law arises from that view - The Revenue appeal is dismissed [Read less]

GST - Classification of non-alcoholic fermented fruit beverage - Chapter 22 of the Customs Tariff - Applicant manufactured a beverage from black grapes, water, sugar and yeast through fermentation and sold it as non-alcoholic red wine. It had been paying tax at the higher rate. It sought classification as a fruit pulp or fruit juice based drink, as its competitors were doing. It produced an old government laboratory certificate that showed alcohol content, and a fresh report from a private laboratory - Whether the beverage is classifiable as a fruit pulp or fruit juice based drink under HSN 2202 9920, and the correct HSN c... [Read more]

GST - Classification of non-alcoholic fermented fruit beverage - Chapter 22 of the Customs Tariff - Applicant manufactured a beverage from black grapes, water, sugar and yeast through fermentation and sold it as non-alcoholic red wine. It had been paying tax at the higher rate. It sought classification as a fruit pulp or fruit juice based drink, as its competitors were doing. It produced an old government laboratory certificate that showed alcohol content, and a fresh report from a private laboratory - Whether the beverage is classifiable as a fruit pulp or fruit juice based drink under HSN 2202 9920, and the correct HSN code and rate of tax for the beverage - HELD - Yeast converts the sugars of the fruit into alcohol, which distinguishes wine from fruit juice. The use of yeast in fermentation, coupled with the sale of the product as non-alcoholic red wine, shows that it cannot be termed as fruit juice. Wine is defined in the Food Safety and Standards (Alcoholic Beverages) Regulations as the beverage produced by alcoholic fermentation of the juice of grapes. The product is therefore a fermented beverage and not a fruit pulp or fruit juice based drink - Chapter Note 3 to Chapter 22 treats a beverage as non-alcoholic only if its alcoholic strength by volume does not exceed the prescribed limit. The old government laboratory certificate was more than a decade old and showed alcohol content. The fresh report was issued by a private laboratory and not by a certified government laboratory authorised for such testing. The alcohol content cannot be determined without valid documentary evidence - In the absence of valid documentary proof, the correct HSN code and the rate of tax cannot be determined – Ordered accordingly [Read less]

Central Excise - Reversal of CENVAT credit on shortage of raw materials - Rule 14 of the CENVAT Credit Rules, 2004 - Respondent-assessee, a manufacturer, found shortage of raw materials in physical stock verification after a theft was detected and reported to the police, and shortages were adjusted in the SAP system through a particular movement entry - Department alleged that the shortages were unreconciled, that the entry was a fictitious book entry, and that the Respondent had not used the inputs on which credit was taken, and the demand was confirmed - The Tribunal set aside the Order-in-Original and the Appellant-Reve... [Read more]

Central Excise - Reversal of CENVAT credit on shortage of raw materials - Rule 14 of the CENVAT Credit Rules, 2004 - Respondent-assessee, a manufacturer, found shortage of raw materials in physical stock verification after a theft was detected and reported to the police, and shortages were adjusted in the SAP system through a particular movement entry - Department alleged that the shortages were unreconciled, that the entry was a fictitious book entry, and that the Respondent had not used the inputs on which credit was taken, and the demand was confirmed - The Tribunal set aside the Order-in-Original and the Appellant-Revenue filed an appeal under Section 35G of the Central Excise Act, 1944 - Whether CENVAT credit attributable to raw materials found short in physical stock verification is required to be reversed, and whether the Tribunal wrongly placed the burden of proof on the Revenue contrary to Rule 9(5) - HELD - The Tribunal recorded findings of fact that only one event of theft was detected and reported, that there was no evidence as to where and when the raw material moved out of the factory, and that the Department merely assumed that the shortage was due to theft or removal. There was no allegation that the original credit taken was incorrect or improper - The SAP entry was made only to tally the physical stock with the inventory in the software, as the shortage caused by mis-handling of accounts could not be entered in the SAP accounting at a later stage, and the adjustment was made on stock taking at the time of implementation of the SAP system - The statement relied upon by the Revenue was interpreted in a truncated manner without considering that the entry was made only to see that the physical stock tallied with the inventory. There was no positive evidence that the inputs found short were disposed of otherwise than in the manufacture of final products, and a demand cannot be based on assumption and presumption without tangible evidence. Improper accounting of inputs cannot be a ground to demand CENVAT credit. The decision relied upon by the Revenue for the burden of proof under the Rules is not applicable where the demand itself rests on assumption and presumption - No substantial question of law arises and the Revenue appeal is dismissed - Reliance on statements of third party without cross-examination - Principles of natural justice - Department relied upon the statement of a person who stated that he arranged CENVATABLE invoices for the Respondent without actual supply of materials, and the request of the Respondent for cross-examination was rejected on the ground that the person was a co-noticee and that the statement was only corroborative of the admissions of employees - Whether the Department could rely on the statement for confirming the demand of CENVAT credit without affording cross-examination - HELD - The person making the statement produced no documentary evidence in support of his averments and did not give details of the invoices or the period to which they belonged. No reliance can be placed on the oral statement of a person who has not been subjected to cross-examination during adjudication. The denial of cross-examination was fatal to the reliance placed on the statement. The statement of the former employee related to the adjustment of shortages found in stock taking in the SAP system and was in a different context, and it could not corroborate the allegation of invoices arranged without actual supply of materials. The cross-examination of the person would not have incriminated him in respect of the demand of CENVAT credit - The Tribunal was justified in holding that without affording cross-examination the statement could not be relied upon - The appeal is dismissed. [Read less]

GST - Classification of Kraft paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags by using Kraft paper and adhesive glue. The bags were plain or printed, uncoated, without lamination or plastic content, unbranded and without handles. They were supplied for packaging in pharmaceutical stores, grocery shops and by small traders - Whether the Kraft paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Sub-Heading 4819 covers cartons, boxes, cases, bags and other packing containers of paper, and the impugned bags being pap... [Read more]

GST - Classification of Kraft paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags by using Kraft paper and adhesive glue. The bags were plain or printed, uncoated, without lamination or plastic content, unbranded and without handles. They were supplied for packaging in pharmaceutical stores, grocery shops and by small traders - Whether the Kraft paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Sub-Heading 4819 covers cartons, boxes, cases, bags and other packing containers of paper, and the impugned bags being paper bags are covered by it. The bags are made of Kraft paper, are unbranded and without handles, and do not have the base width prescribed for tariff item 4819 3000. Correlating these characteristics with the HSN notes to Sub-Heading 4819, the bags find a specific entry under tariff item 4819 4000 covering other sacks and bags, including cones. The bags are classified under HSN 48194000 – Ordered accordingly - Exemption from tax and applicability of Serial No. 319 of Schedule I to Notification No. 9/2025-CT (Rate) - Paper sacks and bags - Applicant claimed that the bags, being eco-friendly and compostable, should attract the concessional rate under Serial No. 319 of Schedule I and not the rate under Serial No. 185 of Schedule II - Whether the Kraft paper bags are exempt from GST or are covered by Serial No. 319 of Schedule I, and the rate of tax applicable - HELD - The exemption notification for intra-State supplies of goods does not contain an entry for tariff item 4819 4000. The bags are therefore not exempt from GST. Two competing entries are found for the paper bags, one under Serial No. 319 of Schedule I and the other under Serial No. 185 of Schedule II. Serial No. 319 covers paper sacks and bags and biodegradable bags falling under Chapters 39 and 48, and it takes into account the taxability of both - The reduced rate reflects the Government's push towards eco-friendly alternatives to plastics. Paper made from natural plant fibres biodegrades through the action of microorganisms without leaving toxic microplastics in the environment. On a plain reading, paper bags manufactured using Kraft paper and adhesive glue are squarely covered by Serial No. 319 of Schedule I - The bags are not exempt from GST. They attract GST at the rate of 5% under Serial No. 319 of Schedule I - Eligibility to Input Tax Credit - Applicant manufactured Kraft paper bags taxable at the concessional rate - Whether the Applicant is eligible to avail Input Tax Credit on the inputs and input services used in the manufacture of the bags - HELD - The eligibility and conditions for availing Input Tax Credit are specified under Section 16 of the CGST Act. Since the bags are taxable at 5%, the Applicant is eligible to avail ITC on the inputs and input services used in the manufacture of the outward supply, subject to satisfying all the conditions prescribed under Section 16 - The Applicant is eligible to avail Input Tax Credit subject to Section 16 conditions. [Read less]

GST - Classification of paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags, Greaseproof paper bags and Glassine paper bags by using the respective papers and adhesive glue. The bags were plain or printed, uncoated, without lamination or plastic content, unbranded and without handles. They were supplied for packaging in pharmaceutical stores, grocery shops and sweet shops - Whether the paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Kraft paper, greaseproof paper and glassine paper are made out of natural plant f... [Read more]

GST - Classification of paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags, Greaseproof paper bags and Glassine paper bags by using the respective papers and adhesive glue. The bags were plain or printed, uncoated, without lamination or plastic content, unbranded and without handles. They were supplied for packaging in pharmaceutical stores, grocery shops and sweet shops - Whether the paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Kraft paper, greaseproof paper and glassine paper are made out of natural plant fibres, which establishes that the bags are goods made out of paper. Sub-Heading 4819 covers cartons, boxes, cases, bags and other packing containers of paper. The bags are unbranded and without handles, and they do not have the base width prescribed for tariff item 4819 3000. Correlating these characteristics with the HSN notes to Sub-Heading 4819, the bags find a specific entry under tariff item 4819 4000 covering other sacks and bags, including cones - The bags are classified under HSN 48194000 – Ordered accordingly - Exemption from tax and applicability of Serial No. 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) - Paper sacks and bags - Applicant claimed that the paper bags, being eco-friendly and biodegradable, are eligible for the concessional rate notified for paper sacks, bags and biodegradable bags - Whether the paper bags are exempt from GST or are covered by Serial No. 319 of Schedule I, and the rate of tax applicable - HELD - The exemption notification for intra-State supplies of goods does not contain an entry for the impugned bags classified under tariff item 4819 4000. The bags are therefore not exempt from GST. Serial No. 319 of Schedule I covers paper sacks and bags and biodegradable bags falling under Chapters 39 and 48, and it takes into account the taxability of both. The reduced rate reflects the Government's push towards eco-friendly alternatives to plastics. Paper made from natural plant fibres biodegrades through the action of microorganisms without leaving toxic microplastics in the environment. Bags manufactured using Kraft, Greaseproof or Glassine paper and adhesive glue qualify as paper bags under Serial No. 319 - The bags are not exempt from GST. They attract GST at the rate of 5% under Serial No. 319 of Schedule I - Eligibility to Input Tax Credit - Section 16 of the CGST Act, 2017 - Applicant manufactured paper bags taxable at the concessional rate - Whether the Applicant is eligible to avail Input Tax Credit on the inputs and input services used in the manufacture of the bags - HELD - The eligibility and conditions for availing Input Tax Credit are specified under Section 16 of the CGST Act and the TNGST Act. Since the bags are taxable at 5%, the Applicant is eligible to avail Input Tax Credit on the inputs and input services used in the manufacture of the outward supply, subject to satisfying all the conditions prescribed under Section 16 - The Applicant is eligible to avail Input Tax Credit subject to Section 16 conditions. [Read less]

GST - Printing and supply of examination related items - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant printed and supplied pre-examination and post-examination items such as question papers, OMR sheets, answer booklets, hall tickets, mark sheets, grade sheets and degree certificates for educational boards and universities. The Applicant also scanned and processed OMR sheets and results. The content to be printed was provided by the educational institutions, while the paper belonged to the Applicant - Whether the printing and supply of examination related items is a supply of goods or a supply of s... [Read more]

GST - Printing and supply of examination related items - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant printed and supplied pre-examination and post-examination items such as question papers, OMR sheets, answer booklets, hall tickets, mark sheets, grade sheets and degree certificates for educational boards and universities. The Applicant also scanned and processed OMR sheets and results. The content to be printed was provided by the educational institutions, while the paper belonged to the Applicant - Whether the printing and supply of examination related items is a supply of goods or a supply of services - HELD - The activity involves the supply of goods by way of paper on which the content is printed and the service of printing itself. Both happen concurrently and are bundled, which makes the activity a composite supply. The principal supply is the predominant element to which the other supply is ancillary. The institutions approached the Applicant for printing of content owned and provided by them and not for supply of paper. The predominant element is therefore the printing service. Where only the content is supplied by the recipient and the physical inputs including paper belong to the printer, printing of the content is the principal supply. Such supply constitutes a supply of service falling under heading 9989 - The printing and supply of examination related items is a supply of services. Ordered accordingly - Exemption for printing of pre-examination items - Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) - Applicant printed and supplied hall tickets, question papers, OMR sheets and answer booklets, including transportation and delivery, for educational boards and universities. The Applicant was charging GST on these services - Whether the printing and supply of pre-examination items is exempt under Serial No. 66 - HELD - Under Serial No. 66(b)(iv), services provided to an educational institution by way of services relating to admission to, or conduct of examination by, such institution are exempt. Central and State Educational Boards are treated as educational institutions for the limited purpose of providing services by way of conduct of examination. Input services relating to the conduct of examination, such as printing of admit cards and question papers, are covered when provided to such institutions. The Applicant's printing is a service provided to educational institutions - The services of printing pre-examination items provided to educational institutions for conducting examination are exempt under Serial No. 66 of the Notification - Exemption for post-examination items and processing of results - Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) - Applicant printed and supplied mark sheets, grade sheets, rank sheets and degree certificates, and scanned OMR sheets and processed results. The Applicant submitted that this activity forms the end of the examination process - Whether these post-examination services are exempt under Serial No. 66 - HELD - Processing and scanning of results and printing of mark sheets and certificates are essential for completing a qualification recognised by law. The post-examination activity is therefore in relation to conduct of examination. The reasons applicable to the pre-examination process apply equally to this activity - The services of printing post-examination items, including scanning of OMR sheets and processing of results provided to educational institutions, are exempt under Serial No. 66 of the Notification. [Read less]