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Customs - Conditions of provisional release - Section 110A of the Customs Act, 1962 - The Appellant imported distillate marine oil declared for industrial use. The test report stated that the sample was most akin to a restricted grade of diesel but had a flash point below the prescribed minimum, and the goods were seized under Section 110. The Commissioner held that the goods could not be treated as the restricted grade at that stage and ordered provisional release under Section 110A. The release was subject to an end-use bond, maintenance of batch-wise records, a bond for the full assessable value and a bank guarantee for... [Read more]

Customs - Conditions of provisional release - Section 110A of the Customs Act, 1962 - The Appellant imported distillate marine oil declared for industrial use. The test report stated that the sample was most akin to a restricted grade of diesel but had a flash point below the prescribed minimum, and the goods were seized under Section 110. The Commissioner held that the goods could not be treated as the restricted grade at that stage and ordered provisional release under Section 110A. The release was subject to an end-use bond, maintenance of batch-wise records, a bond for the full assessable value and a bank guarantee for a percentage of the assessable value. The Appellant complied under financial hardship due to mounting terminal charges, and the goods were provisionally released. The Appellant sought modification of the conditions and discharge of the bank guarantee, relying on decisions in the cases of similarly situated importers. The Respondent justified the order - Whether the bank guarantee and the other conditions imposed for provisional release are liable to be set aside - HELD - In a recent matter concerning a similar product, the Tribunal considered the same test reports and clarifications of the laboratory. The test reports were not definitive as to whether the distillate oil was diesel or the restricted grade. Diesel fraction is a broad category including the restricted grade and other distillate oils, and cloud point cannot be the sole basis for seizure of the cargo. The condition of furnishing a bank guarantee is against the directions given in the cases of identical goods and is liable to be set aside. The end-use certificate has already been produced on record, and any remaining certificate shall be produced before the authorities - The bank guarantee shall be returned on production of the end-use certificate and execution of a bond - The appeal is allowed [Read less]

Central Excise - Eligibility to CENVAT Credit on Service Tax paid on broadcasting services - Rules 2(1), 3 and 9(2) of the CENVAT Credit Rules, 2004 - The Respondent, a manufacturer, engaged an advertising agency for television advertisement of its products. The agency booked air time with broadcasting channels, which billed the agency and paid Service Tax on the broadcasting charges. The agency raised invoices on the Respondent showing the broadcasting charges and the Service Tax thereon as reimbursement, along with its own commission. The Department denied credit of the Service Tax on broadcasting charges by SCN, since t... [Read more]

Central Excise - Eligibility to CENVAT Credit on Service Tax paid on broadcasting services - Rules 2(1), 3 and 9(2) of the CENVAT Credit Rules, 2004 - The Respondent, a manufacturer, engaged an advertising agency for television advertisement of its products. The agency booked air time with broadcasting channels, which billed the agency and paid Service Tax on the broadcasting charges. The agency raised invoices on the Respondent showing the broadcasting charges and the Service Tax thereon as reimbursement, along with its own commission. The Department denied credit of the Service Tax on broadcasting charges by SCN, since the channels had billed the agency and not the Respondent. The FAA allowed the credit. The Appellant (Revenue) contended that the broadcasting service was an input service of the agency and not of the Respondent under Rule 2(1). It further contended that Rule 9(2) cannot condone credit taken on invoices not issued by the service provider - Whether the Respondent is eligible to CENVAT credit of Service Tax paid on broadcasting services where the channels' invoices were addressed to the advertising agency - HELD - The appeal fails on its own record. Both members of the Committee of Commissioners agreed that the Order-in-Appeal deserved acceptance on merits, and the appeal was authorised only to keep the issue alive pending the decision in one of the cases relied upon by the FAA. That decision has since attained finality, so the foundation of the appeal no longer exists. The other decision relied upon by the FAA was never challenged and is by itself sufficient to sustain the Order-in-Appeal. On merits, the Revenue's own case is that the agency paid Service Tax only on its commission and did not take credit of the Service Tax charged by the channels. The agency therefore neither used the broadcasting service for any taxable output service of its own nor claimed it as an input service. The amount paid by an advertising agency for space and time in the electronic media, excluding its own commission, is not includible in the value of its taxable service. The only way the tax charged by the channels could reach the advertiser was as a reimbursement shown in the agency's invoice. A service on which the intermediary neither paid tax as part of its output nor took credit as an input cannot be treated as its input service merely because the channel's invoice was addressed to it. The Respondent commissioned the advertisements of its products, bore the Service Tax and used the service in relation to the manufacture of its goods. The service was therefore received by the manufacturer within the meaning of Rule 3, and advertisement falls expressly within the inclusive limb of input service under Rule 2(1). The Revenue's position is also inconsistent, since it allowed credit of the Service Tax on the agency's commission on the very same invoices. Having accepted that the Respondent received the agency service of procuring air time, the Revenue cannot contend that the Respondent did not receive the broadcast so procured. The invoices disclose the Service Tax paid by the channels, the description and value of the service and the particulars of the parties, as Rule 9(2) requires. Credit cannot be denied for a deficiency in the document when payment of tax, receipt of the service and its use are not in dispute - The appeal filed by the Revenue is dismissed and the Order-in-Appeal allowing the CENVAT credit is upheld [Read less]

GST - Reversal of Input Tax Credit on Mismatch with Form GSTR-2A - Section 16(2)(c) of CGST Act, 2017 - The Appellant availed input tax credit in Form GSTR-3B for July 2017 to March 2018 in excess of the amount reflected in Form GSTR-2A - Show cause notice under Section 74 alleging breach of Section 16(2)(c) on the ground that the suppliers had neither reported the supplies nor paid the tax - The FAA affirmed the order after rejecting the amended B2B entries and the supplier certificates produced by the Appellant as not acceptable, without recording reasons - The Appellant contended that the orders are non-speaking, that t... [Read more]

GST - Reversal of Input Tax Credit on Mismatch with Form GSTR-2A - Section 16(2)(c) of CGST Act, 2017 - The Appellant availed input tax credit in Form GSTR-3B for July 2017 to March 2018 in excess of the amount reflected in Form GSTR-2A - Show cause notice under Section 74 alleging breach of Section 16(2)(c) on the ground that the suppliers had neither reported the supplies nor paid the tax - The FAA affirmed the order after rejecting the amended B2B entries and the supplier certificates produced by the Appellant as not acceptable, without recording reasons - The Appellant contended that the orders are non-speaking, that the Circular No. 183/15/2022-GST binds the Respondent, and that proceedings under Section 74 are without jurisdiction in the absence of suppression - Whether the order directing reversal of input tax credit can be sustained where the amended B2B entry and supplier certificates, produced as per the Circular, were rejected by the FAA without reasoned findings - HELD - The Appellant has taken a preliminary objection that the Respondent cannot justify the demand on grounds that do not figure in the SCN. Raising additional grounds at the appellate stage that are not found in the show cause notice is against the principles of natural justice. The enquiry is confined to the case made in the notice, namely the condition in Section 16(2)(c) - The Circular was issued under Section 168(1), and its paragraph 6 extends its application to Financial Year 2017-18 cases where adjudication or appeal proceedings are pending, so it applies to the Respondent - The para 4 of the Circular requires the officer to first seek the details and then ascertain fulfilment of the conditions. The Respondent did not show that the AA or the FAA undertook this exercise - The discrepancy arose from an amendment in the supplier's return and from reporting of supplies against the erstwhile registration of the Appellant, which are supplier-side corrections. The amended B2B entry forms part of Form GSTR-2A generated from the supplier's own declaration and discloses the particulars of the invoice, so it has probative value. Without contrary material, the want of a copy of the invoice cannot sustain the reversal - Where the supplier-wise difference exceeds the prescribed threshold, the Circular requires a certificate of a Chartered Accountant or Cost Accountant bearing a UDIN, and otherwise a certificate from the supplier. The Appellant produced the certificates in the prescribed form. A certificate is itself the means of verification, and the Respondent could have verified the UDIN and the supplier's Form GSTR-3B but did not do so - The Circular does not require the certificate to state the wrong registration number and provides that allowance of credit to the actual recipient does not depend on action against the holder of the registration number wrongly mentioned - Section 155 places the burden of proof on the claimant, but once the material is on record, a bare denial that it is unverified, without verification or contrary material, does not displace it. A difference between Form GSTR-2A and Form GSTR-3B may justify verification but is not conclusive proof of wrong availment - The FAA order is non-speaking. The Appellant established the conditions in Section 16(2) for the credit covered by the amended B2B entry and the certificates, and the demand to that extent is not sustainable and set aside - The appeal filed by the taxpayer is partly allowed - Residual IGST without Certificate - Whether the remaining IGST shortfall can be charged to the Appellant - HELD - The Appellant produced no certificate or other evidence that the supplier paid the tax to the Government, so the burden under Section 155 is not discharged and the condition in Section 16(2)(c) is not shown to be satisfied. Having invoked the Circular as the means of establishing eligibility, the Appellant cannot rely on its prescribed mode of proof for one set of invoices and disclaim it for another, as that would amount to approbating and reprobating, and the conditions of a beneficial instrument apply uniformly to every invoice - The credit for the residual amount is not admissible - Invocation of Section 74, Interest and Penalty - Whether the invocation of Section 74 and the consequential levy of interest and penalty can be sustained - HELD - Section 74 applies only where credit is wrongly availed by reason of fraud, wilful misstatement or suppression of facts to evade tax, and the satisfaction of the proper officer on these ingredients is a jurisdictional requirement. The foundational facts for the inference must be evident from the notice itself, and mere employment of these words does not show application of mind. The notice stated only that the discrepancy would have remained unnoticed without departmental verification and that the Appellant appears to have suppressed the facts. Detection of a discrepancy by the Department is not evidence of suppression, and the word ‘appears’ records a suspicion and not a foundational fact - Mere omission to give correct information is not suppression unless deliberate, and availment of credit without due verification does not amount to suppression, as every transgression of Section 16(2) cannot invite Section 74 without clear evidence of fraud, wilful misstatement or suppression with intent to evade tax. Failure to produce evidence in defence cannot supply, after the notice, an ingredient of suppression that the notice did not disclose. The charge is not established and the notice under Section 74(1) is not sustainable - The tax on the residual credit alone is payable under Section 73, with interest if the credit was utilised and penalty to be computed by the proper officer, the balance demand along with the proceedings under Section 74 is set aside. [Read less]

Service Tax - Extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - The Appellant operates Automalls and facilitates trading in used commercial vehicles. On departmental audit, SCN invoking the extended period proposed recovery of CENVAT credit attributable to trading under Rule 6, denial of credit on input services and recovery of credit on expenditure treated as capital goods, with interest and penalty. The adjudicating authority confirmed the demands and imposed penalty under Section 78. The FAA upheld part of the demand and remanded the rest. The Appellant contended that the proceedings ar... [Read more]

Service Tax - Extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - The Appellant operates Automalls and facilitates trading in used commercial vehicles. On departmental audit, SCN invoking the extended period proposed recovery of CENVAT credit attributable to trading under Rule 6, denial of credit on input services and recovery of credit on expenditure treated as capital goods, with interest and penalty. The adjudicating authority confirmed the demands and imposed penalty under Section 78. The FAA upheld part of the demand and remanded the rest. The Appellant contended that the proceedings arose from audit of its books and returns, that payments and reversals were already made and that the dispute was interpretational. The Respondent contended that the discrepancies were detected only during audit - Whether there is any justification for invoking the extended period of limitation and for sustaining interest and penalty - HELD - Limitation goes to the very recoverability of the demand and is therefore examined first. The normal period under Section 73(1) was one year from the relevant date, and the demand could survive beyond it only if the proviso was validly invoked. The trading activity, input services, credit entries and expenditure were available in the Appellant's records, from which the Department itself made the disputed computations. The Appellant had paid part of the amount with interest and claimed further reversals through ST-3 returns well before the SCN. These circumstances militate against a finding that the transactions or credit were deliberately withheld. The dispute involved interpretation of Rule 6 and of the definition of input service. The substantive question whether credit was reversible is distinct from the requirement of establishing fraud, wilful misstatement, suppression of facts or contravention with intent to evade. Under Section 73(6), the relevant date is determined with reference to the filing of the periodical return. The returns were due on dates more than one year before the SCN, and their subsequent filing cannot retrospectively extend the limitation applicable to a notice already issued. Mere detection of discrepancies during audit, where payments and reversals had already been made, cannot by itself establish the ingredients of the extended period. Since the extended period is not invocable, interest under Section 75 and penalty under Section 78 read with Rule 15 cannot survive - The entire demand is barred by limitation and the interest and penalty are set aside - Reversal of CENVAT credit attributable to trading - Rule 6 of the CENVAT Credit Rules, 2004 - The demand was for short reversal of CENVAT credit attributable to trading for the years 2010-11 and 2011-12. The FAA upheld the demand for 2010-11 and remanded 2011-12 for re-determination under the applicable formula. The Appellant contended that the statutory formula had to be correctly applied from 01.04.2011 and that Rule 6(5) protected the services covered by it - Whether the demand towards reversal of CENVAT credit attributable to trading is sustainable under Rule 6 - HELD - Since the entire demand is already held to be barred by limitation, the merits are examined only briefly as an alternative. The Explanation treating trading as an exempted service became operative from 01.04.2011, and a notification modified the manner of determining the value of trading for the purposes of Rule 6. For the period from 01.04.2011, the computation therefore had to conform to the statutory formula. Rule 6(5) operates independently, notwithstanding the general restrictions under Rule 6(1) to (3). The Department has not satisfactorily demonstrated that the demand was correctly quantified after giving effect to the statutory formula, the reversals already made and the claim under Rule 6(5). A final determination on substantive liability is not necessary since the demand is barred by limitation - The demand towards trading cannot be recovered, and the demand confirmed for 2010-11 and the remand for 2011-12 do not survive - Input service credit and capital goods credit - Rules 2(l) and 2(a) of the CENVAT Credit Rules, 2004 - The Department denied credit on input services such as property valuation, company-secretarial services, expenditure on the launch of an Automall and group critical-illness insurance. It also treated credit on rent, engineering, installation and communication services as capital goods credit, since the expenditure was capitalised. The Appellant had already reversed the latter amount. The Appellant contended that the services had nexus with its business and that capitalisation in the accounts cannot convert a service into capital goods - Whether the denial of input service credit and the demand relating to alleged capital goods credit are sustainable - HELD - Since the entire demand is already held to be barred by limitation, these issues are examined briefly as an alternative. The valuation services and the company-secretarial services have a discernible business nexus, and the Department has not established that they were wholly unrelated to the Appellant's business. The launch expenditure was connected with publicity and promotion of the business, and advertisement and sales promotion were specifically covered within the definition of input service applicable during the relevant period. The Appellant has not established that the group critical-illness insurance fell outside the exclusion applicable to life or health insurance used primarily for personal use or consumption of employees. The denial of this component is not disturbed on merits, but the amount is not recoverable since the extended period is unavailable. Capitalisation of expenditure in the books is only an accounting treatment and does not by itself convert a service into capital goods within the meaning of Rule 2(a). Where the invoices are for services, eligibility has to be examined with reference to the definition of input service. The Department has not established that the disputed amount represented specified goods falling within the definition of capital goods. The reversal made by the Appellant cannot determine the original admissibility of the credit - The finding treating the amount as inadmissible capital goods credit is unsustainable, the remaining components are not recoverable on limitation, and the Order-in-Appeal is set aside to the extent challenged with the appeal allowed. [Read less]

GST - Maintainability of departmental appeal before the Appellate Tribunal - Monetary limit prescribed by Circular No. 207/1/2024-GST dated 26.06.2024 and its exceptions - Respondent claimed refund of accumulated Input Tax Credit under Section 54, which was rejected by the adjudicating authority solely on limitation and allowed by the appellate authority - Appellant-Department filed the appeal under Section 112(3) on the direction of the Principal Commissioner - Respondent contended that the disputed tax was below the monetary limit, that none of the exceptions applied, and that the exception for refunds was confined to in... [Read more]

GST - Maintainability of departmental appeal before the Appellate Tribunal - Monetary limit prescribed by Circular No. 207/1/2024-GST dated 26.06.2024 and its exceptions - Respondent claimed refund of accumulated Input Tax Credit under Section 54, which was rejected by the adjudicating authority solely on limitation and allowed by the appellate authority - Appellant-Department filed the appeal under Section 112(3) on the direction of the Principal Commissioner - Respondent contended that the disputed tax was below the monetary limit, that none of the exceptions applied, and that the exception for refunds was confined to interpretation of the substantive law of entitlement - Whether the appeal is liable to be dismissed in limine as not maintainable on account of the monetary limit - HELD - The right to file the appeal flows from Section 112(3) of the Act, and the review order was passed in exercise of that power. The Circular itself provides that the monetary limits do not apply where the matter relates to refunds, and the dispute being one relating to refund falls squarely within that exclusion. The contention that the exception is confined to the substantive law of entitlement finds no support in the language of the Circular, which speaks of a matter related to refunds without any qualification. The appeal also raises questions of true construction of Section 54(1), Notification No. 13/2022, the proviso to Rule 90(3) and the effect of a deficiency memo, which would govern numerous other cases. Section 120(1) permits instructions on monetary limits only to regulate the discretion of officers and does not curtail the jurisdiction of the Tribunal - The objection on maintainability is rejected and the appeal is held maintainable - Computation of limitation for refund of exporter during the COVID exclusion period - Limitation under Section 54(1) read with Notification No. 13/2022-Central Tax and the judgment of the Hon'ble Supreme Court in the suo motu proceedings on extension of limitation - Respondent exported goods by sea, and the relevant date was taken as the date of Let Export Order on the shipping bills, which fell within the excluded window from 01.03.2020 to 28.02.2022. The first refund application was filed on 22.02.2024. The appellate authority excluded only the days running from the relevant date to the end of the window and left a residual delay of twelve days for the second application - Whether the first refund application was filed within the period of limitation, and whether the computation of the appellate authority is sustainable - HELD - The limitation question is a pure question of law on admitted facts, and the Tribunal is bound to reckon limitation correctly irrespective of the manner of computation adopted by the parties or the authorities below. The direction of the Hon'ble Supreme Court granting ninety days from 01.03.2022 applies only where limitation would have expired within the exclusion window. Where the relevant date itself falls within the window and the two-year period had not started running, the entire period up to 28.02.2022 stands excluded, and the balance period becomes available from 01.03.2022. The day of the relevant date is excluded under Section 9 of the General Clauses Act, 1897. The full period of two years is therefore reckoned from 01.03.2022, and the last date for filing the refund application is 29.02.2024. The first application filed on 22.02.2024 is within time on the computation of the appellate authority, on the computation of the Hon'ble High Court of Andhra Pradesh, and on the computation adopted by the Tribunal – The first refund application is held to be filed within the extended period of limitation - Effect of deficiency memo and relation back of rectified refund application - Effect of a deficiency memo on limitation - Proviso to Rule 90(3) of the CGST Rules, 2017 and paragraph 12 of Circular No. 125/44/2019-GST - Respondent filed the first refund application, which was followed by a deficiency memo stating only that supporting documents were incomplete - The Appellant-Department contended that the second application was a fresh application with a residual delay, that only the period up to the deficiency memo could be excluded, and that the Circular was binding - Whether the second refund application relates back to the first application, and what effect the deficiency memo has on limitation - HELD - A bona fide rectification of deficiencies following a deficiency memo does not give rise to a fresh cause of action or a fresh limitation period, and relates back to the original application as its continuation. The decisions of the Hon'ble High Court of Delhi, which are binding on the Tribunal within its territorial jurisdiction, hold that an application not deficient in material particulars cannot be treated as non est and that limitation stops on its filing - The doctrine of relation back operates only where the original application was itself filed within the extended period of limitation, and that condition was satisfied. The deficiency memo did not identify any missing document, no finding was recorded that the first application was deficient in any material particular, and the Appellant did not point out any such particular even before the Tribunal. A taxpayer who responds promptly to a deficiency memo cannot be penalised for diligence. The residual delay arises only if the second application is treated as fresh, and as it is a continuation of the first, no question of delay arises - The issue is answered in favour of the Respondent-assessee - Whether the two-year period under Section 54(1) is mandatory or directory - Appellate authority relied on the decisions of the Hon'ble High Court of Madras holding that the period is directory and that delay can be condoned for reasons shown - Appellant-Department contended that those decisions were not accepted and were under challenge in pending writ appeals - Whether the two-year period under Section 54(1) is mandatory or merely directory - HELD - Limitation periods under special fiscal statutes are to be strictly construed and are not ordinarily susceptible to relaxation on equitable grounds, however marginal the delay. The Hon'ble Supreme Court has held that a claim for refund must be made within the four corners of the statute, that where a special statute prescribes its own limitation without a power to condone delay, neither the authorities nor the High Court can extend it, and that a refund under GST law is a statutory concession to be claimed strictly in accordance with the prescribed conditions - No provision of the Act confers on the proper officer or the appellate authority a power to condone delay in filing a refund application, and the Hon'ble High Court of Delhi has also expressed reservation about treating the period as directory. The Tribunal declined to adopt the view of the Hon'ble High Court of Madras - The error of the appellate authority does not affect the outcome, as the refund claim was filed within time and no delay required condonation - The period is held to be mandatory and not directory, the finding does not alter the result. The appeal of the Department is dismissed [Read less]

GST - Revocation of cancellation of registration - Proviso to Rule 23(1) of the CGST Rules, 2017 - Payment of interest, late fee and penalty on returns filed for revocation – Respondent defaulted in furnishing returns for a continuous period of six months, and its registration was cancelled after an SCN - FAA revoked the cancellation, having noted that all returns were filed immediately after the SCN, and directed the proper officer to verify filing of returns and payment of tax - Appellant-Department contended that the FAA ignored the proviso to Rule 23(1) and did not ensure payment of interest, late fee and penalty - ... [Read more]

GST - Revocation of cancellation of registration - Proviso to Rule 23(1) of the CGST Rules, 2017 - Payment of interest, late fee and penalty on returns filed for revocation – Respondent defaulted in furnishing returns for a continuous period of six months, and its registration was cancelled after an SCN - FAA revoked the cancellation, having noted that all returns were filed immediately after the SCN, and directed the proper officer to verify filing of returns and payment of tax - Appellant-Department contended that the FAA ignored the proviso to Rule 23(1) and did not ensure payment of interest, late fee and penalty - Whether the FAA was within its powers to allow the appeal without ensuring that interest, late fee and penalty were paid along with the tax for the relevant period - HELD - The liability arising from the returns extends to interest, late fee and penalty, which are substantive obligations integral to the correct adjudication of the dispute. The FAA approached the matter solely on verification of tax payment and filing of returns without any consideration of the proviso to Rule 23(1), which requires such amounts to be paid before revocation, and thereby committed a jurisdictional and substantive error - The intent of the FAA, though Rule 23 was not directly referred to, appears to be that the amounts indicated in that Rule were to be collected. As the Respondent had paid only the tax and filed the returns, the Appellant was at liberty to collect interest and late fee under Sections 50 and 47 of the Act. Since the amounts are admitted, the statutory machinery of Section 79 is available for their recovery. The Respondent is further liable for penalty under Rule 23, and a penalty is accordingly imposed - The order of the FAA is modified to this extent, the appeal of the Department is allowed [Read less]

GST - Reversal of Input Tax Credit under Section 17(2) read with Rules 42 and 43 of the CGST Rules, 2017 - Respondent, trading in taxable goods and tax-exempt food products, had exempt outward supplies declared in the annual return, on the basis of which the proper officer presumed common inputs and confirmed a demand for proportionate reversal - FAA dropped the demand entirely on the strength of separate books, purchase ledgers and stock registers - Revenue contended that no verified demarcation criteria existed and that manual books could not bypass the formula - Whether the order of the FAA dropping the demand under Sec... [Read more]

GST - Reversal of Input Tax Credit under Section 17(2) read with Rules 42 and 43 of the CGST Rules, 2017 - Respondent, trading in taxable goods and tax-exempt food products, had exempt outward supplies declared in the annual return, on the basis of which the proper officer presumed common inputs and confirmed a demand for proportionate reversal - FAA dropped the demand entirely on the strength of separate books, purchase ledgers and stock registers - Revenue contended that no verified demarcation criteria existed and that manual books could not bypass the formula - Whether the order of the FAA dropping the demand under Section 17(2) read with Rule 42 is sustainable - HELD - Section 17(2) restricts credit to the portion attributable to taxable supplies where inputs are used partly for taxable and partly for exempt supplies, and Rule 42 prescribes a formula based on the ratio of exempt turnover to total turnover - The FAA dropped a substantial demand without recording the actual values of exempt sales, taxable sales and common credit for the disputed period. The claim that no common credit was mixed was accepted at face value without any verified physical audit or examination of the separate stock registers. In a wholesale-cum-retail trading firm operating from a single principal place of business, shared overheads and common inputs ordinarily exist, and the FAA failed to verify whether credit on such shared channels was properly segregated - The order, resting on general assertions without clear numbers and calculations, is non-speaking and unquantified to the extent it drops the demand under Rule 42 - The portion of the order-in-appeal dropping the demand under Section 17(2) read with Rule 42 is set aside and the matter is remanded to the FAA for de novo adjudication – Ordered accordingly - Mismatch between ITC claimed in GSTR-3B and ITC reflected in GSTR-2A - Relief granted by the FAA under Circular No. 183/15/2022-GST - Respondent explained that a portion of the mismatch arose because the supplier had wrongly mapped valid transactions to a different GSTIN in its returns, and produced tax invoices, banking records and a supplier certificate - Whether the FAA was correct in extending the benefit of the Circular on the mismatched ITC - HELD - The Respondent fulfilled all the verification requirements under the Circular by producing valid tax invoices, banking records proving actual payment of consideration and a certificate from the supplier confirming that the tax was fully paid to the Government but inadvertently mapped to an incorrect GSTIN. The core requirements of Section 16(2)(c) of the Act being satisfied, the FAA correctly extended the benefit of the Circular. The Revenue cannot validly challenge a relaxation mechanism officially mandated by its own Board - The findings of the FAA on the GSTR-3B versus GSTR-2A mismatch and the sustained liability are upheld and the Revenue appeal is rejected - Revenue objection to ITC already disallowed by the FAA - Objection of the Revenue to ITC pertaining to purchase invoices of a particular supplier not reflected in GSTR-2A - Revenue contended that the supplier's certificate did not reconcile with its declared filings, making the credit unverified - Whether the objection of the Revenue on this ITC component is sustainable - HELD - A review of the order-in-appeal reveals that this specific credit was already disallowed and decided against the Respondent due to non-production of a reconciled transaction validation certificate. The issue having been decided in favour of the Revenue, there is nothing left for the Revenue to challenge on this point - The objection of the Revenue is without merit and is rejected. [Read less]

Customs - Undervaluation of imported goods - Evidentiary value of statements under Section 108 of the Customs Act, 1962 - On intelligence of evasion of Customs duty by undervaluation and fabrication of documents, investigation was conducted against the importer of hop products, its directors and its employees. Parallel invoices were recovered from the premises, the laptop and the hard disc. SCN proposed rejection of the declared value, re-determination of value, demand of differential duty, confiscation and penalties, which the adjudicating authority confirmed. The Appellants did not make final submissions despite repeated... [Read more]

Customs - Undervaluation of imported goods - Evidentiary value of statements under Section 108 of the Customs Act, 1962 - On intelligence of evasion of Customs duty by undervaluation and fabrication of documents, investigation was conducted against the importer of hop products, its directors and its employees. Parallel invoices were recovered from the premises, the laptop and the hard disc. SCN proposed rejection of the declared value, re-determination of value, demand of differential duty, confiscation and penalties, which the adjudicating authority confirmed. The Appellants did not make final submissions despite repeated adjournments, and the appeals were decided on merits. The Appellants had retracted their statements - Whether the hop products imported by the Appellants have been undervalued and whether the statements recorded under Section 108 can be relied upon - HELD - Section 108 empowers the gazetted officer of Customs to summon any person to give evidence or produce documents. Under sub-section (3) the persons summoned are bound to state the truth, and under sub-section (4) the inquiry is deemed a judicial proceeding. Customs officers are not police officers, so statements recorded by them are admissible as substantive evidence. A retraction must be contemporaneous and made at the first available opportunity. There was nothing on record to suggest that the statements were recorded under threat, and the statements were in the nature of admissions which need no further proof. Although the procedure under Section 138B was not followed, the statements were rightly relied upon in view of the distinguishing facts. The statements stand corroborated by documentary evidence. Invoices bearing the same number carried two different values, and the invoices filed before Customs carried altered and reduced values. The overseas enquiry revealed that the invoices submitted at import clearance were forged and that the exporters denied any knowledge of them. Procedural non-compliance is insufficient to falsify the corroborated documentary evidence - The Appellants have mis-declared the value of the imported goods, and the question is decided in favour of the Revenue - Rejection and re-determination of transaction value - Section 14 of the Customs Act, 1962 and Rules 3, 4, 5 and 12 of the Customs Valuation Rules, 2007 - The Department rejected the declared value of the imported hop products and re-determined it with reference to the value of similar goods imported at about the same time. The Appellants challenged the rejection and re-determination - Whether the declared value has rightly been rejected and re-determined - HELD - Under Section 14 read with Rule 3(1), the price actually paid or payable is ordinarily to be accepted as the transaction value, subject to Rule 12. The Assessing Officer can reject the declared value only by giving reasons supported by material. The Department obtained contemporaneous import invoices of the same and similar goods from other importers, and these showed values several times higher than the declared value. The foreign suppliers denied knowledge of the invoices filed in India. The declared value has therefore been rightly rejected, and Rules 3, 4 and 5 were sequentially followed in re-determining the value. The transaction value is not acceptable when goods of the same kind are imported at a higher price about the same time and the claim of a lower price is not substantiated by documentary evidence - The value has rightly been re-determined and the question is decided in favour of the Revenue - Differential duty, confiscation and penalty - Sections 28(4), 111(m), 112, 114A and 114AA of the Customs Act, 1962 - The adjudicating authority confirmed the differential duty with interest, held the goods liable to confiscation and imposed penalties on the importer, its directors and its employees - Whether the differential duty, confiscation and penalties are sustainable - HELD - In view of the finding that the value was mis-declared by use of forged invoices, the differential duty has rightly been confirmed under Section 28(4). The goods are rightly held liable to confiscation under Section 111(m). Penalty equal to the differential duty on the importer under Section 114A is upheld. The penalties on the other Appellants under Sections 112 and 114AA are also upheld - The order under challenge is upheld and the appeals are dismissed. [Read less]

Customs - Refund of Special Additional Duty - Time limit under Notification No. 102/2007-Cus. as amended by Notification No. 93/2008-Cus. - The Respondent imported almonds in shells and paid additional duty of customs of 4%. It filed a refund claim under the Notification more than one year after the date of payment of duty. The original authority rejected the claim as barred by limitation, but the FAA allowed the Respondent's appeal. The Appellant (Revenue) contended that the amending Notification prescribed a time limit of one year from the date of payment, so the claim was time barred. The Respondent contended that the c... [Read more]

Customs - Refund of Special Additional Duty - Time limit under Notification No. 102/2007-Cus. as amended by Notification No. 93/2008-Cus. - The Respondent imported almonds in shells and paid additional duty of customs of 4%. It filed a refund claim under the Notification more than one year after the date of payment of duty. The original authority rejected the claim as barred by limitation, but the FAA allowed the Respondent's appeal. The Appellant (Revenue) contended that the amending Notification prescribed a time limit of one year from the date of payment, so the claim was time barred. The Respondent contended that the claim was filed within the time limit counted from the last domestic sale and that all other conditions were met - Whether the refund claim of Special Additional Duty filed beyond one year from the date of payment of duty is barred by limitation under the amended Notification - HELD - With effect from 01.08.2008, the amending Notification substituted clause (c) of paragraph 2 of the original Notification and required the importer to file the refund claim before the expiry of one year from the date of payment of the additional duty. The decisions relied upon by the FAA and the Respondent concerned imports prior to 01.08.2008 and dealt only with the retrospective application of the amended Notification. They have no application to imports made after the time limit was introduced. In the present case, the Bills of Entry were filed and the duty was paid after the introduction of the one year time limit, and the refund claim was submitted well beyond one year from the date of payment. A notification has to be read as a whole, and if any condition laid down in it is not fulfilled, the party is not entitled to its benefit. The conditions of an exemption notification are to be strictly construed, and the importer cannot pick and choose the conditions that suit it - The original authority rightly rejected the refund claim as time barred, the order of the FAA is set aside and the appeal of the Revenue is allowed [Read less]

Service Tax - Continuation of Proceedings after Death of Service Provider - Section 73 and Section 65(7) of Finance Act, 1994 - The Respondent passed an Order-in-Original raising a demand of service tax under Sections 73, 75, 77 and 78 for Financial Year 2015-16, and later issued a notice for payment in the name of the service provider, who had died, warning of recovery action under Section 87 - The Petitioner, the wife of the deceased service provider, intimated the death with the death certificate and filed a writ petition for quashing the Order-in-Original - The Petitioner contended that the order is a nullity as it can... [Read more]

Service Tax - Continuation of Proceedings after Death of Service Provider - Section 73 and Section 65(7) of Finance Act, 1994 - The Respondent passed an Order-in-Original raising a demand of service tax under Sections 73, 75, 77 and 78 for Financial Year 2015-16, and later issued a notice for payment in the name of the service provider, who had died, warning of recovery action under Section 87 - The Petitioner, the wife of the deceased service provider, intimated the death with the death certificate and filed a writ petition for quashing the Order-in-Original - The Petitioner contended that the order is a nullity as it cannot subsist against a dead person, and that the Finance Act, 1994 has no provision to proceed against legal representatives, unlike the provision in the income tax law - Whether proceedings under Section 73 can continue, and an Order-in-Original can be passed in the name of the service provider, after his death - HELD - A taxing statute must be read strictly, and what is not explicit cannot be construed as implicit. Section 65(7) defines assessee as a person liable to pay the service tax and includes his agent. The terms person and agent are not defined in Chapter V, so they take their ordinary meaning. An agent is a person employed to do any act for another or to represent another in dealings with a third person, and it is not the Respondent's case that the deceased engaged his legal heirs as agents in his business. A legal heir therefore cannot be equated with an agent - The definition of ‘person’ in the General Clauses Act, 1897 does not include legal representatives of a deceased person. Under Section 65(121), the definitions in the Central Excise Act, 1944 apply to service tax, so the exposition on continuing assessment against a dead person applies to the present facts. Sections 69 and 73 also refer only to the person liable to pay service tax and the person chargeable with the service tax - The Petitioner's argument that no provision in Chapter V allows proceedings under Section 73 to continue against a legal heir remained uncontroverted. The service provider died of natural causes, and it was not a case where death was manoeuvred to evade tax. On the death of the service provider, in the absence of a statutory provision empowering the authority to continue, the proceeding under Section 73 abates - Respondent could not discard the death certificate, and an Order-in-Original issued in the name of a dead person is a nullity. Recovery under Section 87 therefore cannot be taken - The Order-in-Original is set aside, the direction in the letter to discharge the liability is quashed. The writ petition is allowed [Read less]

GST - Demand under Section 73 of the CGST Act, 2017 for ITC availed and utilised under CGST and SGST instead of IGST - Appellant inadvertently availed credit under the CGST and SGST heads instead of IGST in the first year of the GST regime, when the auto-populated statement became available only later - Adjudicating Authority confirmed the demand holding that credit of one tax head cannot be adjusted against another, which was upheld by the FAA with interest and penalty - Appellant contended that there was no loss of revenue and that justice should not be denied for a technical error, relying on the High Court decisions - ... [Read more]

GST - Demand under Section 73 of the CGST Act, 2017 for ITC availed and utilised under CGST and SGST instead of IGST - Appellant inadvertently availed credit under the CGST and SGST heads instead of IGST in the first year of the GST regime, when the auto-populated statement became available only later - Adjudicating Authority confirmed the demand holding that credit of one tax head cannot be adjusted against another, which was upheld by the FAA with interest and penalty - Appellant contended that there was no loss of revenue and that justice should not be denied for a technical error, relying on the High Court decisions - Whether the ITC inadvertently availed under CGST and SGST instead of IGST is to be reversed along with interest and penalty - HELD - The Kerala High Court in Kelleppuram Metals held that the electronic credit ledger is a pool of funds with compartments for IGST, CGST and SGST, to be taken as a unified source, so that no wrongful availing or utilisation arises and no loss of revenue results from utilising CGST and SGST instead of IGST, and that Section 73 is attracted only where tax is not paid or short paid, erroneously refunded or input tax is wrongly availed or utilised. A mistake which is inadvertent and technical does not justify proceedings under Section 73. These judgments squarely apply to the present case - The order of the FAA is set aside and the matter is remanded to the FAA to reconsider the appeal afresh in the light of those judgments after affording a reasonable opportunity of hearing to the Appellant – The appeal is disposed of - Reversal of a small portion of ITC held to be availed in breach of Section 16(4) of the CGST Act, 2017 - FAA directed the Appellant to reverse ITC pertaining to invoices uploaded by the supplier after the prescribed date - Whether the Appellant is liable to reverse such ITC - HELD - The dispute stands put to rest after the insertion of the non-obstante clause in sub-section (5) of Section 16 of the CGST Act - The Appellant is absolved of the liability of reversing the said amount of ITC under CGST and SGST in terms of Section 16(5). [Read less]

GST - Transitional credit under Section 140(3) of the CGST Act, 2017 - Entry of credit in Table 5(a) instead of Table 7(a) of Form GST TRAN-1 - Respondent availed transitional credit on stock held on the appointed day under Table 5(a), which is meant for credit carried forward under Section 140(1) - Adjudicating Authority confirmed the demand under Section 73 on the sole ground of entry under the wrong head, also holding that earlier judgments were inapplicable after the Board Circular permitting revised TRAN-1 - FAA allowed the appeal and Revenue challenged the same - Whether transitional credit can be denied merely becau... [Read more]

GST - Transitional credit under Section 140(3) of the CGST Act, 2017 - Entry of credit in Table 5(a) instead of Table 7(a) of Form GST TRAN-1 - Respondent availed transitional credit on stock held on the appointed day under Table 5(a), which is meant for credit carried forward under Section 140(1) - Adjudicating Authority confirmed the demand under Section 73 on the sole ground of entry under the wrong head, also holding that earlier judgments were inapplicable after the Board Circular permitting revised TRAN-1 - FAA allowed the appeal and Revenue challenged the same - Whether transitional credit can be denied merely because it was entered in the wrong table of TRAN-1 - HELD - Registered persons claiming credit under Section 140(1) enter details in Table 5(a), while those claiming under Section 140(3) enter them in Table 7(a). Several High Courts have viewed filing a credit claim in a wrong head or table as an inadvertent error or a procedural lapse which should not impede the right to claim transitional credit if the person is otherwise eligible - The reasoning of the Adjudicating Authority that earlier judgments stood displaced by the Circular is surprising, as these judgments not only permit filing of a corrected TRAN-1 but also reiterate the cardinal principle that procedural lapses cannot impair substantive rights. The notice and the order-in-original were silent on any inability of the Respondent to fulfil the conditions of Section 140(3) and were based solely on entry in the wrong column - The credit cannot be denied on the ground of entry in the wrong table - The impugned order is upheld and the Revenue appeal is dismissed - Ground of ineligibility under Section 140(3) not taken in the SCN and raised first in appeal - Raising a ground of non-fulfilment of conditions under Section 140(3) for the first time before the Tribunal when the SCN and the order-in-original were based only on entry in the wrong table - Revenue contended that the Respondent had not produced documentary evidence of eligibility except hard copies of invoices - Whether the Revenue can raise such a ground at the appellate stage - HELD - The Respondent had offered to produce the prescribed documents and registers, but the Adjudicating Authority did not scrutinise them or call for additional records, and never undertook an enquiry under Rule 121 despite being empowered. The ground of eligibility under Section 140(3) having been omitted in the order-in-original, it is deemed to have been constructively held not to be a ground for disallowing the credit. The Revenue cannot take such an inconsistent stand in appeal, which amounts to approbating and reprobating on the same issue - The contention of the Revenue is not sustainable and rejected - Duty of the FAA to make further enquiry under Section 107(11) - Whether the FAA was obliged to verify the entitlement of the Respondent to transitional credit under Section 140(3) and whether failure to do so renders the order invalid - HELD - The expression "as may be necessary" in Section 107(11) shows that the appellate authority is not required to undertake an enquiry in every appeal as a matter of routine, the sub-section conferring a discretionary power to be exercised when the facts of the case demand. No infirmity is found in the reasoning of the FAA - The contention of the Revenue has no merit, the impugned order-in-appeal is upheld and the appeal of the Revenue is rejected. [Read less]

GST - Transitional credit under Section 140 of the CGST Act, 2017 - Jurisdiction of CGST authorities to initiate proceedings under Section 73 for recovery of allegedly inadmissible CENVAT credit carried forward through Form GST TRAN-1 - Appellant carried forward CENVAT credit and claimed unavailed credit on capital goods, and on scrutiny the Revenue alleged excess transitional credit, the revised return filed manually under the earlier law not having been reflected in the system - Demand was confirmed under Section 73 with interest and penalty, and FAA gave partial relief on the capital goods credit but upheld the rest - A... [Read more]

GST - Transitional credit under Section 140 of the CGST Act, 2017 - Jurisdiction of CGST authorities to initiate proceedings under Section 73 for recovery of allegedly inadmissible CENVAT credit carried forward through Form GST TRAN-1 - Appellant carried forward CENVAT credit and claimed unavailed credit on capital goods, and on scrutiny the Revenue alleged excess transitional credit, the revised return filed manually under the earlier law not having been reflected in the system - Demand was confirmed under Section 73 with interest and penalty, and FAA gave partial relief on the capital goods credit but upheld the rest - Appellant contended that eligibility to avail CENVAT credit of the earlier regime cannot be disputed in proceedings under Section 73, while Revenue relied on Rule 121 which provides for verification of transitional credit and initiation of proceedings under Section 73 or 74 - Whether the CGST authorities have jurisdiction to proceed under Section 73 to recover such credit - HELD - A jurisdictional issue must be decided first, as an order passed without jurisdiction over the subject matter is a nullity and the defect cannot be cured by consent. The Jharkhand High Court in Usha Martin Limited case held that Section 73 does not speak of CENVAT credit, that whether credit was admissible under the existing law was not an issue within the jurisdiction of the CGST authorities, and that under the savings clause in Section 174 proceedings for such contravention must be initiated under the existing law, since parallel proceedings under two laws cannot be countenanced - The Calcutta High Court in a similar situation quashed a notice under Section 73 for want of jurisdiction while granting liberty to proceed under the existing law. The Revenue made only a bald assertion that the earlier decision was distinguishable without showing how the legal issue differed - The legal issues are squarely covered by these decisions, proceedings under the CGST Act for recovery of allegedly inadmissible CENVAT credit are not legally sustainable for inherent lack of jurisdiction - The order of the FAA is set aside and the appeal is allowed. [Read less]

GST - Refund of unutilised Input Tax Credit on zero-rated supplies under Section 54 of the CGST Act, 2017 read with Rule 89(4) of the CGST Rules, 2017 - Appellant claimed refund for supplies made to SEZ unit or developer without payment of tax, but the supplies were not disclosed in the outward supply statement - Proper officer treated the zero-rated turnover of goods as nil and rejected the claim, which was upheld by the FAA - Appellant contended that it held all tax invoices, SEZ endorsements and export documents, while Revenue submitted that consistency of aggregate turnover does not establish the character of each indi... [Read more]

GST - Refund of unutilised Input Tax Credit on zero-rated supplies under Section 54 of the CGST Act, 2017 read with Rule 89(4) of the CGST Rules, 2017 - Appellant claimed refund for supplies made to SEZ unit or developer without payment of tax, but the supplies were not disclosed in the outward supply statement - Proper officer treated the zero-rated turnover of goods as nil and rejected the claim, which was upheld by the FAA - Appellant contended that it held all tax invoices, SEZ endorsements and export documents, while Revenue submitted that consistency of aggregate turnover does not establish the character of each individual supply - Whether the refund claim is admissible or the matter requires fresh examination - HELD - Zero-rated supply includes export and supply to an SEZ developer or unit for authorised operations, and the formula in Rule 89(4) makes it abundantly clear that a taxpayer must correctly report zero-rated supply in the return and provide a correct break-up in the outward supply statement, with details of supplies to SEZ also required in the annual return - The Appellant showed gross negligence in omitting the purported SEZ supplies from the outward supply statement and the annual return. The case involves disputed questions of fact, the FAA having recorded that the mandatory documents were not submitted, and requires reconciliation of the discrepancies in the turnover of supplies to SEZ - The order of the FAA is set aside and the matter is remanded to the proper officer for re-examination of the refund claim, with direction to the Appellant to submit invoice-wise reconciliation, copies of tax invoices and shipping bills, endorsements by the specified officer and the letter of undertaking - The proper officer to pass a speaking order after hearing in accordance with Rule 92 – The appeal is disposed of [Read less]

GST - Invocation of extended period under Section 74(1) of the CGST Act, 2017 in the absence of fraud, wilful misstatement or suppression - Appellant supplied goods of two categories, and on audit a notice under Section 74 was issued for three financial years alleging short payment of tax on supplies detected in the profit and loss account but not declared in the returns, among other objections - Entire demand was confirmed with interest and penalty, and Appellant paid the tax before the notice, disputing only the invocation of Section 74 - FAA dropped interest and penalty for the first year since the accounts had been upl... [Read more]

GST - Invocation of extended period under Section 74(1) of the CGST Act, 2017 in the absence of fraud, wilful misstatement or suppression - Appellant supplied goods of two categories, and on audit a notice under Section 74 was issued for three financial years alleging short payment of tax on supplies detected in the profit and loss account but not declared in the returns, among other objections - Entire demand was confirmed with interest and penalty, and Appellant paid the tax before the notice, disputing only the invocation of Section 74 - FAA dropped interest and penalty for the first year since the accounts had been uploaded and no suppression was established, but upheld them for the other two years on the ground that the records were not available with the department before audit - Whether proceedings under Section 74 are tenable for the subsequent two years - HELD - Proceedings under Sections 73 and 74 can be initiated only on the satisfaction of the Assessing Officer, and for a notice under Section 74 the officer must be satisfied that fraud, wilful misrepresentation or suppression led to the short payment, the foundational facts for which must be evident from the notice and not mechanically recited - The Appellant had not filed the annual reconciliation statement owing to an exemption based on aggregate turnover, a plea not objected to by the Revenue. The discrepancy was detected solely from documents prepared and produced by the Appellant, no incriminating material was found - Not discharging liability before audit does not necessarily mean wilful suppression, as action under Section 74 requires definite evidential support forming part of the notice in terms of the Board instruction. The reasoning of the FAA for the first year therefore holds equally good for the subsequent two years - Proceedings under Section 74 are not tenable and are quashed, the Revenue is precluded from taking action for the first year being time barred, the order of the FAA for the other two years is set aside - The matter is remanded to the proper officer to determine the tax afresh under Section 75(2) deeming the notice to be issued under Section 73(1) with liberty to the appellant to approach the officer for the benefit under Section 128A – The appeal is disposed of [Read less]

GST - Refund of pre-deposit made for filing an appeal against a service tax demand - Applicability of the two-year limitation under Section 54(1) of the CGST Act, 2017 - Respondent, unable to pay the statutory pre-deposit through the legacy portal owing to login issues, paid it through Form DRC-03 from the electronic cash ledger, later paid it again through the proper channel, and after the service tax demand was set aside, claimed refund of the amount paid through DRC-03 - Refund claim was rejected as time barred since it was filed more than two years from the date of payment - FAA allowed the refund and Revenue appealed ... [Read more]

GST - Refund of pre-deposit made for filing an appeal against a service tax demand - Applicability of the two-year limitation under Section 54(1) of the CGST Act, 2017 - Respondent, unable to pay the statutory pre-deposit through the legacy portal owing to login issues, paid it through Form DRC-03 from the electronic cash ledger, later paid it again through the proper channel, and after the service tax demand was set aside, claimed refund of the amount paid through DRC-03 - Refund claim was rejected as time barred since it was filed more than two years from the date of payment - FAA allowed the refund and Revenue appealed - Whether the refund of the pre-deposit paid through DRC-03 is barred by limitation under Section 54 - HELD - Section 54 of the CGST Act is applicable only for claiming refund of tax paid under the CGST Act or the IGST Act. The amount paid through DRC-03 was a pre-deposit payable for preferring an appeal against a service tax demand and not tax under the GST law. The payment having been made under mistake of law, the statutory time limit under Section 54 does not apply, the claim is outside the purview of the CGST Act, and the general provisions of the Limitation Act apply. This follows the High Court rulings holding that Section 54 is not applicable to amounts collected without authority of law, and that refund of duty or service tax paid under mistake cannot be barred by the special statutory limitation - The refund claim is not barred by limitation. The Revenue appeal is dismissed - Applicability of the doctrine of unjust enrichment to refund of pre-deposit made for preferring an appeal - Respondent had paid the pre-deposit from its own funds without passing on the burden to any customer - Whether the principle of unjust enrichment applies to refund of such pre-deposit - HELD - Following the Bombay High Court, a deposit made as a pre-deposit for availing the right of appeal is not a payment of duty, such amount is bound to be refunded when the appeal is allowed with consequential relief, and the doctrine of unjust enrichment is inapplicable - The order of the FAA allowing the refund of the pre-deposit paid through Form DRC-03 is upheld and the appeal of the Revenue is rejected. [Read less]

Central Excise - Liability of a trader alleged to have goods manufactured through job workers - Rule 25 of the Central Excise Rules, 2002 - Search at the premises of the Appellant, a proprietary trading concern, revealed excess stock of electrical goods and cash. The registration which the Appellant had applied for was revoked, as verification found no power connection, plant and machinery. SCN alleged that the goods were manufactured by job workers on the Appellant's account and cleared without payment of duty. It demanded duty and proposed confiscation of the goods and cash with penalties, which the authorities below con... [Read more]

Central Excise - Liability of a trader alleged to have goods manufactured through job workers - Rule 25 of the Central Excise Rules, 2002 - Search at the premises of the Appellant, a proprietary trading concern, revealed excess stock of electrical goods and cash. The registration which the Appellant had applied for was revoked, as verification found no power connection, plant and machinery. SCN alleged that the goods were manufactured by job workers on the Appellant's account and cleared without payment of duty. It demanded duty and proposed confiscation of the goods and cash with penalties, which the authorities below confirmed. The Appellant contended that it was only a trader. The Department relied on a statement that goods were got manufactured from job workers on the Appellant's account - Whether the Appellant is a manufacturer liable to duty and whether the goods are liable to confiscation - HELD - The premises had no electricity connection, plant and machinery or other infrastructure for manufacture, so the Appellant cannot be held to be a manufacturer. No investigation was conducted with the job workers, and no job worker came forward to state that goods were manufactured on behalf of the Appellant. If goods are manufactured by a job worker, the job worker is the manufacturer and is liable to pay duty. The Appellant being only a trader, the goods cannot be seized on the premise that they were meant for clandestine removal - The seizure, confiscation, redemption fine and duty are set aside, and no penalty is imposable on the Appellant or its representatives - Confiscation of excess goods and cash found with manufacturer - Rule 25 of the Central Excise Rules, 2002 - Excess electrical goods not entered in the RG-1 register were found at the premises of the Appellant, a registered manufacturer. Cash was found at the factory and at the residences of its directors. The authorities below confiscated the goods and cash and allowed redemption of the goods on payment of fine. The Appellant contended that the goods were work in progress, as they had to be tested, repacked and affixed with MRP stickers, and were later cleared on payment of duty. It explained the cash as the cash book balance, the personal property of family members and an advance received for sale of property - Whether the excess goods and cash are liable to confiscation - HELD - No investigation was conducted to establish that the excess goods were finished goods meant for clandestine removal. It does not appear that the goods had test reports and MRP stickers affixed, so the contention that they had not reached the stage of finished goods is acceptable. The advance was entered in the cash ledger before the search and supported by an agreement, and the other amounts were explained. The cash cannot be said to be sale proceeds of clandestine clearance in the absence of evidence by the Revenue - The goods are not liable for confiscation, the redemption fine and penalty are set aside, and the cash is to be refunded - Duty on packing, repacking and affixing MRP stickers by unregistered unit - Section 2(f)(iii) of the Central Excise Act, 1944 - The Appellant, an unregistered company, was engaged in packing, repacking and affixing MRP stickers on goods. SCN demanded duty on the clearances, treating the activity as manufacture, and proposed confiscation of the goods and penalty. The Appellant contended that the goods already suffered duty at the hands of the supplier - Whether duty, confiscation and penalty are sustainable on the Appellant - HELD - The goods were MRP based, and the supplier had already paid duty on them after taking the abatement. The assessable value did not change after the MRP stickers were affixed. The Appellant being unregistered could not take CENVAT credit, and the duty payable by it would be equal to the credit available. It is a revenue neutral situation, and the non-availment of CENVAT credit amounts to payment of duty - The demand of duty, confiscation, redemption fine and penalty are set aside - Penalty on proprietor and directors - Rule 26 of the Central Excise Rules, 2002 - Penalties were imposed on the proprietor and the directors of the concerns - Whether penalty can be imposed on the proprietor and directors - HELD - The case made out by the Revenue against the concerns is not sustainable, so no penalty can be imposed on the proprietor and the directors - The penalties are set aside and the appeals are allowed. [Read less]

GST - Classification of chuna in slurry and paste form - Whether goods obtained by mixing slaked lime with water, calcium carbonate and glycerin are excluded from heading 2522 by Note 1 to Chapter 25 - Respondent purchased slaked lime and made chuna by physical mixing with water and fillers, and classified it under tariff item 2522 20 00 at the lower rate - Appellant-Revenue issued an SCN under Section 74 proposing classification under tariff item 2106 90 99 as a food preparation at the higher rate, relying on Note 1 to Chapter 25 which excludes products obtained by mixing. The adjudicating authority confirmed the demand, ... [Read more]

GST - Classification of chuna in slurry and paste form - Whether goods obtained by mixing slaked lime with water, calcium carbonate and glycerin are excluded from heading 2522 by Note 1 to Chapter 25 - Respondent purchased slaked lime and made chuna by physical mixing with water and fillers, and classified it under tariff item 2522 20 00 at the lower rate - Appellant-Revenue issued an SCN under Section 74 proposing classification under tariff item 2106 90 99 as a food preparation at the higher rate, relying on Note 1 to Chapter 25 which excludes products obtained by mixing. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) set it aside - Whether the goods are excluded from heading 2522 by Note 1 to Chapter 25 - HELD - Every limb of the exclusion in Note 1 is subject to its opening words, namely that the headings cover such products except where their context otherwise requires. The Hon'ble Supreme Court held in the case of calcined china clay that the exclusion of calcination does not apply where the context otherwise requires. The context need not arise only from express words of process in the heading, as the Revenue itself accepts that quicklime and slaked lime, products of calcination and hydration, fall in heading 2522 which contains no such words, and the Explanatory Note recognises that certain headings refer to goods which by their nature are subjected to a process not provided for by Note 1. Slaked lime itself is produced by bringing quicklime and water together, so mixing of lime and water cannot by itself attract the exclusion. The test is whether the goods as obtained remain the slaked lime named in the heading - On admitted facts the process is simple physical blending without any chemical reaction, the additions are fillers, a diluent and a soothing agent, no new article emerges, and the essential character is that of slaked lime. Non-conformity with grades of hydrated lime only shows that the goods are not purified calcium hydroxide of heading 2825. The anti-dusting proviso is merely permissive and does not cut down the opening words - The goods are not excluded from heading 2522 by Note 1 and are classifiable under tariff item 2522 20 00 – The appeals filed by the Revenue are dismissed - Classification of chuna - Whether chuna is a food preparation of heading 2106 - Appellant-Revenue relied on the food additive licence held by the Respondent, Supplementary Note 5 to Chapter 21, the Explanatory Note to heading 21.06 and Note 1(b) to Chapter 38, contending that chuna is a preparation made by combining ingredients to a fixed recipe - Whether the goods are covered by heading 2106 - HELD - Heading 2106 applies only to food preparations not elsewhere specified or included and yields to any heading that covers the goods, since goods with a reasonable claim to a specific heading cannot be consigned to a residuary entry, as held by the Hon'ble Supreme Court - Chuna is not consumed directly or after processing such as cooking or dissolving, and is applied in small quantities to betel leaf or mixed with areca nut and tobacco as an ingredient. None of its constituents is a foodstuff, and the Revenue itself treated calcium carbonate and glycerin as chemicals of other Chapters, while its contention that they are dietary ingredients was unsupported by technical evidence. Pan masala and supari have their own tariff items, and lime is named in the Supplementary Notes only as an ingredient, which does not make lime itself a preparation of heading 2106 - The headings, Supplementary Notes and Explanatory Notes describe articles which are themselves food, and chuna bears no resemblance to that class. A licence under a regulatory statute does not determine classification, and under that statute a food additive is a substance not normally consumed as food by itself and cannot be equated with food - Note 1(b) to Chapter 38 is merely an exclusionary Note and its premise of a mixture of chemicals with foodstuffs is not established. That the goods are prepared by a process does not make them food preparations - The goods are not covered under heading 2106 or tariff item 2106 90 99 - The appeals filed by the Revenue are dismissed - Application of General Rules of Interpretation and test reports - Application of Rules 2(b), 3 and 4 of the General Rules of Interpretation and relevance of test reports - Whether the goods are correctly classifiable under tariff item 2522 20 00 on application of the General Rules - HELD - The premise that Note 1 removes heading 2522 fails in view of the earlier finding. Rule 2(b) extends a heading to mixtures of the named material, so the goods are prima facie classifiable by reference to slaked lime, while heading 2106 does not refer to any material of which the goods consist - Under Rule 3(a), heading 2522 which names slaked lime is more specific than the residuary heading 2106. Under Rule 3(b), mixtures are classified by the component giving essential character, which is slaked lime, and the route adopted in the SCN therefore leads to heading 2522. Rules 3(c) and 4 are rules of last resort and would also lead to heading 2522, as it occurs last in numerical order and the goods are most akin to lime - The conclusion rests on the statutory text read with the Explanatory Notes and not on commercial parlance - The goods are classifiable under tariff item 2522 20 00 attracting the lower rate, the demand of differential tax, interest and penalty does not survive - The appeals of the Revenue are dismissed and the impugned order is upheld. [Read less]

GST - Denial of input tax credit on inward supply from a supplier found non-existent - Burden of proof under Section 155 of the CGST Act, 2017 and conditions under Section 16(2) - Appellant relied on tax invoices, e-way bills, lorry receipts, goods receipt note, photographs, ledger and bank statements, and contended that the authorities acted on borrowed satisfaction from the investigation letter - Whether the Appellant availed Input Tax Credit without actual inward supply of goods covered by the invoices - HELD - Section 155 places the burden of proving eligibility of Input Tax Credit on the person claiming it, and this b... [Read more]

GST - Denial of input tax credit on inward supply from a supplier found non-existent - Burden of proof under Section 155 of the CGST Act, 2017 and conditions under Section 16(2) - Appellant relied on tax invoices, e-way bills, lorry receipts, goods receipt note, photographs, ledger and bank statements, and contended that the authorities acted on borrowed satisfaction from the investigation letter - Whether the Appellant availed Input Tax Credit without actual inward supply of goods covered by the invoices - HELD - Section 155 places the burden of proving eligibility of Input Tax Credit on the person claiming it, and this burden rests strictly on the Appellant once physical verification establishes that the supplier is fake and non-existent. The e-way bills are not conclusive proof of actual movement of goods. The photographs without spatial co-ordinates or verifiable audit trails cannot override the physical inspection findings. The goods receipt note may be fabricated after receipt of notice. Paper trails of invoices, banking entries and lorry receipts can easily create an impression of authenticity and do not automatically establish physical receipt of goods, particularly as the inspection was made only three months after the transactions - The Appellant produced no independent verifiable evidence of the source of the goods, no consignment note, weighment slip or GSTR-2A, and no evidence that the supplier had deposited the tax with the Government as required under Section 16(2)(c) - The decisions of the Hon'ble Supreme Court and the Hon'ble High Court of Allahabad on the documents required to prove genuineness of purchases and on the need for deposit of tax by the supplier apply - The impugned orders are upheld and the appeal is dismissed [Read less]

GST - Departmental appeal against order of the FAA reducing demand - Scrutiny of returns, Input Tax Credit under Section 17(5), capital goods and cancelled e-way bills - Respondent did not respond to the notice for discrepancies in scrutiny of returns or to the SCN under Section 73, and an ex-parte order imposed tax and penalty. The FAA partially allowed the appeal and substantially reduced the demand - The Appellant-Department contended that the FAA reduced the demand without appreciating the facts, that the discrepancies between returns, the blocked credits, the credit on capital goods and the treatment of expenses were ... [Read more]

GST - Departmental appeal against order of the FAA reducing demand - Scrutiny of returns, Input Tax Credit under Section 17(5), capital goods and cancelled e-way bills - Respondent did not respond to the notice for discrepancies in scrutiny of returns or to the SCN under Section 73, and an ex-parte order imposed tax and penalty. The FAA partially allowed the appeal and substantially reduced the demand - The Appellant-Department contended that the FAA reduced the demand without appreciating the facts, that the discrepancies between returns, the blocked credits, the credit on capital goods and the treatment of expenses were not satisfactorily explained, and that cancelled e-way bills were rightly treated as suppressed supplies - Whether the order of the FAA was passed after due scrutiny of all the relevant facts or suffers from any infirmity of law and facts requiring interference - HELD - The FAA analysed each point raised in the SCN through the books of account and documents and passed a reasoned order. Expenses on job work were verified through tax invoices reflected in the supplier-based return, with credit claimed in the return and not questioned. Repair expenses of machinery were verifiable, and for other repairs no credit was claimed. Insurance of stock is not prohibited by Section 17(5), which bars credit only for general insurance, servicing, repair and maintenance of motor vehicles, vessels or aircraft, and the credit was rightly allowed except for a small expenditure not related to furtherance of business, which was rightly disallowed - On capital goods the FAA examined the matter in detail and disallowed only the credit relating to office chairs, wire and a mobile phone as not related to furtherance of business, while other credit was allowable. The cancelled e-way bills were found to be due to typographical and clerical errors, copies were produced, and new e-way bills were issued against the same invoices immediately or within a short period less than the time required for transportation, so no likelihood of misuse was found. The Department failed to point out any factual or legal infirmity in the order - The order of the FAA is upheld and the departmental appeal is dismissed [Read less]

Service Tax - Taxability of consulting engineer's service provided by body corporate - Section 65(31) and Section 65(105)(g) of the Finance Act, 1994 - The Appellant, a body corporate, provided consulting engineers services to a government authority during July 2003 to September 2005. It paid Service Tax on the gross amounts charged up to June 2003 and thereafter only on the remuneration for local professional staff and support staff. It did not pay Service Tax on the amounts received under other heads such as transportation, travel, office rent, supplies, utilities, document printing and contingencies. SCNs demanded the S... [Read more]

Service Tax - Taxability of consulting engineer's service provided by body corporate - Section 65(31) and Section 65(105)(g) of the Finance Act, 1994 - The Appellant, a body corporate, provided consulting engineers services to a government authority during July 2003 to September 2005. It paid Service Tax on the gross amounts charged up to June 2003 and thereafter only on the remuneration for local professional staff and support staff. It did not pay Service Tax on the amounts received under other heads such as transportation, travel, office rent, supplies, utilities, document printing and contingencies. SCNs demanded the Service Tax, which was confirmed by the adjudicating authority, and the FAA confirmed part of the demand in remand proceedings. The Appellant contended that bodies corporate were brought within the ambit of consulting engineers only by an amendment. The Respondent contended that the expression person included bodies corporate even before the amendment - Whether a body corporate was covered by the definition of consulting engineer before the amendment - HELD - Bodies corporate, being persons, were covered under the definition of consulting engineer even before the amendment. All contrary decisions on this question of law stand overruled - The contention of the Appellant is rejected - Valuation of taxable service - Reimbursable expenses - Section 67 of the Finance Act, 1994 and Rule 5 of the Service Tax (Determination of Value) Rules, 2006 - The dispute was only with respect to the amounts received as reimbursable expenses, and the demand related to the period before 2015. The Appellant contended that reimbursable expenses do not form part of the value of the taxable service. The Respondent supported the demand - Whether Service Tax is payable on reimbursable expenses for the period before the amendment of Section 67 - HELD - Rule 5 provided for inclusion of reimbursable expenses in the taxable value, but the Rule has been held to be ultra vires of Section 67. Section 67 was amended later to include reimbursable expenses in the taxable value. The present demand pertains to the period before the amendment and is therefore not sustainable - The impugned order is set aside and the appeal is allowed. [Read less]

GST - Transition of TDS credit through Form GST TRAN-1 - Demand on grounds beyond the SCN - Section 73 and Section 75(7) of CGST Act, 2017 - Respondent, a works contractor, claimed in Form GST TRAN-1 transitional credit consisting of a small purchase-credit component and a large component of tax deducted at source from its works-contract receipts under the UPVAT Act. SCN under Section 73 alleged a mismatch between the TRAN-1 claim and the credit shown in the VAT return, and non-furnishing of particulars of Forms C - Whether a ruling on the eligibility of VAT TDS for transition can be given in the absence of a properly fram... [Read more]

GST - Transition of TDS credit through Form GST TRAN-1 - Demand on grounds beyond the SCN - Section 73 and Section 75(7) of CGST Act, 2017 - Respondent, a works contractor, claimed in Form GST TRAN-1 transitional credit consisting of a small purchase-credit component and a large component of tax deducted at source from its works-contract receipts under the UPVAT Act. SCN under Section 73 alleged a mismatch between the TRAN-1 claim and the credit shown in the VAT return, and non-furnishing of particulars of Forms C - Whether a ruling on the eligibility of VAT TDS for transition can be given in the absence of a properly framed allegation and component-wise determination - HELD - The SCN is the foundation of the Revenue's case. The SCN identified only the return mismatch and the Form C objection. It did not separately identify an amount as TDS or allege that such an amount was incapable of transition because it arose from deductions from outward receipts. The Form C ground was dropped in the adjudication order. The rejection on the ground that TDS is not input tax was a distinct charge introduced for the first time in the order. Mere reference to Section 140 and Rule 117 does not meet the requirement of natural justice in the absence of a specific allegation - Section 75(7) confines confirmation of demand to the grounds specified in the notice, and the adjudicating order cannot repair a missing substantive charge. The order also did not reconcile the TDS component with the purchase-credit component, which is contrary to Section 75(6) requiring the order to state the relevant facts and its basis. The Revenue produced no completed VAT assessment or refund-disposal order to show that the legacy balance was rejected or exhausted, and such an order cannot be presumed. Remand merely to construct a fresh charge beyond the SCN would not cure the defects. As the appeal is decided on the validity of the notice and the proof of the demand, the question whether TDS can in principle be included in TRAN-1 is left open - The demand cannot be restored and the Revenue appeal is dismissed - Interest and penalty - Section 50 and Section 73(9) of CGST Act, 2017 - Interest and penalty were confirmed along with the tax demand on the transitional credit. The Respondent contended that the credit had been used before the notice and that there was no fraud, wilful misstatement or suppression - Whether the interest and penalty confirmed can be sustained - HELD - Interest must have a statutory basis and a verifiable computation. Interest on credit wrongly availed and utilised under Section 50(3) is computed under Rule 88B, while interest on unpaid output tax under Section 50(1) requires identification of the liability and the period of default. These distinct bases cannot be interchanged without reasons. The material did not supply the dates, rate, ledger-based utilisation and period supporting the interest, and the statement of the Respondent that credit was used before the notice is no substitute for that working - Section 75(9) does not dispense with proof of the facts required to establish and compute interest. Absence of fraud alone does not exclude liability or penalty arising under Section 73, but the penalty rests on the tax determination, which has not been sustained. The statutory conditions for a penalty provision must first exist before it can be imposed - The determination of interest and the penalty are unsustainable and cannot be restored. [Read less]

GST - Demand confirmed on grounds not stated in the SCN - Section 75(4) and Section 75(7) of CGST Act, 2017 - SCN under Section 73(1) alleged that the Appellant had not issued any credit notes against the sales returns claimed, resulting in escapement of turnover and short payment of tax. The Appellant furnished sample credit notes and offered to produce the complete set on requisition. The order in original did not call for the remaining credit notes, held that the credit notes were issued on the same day as the sales invoices and examined their values against the invoices, and confirmed the demand with interest and penal... [Read more]

GST - Demand confirmed on grounds not stated in the SCN - Section 75(4) and Section 75(7) of CGST Act, 2017 - SCN under Section 73(1) alleged that the Appellant had not issued any credit notes against the sales returns claimed, resulting in escapement of turnover and short payment of tax. The Appellant furnished sample credit notes and offered to produce the complete set on requisition. The order in original did not call for the remaining credit notes, held that the credit notes were issued on the same day as the sales invoices and examined their values against the invoices, and confirmed the demand with interest and penalty. No personal hearing was recorded - Whether the order in original confirming the demand on grounds not contained in the SCN and without personal hearing is sustainable - HELD - The foundational premise of the SCN that no credit notes were issued was contradicted by the order in original itself, which dealt with credit notes issued on the same day as the sales invoices. The order then tested the credit notes against Section 34, which was not invoked in the SCN, and examined their dates and values, which were never put to the Appellant. The Revenue itself appeared unsure of the basis of the SCN. Section 75(7) provides that no demand shall be confirmed on grounds other than the grounds specified in the notice. Section 75(4) requires an opportunity of hearing where an adverse decision is contemplated, and a personal hearing also allows the adjudicating authority to clarify its doubts. Where the Appellant offered to produce all credit notes and the officer never called for them, the Revenue cannot contend that the Appellant filed samples and withheld the rest. The plea of absence of prejudice cannot be accepted when the fresh grounds became known only after the order was issued - The order in original violates the principles of natural justice and Section 75(4) and Section 75(7) and is null and void - Findings of FAA on grounds beyond the SCN - Section 107(11) and Section 75(7) of CGST Act, 2017 - FAA dismissed the appeal on the grounds of non-disclosure of credit notes within the time limit under Section 34, non-reflection in annual returns, simultaneous generation of credit notes and invoices, and improbability of exchanges within a few days. None of these grounds was raised in the SCN. The Revenue contended that FAA could make further inquiry under Section 107(11), that the core finding of unproved sales returns was common to all orders, and that the Appellant had full opportunity before the Tribunal - Whether the order of FAA based on grounds beyond the SCN can be sustained - HELD - The order in appeal is founded on theories of the economics of the jewellery trade and the behaviour of consumers, and these cannot supplant evidence and legal principles. Further inquiry under Section 107(11) must also be conducted within the framework of natural justice. The appellate authority cannot enter a finding without first putting it to the Appellant, recording the contentions and passing a speaking order. There was no evidence that such an inquiry was conducted. A finding in the order in original on a ground not contained in the SCN does not attain any sanctity, and it was the duty of the appellate authority to rectify such errors, which it instead compounded by adding further grounds. The remarks on reporting time limits are not harmless, as they were used to discredit the credit notes. The plea that the Appellant has full opportunity before the Tribunal cannot compensate for the lack of opportunity before the lower authorities, since the Appellant has a vested right to a full opportunity at every stage. As the orders are quashed on these grounds, examination of the merits is unnecessary - The order in appeal is set aside and the appeal is allowed. [Read less]

GST - Appeal by Revenue under Section 112(3) of CGST Act, 2017 – Respondent-assessee filed an appeal before the FAA against the order passed under Section 74(3) of the CGST Act, 2017 - FAA dismissed the appeal on the ground of limitation without examining the merits, as it was filed beyond the period of three months under Section 107(1) and no application for condonation of delay was filed - The Appellant/Revenue reviewed the appeal under Section 112(3) and contended that the FAA order is liable to be set aside as the Respondent failed to comply with the mandatory condition of pre-deposit under Section 107(6) at the time... [Read more]

GST - Appeal by Revenue under Section 112(3) of CGST Act, 2017 – Respondent-assessee filed an appeal before the FAA against the order passed under Section 74(3) of the CGST Act, 2017 - FAA dismissed the appeal on the ground of limitation without examining the merits, as it was filed beyond the period of three months under Section 107(1) and no application for condonation of delay was filed - The Appellant/Revenue reviewed the appeal under Section 112(3) and contended that the FAA order is liable to be set aside as the Respondent failed to comply with the mandatory condition of pre-deposit under Section 107(6) at the time of filing the first appeal - Whether the order of the FAA is liable to be set aside on the ground of non-compliance with the pre-deposit under Section 107(6) - HELD - The FAA order, at para 5, clearly records that the Respondent submitted a challan as proof of payment of the pre-deposit. The appeal having been dismissed by the FAA on the ground of limitation, the original adjudication order remains operative and enforceable. The appeal preferred by the Revenue under Section 112(3) read with Section 112(4), challenging the FAA order, is uncalled for - The impugned order does not suffer from any infirmity warranting interference by the Tribunal - The appeal filed by the Revenue is dismissed [Read less]

GST - Refund of excess payment of tax - Relevant date under clause (h) of the Explanation to Section 54 of the CGST Act, 2017 - Respondent filed a single refund application in May 2020 for excess payment of tax shown as the tax period March 2018, which in substance covered the entire financial year 2017-18 from July 2017 to March 2018. The appellate authority allowed the claim by holding that the relaxation notifications covered the filing date - Whether the relevant date for a single composite refund claim for the year is to be taken from the annual reconciliation of March 2018 or whether limitation must be examined separ... [Read more]

GST - Refund of excess payment of tax - Relevant date under clause (h) of the Explanation to Section 54 of the CGST Act, 2017 - Respondent filed a single refund application in May 2020 for excess payment of tax shown as the tax period March 2018, which in substance covered the entire financial year 2017-18 from July 2017 to March 2018. The appellate authority allowed the claim by holding that the relaxation notifications covered the filing date - Whether the relevant date for a single composite refund claim for the year is to be taken from the annual reconciliation of March 2018 or whether limitation must be examined separately for the excess paid with each monthly return - HELD - The Circular No. 26/26/2017-GST and Circular No. 7/7/2017-GST and the Press Release do not alter the Explanation to Section 54, the two-year period or the relevant date. The Circular on carry forward deals with adjustment and not with refund or limitation, and the later Circular permits refund only where adjustment in subsequent returns is not feasible. The Respondent did not identify any return in which the earlier differential was reported on a net basis. Section 59 casts a duty of self-assessment on the registered person, and the annual return only summarises the position for the year. Later amendments to Rule 61(5) and the discontinuance of the reconciliation return concern the mechanism of filing and do not postpone the relevant date. The label in the application cannot fix limitation for a claim covering nine separate payments, and the monthly return is the return as held by the Hon'ble Supreme Court - The claim is not a single composite claim, the relevant date for excess paid with each monthly return is the date of filing of that return, and limitation is to be examined month-wise – Ordered accordingly - Limitation for months July 2017 to February 2018 and effect of Notification No. 35/2020 as amended by Notification No. 55/2020 - Whether claims for earlier months are barred under Section 54(1) and saved by the COVID relaxation Notification No. 35/2020-Central Tax as amended by Notification No. 55/2020-Central Tax - The last dates for the months July 2017 to February 2018 fell between August 2019 and March 2020, before the relaxation window opened on 20.03.2020, whereas the refund application was filed on 06.05.2020. The appellate authority held that the notifications squarely covered the claim as it was filed within the relaxation period - Whether the claims for these months are barred by limitation - HELD - The notification extends a time limit which falls during the period from 20.03.2020 to the specified end date, and what determines its application is the date on which the limit falls and not the date on which the application is filed - A limit which had already expired before 20.03.2020 is not one which falls during the window, and nothing in the notification revives a period that had lapsed before its commencement. The Hon'ble High Court of Karnataka in Merck Life case has also held the two-year period to be mandatory for the tax authority. The claims for July 2017 to February 2018 are therefore barred under Section 54(1) so far as these notifications are concerned - For March 2018 the last date fell within the window and the application was in time, as accepted in the order-in-original, but the Respondent's own figures disclose no excess payment for that month - The notifications afford no refund to the Respondent, and the reasoning of the appellate authority based on the date of filing was not sustainable - Refund for February 2018 under Notification No. 13/2022 and the judgment of the Hon'ble Supreme Court on extension of limitation - Benefit of Notification No. 13/2022-Central Tax dated 05.07.2022 and the judgment of the Hon'ble Supreme Court in the suo motu proceedings on extension of limitation - Limitation for the excess paid with the return for February 2018 expired in March 2020 within the exclusion window, and the application was filed during the window itself - Whether the Respondent is entitled to refund for February 2018 although the claim was not specifically pressed - HELD - Where limitation expired within the period excluded from 15.03.2020 to 28.02.2022, all persons have limitation of ninety days from 01.03.2022, and the application filed earlier is in time on any computation. For July 2017 to January 2018 the limit had expired before the exclusion window commenced, and these claims are not saved by the notification or the judgment. There can be no estoppel against a statute, a concession on a question of law binds neither the party nor the Tribunal, and limitation is a pure question of law on admitted facts which may be considered at any stage. The claim filed already included the excess for February 2018, no prejudice was caused to the Appellant, and denying a refund lawfully due merely because the claim was not framed month-wise would defeat the intent of the Hon'ble Supreme Court and the notification - The Respondent is entitled to refund for February 2018, to be quantified after segregating it from the consolidated claim and granted in accordance with law, while claims for July 2017 to January 2018 remain barred - Plea of amount paid without authority of law under Article 265 of the Constitution - Refund - Alternative plea that excess payment is an amount paid without authority of law within Article 265 of the Constitution, so that the limitation under Section 54(1) does not apply - Whether the excess amount is an amount paid without authority of law so that the limitation under Section 54(1) does not bar its refund - HELD - In the decisions relied upon, the amount was either exempt, unconstitutionally levied, deposited outside the return under a mistaken belief, or paid twice as found by the authority itself. Here GST was chargeable on the services, the amounts were paid as tax through the monthly return, and no authority had found or conceded that any identified amount was paid twice or without authority of law. The record shows only a difference between tax declared in the two returns attributed to corrections and annual reconciliation, and the Respondent did not plead when and how any mistake of law was discovered - The Respondent, having elected to apply under Section 54 through Form GST RFD-01, must take the statutory period that goes with it, and the burden of bringing itself within an exception to limitation was not discharged. The principle laid down by the Hon'ble Supreme Court that a refund application beyond the statutory period is untenable was applied - The alternative plea under Article 265 is not made out on the record, and the claim remains barred under Section 54(1) - Whether there was any excess payment of tax for March 2018 - Existence of excess payment for March 2018 and consistency of the Department's ground with the order-in-original - Respondent contended that the order-in-original itself recorded excess payment for March 2018 and that the Appellant-Department could not approbate and reprobate, and further that excess of earlier months was carried forward into March 2018 - The Appellant-Department contended that on the month-wise break-up of the Respondent there was a short payment for that month and the sanctionable refund was nil - Whether there was any excess payment of tax for March 2018 and whether the ground raised is contrary to the order-in-original - HELD - The order-in-original recorded the figure with a negative sign and concluded in the next sentence that the eligible refund was nil, and a negative figure of excess payment is a shortfall and not an excess. The Respondent's own statement likewise showed a negative figure for that month, and the figures differ but the sign and conclusion are the same, so the ground is consistent with the order-in-original and there is no approbation and reprobation. The plea of carry forward depends on the premise rejected earlier, as the relevant date of each [Read less]

GST - Gujarat AAR - Classification of Biodegradable and Compostable Bags - Heading 3926 of Customs Tariff Act, 1975 - Applicant manufactured biodegradable and compostable packing bags from bio-based/biodegradable polymer resins such as PBAT, starch and calcium carbonate. Applicant claimed classification under sub-heading 39079990 - Whether the biodegradable and compostable packing bags are classifiable under HSN 39079990 - HELD - Polybutylene Terephthalate and polylactic acid find mention under Tariff Heading 3907 whereas starch-based polymers and compostable bioplastics do not find mention in any heading of Chapter 39. Si... [Read more]

GST - Gujarat AAR - Classification of Biodegradable and Compostable Bags - Heading 3926 of Customs Tariff Act, 1975 - Applicant manufactured biodegradable and compostable packing bags from bio-based/biodegradable polymer resins such as PBAT, starch and calcium carbonate. Applicant claimed classification under sub-heading 39079990 - Whether the biodegradable and compostable packing bags are classifiable under HSN 39079990 - HELD - Polybutylene Terephthalate and polylactic acid find mention under Tariff Heading 3907 whereas starch-based polymers and compostable bioplastics do not find mention in any heading of Chapter 39. Since the product is biodegradable and compostable bags, it cannot be covered under Tariff Heading 3907. Headings 3901 to 3914 cover plastic raw materials in primary form, and the bags do not find mention in headings 3915 to 3925. Heading 3926 covers other articles of plastics, and there is no mention of Biodegradable and Compostable Bags in any of its sub-headings. The product is therefore aptly classifiable under sub-heading 39269099 and not under sub-heading 39079990 as opined by the Applicant - The bags are held classifiable under HSN 39269099 of the First Schedule to the Customs Tariff Act, 1975 - Ordered accordingly - Rate of GST on Biodegradable Bags - Entry No. 319 of Schedule-I of Notification No. 09/2025-Central Tax (Rate) - Bags classifiable under sub-heading 39269099 could fall under Entry No. 127 of Schedule-II, which covers heading 3926, or under Entry No. 319 of Schedule-I, which covers paper sacks/bags and bio-degradable bags of Chapters 39 and 48. The Applicant submitted consent orders of the Pollution Control Board, a certificate of an international certification body and a test report on the compostable film in support of the claim that the bags are biodegradable and compostable - Whether the bags attract GST under Entry No. 319 of Schedule-I or under Entry No. 127 of Schedule-II - HELD - Entry No. 319 was newly inserted in Schedule-I and was not part of the earlier Notification No. 01/2017-Central Tax (Rate). The minutes of the 54th meeting of the GST Council show that States urged a reduced rate to promote paper bags and biodegradable bags made from starch as eco-friendly alternatives to plastic bags. The entry therefore takes into consideration the taxability of both paper sacks/bags and biodegradable bags. The inclusion of Chapter 39 in the entry is to encourage production of plastic bags which are biodegradable in nature, eco-friendly and environmental friendly. The test report on the sample shows disintegration, seed germination and biomass levels in line with the composting standard. Since the applicable entry is decided, there is no need to discuss Entry No. 127 of Schedule-II - The bags are covered under Entry No. 319 of Schedule-I and are liable to GST at 5%, strictly subject to the validity of the Applicant's claim that the product is biodegradable. [Read less]

GST - Blocking of Electronic Credit Ledger under Rule 86A of the CGST Rules and bar on parallel proceedings under Section 6 of the MPGST Act, 2017 - Petitioner's Electronic Credit Ledger was blocked under Rule 86A for alleged availment of ITC without valid invoices or debit notes - Petitioner contended that the Central GST authorities had already conducted search, verification and concluded proceedings on the same subject matter and tax period after payment through Form GST DRC-03, that State proceedings were therefore barred by cross-empowerment under Section 6, and that no valid reasons to believe were recorded nor was a... [Read more]

GST - Blocking of Electronic Credit Ledger under Rule 86A of the CGST Rules and bar on parallel proceedings under Section 6 of the MPGST Act, 2017 - Petitioner's Electronic Credit Ledger was blocked under Rule 86A for alleged availment of ITC without valid invoices or debit notes - Petitioner contended that the Central GST authorities had already conducted search, verification and concluded proceedings on the same subject matter and tax period after payment through Form GST DRC-03, that State proceedings were therefore barred by cross-empowerment under Section 6, and that no valid reasons to believe were recorded nor was any opportunity of hearing afforded - Respondents contended that the earlier proceedings pertained to a distinct issue of clandestine removal, while the present proceedings arose from a separate investigation by the Anti-Evasion Bureau into bogus ITC passed on by certain suppliers - Whether the blocking of the Electronic Credit Ledger is sustainable in view of Section 6 and Rule 86A - HELD - Section 6 of the MPGST Act prohibits parallel proceedings only in respect of the same subject matter. The present proceedings relate to a separate transaction and a fresh cause of action, hence Section 6 is not attracted. Rule 86A empowers the proper officer to block the Electronic Credit Ledger where there are reasons to believe that the ITC has been fraudulently availed or is otherwise ineligible. The proper officer formed such belief on the basis of the investigation report received from the Joint Commissioner, State Tax, Anti-Evasion Bureau. No ground is made out for interference and the writ petition is dismissed [Read less]

Central Excise - Recovery of duty foregone on duty free procurement by 100% EOU - Notification Nos. 22/2003-CE and 52/2003-Cus - The Appellant, a 100% EOU, procured raw materials without payment of duty under the Notifications and executed a bond. The bulk drug manufactured from them failed the quality test and was destroyed within the factory without intimation to the department. On CERA audit observation, SCN demanded the duty foregone with interest and penalty, which the adjudicating authority confirmed and the FAA upheld. The Appellant contended that destruction within the unit is permitted and non-intimation is only a... [Read more]

Central Excise - Recovery of duty foregone on duty free procurement by 100% EOU - Notification Nos. 22/2003-CE and 52/2003-Cus - The Appellant, a 100% EOU, procured raw materials without payment of duty under the Notifications and executed a bond. The bulk drug manufactured from them failed the quality test and was destroyed within the factory without intimation to the department. On CERA audit observation, SCN demanded the duty foregone with interest and penalty, which the adjudicating authority confirmed and the FAA upheld. The Appellant contended that destruction within the unit is permitted and non-intimation is only a procedural lapse, and that duty can be demanded only on goods cleared into DTA. The Respondent contended that the conditions of the Notifications and the bond were not fulfilled - Whether the duty foregone on duty free raw materials is recoverable where the finished goods manufactured from them were destroyed - HELD - The raw materials were procured duty free on the condition that they are used for manufacture of finished goods for export. The Appellant had bound itself by the bond to pay duty with interest if the raw materials were not used for the intended purpose. There is no dispute that the raw materials were used for manufacture of the finished goods. The intended purpose of allowing duty free procurement was, however, to export the manufactured goods and earn foreign exchange, which was not satisfied. The Foreign Trade Policy provides that no duties are payable on goods destroyed with permission of Customs authorities, but the Appellant did not intimate the department regarding destruction. An exemption notification is to be construed strictly. The conditions of the Notifications not being satisfied, the Appellant is not entitled to the exemption and is liable to pay the duty foregone as per the bond - The duty demand along with interest is upheld - Limitation and demand based on audit observations - Bond executed under Notification Nos. 22/2003-CE and 52/2003-Cus - The SCN for duty foregone on procurements of 2013-14 and 2014-15 was issued in 2018 on the basis of CERA observations. The Appellant contended that the SCN was time barred, that the extended period was wrongly invoked and that the notice was issued without independent investigation - Whether the demand is barred by limitation and is sustainable on the basis of audit observations - HELD - Where a bond is executed undertaking to pay duty if the goods are not used as specified, the normal period of limitation does not apply and the demand is not hit by limitation. The conditions of the bond and the Notifications having been violated, the grounds challenging the extended period or the issue of the SCN without investigation are not sustainable - The demand is not barred by limitation - Penalty - Section 11AC of the Central Excise Act, 1944 - Penalty equal to the duty was imposed on the Appellant. The Appellant had reversed the CENVAT credit on duty paid raw materials with interest on being pointed out by the audit team. The Appellant contended that no fraud, collusion, wilful mis-statement or suppression was involved - Whether penalty under Section 11AC is imposable on the Appellant - HELD - There is no element to suggest that the Appellant had any intention to evade payment of duty, as is clear from its reversal of the CENVAT credit with interest on being pointed out by the audit team. The Notifications require the 100% EOU to pay duty and interest on the goods not used for the intended purpose but do not mandate imposition of penalty - The penalty under Section 11AC is set aside and the appeal is partly allowed. [Read less]

GST - Refund of unutilised Input Tax Credit lying in Electronic Credit Ledger - Section 54 of CGST Act, 2017 - Respondent, an SEZ unit, filed refund application under the category of "any other" for unutilised ITC lying in its Electronic Credit Ledger. SCN issued and the refund claim was rejected under Rule 92(3) of CGST Rules, 2017. FAA allowed the appeals filed by the Respondent - The Revenue filed appeals before the Tribunal. Respondent took an additional stand that the refund claimed is of excess tax paid by it and not of unutilised ITC under Section 54(3) - Whether the refund claim falls under the category of refund o... [Read more]

GST - Refund of unutilised Input Tax Credit lying in Electronic Credit Ledger - Section 54 of CGST Act, 2017 - Respondent, an SEZ unit, filed refund application under the category of "any other" for unutilised ITC lying in its Electronic Credit Ledger. SCN issued and the refund claim was rejected under Rule 92(3) of CGST Rules, 2017. FAA allowed the appeals filed by the Respondent - The Revenue filed appeals before the Tribunal. Respondent took an additional stand that the refund claimed is of excess tax paid by it and not of unutilised ITC under Section 54(3) - Whether the refund claim falls under the category of refund of unutilised ITC lying in the Electronic Credit Ledger or refund of excess tax paid by the supplier - HELD - The SCN itself records that the refund application was filed under the category of "any other" for ITC remaining unutilised in the Electronic Credit Ledger. The order of the FAA records that the claim relates to unutilised ITC in respect of credit distributed by the Input Service Distributor and in some cases tax paid on inward supplies by suppliers. This was never questioned or controverted by the Respondent at any stage - The additional stand that the refund is of excess tax paid is not backed by any documentary evidence or law. The supplier paid the tax voluntarily for a long time and it cannot be assumed that the tax was paid by mistake or under duress or coercion. Both the Revenue and the Respondent are on the same page that the refund claims pertain to unutilised ITC availed on the basis of credit distributed by the Input Service Distributor - The claim is held to be a refund of unutilised ITC distributed by the Input Service Distributor and the additional plea of refund of excess tax paid is not accepted - Refund of ITC distributed by Input Service Distributor to SEZ unit - Section 54 of CGST Act, 2017 read with Rule 89 of CGST Rules, 2017 – Respondent-SEZ claimed refund of unutilised ITC lying in its Electronic Credit Ledger, being credit distributed by the Input Service Distributor - Revenue contended that under the proviso to Rule 89(1) the application for refund in respect of supplies to an SEZ unit is to be filed by the supplier. It was further contended that the SEZ unit is not liable to pay tax on such supplies, and that credit distributed by the ISD cannot be equated with tax paid on supplies made to the SEZ unit - Whether the refund of unutilised ITC distributed by the Input Service Distributor can be claimed by an SEZ unit as the recipient of the services - HELD - The Input Service Distributor, as defined in Section 2(61) of the CGST Act, is an office of the supplier which receives tax invoices towards input services and issues a prescribed document for distributing the credit. In such a case it is not possible for the supplier of goods and services to file a refund application for the input tax credit distributed by the Input Service Distributor. As there is no specific supplier who can claim the refund, the stand of the Revenue that the SEZ unit is not entitled to seek refund of the ITC paid in connection with goods or services supplied to it is not tenable - The proviso to Rule 89 does not use the word "only", and no word can be inserted into a Rule by interpretation. The restriction read into the proviso by the Revenue is therefore misplaced. An SEZ unit cannot be denied refund of ITC solely on the ground that it is not the supplier. No decision contrary to this position was cited by the Revenue - The contention of the Revenue is rejected and the SEZ unit is held entitled to claim refund of the unutilised ITC distributed by the Input Service Distributor - Relevance of Board circulars on manual filing of refund claims - Circular No. 17/17/2017-GST and Circular No. 24/24/2017-GST - Revenue submitted that the refund claim could not be processed under any of the categories of refund specified in the circulars prescribing manual filing and processing of refund claims, and therefore the claim was rightly rejected - Whether the Board circulars restrict the right of the SEZ unit to claim refund - HELD - The Circulars were issued due to non-availability of the refund module on the common portal and prescribe the procedure for manual filing and processing of refund claims. They did not bring any substantial change in the law relating to the right of refund to SEZ units and do not in any manner circumscribe the right of the SEZ unit to claim refund - The reliance of the Revenue on the Circulars is rejected, no fault is found with the orders of the FAA, the orders are affirmed – The appeals filed by the Revenue are dismissed [Read less]

Andhra Pradesh VAT Act, 2005 - Taxability of service line charges and development charges collected by an electricity distribution company under Section 4(8) of the APVAT Act as transfer of the right to use goods - Petitioner, a distribution licensee under the Electricity Act, 2003, extended service lines and developed distribution infrastructure comprising electric poles, transformers and cables for applicants, and recovered the cost of the goods under the heads of service line charges and development charges - Respondent held that there was a transfer of the right to use goods and levied tax on the turnover under Section... [Read more]

Andhra Pradesh VAT Act, 2005 - Taxability of service line charges and development charges collected by an electricity distribution company under Section 4(8) of the APVAT Act as transfer of the right to use goods - Petitioner, a distribution licensee under the Electricity Act, 2003, extended service lines and developed distribution infrastructure comprising electric poles, transformers and cables for applicants, and recovered the cost of the goods under the heads of service line charges and development charges - Respondent held that there was a transfer of the right to use goods and levied tax on the turnover under Section 4(8) of the APVAT Act - Whether the recovery of service line charges and development charges from consumers amounts to a transfer of the right to use goods exigible to tax under Section 4(8) of the APVAT Act - HELD - The mere recovery of the cost of materials does not by itself establish that the right to use the goods was transferred to the consumers. The poles, transformers and cables continued to remain under the control and maintenance of the Petitioner, and the consumers were not entitled to interfere with or operate the equipment – The continued ownership and control are relevant factors, and the issue cannot be decided merely on the basis of recovery of cost or installation of the equipment. However, the entire cost of the goods used in developing the infrastructure was recovered from the respective applicants, the infrastructure was developed exclusively for their use, and such activity was ancillary to the principal business of supplying electricity. Viewed in its entirety, the nature of the transaction establishes a transfer of the right to use the goods, as transfer of ownership is not necessary and the transfer of the right to use is sufficient to attract the levy - The tax levied on the value of the goods recovered is exigible at the applicable rates under Section 4(8) of the APVAT Act – The question is answered in favour of the Respondent and the writ petition is dismissed [Read less]

Customs - Invocation of extended period of limitation - Proviso to Section 28(1) of the Customs Act, 1962 - The Respondent imported telecom equipment. On a doubt that the goods were misdeclared by giving only the technical name and not the trade name to evade anti-dumping duty, investigation was taken up. SCN was issued under the proviso to Section 28(1) proposing demand of anti-dumping duty, confiscation and penalty. The Commissioner dropped the proceedings, and the Appellant (Revenue) challenged that order. The Respondent contended that the Bill of Entry was filed long before the SCN, which was therefore beyond the norma... [Read more]

Customs - Invocation of extended period of limitation - Proviso to Section 28(1) of the Customs Act, 1962 - The Respondent imported telecom equipment. On a doubt that the goods were misdeclared by giving only the technical name and not the trade name to evade anti-dumping duty, investigation was taken up. SCN was issued under the proviso to Section 28(1) proposing demand of anti-dumping duty, confiscation and penalty. The Commissioner dropped the proceedings, and the Appellant (Revenue) challenged that order. The Respondent contended that the Bill of Entry was filed long before the SCN, which was therefore beyond the normal period, and that it had correctly declared the description and value of the goods. It further contended that the Department had visited its premises and collected the relevant documents, so the extended period could not be invoked. The Appellant contended that the Commissioner erred in interpreting the exclusion clause of the notification - Whether the Revenue was justified in issuing the SCN by invoking the extended period of limitation - HELD - The officials of the Department visited the Respondent's premises and collected the relevant documents, and the Respondent had explained the nature and description of the goods much before the SCN. The Revenue was therefore aware of the facts but chose not to act in time. The Respondent cannot be alleged to have colluded or made any wilful misstatement or suppression of facts. A SCN which is wholly time barred challenges the jurisdiction of the adjudicating authority and must be examined at the threshold. An order passed without jurisdiction is a nullity and cannot be cured in appellate proceedings - The appeal of the Revenue is dismissed on limitation itself, and the merits are not examined [Read less]

Service Tax - Construction of individual residential houses under assignment agreements - Section 65(91a) and Section 65(105)(zzzh) of the Finance Act, 1994 and Entry 14(b) of Notification No. 25/2012-ST - The Appellant constructs residential complexes. Under assignment agreements, the purchasers acquired plots registered in their own names and engaged the Appellant to construct individual houses such as simplex, duplex and bungalows. SCN invoking the extended period alleged that these houses form part of a residential complex and are taxable as construction of residential complex service. The adjudicating authority confir... [Read more]

Service Tax - Construction of individual residential houses under assignment agreements - Section 65(91a) and Section 65(105)(zzzh) of the Finance Act, 1994 and Entry 14(b) of Notification No. 25/2012-ST - The Appellant constructs residential complexes. Under assignment agreements, the purchasers acquired plots registered in their own names and engaged the Appellant to construct individual houses such as simplex, duplex and bungalows. SCN invoking the extended period alleged that these houses form part of a residential complex and are taxable as construction of residential complex service. The adjudicating authority confirmed the demand with interest and penalty, relying on the planned layout, common amenities and presence of more than twelve units. The Appellant contended that individual houses built on separate plots under separate approvals are not a residential complex. The Respondent contended that the colony had common area and facilities under the builder's control - Whether construction of individual residential houses under assignment agreements is taxable as construction of residential complex - HELD - The definition of residential complex before 01.07.2012 is cumulative. It requires a building or buildings having more than twelve residential units, a common area, specified facilities and an approved layout. The mere existence of several residential structures within a larger development does not dispense with proof of these elements. The requirement of more than twelve units is not fulfilled at the level of the individual structures, as the purchasers acquired the plots in their own names and entrusted the Appellant with construction of individual houses. The existence of other independently owned houses elsewhere in the colony cannot establish taxability. From 01.07.2012, Entry 14(b) exempts construction of a single residential unit otherwise than as part of a residential complex. Where title to a demarcated plot has passed to the purchaser and the construction agreement entrusts the erection of a house, the transaction bears the characteristics of construction undertaken for the landowner. The source of the land is not decisive, and the gated nature of the colony, common boundary and facilities are not conclusive. The houses were self-contained units with separate entries and separate electricity and water connections for one family, and the Revenue failed to establish that they formed part of a residential complex - The demand, interest and penalty on construction of individual houses are set aside - Abatement on construction of residential flats - Notification Nos. 1/2006-ST, 29/2010-ST and 26/2012-ST - Under agreements for sale, the purchasers acquired identified flats together with the corresponding interest in land for a consolidated consideration. The Appellant did not dispute the taxability of construction of flats but discharged Service Tax on the abated value. The Department denied the abatement on the ground that the value of land was not included in the amount charged, and that a satisfactory break-up of corner charges and development charges was not furnished. The Respondent contended that an exemption notification is to be construed strictly - Whether the abatement can be denied on construction of residential flats - HELD - The abatement of 33% under Entry 10 of the 2006 Notification carried no condition regarding land. The condition regarding separate recovery of land cost was introduced by Entry 10(a) only from 01.07.2010. Where the purchaser agrees to acquire a flat together with the corresponding interest in the land for a consolidated consideration, the amount represents the consideration for the transaction as a whole. The absence of a separately stated allocation towards land does not signify that land was excluded or separately recovered. In the case of flats, land is never sold separately but forms the undivided portion accruing to the flat buyer, so the land cost is invariably included in the value of the flat. The denial of abatement on the premise that the value of land was not separately identified is unsustainable. The absence of a break-up of corner charges and development charges cannot by itself render the entire consideration ineligible for abatement. The same reasoning applies to the condition under Notification No. 26/2012-ST that the value of land is included in the amount charged from 01.07.2012 - The Appellant is entitled to abatement for the entire period, subject to verification of other conditions. The matter is remanded to the adjudicating authority to re-quantify the demand after allowing abatement and to adjust the Service Tax already paid. The payment claimed on preferential location or development service is remanded for verification. Penalty is set aside, the claim of refund is left open to be made separately and limitation is not examined since the merits are decided. [Read less]

GST - Validity of cancellation of registration under Rule 21(e) where SCN rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of ITC in contravention of Section 16 of the CGST Act, 2017, on the basis of invoices issued by supplier firms whose registrations had been cancelled, and the FAA confirmed the cancellation - The SCN alleged that the Appellant was violating Section 16(2) by claiming ITC - Whether the cancellation is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars o... [Read more]

GST - Validity of cancellation of registration under Rule 21(e) where SCN rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of ITC in contravention of Section 16 of the CGST Act, 2017, on the basis of invoices issued by supplier firms whose registrations had been cancelled, and the FAA confirmed the cancellation - The SCN alleged that the Appellant was violating Section 16(2) by claiming ITC - Whether the cancellation is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars of inadmissible ITC, and does not refer to Section 29 - HELD - The SCN issued by the adjudicating authority must contain all details necessary under law. An SCN which does not specify the grounds or sufficient factual particulars violates natural justice. The requirements necessary to sustain the validity of a notice or order must be contained therein, and any deficiency in the SCN cannot subsequently be cured - The SCN did not disclose who the supplier was, what the GSTIN was or in which period inadmissible ITC was claimed. The recommendation for cancellation was based merely on an oral intimation, and no other formal communication was made to the Proper Officer for initiating cancellation proceedings. A mere reference to an oral intimation allegedly given by an officer cannot by itself constitute a valid and sufficient ground for cancellation in the absence of specific allegations supported by the relevant statutory provisions - Proceedings under Rule 21(e) and proceedings under Section 74A are distinct and materially different in nature, scope and legal consequences, and the cancellation had to be examined strictly within its own scope, without any finding on the Section 74A proceedings. Section 29 read with Rule 22 provides the framework for cancellation, but neither the SCN nor the cancellation order referred to it, and its invocation by the FAA cannot cure the fundamental defects as the taxpayer must be afforded a fair and effective opportunity to meet the allegations - The cancellation order and the Order-in-Appeal suffer from legal infirmities the cancellation is revoked and the registration stands restored - The appeal is allowed - Powers of FAA to rely on material not mentioned in the SCN while confirming cancellation of registration - The FAA confirmed the cancellation of registration on the basis of an enquiry report and details of the Form DRC-01A, which were not mentioned in the SCN issued for cancellation, after seeking clarification from the Proper Registering Authority - Whether the FAA can confirm the cancellation on the basis of evidence not produced at the time of passing the cancellation order and without giving the Appellant an opportunity of rebuttal - HELD - The FAA went beyond the SCN and acted as if collecting evidence at the appellate stage. Additional evidence can be produced only in rare circumstances, and where the authority wants additional evidence, a proper opportunity of rebuttal must be given to the Appellant. The order of the FAA did not mention any effective and reasonable opportunity of rebuttal and hearing. Under Rule 112, additional evidence is admissible only in the circumstances specified therein. The Appellate Authority must record specific reasons for admitting or rejecting such evidence, and a personal hearing must be provided in case of rejection. Before admitting such evidence, reasonable opportunity must be given to the adjudicating authority to examine and rebut it. Appellate proceedings should not, as a matter of ordinary practice, be converted into a fresh investigation merely to remedy deficiencies in the original adjudication - The Order-in-Appeal confirming the cancellation on the basis of an enquiry report not mentioned in the SCN is not sustainable in law. The appeal is allowed [Read less]

GST - Validity of cancellation of registration where Show Cause Notice rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of Input Tax Credit (ITC) in violation of Section 16(2) of the CGST Act, 2017 and the First Appellate Authority (FAA) confirmed the cancellation by invoking Section 29 of the Act - SCN alleged that the Appellant was claiming ITC in violation of Section 16(2), referred to an intimation notice under Section 74A and to an oral communication by an officer, and directed the Appellant to explain why regis... [Read more]

GST - Validity of cancellation of registration where Show Cause Notice rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of Input Tax Credit (ITC) in violation of Section 16(2) of the CGST Act, 2017 and the First Appellate Authority (FAA) confirmed the cancellation by invoking Section 29 of the Act - SCN alleged that the Appellant was claiming ITC in violation of Section 16(2), referred to an intimation notice under Section 74A and to an oral communication by an officer, and directed the Appellant to explain why registration should not be cancelled - Whether the cancellation of registration is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars of inadmissible ITC, and does not refer to Section 29 - HELD - The SCN issued by the adjudicating authority must contain all details necessary under law, and an SCN which does not specify the grounds or sufficient factual particulars violates natural justice - The requirements necessary to sustain the validity of a notice or order must be contained therein, and any deficiency in the SCN cannot subsequently be cured. The SCN did not disclose who the supplier was, what the GSTIN was or in which period inadmissible ITC was claimed. The recommendation for cancellation was based merely on an oral intimation, and no other formal communication was made to the Proper Officer for initiating cancellation proceedings - A mere reference to an oral intimation allegedly given by an officer cannot by itself constitute a valid and sufficient ground for cancellation in the absence of specific allegations supported by the relevant statutory provisions. Proceedings for cancellation of registration and proceedings under Section 74A are distinct and materially different in nature, scope and legal consequences, and the cancellation had to be examined strictly within its own scope, without any finding on the Section 74A proceedings - Section 29 read with Rule 22 provides the framework for cancellation, but neither the SCN nor the cancellation order referred to it, and its invocation by the FAA cannot cure the fundamental defects as the taxpayer must be afforded a fair and effective opportunity to meet the allegations - The cancellation order and the Order-in-Appeal suffer from legal infirmities. The cancellation is revoked and the registration stands restored - The appeal is allowed - GST - Powers of FAA to rely on material not mentioned in the SCN while confirming cancellation of registration - The FAA confirmed the cancellation of registration on the basis of an enquiry report and details of the Form DRC-01A, which were not mentioned in the SCN issued for cancellation, after seeking clarification from the Proper Registering Authority - Whether the FAA can confirm the cancellation on the basis of evidence not produced at the time of passing the cancellation order and without giving the Appellant an opportunity of rebuttal - HELD - The FAA went beyond the SCN and acted as if collecting evidence at the appellate stage. Additional evidence can be produced only in rare circumstances, and where the authority wants additional evidence, a proper opportunity of rebuttal must be given to the Appellant. The order of the FAA did not mention any effective and reasonable opportunity of rebuttal and hearing. Under Rule 112, additional evidence is admissible only in the circumstances specified therein. The Appellate Authority must record specific reasons for admitting or rejecting such evidence, and a personal hearing must be provided in case of rejection. Before admitting such evidence, reasonable opportunity must be given to the adjudicating authority to examine and rebut it. Appellate proceedings should not, as a matter of ordinary practice, be converted into a fresh investigation merely to remedy deficiencies in the original adjudication - The Order-in-Appeal confirming the cancellation on the basis of an enquiry report not mentioned in the SCN is not sustainable in law. The appeal is allowed [Read less]

GST - Constitutional validity of Rule 36(4) of the CGST Rules restricting ITC on invoices or debit notes not uploaded by suppliers under Section 37(1) of the CGST Act - Rule 36(4) was inserted restricting availment of ITC in respect of invoices or debit notes not uploaded by suppliers to a prescribed limit of the eligible credit reflected in uploaded invoices, and the limit was subsequently reduced - Petitioners sought quashing of Rule 36(4) contending that it is ultra vires Section 16, contrary to Sections 37 and 42, that Section 43A was not notified, and that it penalises bona fide recipients in violation of Articles 14,... [Read more]

GST - Constitutional validity of Rule 36(4) of the CGST Rules restricting ITC on invoices or debit notes not uploaded by suppliers under Section 37(1) of the CGST Act - Rule 36(4) was inserted restricting availment of ITC in respect of invoices or debit notes not uploaded by suppliers to a prescribed limit of the eligible credit reflected in uploaded invoices, and the limit was subsequently reduced - Petitioners sought quashing of Rule 36(4) contending that it is ultra vires Section 16, contrary to Sections 37 and 42, that Section 43A was not notified, and that it penalises bona fide recipients in violation of Articles 14, 19 and 300A - Respondents contended that Rule 36(4) derives authority from Sections 16 and 164, was not introduced under Section 43A, and is a policy measure to curb fraudulent availment of ITC - Whether Rule 36(4) of the CGST Rules is ultra vires the CGST Act and unconstitutional - HELD - Three High Courts have dealt with the same issue and upheld the rule, and the matter is no longer res integra. Rule 36 and in particular sub-rule (4) derives power from Section 16 of the CGST Act as well as from the general powers conferred by the Act. Section 43A, having never been enforced, cannot be treated as the source of power of a rule. The Court is in respectful agreement with the view taken by the High Courts and sees no reason to take a contrary view - The challenge to the constitutional validity of Rule 36(4) of the CGST Rules fails and the petitions are disposed of accordingly - Maintainability of challenge to show cause notices issued for reversal of ITC on the ground of mismatch under Rule 36(4) of the CGST Rules - Respondents issued Form GST DRC-01A calling upon the Petitioner to reverse ITC on the ground of mismatch between the ITC availed and the amounts reflected in GSTR-2A, and the Petitioners assailed the notices along with the vires of Rule 36(4) - Whether the SCN are liable to be quashed at the stage of their issuance - HELD - The challenge to the show cause notices is primarily founded on the challenge to the vires of Rule 36(4), and since that challenge has failed the Court is not persuaded to quash the notices. The Hon'ble Supreme Court has held that no writ lies against the issuance of a show cause notice and such a writ petition would not be maintainable. The Petitioners are at liberty to avail the appropriate remedies by appearing before the competent authorities and placing whatever material they wish to rely upon - The Court declines to interfere with the show cause notices at this stage and the writ petitions are disposed of, with liberty to challenge any assessment orders in accordance with law. [Read less]

GST - Eligibility of ITC under Section 16(2) of CGST Act, 2017 where the supplier is subsequently found to be non-existent - Respondent purchased GP sheet used in manufacturing of padlock and metal items from a supplier and claimed ITC thereon - Revenue informed that the supplier was a non-existent firm only issuing fictitious invoices without actual supply of goods - FAA allowed the first appeal and set aside the demand, against which the Revenue preferred the second appeal - Whether ITC can be denied under Section 16(2) to a purchasing taxpayer who possesses valid tax invoice, e-way bills, transport records and proof of ... [Read more]

GST - Eligibility of ITC under Section 16(2) of CGST Act, 2017 where the supplier is subsequently found to be non-existent - Respondent purchased GP sheet used in manufacturing of padlock and metal items from a supplier and claimed ITC thereon - Revenue informed that the supplier was a non-existent firm only issuing fictitious invoices without actual supply of goods - FAA allowed the first appeal and set aside the demand, against which the Revenue preferred the second appeal - Whether ITC can be denied under Section 16(2) to a purchasing taxpayer who possesses valid tax invoice, e-way bills, transport records and proof of payment through banking channels, merely because the supplier was subsequently found to be non-existent - HELD - Section 16(1) and 16(2) prescribe the conditions for claiming ITC, namely possession of tax invoice, actual receipt of goods, payment of tax charged to the public exchequer and filing of return under Section 39 - Respondent produced verifiable documents, being e-way bill, consignment note and payment details, and the raw material was utilised in manufacturing of padlock goods. The department neither questioned nor disputed the manufacture or sale of the finished goods, and manufacturing of such goods without raw material is impermissible, which validates actual physical receipt of goods. Payment for the inward supply was also proved through verifiable banking channels prior to receipt of SCN. At the time of the transaction the supplier was a registered entity carrying a valid GSTIN on the common portal, and a subsequent investigation declaring the supplier non-existent or retrospective cancellation of registration cannot automatically disentitle a bonafide buyer who acted upon the registration status displayed on the official portal - Though the burden of proving eligibility of ITC lies on the person claiming it under Section 155, Respondent successfully discharged it, and the burden to rebut shifted to the department, which failed to do so. The Revenue cannot make the purchasing dealer a guarantor for the supplier's statutory compliance or post transaction records - The question is answered against the Appellant, FAA rightly set aside the reversal of ITC - The appeal is dismissed - Justification of penalty under Section 74 of CGST Act against a purchasing dealer without proof of collusion or active participation in fraud - FAA set aside the demand and penalty, and the Revenue preferred the second appeal - Whether a penalty order under Section 74 is justified against a purchasing dealer without proving collusion or active participation in the fraud - HELD - Section 74 applies only where tax is not paid, short paid or ITC is wrongly availed by reason of fraud or wilful misstatement or suppression of facts to evade tax liability. To invoke Section 74, the onus is on the department to establish deliberate fraud, misinterpretation or collusion between buyer and supplier. In the SCN, the proper officer failed to produce any direct evidence, statement or material to show that the Respondent was aware of any bogus invoice ring operated by the supplier - Respondent, having produced tax invoice, e-way bill, consignment note, bank transaction statement and evidence of raw material consumption, is a bonafide taxpayer who entered into the transaction in good faith with a registered entity and cannot be penalised for the post transaction disappearance of the supplier. The penalty is not sustainable and set aside - The order of FAA is upheld and the appeal is dismissed. [Read less]

GST – Classification of Supply, erection, testing and commissioning of fire protection system - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant supplied fire protection systems comprising pumps, pipes, valves, fittings, hydrant components and compressors to private industries and Government institutions, along with installation, testing and commissioning. Under the sample work order, the Applicant was required to supply the items, clear the site, build RCC pedestals and platforms, and erect, test and commission the system - Whether the supply, erection, testing and commissioning of the fire protect... [Read more]

GST – Classification of Supply, erection, testing and commissioning of fire protection system - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant supplied fire protection systems comprising pumps, pipes, valves, fittings, hydrant components and compressors to private industries and Government institutions, along with installation, testing and commissioning. Under the sample work order, the Applicant was required to supply the items, clear the site, build RCC pedestals and platforms, and erect, test and commission the system - Whether the supply, erection, testing and commissioning of the fire protection system constitutes a composite supply under Section 2(30) - HELD - A composite supply means two or more taxable supplies of goods or services which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. In the contract for the fire protection system, the supply of goods and the erection, testing and commissioning services are naturally bundled and supplied in conjunction with each other. The supply is a composite supply - Ordered accordingly - Fire protection system - Movable or immovable property for levy of GST - Applicant contended that the system is not permanently attached to the earth, that it can be dismantled and assembled as per the needs of the recipient, and that installation involves no earth work - Whether the fire protection system is movable or immovable property for the purpose of levy of GST - HELD - The Applicant is required to get the designated spot ready by clearing bushes and trees, build the necessary RCC pedestals and platforms, do the electric wiring, install the pipes, valves and gauges, connect the whole system, and carry out testing and commissioning. The components installed at the building or premises are intended to provide a permanent fire-protection infrastructure for the facility. They are not meant to be removed and relocated without substantial dismantling. The completed system therefore assumes the character of immovable property for the purpose of levy of GST - The fire protection system is regarded as immovable property - Works contract under Section 2(119) of the CGST Act, 2017 - Classification under SAC 9954 and applicable rate - Applicant sought to know whether the contract is a works contract covered under SAC 9954 and chargeable at 12%. The Applicant also supplied the system to Government institutions - Whether the contract for supply, erection, testing and commissioning of the fire protection system is a works contract covered under SAC 9954 and chargeable at the rate of 12% - HELD - A works contract means a contract for erection, installation, fitting out or commissioning of any immovable property wherein transfer of property in goods is involved in the execution of such contract. The fire protection system involves transfer of property in goods and erection, testing and commissioning of an immovable property. The contract is therefore a composite supply of works contract, which is treated as a supply of services under para 6 of Schedule II - Heading 9954 covers construction services. The electrical installation work, including fire alarm installation, is covered under SAC 995461. The firefighting water piping, sprinkler and hydrant network installation is covered under SAC 995462 - As regards the rate, the entry for composite supply of works contract provided to Government involves predominantly earth work. The sample work order requires excavation and backfilling, which are part of earth work. However, the charges for the same are minuscule in relation to the total contract amount. The works contract services therefore do not get covered under that entry, and the rate of 6% sought by the Applicant is not applicable - The contract is a works contract covered under SAC 9954. It is not chargeable at 12% and is not covered under Serial No. 3(vii) of Notification No. 11/2017-Central Tax (Rate). [Read less]

GST – Karnataka AAR - Transfer of Business as Supply - Section 7(1)(a) of CGST Act, 2017 - Applicant, a Limited Liability Partnership, entered into Commercial Terms for Agreement to Sale for transfer of its restaurant business to the Buyer for a lump-sum consideration - Whether the transfer of business constitutes a supply within the meaning of Section 7 of the CGST Act, 2017 - HELD - Section 7(1)(a) requires that there is a supply of goods or services or both, made or agreed to be made for a consideration, by a person, in the course or furtherance of business. The Applicant, being a Limited Liability Partnership, falls ... [Read more]

GST – Karnataka AAR - Transfer of Business as Supply - Section 7(1)(a) of CGST Act, 2017 - Applicant, a Limited Liability Partnership, entered into Commercial Terms for Agreement to Sale for transfer of its restaurant business to the Buyer for a lump-sum consideration - Whether the transfer of business constitutes a supply within the meaning of Section 7 of the CGST Act, 2017 - HELD - Section 7(1)(a) requires that there is a supply of goods or services or both, made or agreed to be made for a consideration, by a person, in the course or furtherance of business. The Applicant, being a Limited Liability Partnership, falls within the definition of person under Section 2(84) of the CGST Act, 2017. The Buyer is required to pay a consideration as per the agreement, as defined under Section 2(31), and the transaction is therefore not gratuitous in nature. The Applicant carries on business within the meaning of the inclusive definition in Section 2(17), and the transaction arises in the course or furtherance of such business. All the essential ingredients of Section 7(1)(a) are satisfied - The transaction constitutes a supply within the meaning of Section 7(1)(a) of the CGST Act, 2017 – Ordered accordingly - Exemption for Transfer of Going Concern under Entry No. 2 of Notification No. 12/2017-Central Tax (Rate) - Under the agreement, the Buyer was to take over the restaurant operations along with the staff, faculty accommodation and recurring operational costs and the assets. A Handover Letter and Asset Transfer Acknowledgement Letter recorded the actual handover of operations and of the assets in working condition. Past liabilities of the business were not transferred, and a single lump-sum consideration was agreed without item-wise valuation of assets - Whether the transfer of business is a transfer of a going concern, as a whole or an independent part thereof, exempt under Entry No. 2 of Notification No. 12/2017-Central Tax (Rate) - HELD - The expression going concern is not defined under the CGST Act, 2017. Its determination requires examining the substance and overall effect of the transaction, namely whether the business activity is transferred as an operational and functional unit which the transferee can continue after the transfer. The handover of operations, staff, assets and responsibility for maintenance, repairs, operational expenses and insurance shows that what is transferred is not merely a collection of assets but the restaurant business as an identifiable and functioning economic activity. The absence of item-wise valuation, by itself, is not conclusive, but it supports the intention to transfer the undertaking as an operational whole. Transfer of all past liabilities is not an indispensable condition, and retention of certain past liabilities by the transferor cannot alter the character of the transfer of a functioning business undertaking - The transfer is covered under Entry No. 2 of Notification No. 12/2017-CT (Rate) and is exempt from GST – Ordered accordingly [Read less]