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M.P. Commercial Tax Act, 1994 - Taxable event and relevance of form of goods at the time of sale - Classification on form of good and not end use – Respondent-assessee manufactured and marketed powder and biscuit products, which the Appellants-Department sought to classify as non-alcoholic drinks and beverages on the ground that the packaging required the consumer to dilute the product with milk or water, while the Respondent contended that, being sold across the counter as powder and biscuit, the goods fell under the residuary entry - High Court upheld classification under the residuary entry - Whether the taxing author... [Read more]

M.P. Commercial Tax Act, 1994 - Taxable event and relevance of form of goods at the time of sale - Classification on form of good and not end use – Respondent-assessee manufactured and marketed powder and biscuit products, which the Appellants-Department sought to classify as non-alcoholic drinks and beverages on the ground that the packaging required the consumer to dilute the product with milk or water, while the Respondent contended that, being sold across the counter as powder and biscuit, the goods fell under the residuary entry - High Court upheld classification under the residuary entry - Whether the taxing authorities are required to levy tax based on the form of the good at the time of sale or on the end product - HELD - Taxing statutes are strictly construed and nothing can be read in or implied beyond the plain language. The taxable event is the act of supply and the incidence of taxation is determined by the nature of the good in the form in which it is sold. The tax authorities are bound to look at what is supplied and not at its end use, and the subsequent use by the consumer in mixing the powder with water or milk does not alter the taxable event, as liability is determined at the point of supply. Classification must be based on the form of the good at the time of sale and not on the manner in which the consumer may later choose to use it, as a powder mix is taxed as a powder while a ready-to-drink beverage is taxed as a beverage - The authorities must levy tax on the basis of the form of the good at the time of sale - Classification of ‘GRD Powder’ and ‘GRD Mix’ under entry for non-alcoholic drinks and beverages or residuary entry - Whether the goods can be classified as non-alcoholic drinks and beverages or fall in the residuary entry - Appellants relied on common parlance, functional character and basic nature tests, the use of the word "including" in the entry, and decisions on powders and tea, while the Respondent relied on the plain language of the charging provision and the absence of any reference to use in the entry - HELD - The expression "beverages" is followed by syrups, cordials, distilled juice, ark and essences, all of which denote liquids or liquid preparations, and under the rule of ejusdem generis the general word derives its meaning from the class constituted by the associated words and cannot be interpreted to encompass goods of a different physical form. The entry makes no reference to end use but classifies goods by physical characteristic and form, and the common parlance, functional or basic nature tests cannot be applied to import the end use concept to override clear and unambiguous language - The expression "including" cannot be taken to mean all encompassing. The decisions relied on by the Revenue are distinguishable - Goods which do not answer the description of a specific entry must fall within the residuary entry and cannot be forced into an inapposite specific entry merely to attract a higher rate of tax - At the time of the taxable event the goods exist in the form of powder and biscuit and do not fall within the expression beverage. While it is possible that the goods may ultimately be used to make a beverage or a solid preparation, at the point of taxable event, they remain in powder form. Consequently, they do not fall within the expression ‘beverage’ - The appeals are dismissed [Read less]

Service Tax - Refund of service tax paid under mistake of law on Goods Transport Agency service - Applicability of Section 11B of the Central Excise Act, 1944 - Appellant, a manufacturer of yeast, paid service tax under reverse charge on Goods Transport Agency service, although it was eligible for exemption for food stuff under Notification No. 25/2012-ST as amended, and had not claimed the exemption in its returns - Commissioner (Appeals) rejected the refund on the ground that exemption was not claimed at the time of self-assessment and ignorance of law is no excuse - Whether the amount paid by the Appellant by mistake of... [Read more]

Service Tax - Refund of service tax paid under mistake of law on Goods Transport Agency service - Applicability of Section 11B of the Central Excise Act, 1944 - Appellant, a manufacturer of yeast, paid service tax under reverse charge on Goods Transport Agency service, although it was eligible for exemption for food stuff under Notification No. 25/2012-ST as amended, and had not claimed the exemption in its returns - Commissioner (Appeals) rejected the refund on the ground that exemption was not claimed at the time of self-assessment and ignorance of law is no excuse - Whether the amount paid by the Appellant by mistake of law is refundable to the Appellant - HELD - The Commissioner (Appeals) did not dispute that the Appellant was entitled to exemption, so the service tax paid under reverse charge was not payable and was admittedly paid under mistake of law. An amount paid under mistaken notion of law does not take the colour of duty and remains only a deposit, Section 11B refers to claim for refund of duty only and not to other amounts collected without authority of law, and the provisions of Section 11B and its limitation are not attracted. The principle of unjust enrichment does not apply and the Revenue has no authority to retain the amount - The refund of the amount paid is admissible to the Appellant – The appeal is allowed - Service Tax - Interest on refund of amount paid under mistake of law - Rate of interest - Appellant sought interest from the date of respective deposit till the date of refund of the amount paid by mistake of law, which was treated as a deposit - Whether the Appellant is entitled to interest and, if so, at what rate - HELD - Since Section 11B is not applicable to the refund of an amount paid under mistake of law, Section 11BB and the notification prescribing the rate of interest thereunder are also not applicable. Following the decisions of the Tribunal granting interest at twelve per cent per annum on such refunds, the decisions of the High Court upheld by the Supreme Court, and the Tribunal's decision in the Appellant's own case granting interest at the same rate, the Appellant is eligible for interest at twelve per cent from the date of deposit till the date of payment of the refund - The impugned order is set aside, the Revenue is directed to refund the amount along with interest at twelve per cent per annum from the date of respective deposits. [Read less]

GST - Penalty under Section 129(3) for address discrepancy in tax invoices and e-way bills - Appellant dispatched goods in an inter-State supply accompanied by tax invoices, e-way bills and transporter's bilty, with IGST charged - Two tax invoices and the corresponding e-way bills showed the buyer's former VAT address instead of the updated GST-registered address. Proceedings under Section 129(3) were initiated and a penalty was imposed - Whether the use of the consignee's former address in two invoices and the corresponding e-way bills justifies penalty under Section 129 of the CGST Act, 2017 - HELD - Section 129 does not... [Read more]

GST - Penalty under Section 129(3) for address discrepancy in tax invoices and e-way bills - Appellant dispatched goods in an inter-State supply accompanied by tax invoices, e-way bills and transporter's bilty, with IGST charged - Two tax invoices and the corresponding e-way bills showed the buyer's former VAT address instead of the updated GST-registered address. Proceedings under Section 129(3) were initiated and a penalty was imposed - Whether the use of the consignee's former address in two invoices and the corresponding e-way bills justifies penalty under Section 129 of the CGST Act, 2017 - HELD - Section 129 does not expressly require fraudulent intent in every case. The statutory conditions for a penalty must still be proved, and a documentary defect cannot be presumed to establish tax evasion without examining the explanation and evidence - The First Appellate Authority confused the rule about intent with the need to prove a breach that attracts the particular penalty. Tax invoices, e-way bills and bilty documents accompanied the goods, and physical verification showed that the goods matched - The explanation connecting the disputed entry to the buyer's former VAT address and old customer details retained in the ERP system was supported by the record. The Department did not identify a different purchaser, a fictitious transaction, any actual diversion of the goods, clandestine unloading or suppression of taxable value. The address mismatch alone cannot take the place of such evidence - Repetition of the same error in both invoices and e-way bills can be explained by use of the same customer data - A deliberate change of destination, an unidentified consignee or a material gap in the supporting documents may justify a different result - The error was bona fide and without any intention to evade tax. The penalty under Section 129 therefore cannot be sustained - The Order-in-Appeal and the Order-in-Original are set aside to the extent of the penalty, and any amount deposited towards it is to be refunded with interest wherever legally payable - The appeal is allowed [Read less]

GST - Full Bench Order - Validity of show cause notices and orders without visible digital signature - Electronic authentication through common portal - Notices and orders under Sections 73 and 74 of the CGST Act, 2017 and their summaries in Forms DRC-01, DRC-01A and DRC-07 were made available on the common portal without any visible physical or digital signature - The petitioners contended that they were unsigned documents, a nullity, relying on Rule 26(3) and on the mandatory use of "shall" in Rule 142 and the Forms - Whether such notices and orders are unsigned documents within the meaning of the GST Acts read with the ... [Read more]

GST - Full Bench Order - Validity of show cause notices and orders without visible digital signature - Electronic authentication through common portal - Notices and orders under Sections 73 and 74 of the CGST Act, 2017 and their summaries in Forms DRC-01, DRC-01A and DRC-07 were made available on the common portal without any visible physical or digital signature - The petitioners contended that they were unsigned documents, a nullity, relying on Rule 26(3) and on the mandatory use of "shall" in Rule 142 and the Forms - Whether such notices and orders are unsigned documents within the meaning of the GST Acts read with the Information Technology Act, 2000 and are a nullity in law - HELD - Forms are subservient to the Rules and legislation and cannot supplant them, so the requirement of inscription of signature in the prescribed Forms cannot override the Rules under which they are prescribed. Rule 26(3), which falls under the Chapter on Registration, does not extend to Chapter XVIII, where the rule making authority has consciously provided for different modes of authentication under different Chapters - Notices and orders under Chapter XVIII are electronically authenticated through the common portal, where the officer is onboarded by means of a digital signature certificate protected by a PIN known only to the holder, registered against his identity, and the system generates a hash value through asymmetric cryptography, which satisfies Sections 3, 3A and 5 of the Information Technology Act and the Second Schedule, with legal recognition under Section 5. The common portal is a secure system accessible only to the proper officer and the registered taxpayer, so verification of the digital signature at the recipient end is not required - A presumption of regularity attaches to the electronic record and electronic signature under the evidence law, which the petitioners failed to rebut, and the absence of a visible digital signature on the PDF version does not render the document invalid. The admission of the State officers in some cases that documents bore no signature may be on account of ignorance of the working of the system, and the earlier decisions taking a contrary view did not have the benefit of the working of the GST system explained by the GST Network - The presence of a digital signature on the Forms is not a requirement on documents covered under Chapter XVIII, and show cause notices and orders electronically authenticated by the proper officer and uploaded on the common portal are valid documents in law, the contrary view not laying down the correct position of law - The Reference is answered accordingly - Service of show cause notice or order by upload on common portal - Additional Notices and Orders tab - Commencement of limitation - Section 169(1)(d) of the CGST Act, 2017 - Petitioners contended that uploading on the common portal cannot be construed as service as the taxpayer is not expected to keep looking at the portal; that limitation should run from actual retrieval, that notices placed in the Additional Notices tab were not seen, and that writ petitions were not barred by delay - Whether uploading of notices and orders on the common portal amounts to valid service and from what date limitation runs - HELD - Section 169(1) provides for service by any one of the methods prescribed, read disjunctively, and under Section 169(1)(d) making the notice or order available on the common portal amounts to service. Under Section 13(2) of the Information Technology Act, receipt occurs when the electronic record enters the designated computer resource, which is the common portal, so the date of upload is the date of receipt. The statute casts a duty of diligence on the taxpayer to make compliances through the common portal, including returns, refund claims and audit, failing which legal consequences follow - Where the portal carries a Note clarifying that notices and orders on adjudication and similar modules are available under the Additional Notices and Orders tab, a taxpayer cannot feign ignorance of service for notices issued after the Note, though the question for notices uploaded earlier was left open for the appropriate forum. Since the notices and orders are valid, the bar of limitation for approaching the writ court on the ground of availability of a statutory remedy is attracted - Uploading on the common portal is valid service, and limitation to avail statutory remedy or to make other compliances runs from the date of upload - The petitioners are allowed liberty to file statutory appeals within two weeks, raising such other grounds - The Reference is answered accordingly - Requirement of Document Identification Number or Reference Number on notices and orders - Petitioners contended that the impugned orders did not quote the Document Identification Number as required by the Board's circulars binding under Section 168, and that the later circular dispensing with it where the Reference Number is shown operates only prospectively - Whether notices and orders not quoting the Document Identification Number are invalid - HELD - The Circulars issued by the Board and adopted by the State are binding on the Revenue under Section 168, and orders which do not quote the Document Identification Number or the Reference Number are not fit to be relied upon. The later Circular clarifies that for communications through the common portal bearing a verifiable Reference Number, quoting of the DIN is not required. Nothing in it makes it prospective, so the document should reflect either number, failing which the order would not be valid in law. The Reference Number is a valid authentication mechanism, verifiable by the taxpayer on the portal - In the individual writ petitions either the Reference Number or the Document Identification Number was quoted in the notices and orders, and they cannot be held invalid on this ground - The Reference is answered accordingly - Maintainability of reference to Full Bench on conflicting Division Bench decisions - Writ petitions were referred to the Full Bench on the issue of unsigned show cause notices and orders, in view of conflicting decisions of coordinate Division Benches on the application of Rule 26(3) of the CGST Rules, 2017 - Petitioners questioned the reference on the ground that the referral order did not frame the questions or indicate any conflict and that the Chief Justice could not authorise a reference administratively - Whether the reference to the Full Bench is maintainable - HELD - Three coordinate Benches had taken conflicting views, one holding the contrary view to be per incuriam, and the earlier Benches did not have the benefit of the live demonstration of the working of the common portal by technical experts of the GST Network. Judicial discipline requires that if two Division Benches of the same High Court take different views, the matter should be referred to a larger Bench, and one Division Bench cannot ignore or refuse to follow an earlier Division Bench of the same Court - There is no infirmity in the referral order. [Read less]

Central Excise - Reliance on statements recorded under Section 14 without compliance with Section 9D of the Central Excise Act, 1944 - Revenue alleged that the Appellant availed and utilised CENVAT Credit on invoices of registered dealers without receipt of goods, relying principally on statements recorded under Section 14 of persons associated with the dealers, which the adjudicating authority used directly without examining the makers - Whether the statements recorded under Section 14 can be relied upon to prove the truth of their contents without following the procedure under Section 9D - HELD - Not every statement reco... [Read more]

Central Excise - Reliance on statements recorded under Section 14 without compliance with Section 9D of the Central Excise Act, 1944 - Revenue alleged that the Appellant availed and utilised CENVAT Credit on invoices of registered dealers without receipt of goods, relying principally on statements recorded under Section 14 of persons associated with the dealers, which the adjudicating authority used directly without examining the makers - Whether the statements recorded under Section 14 can be relied upon to prove the truth of their contents without following the procedure under Section 9D - HELD - Not every statement recorded during investigation automatically acquires substantive evidentiary value. Save in the exceptional circumstances in Section 9D(1)(a), the statement has to pass through the procedure under Section 9D(1)(b), requiring the examination of the maker as a witness before the adjudicating authority and a determination, for reasons recorded in writing, that the statement deserves to be admitted in evidence. The record did not disclose that this exercise was undertaken or that the case fell within any exceptional circumstance, and where the procedure is not followed the statements have to be eschewed from consideration as not relevant for proving the truth of their contents. The statement of the vehicle owner also cannot be admitted as substantive evidence without examination - The statements cannot be relied upon, and the case of the Revenue, constructed on a chain of statements of third parties, dealers and co-accused persons, fails - Central Excise - Admissibility of electronic data retrieved from hard disk seized from third party - Section 36B of the Central Excise Act, 1944 - Revenue relied on electronic data and digital RG-23 records retrieved from a hard disk seized from the premises of a third party dealer, which was not recovered from the Appellant, and no certificate was obtained or annexed at the time of seizure, extraction or reliance - Whether the electronic data retrieved from the hard disk is admissible as evidence against the Appellant - HELD - Section 36B, which is pari materia with Section 65B of the Indian Evidence Act, is a self-contained code under which a certificate identifying the electronic record, describing the manner in which it was produced and giving particulars of the device, signed by a person in a responsible official position, must be produced under Section 36B(4), and its mandatory nature has been consistently enforced. Mere recovery of a hard disk from a third party does not establish the authenticity, integrity or correctness of every entry or the Appellant's participation in the alleged paper transactions, and without certification the contents remain unauthenticated secondary hearsay evidence - The electronic data is legally inadmissible as substantive evidence against the Appellants, and the case built on uncertified digital extractions fails on this count - Central Excise - Denial of CENVAT Credit on allegation of non-receipt of goods - Evidence of non-transportation and upstream irregularities - Revenue alleged that goods were not transported and received, relying on sample checks of vehicle numbers on the VAHAN portal showing vehicles incapable of carrying the goods, a statement of a vehicle owner, a delayed search at the premises of the alleged non-existent manufacturer and the cancellation or irregularities of upstream suppliers, while the Appellant produced valid cenvatable invoices, made payment and recorded receipt and consumption in its statutory books - Whether the demand of CENVAT Credit, interest and penalty on the Appellant company is sustainable - HELD - Under trade practice the dealer arranges freight and delivery, and the law does not cast an unworkable burden on the manufacturing buyer to verify the registration credentials of transport vehicles, nor can it be penalised for clerical discrepancies in vehicle numbers recorded by upstream suppliers once goods are received and accounted for in the stock registers. The Department checked only a small sample of vehicles and was required to establish non-transportation with respect to each specific invoice, and data from public databases is susceptible to errors and cannot be irrebuttable proof dispensing with independent physical verification such as toll gate logs or factory entry registers. The condition of an upstream manufacturer's premises, searched more than two years after the invoices, cannot establish its status for the earlier period, and ignorance of an upstream supplier of subsequent dealings or cancellation of registration cannot by itself prove non-receipt of goods by the Appellant. The Revenue was required to establish a direct, unbroken evidentiary link connecting upstream defects to the specific consignments received, and cannot extend isolated suspicion to declare all transactions fictitious. In absence of admissible evidence establishing non-receipt of inputs, fraudulent collusive activity or cash flow back, the documentary evidence of the Appellant was not displaced - The demand of CENVAT Credit along with interest and equivalent penalty on the Appellant company is unsustainable and set aside - Central Excise - Penalty on Director under Rule 26 of the Central Excise Rules, 2002 - Personal penalty was imposed on the Director of the Appellant company on the allegation of involvement in the irregular availment of CENVAT Credit by procurement of fake invoices - Whether personal penalty under Rule 26 on the Director is sustainable - HELD - Vicarious personal liability cannot be automatically fastened upon a Director merely by virtue of his executive designation or corporate position. To invoke Rule 26, the Department carries a strict burden to prove mens rea, active personal participation and specific overt acts showing that the individual knowingly dealt with goods liable to confiscation or consciously arranged fraudulent transactions, requiring positive, transaction-specific proof of actual knowledge or reasonable belief that the goods were liable to confiscation. The Revenue failed to adduce any admissible evidence on this count, and the main demand against the company stands set aside - The personal penalty on the Director is wholly unsustainable and is set aside - Central Excise - Deposit made during investigation as admission of liability - Revenue sought to draw an adverse inference from the amount deposited by the Appellant during the course of investigation, treating it as an implicit admission of guilt, while the Appellants contended that the deposit and the averments of the Director were made under threat, coercion or duress - Whether the deposit made during investigation amounts to an admission of liability - HELD - An interim deposit or payment made by an assessee during search, seizure or investigative proceedings, often under duress or coercion or on apprehension of coercive penal action, cannot be elevated to the status of an unconditional admission of tax liability - The deposit made during the investigation cannot be equated to an admission of guilt or liability. 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Customs - Removal of known encumbrance from encumbrance certificate after sale - Rule 9(6) to 9(10) of the Security Interest (Enforcement) Rules, 2002 - Sale certificate was issued by the Authorised Officer of the Appellant bank disclosing the known encumbrances, including the attachment effected by the Central Excise Department, the sale was on "as is where is" basis with the purchaser to clear statutory liability, and neither the bank nor the auction purchaser discharged the dues of the Department - Appellant bank sought a mandamus to remove the attachment from the encumbrance certificate to enable registration of the sa... [Read more]

Customs - Removal of known encumbrance from encumbrance certificate after sale - Rule 9(6) to 9(10) of the Security Interest (Enforcement) Rules, 2002 - Sale certificate was issued by the Authorised Officer of the Appellant bank disclosing the known encumbrances, including the attachment effected by the Central Excise Department, the sale was on "as is where is" basis with the purchaser to clear statutory liability, and neither the bank nor the auction purchaser discharged the dues of the Department - Appellant bank sought a mandamus to remove the attachment from the encumbrance certificate to enable registration of the sale certificate, and the Single Judge dismissed the writ petition - Whether the Appellant bank has a legal right to demand the registration department to remove the encumbrances from the encumbrance certificate without settling the dues payable under those encumbrances, when the sale certificate discloses the known encumbrances - HELD - The sale notice and sale certificate under Rule 9 are based on the principle of caveat venditor, requiring the bank to disclose known encumbrances, while the auction purchaser must also be vigilant, and ignorance of Rule 9(7) does not excuse the purchaser from depositing the amount payable towards the dues of the known encumbrances - Rule 9(6) to 9(10) are mandatory and have to be strictly adhered to, and the sale to the purchaser is only subject to the known encumbrances disclosed in the sale certificate. The property can be delivered free from encumbrances only on deposit of money under Rule 9(7). Directing the registration department to remove the encumbrance would indirectly set aside the disclosures made in the sale notice and sale certificate and amount to achieving what could not be done directly, and the purchaser having participated in the auction with eyes wide open cannot seek removal without discharging the dues. There is no estoppel against law on the part of the Department - The primary issue is held against the Appellant and the auction purchaser, the writ appeal is dismissed - Maintainability of writ petition by bank after issue of sale certificate - Functus officio - Sale certificate was issued in favour of the auction purchaser and registered by the Sub Registrar, and the Department contended that the Appellant bank had become functus officio and the writ petition was not maintainable - Whether the Appellant bank has become functus officio after issuance and registration of the sale certificate and whether the writ petition filed by the bank is maintainable - HELD - The bank becomes functus officio only after the debt payable to it is fully recovered and its statutory right to hold or further enforce security against the remaining properties or assets of the borrower completely ceases. The bank had not recovered its entire dues and the proceedings before the Debts Recovery Tribunal for recovery of the outstanding dues were still pending - The contention that the bank has become functus officio and is not entitled to file the writ petition is untenable at this stage - Priority of secured creditor over Government dues - Section 26E and Section 35 of the SARFAESI Act, Section 31B of the Recovery of Debts and Bankruptcy Act, Section 142A of the Customs Act and Section 11E of the Central Excise Act - Appellant bank and auction purchaser relied on the priority of secured creditors over Crown dues to seek removal of the Department's encumbrance - Whether Section 26E, Section 35 of the SARFAESI Act and Section 31B of the Recovery of Debts and Bankruptcy Act grant priority to secured creditors over government dues, and whether the statutory first charge under Section 11E of the Central Excise Act, pari materia with Section 142A of the Customs Act, is subject to such priority - HELD - The law is well settled that registered secured creditors have priority over Central, State and local government dues, including taxes and revenues, and the dues of the bank rank ahead of the dues of the Department. However, Section 26E of the SARFAESI Act only states that the secured creditor's debt must be paid in priority after registering the security interest, and Section 31B of the Recovery of Debts and Bankruptcy Act only confers overriding powers to realise secured debts ahead of government dues. Neither provision overrides Rule 9(6) to 9(10) of the Security Interest (Enforcement) Rules, which are mandatory, and no legal authority was produced to show otherwise. These provisions cannot be interpreted in isolation without taking into consideration Rule 9, and have no bearing where the purchaser has not deposited the dues of the known encumbrances as required by Rule 9(7) - Priority of the secured creditor does not entitle the bank or the purchaser to a direction for removal of the known encumbrance without compliance with Rule 9 - Attachment by Department, whether an encumbrance - Section 100 of the Transfer of Property Act, 1882 - Appellant bank and auction purchaser contended that the attachment reflected in the encumbrance certificate is different from the encumbrance referred to in the Security Interest (Enforcement) Rules, while the Department contended there is no difference - Whether attachment effected by the Department over the property is an encumbrance - HELD - An encumbrance places a burden or claim on the property by operation of law or a court order, which prevents the owner from selling, transferring or creating further mortgages or charges, and appears on the encumbrance certificate giving notice to the public and potential buyer that the title is restricted. The attachment reflected in the encumbrance certificate prevents the owner from selling, transferring or creating further mortgages or charges, and by virtue of Section 100 of the Transfer of Property Act the right of alienation is restricted. The attachment satisfies the ingredients required for treating it as an encumbrance - The purchaser, having purchased the property knowing about the encumbrance, cannot escape liability to pay the dues of the Department under Rule 9(7), and the contention that the attachment is not an encumbrance is rejected. [Read less]

Customs – Validity of seizure of gold under Section 110(1) of the Customs Act, 1962 – Reasonable belief – Gold biscuits were seized by the Government Railway Police Service from a person travelling by train on information that he was carrying smuggled gold, and were later handed over to the Customs Officers, who prepared the seizure inventory under Section 110 - Seizure list did not indicate any foreign marking on the gold and the samples were not sent to the Customs Revenue Control Laboratory - Adjudicating authority absolutely confiscated the gold under Sections 111(b) and 111(d) and imposed penalties under Section... [Read more]

Customs – Validity of seizure of gold under Section 110(1) of the Customs Act, 1962 – Reasonable belief – Gold biscuits were seized by the Government Railway Police Service from a person travelling by train on information that he was carrying smuggled gold, and were later handed over to the Customs Officers, who prepared the seizure inventory under Section 110 - Seizure list did not indicate any foreign marking on the gold and the samples were not sent to the Customs Revenue Control Laboratory - Adjudicating authority absolutely confiscated the gold under Sections 111(b) and 111(d) and imposed penalties under Section 112(a) and (b) - Whether the seizure of the gold was based on a "reasonable belief" as required under Section 110(1) - HELD - The gold was seized by the personnel of the Railway Police and later handed over to Customs, and the Customs Officer did not act on his independent belief but merely accepted the seizure done by another agency. The authority effecting the seizure must demonstrate a subjective satisfaction based on objective material, failing which the seizure is invalid. The seizure inventory failed to disclose any material evidence justifying a reasonable belief, there being no foreign marking on the gold, and the marking on one item does not indicate that the gold is of foreign origin. Mere finding of gold does not render it liable for seizure unless there is cogent and positive evidence proving its foreign origin, and mere suspicion is not sufficient. The recovery solely on suspicion and acceptance of the presumption created by the other agency without independent verification or due diligence renders the seizure arbitrary and legally unsustainable - There was no reasonable belief for seizure under Section 110(1) and the gold cannot be held liable for confiscation - The impugned order is set aside and the appeals are allowed - Customs – Burden of proof under Section 123 of the Customs Act, 1962 – Confiscation and penalty – Appellant claimed ownership of the seized gold and produced purchase invoices for gold ornaments bought from a finance company, which were melted into gold pieces, along with bank statement and income tax return, and the invoices were not disputed by the Revenue - Whether the Appellant discharged the burden under Section 123 and whether the gold is liable for confiscation and the Appellants are liable to penalty under Section 112 - HELD - The documents produced by the Appellant, which were not discarded by the Revenue, are admissible as evidence. The Appellant discharged the burden cast on him under Section 123, and the onus then shifted to the Revenue to prove that the gold in question is smuggled, which the Revenue failed to do. As the gold is not liable for confiscation, it is to be released to the Appellant and no penalties are imposable on the Appellants - The impugned order is set aside and the appeals are allowed [Read less]

Service Tax – Commercial Training or Coaching Services provided to a local corporation – Extended period of limitation and penalty - Appellant provided taxable services classifiable under Commercial Training or Coaching Services and did not discharge service tax on services provided to the corporation, claiming them to be exempted - Commissioner confirmed the demand for the entire period with interest and imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994, a part of the demand having been collected from the clients and paid - Whether the Appellant is liable to pay service tax on the services render... [Read more]

Service Tax – Commercial Training or Coaching Services provided to a local corporation – Extended period of limitation and penalty - Appellant provided taxable services classifiable under Commercial Training or Coaching Services and did not discharge service tax on services provided to the corporation, claiming them to be exempted - Commissioner confirmed the demand for the entire period with interest and imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994, a part of the demand having been collected from the clients and paid - Whether the Appellant is liable to pay service tax on the services rendered to the corporation and whether the extended period of limitation can be invoked - HELD - Following the ratio of the Tribunal in identical facts, where the demand was upheld on merit but set aside for the extended period along with penalties under Sections 76 and 78 and the matter was remanded for computing the demand for the normal period, the demand invoking the extended period of limitation and the penalty are set aside. Since the writ petitions filed by the appellants were disposed of by the High Court upholding the demand of service tax and directing the corporation to pay the amounts including the service tax to the appellant, the Department is at liberty to collect the service tax amount over and above the normal period, if any, received by the Appellant from the corporation as per the directions of the High Court. The demand of service tax is sustained on merit and the Appellant is liable to pay service tax on the services rendered. The amount admittedly collected from the clients and paid by the Appellant is not in dispute and is upheld - The demand for the balance is confirmed only for the normal period, excluding any amount paid towards the normal period, and the appeal is partially allowed [Read less]

GST - Refund of IGST paid on ocean freight under Reverse Charge Mechanism, Whether utilisation of IGST credit bars refund and amounts to unjust enrichment - Respondent paid IGST under RCM on ocean freight on import of goods under notifications later declared ultra vires. Respondent filed refund claims after the Supreme Court judgment - The adjudicating authority rejected the claims on the ground that the credit was availed and utilised. The Appellate Authority allowed the assessee appeal - Whether the Revenue can raise the ground of utilisation of IGST credit when it was not specified in the order of the Commissioner under... [Read more]

GST - Refund of IGST paid on ocean freight under Reverse Charge Mechanism, Whether utilisation of IGST credit bars refund and amounts to unjust enrichment - Respondent paid IGST under RCM on ocean freight on import of goods under notifications later declared ultra vires. Respondent filed refund claims after the Supreme Court judgment - The adjudicating authority rejected the claims on the ground that the credit was availed and utilised. The Appellate Authority allowed the assessee appeal - Whether the Revenue can raise the ground of utilisation of IGST credit when it was not specified in the order of the Commissioner under Section 112(3), and whether refund is barred because the IGST credit was availed and utilised - HELD - The authority of the officer to file an application before the Tribunal flows from the order of the Commissioner and is confined to the points specified by the Commissioner in his order. The Commissioner did not dispute the Appellate Authority's finding on utilisation of IGST, so there was no sanction of appeal on that point. A ground considered and dropped by the Commissioner cannot be raised by the Authorised Representative - In any case, the judgment relied upon by the Revenue did not hold that refund is disallowed if IGST has been utilised. In that case the IGST credit had been reversed by utilising the balance of State GST, and refund was allowed. Here also the IGST had been utilised and the balance remained in CGST and SGST. Holding a combined unutilised balance of CGST and SGST equal to the refund amount and debiting it from the credit ledger amounts to non-utilisation of the credit in substance. No double benefit arises, so the bar of unjust enrichment does not apply merely because the IGST equivalent to the refund amount is debited by utilising CGST or SGST or both - The contention of the Revenue is rejected - The appeals filed by the Department are dismissed, the order of the Appellate Authority is upheld and the department is directed to process the refund claims and pay the refund and interest under Section 56 for the period of delay beyond 60 days from the date of the original application – The Revenue appeal is dismissed - Refund of IGST paid on ocean freight under RCM - Retrospective effect of Supreme Court judgment declaring notifications ultra vires - Whether the judgment in Mohit Mineral declaring the notifications ultra vires and unconstitutional operates only prospectively so as to deny refund of tax paid before the date of the judgment - HELD - Unless otherwise specified, all laws are prospective and all judgments are retrospective. A legal provision or notification cannot be given retrospective effect unless specifically mentioned therein, but the converse is true for judgments, which apply with retrospective effect unless the Court expressly makes them prospective. Courts interpret and declare the law and do not legislate or amend it - When the levy is declared ultra vires and unconstitutional, it was always so, and the levy did not become ultra vires or unconstitutional due to the judgment. The doctrine of prospective overruling is an exception that applies only when the Court itself declares the judgment to be prospective. There was no such declaration in the Supreme Court judgment - The decision on prospective application of a Constitutional amendment also does not declare that judgments operate prospectively, and it reinforces that where the Court wants its judgment to be prospective, it directs so - Refund cannot be rejected on the ground that the judgment does not state that it has retrospective effect - Department contended that the Respondent was not a party to the Supreme Court judgment declaring the levy unconstitutional - Whether a taxpayer who was not a party to the judgment can claim refund of tax collected under a levy declared ultra vires and unconstitutional, and whether the judgment is the order contemplated by Rule 89(2) - HELD - Under Article 265, no tax shall be levied or collected except by authority of law. Where the levy itself is declared ultra vires and unconstitutional, the collection of tax is without authority of law from the inception. The levy stood equally and ab initio void against a taxpayer who was a party to the judgment and one who was not. Following the decision of the Supreme Court in Mafatlal case, where the levy is held unconstitutional, the claimant is not fettered by the provisions of the taxing statute except the bar of unjust enrichment. The limitation under the statute does not apply, and the period under Section 17(1)(c) of the Limitation Act, 1963 is available. The refund is not barred merely because the claimant was not a party to the judgment - The only exception is a person who himself unsuccessfully challenged the same provision and allowed the adverse decision to attain finality. The Respondent did not challenge the levy and lose, and it simply paid tax under a levy since declared void ab initio. The declaration by the court that the levy was ab initio void is itself the legal foundation for entitlement to refund. No further order in the name of the claimant is required, and the objection that the judgment is not an order contemplated by Rule 89(2) is rejected. [Read less]

GST - Penalty under Section 129 of the CGST Act, 2017 for expiry of validity of e-way bill - Appellant explained that the goods were transported over a long distance, that the e-way bill could not be extended due to inadvertence, non-availability of regular staff during the festive period and office closure - Whether the mere expiry of the validity of an e-way bill, without any independent evidence establishing an intention to evade tax, is sufficient to justify the imposition of penalty under Section 129, when the goods were accompanied by relevant transportation documents - HELD - Mere expiry of the e-way bill, by itself... [Read more]

GST - Penalty under Section 129 of the CGST Act, 2017 for expiry of validity of e-way bill - Appellant explained that the goods were transported over a long distance, that the e-way bill could not be extended due to inadvertence, non-availability of regular staff during the festive period and office closure - Whether the mere expiry of the validity of an e-way bill, without any independent evidence establishing an intention to evade tax, is sufficient to justify the imposition of penalty under Section 129, when the goods were accompanied by relevant transportation documents - HELD - Mere expiry of the e-way bill, by itself, does not conclusively establish that the Appellant intended to evade tax, and a procedural or documentary lapse and an intention to evade tax are distinct matters which must be examined on the facts and evidence of the case. The existence of a procedural contravention does not dispense with the requirement of examining the circumstances in which it occurred. The goods were accompanied by the relevant tax documents and were being transported to the declared destination, and the record did not establish any diversion of goods, suppression of the transaction, discrepancy in the identity of the goods or any other independent circumstance demonstrating an attempt to evade tax, nor was any evidence brought by the Department to show that the Appellant deliberately allowed the e-way bill to expire - The factual basis for the penalty must be established by the authority seeking to sustain it. The penalty imposed merely on account of the expiry of the e-way bill, without any independent evidence of tax evasion, is not sustainable - The order of the first appellate authority is set aside, the appeal is allowed [Read less]

GST – Invocation of Section 74(1) of the CGST Act, 2017 for delayed payment of tax, belated filing of return in Form GSTR-3B and short payment of interest – Show cause notice to the Respondent-assessee demanding tax paid beyond the due date along with interest and penalty under Section 74, although the Respondent had deposited the self assessed tax and interest and uploaded the return before the proceedings were drawn up. The short paid interest was also paid through Form DRC-03 before the notice - Adjudicating authority confirmed the demand and imposed penalty, but the first appellate authority set aside the order, ho... [Read more]

GST – Invocation of Section 74(1) of the CGST Act, 2017 for delayed payment of tax, belated filing of return in Form GSTR-3B and short payment of interest – Show cause notice to the Respondent-assessee demanding tax paid beyond the due date along with interest and penalty under Section 74, although the Respondent had deposited the self assessed tax and interest and uploaded the return before the proceedings were drawn up. The short paid interest was also paid through Form DRC-03 before the notice - Adjudicating authority confirmed the demand and imposed penalty, but the first appellate authority set aside the order, holding that there was no proof of fraud, wilful misstatement or suppression of facts to evade tax – Appellant-Revenue contended that belated payment of tax and short payment of interest amounts to fraud contemplated under Section 74 - Whether the Revenue has been able to make out a case under Section 74 of the CGST Act in the given facts - HELD - Section 74(1) can be invoked only where tax has not been paid or short paid by reason of fraud, or any wilful misstatement or suppression of facts to evade tax, which requires a deliberate intention on the part of the taxpayer to evade tax, and cannot be invoked merely on account of non-payment of GST without a specific element of fraud or wilful misstatement or suppression of facts – Further, the Supreme Court in M/s Tata Steel Limited case held that the foundational facts which led to the inference of fraud, wilful misrepresentation or suppression should be evident from the notice itself, and the words are not to be mechanically recited in the notice to enable recovery outside the normal limitation. The show cause notice lacked such foundational facts - The First Appellate Authority was correct in holding that it was not a fit case for invocation of Section 74(1), there is no reason to interfere with its order, and the appeal of the Revenue is dismissed [Read less]

GST - Penalty under Section 129 for transporting goods contrary to description in invoice and e-way bill - Intention to evade tax - Vehicle was intercepted and goods of higher quantity and value, kept in bags and covered with loose goods of lesser quantity and value, were found contrary to the description mentioned in the invoice and e-way bill, and the goods and vehicle were taken into custody - Appellant contended that the goods were loaded by labourers due to bonafide mistake and relied on High Court decisions holding that penalty cannot be imposed for classification disputes or minor typographical errors, while the Rev... [Read more]

GST - Penalty under Section 129 for transporting goods contrary to description in invoice and e-way bill - Intention to evade tax - Vehicle was intercepted and goods of higher quantity and value, kept in bags and covered with loose goods of lesser quantity and value, were found contrary to the description mentioned in the invoice and e-way bill, and the goods and vehicle were taken into custody - Appellant contended that the goods were loaded by labourers due to bonafide mistake and relied on High Court decisions holding that penalty cannot be imposed for classification disputes or minor typographical errors, while the Revenue contended that the Appellant was a habitual evader since a connected appeal showed documents generated after interception - Whether the Appellant transported the goods placed in bags and covered with loose goods, contrary to the description in the invoice and e-way bill, with intention to evade tax - HELD - The decisions relied upon by the Appellant have no application, as the question of classification of goods or typographical error is not involved. The goods of much higher quantity and value had been concealed in the vehicle by covering them with goods of lesser quantity and value, both were separately identifiable, and no question of classification was involved. In the garb of invoice and e-way bill prepared for only the lesser valued goods, the Appellant tried to transport goods of much higher value, which clearly establishes intention to evade tax, as held in the High Court decisions where misdescription in transport papers permitted an entirely different and higher value commodity and in the decision where mixed scrap was transported without valid documents. Civil matters are decided on preponderance of probabilities, and repetition of such conduct as in the connected appeal enhances the degree of probability of dishonest and fraudulent intention. The version of confusion in the mind of labourers appears illusory - The appellant is liable to pay tax and penalty - The appeal is dismissed - Generation of fresh invoice and e-way bill after interception of vehicle - Whether preparation of fresh invoice and generation of e-way bill after interception of the vehicle converted the illegality caused by the Appellant into legality - Appellant submitted a fresh tax invoice and e-way bill after the interception and expressed willingness to deposit the tax and penalty, and the adjudicating authority imposed tax and penalty, which was upheld by the first appellate authority - HELD - Under the GST law, an illegal act cannot be validated at a subsequent stage. Generating documents after interception or detention is a post detection remedy that cannot cure earlier non-compliance, and in absence of statutory provision the subsequent preparation of documents to convert illegality into legality is impermissible. Goods must be supplied only with valid invoice and e-way bill, and where goods are not accompanied by proper documents a presumption of intention to evade tax may be raised, which the Appellant failed to rebut - The impugned orders are lawful and justified, the statute does not permit such rectification, and the appeal is dismissed. [Read less]

GST – Dismissal of appeal by State before Appellate Tribunal for non-removal of registry defects – Respondent-assessee succeeded before the First Appellate Authority, which set aside the order of the Adjudicating Authority, observing that minor discrepancies did not give reason to believe there was any intention to evade tax – Appellant-State filed the appeal before the Tribunal but did not remove the defects raised by the registry in spite of many opportunities, and the amount of tax and penalty in dispute was shown as below a stated figure - Whether the appeal filed by the Appellant State is liable to be dismissed ... [Read more]

GST – Dismissal of appeal by State before Appellate Tribunal for non-removal of registry defects – Respondent-assessee succeeded before the First Appellate Authority, which set aside the order of the Adjudicating Authority, observing that minor discrepancies did not give reason to believe there was any intention to evade tax – Appellant-State filed the appeal before the Tribunal but did not remove the defects raised by the registry in spite of many opportunities, and the amount of tax and penalty in dispute was shown as below a stated figure - Whether the appeal filed by the Appellant State is liable to be dismissed at the stage of hearing for failure to remove the defects - HELD - In spite of so many opportunities afforded to remove the defects, the Appellant utterly failed to ensure compliance, and such conduct clearly establishes that the appeal had been filed only to abuse the process of the Tribunal. The FAA had observed the Respondent as a bonafide company registered under GST law and held that minor discrepancies did not result in belief of any intention to evade tax. Failure to remove the defects raised by the registry reveals sufficient ground to believe that the State did not pay proper heed. It would not be in the interest of justice to afford more opportunity to cure the defects - The appeal is dismissed at this stage [Read less]

GST - Penalty under Section 129(3) of the CGST Act, 2017 for transporting goods without tax invoice and e-way bill - Generation of documents after interception - Vehicle loaded with taxable goods was intercepted in transit and the driver had no bill, bilty or e-way bill, an order of detention under Section 129(1) was issued, and the Appellant's authorised person produced a tax invoice and e-way bill generated several hours after the interception, whereafter the penalty was paid for release of the goods - Appellant contended that the lapse was procedural, that the invoice and e-way bill pertained to the same date and were p... [Read more]

GST - Penalty under Section 129(3) of the CGST Act, 2017 for transporting goods without tax invoice and e-way bill - Generation of documents after interception - Vehicle loaded with taxable goods was intercepted in transit and the driver had no bill, bilty or e-way bill, an order of detention under Section 129(1) was issued, and the Appellant's authorised person produced a tax invoice and e-way bill generated several hours after the interception, whereafter the penalty was paid for release of the goods - Appellant contended that the lapse was procedural, that the invoice and e-way bill pertained to the same date and were produced before the penalty order, that the goods matched the invoice - Revenue contended that the documents were generated after interception, that the Appellant's statements were contradictory, and that the Appellant had repeated the wrong - Whether preparation or generation of invoice and e-way bill after the interception of the vehicle validated the illegal act of the Appellant - HELD - Rule 138 of the CGST Rules, 2017 requires information to be furnished before commencement of movement of goods, and the word "and" in Rule 138A(1) makes both the carrying of the invoice and the e-way bill mandatory, which is strengthened by Rule 138B, so that an e-way bill and tax invoice are mandatory to be carried along with the consignment - Section 129 starts with a non-obstante clause and gets triggered at the very moment the conveyance leaves with the consignment in contravention of the Act and Rules. The e-way bill mechanism was introduced to track movement of goods and check tax evasion, and compliance is to be done before the goods are moved and not after interception. Where goods are not accompanied by the invoice and e-way bill, a presumption of intention to evade tax may be raised, which is rebuttable by a proper and reasonable explanation, and mere furnishing of documents subsequent to the interception is not a valid ground to show absence of such intention - The decisions relied upon by the Appellant were distinguished on facts, as the Appellant had again supplied goods and generated fresh documents after interception, and the explanation of a family function appeared to be a novel story set up to justify the illegal act - The Appellant failed to rebut the presumption, the penalty is sustained, and the appeal is dismissed [Read less]

Customs - Applicability of domestic regulatory regime to goods sold in Duty Free Shop - Petitioners operated Duty Free Shops in the Departure Terminal of an International Airport and sold imported nicotine pouches stored in a special warehouse under Section 58-A of the Customs Act, 1962, without any import licence or Registration Certificate under the Drugs and Cosmetics Act, 1940, contending that the product was meant only for outbound travellers and was a case of re-export - Authorities banned the sale on the ground that the product was a drug requiring licence - Whether all transactions conducted within a Duty Free Shop... [Read more]

Customs - Applicability of domestic regulatory regime to goods sold in Duty Free Shop - Petitioners operated Duty Free Shops in the Departure Terminal of an International Airport and sold imported nicotine pouches stored in a special warehouse under Section 58-A of the Customs Act, 1962, without any import licence or Registration Certificate under the Drugs and Cosmetics Act, 1940, contending that the product was meant only for outbound travellers and was a case of re-export - Authorities banned the sale on the ground that the product was a drug requiring licence - Whether all transactions conducted within a Duty Free Shop, beyond the customs barrier, enjoy absolute immunity from the domestic regulatory regime or whether such immunity is restricted solely to fiscal levies such as customs duty and indirect tax - HELD - The decisions relied upon by the Petitioners exclusively deal with the taxable events for assessing customs duty and sales tax/VAT and do not extend any blanket immunity to Duty Free Shop operators from the domestic regulatory or public health laws. Under Section 2(23), 2(25) and 2(27) of the Customs Act, goods are imported once they enter the territorial waters of India, even if not cleared for home consumption. By reason of the words "any other law for the time being in force" in Section 2(33), goods restricted or prohibited under any other law become prohibited goods, and the prohibition under Section 10 of the Drugs and Cosmetics Act applies to them - The coordinate Bench decision in Glamstone Cosmetics holding that import for the limited purpose of warehousing or re-export enjoys no immunity is a binding precedent. Import of goods into India, even for the limited purpose of warehousing or re-export, does not enjoy any immunity from domestic laws, and the exemption, if any, is limited to fiscal measures such as customs duty, tax and VAT - The first question is answered against the Petitioners and in favour of the Respondents - Drugs and Cosmetics Act, 1940 - Whether nicotine pouch is a "drug" under Section 3(b) - Ban on sale of nicotine pouches in Duty Free Shops by the Assistant Drug Controller on the ground that the product is a drug requiring import licence and Registration Certificate - Petitioners had not furnished product specification and the impugned communication did not indicate under which clause of Section 3(b) the product fell - Whether nicotine pouch falls within the definition of "drug" under Section 3(b), making import licence and registration mandatory even for dealing within the customs barrier of the International Departure Terminal - HELD - Section 3(b) contemplates four categories. Under clause (i) the substance must have intended use in diagnosis, treatment, mitigation or prevention of disease or disorder, and under clauses (ii) and (iv) the substance or device must be specified in a Central Government Notification, which is admittedly not available for nicotine pouch. Clause (iii) requires intended use as a component of a drug. A nicotine pouch marketed purely as a recreational product without therapeutic or cessation claims may not automatically be a drug merely because nicotine has physiological effects - The Drug Controller has jurisdiction to ban sale without licence only if the product is a drug, and the jurisdictional facts must be clearly established before invoking powers under the Act, which were completely missing in the impugned communication. Whether the product is a drug, or is covered by Schedule D or Schedule K exemptions, requires factual inquiry into composition and intended use, which cannot be adjudicated in a writ petition under Article 226, and the question is kept open. Since the Petitioners had not provided product specification, the impugned communication cannot be faulted for want of reasons - The Petitioners are at liberty to file representations with supporting material, to be disposed of by a reasoned order after personal hearing [Read less]

GST - Monetary threshold limit for filing appeal before the GSTAT - Whether departmental appeal for penalty amount below the prescribed monetary limit of Rs. 20 lakh can be admitted without establishing an applicable exception - HELD - A departmental appeal is governed by the monetary-limit framework prescribed for Departmental litigation. The right of appeal is a creature of statute and its exercise remains subject to the statutory and regulatory framework governing departmental litigation. The existence of an exception cannot be presumed merely because the Department desires to pursue the appeal - An exception is an exce... [Read more]

GST - Monetary threshold limit for filing appeal before the GSTAT - Whether departmental appeal for penalty amount below the prescribed monetary limit of Rs. 20 lakh can be admitted without establishing an applicable exception - HELD - A departmental appeal is governed by the monetary-limit framework prescribed for Departmental litigation. The right of appeal is a creature of statute and its exercise remains subject to the statutory and regulatory framework governing departmental litigation. The existence of an exception cannot be presumed merely because the Department desires to pursue the appeal - An exception is an exception precisely because it takes a case outside the general rule. The burden lies upon the Revenue to disclose which exception is being invoked demonstrating that the statutory discretion was actually exercised in the particular case - Permission to institute an appeal is not the same as statutory compliance and a mere assertion that the appeal has been filed with the approval or authorisation of the Commissioner is insufficient - The monetary-limit principle is one of institutional discipline. The object of appellate adjudication is not to provide an unrestricted forum for Governmental disagreement with every adverse order - The Revenue has failed to establish that the present appeal falls within any recognised exception. No material has been produced demonstrating a specific, reasoned and legally cognisable exercise of the Commissioner's residual power in the present case - The appeal does not satisfy the conditions governing its admission and maintainability before this Tribunal - The appeal is dismissed at the threshold on the ground of the prescribed monetary limit [Read less]

Service Tax - Levy on sale of goods component of works contract - Petitioners were engaged in execution of a works contract for lift irrigation works on turnkey basis and in supply and installation of pump sets to Government organisations, and the Department issued show cause notices based solely on income tax Form 26AS demanding service tax on the amounts reflected therein - Petitioners contended that sale of goods was taxed under the service tax law, that VAT/sales tax was paid on the sale value and service tax on the service value - Whether service tax can be levied on sale of goods component as indicated in the impugne... [Read more]

Service Tax - Levy on sale of goods component of works contract - Petitioners were engaged in execution of a works contract for lift irrigation works on turnkey basis and in supply and installation of pump sets to Government organisations, and the Department issued show cause notices based solely on income tax Form 26AS demanding service tax on the amounts reflected therein - Petitioners contended that sale of goods was taxed under the service tax law, that VAT/sales tax was paid on the sale value and service tax on the service value - Whether service tax can be levied on sale of goods component as indicated in the impugned orders - HELD - Section 65B(44) excludes from "service" the activity of sale of goods and transactions referred to in Article 366(29A) of the Constitution. Further, under Section 66E(h) only the service portion in the execution of a works contract is a declared service. Rule 2A(i) of the Valuation Rules specifically provides for exclusion of the value of goods transferred, to ensure that the value of goods, which is in the exclusive domain of the State, is not taxed. The scope of works in the works contract fell outside the purview of service tax, and where service was involved, the records, invoices, returns and reconciliation between ST-3 returns, VAT returns and Form 26AS showed payment of service tax, which the authorities had ignored even after remand - Point answered in favour of the Petitioners - Service Tax - Exemption Notification No. 25/2012-ST - Entitlement of works contract for lift irrigation project awarded by a Government company - Petitioner executed works of survey, design and construction of lift irrigation project for a Government company and claimed exemption for services by way of construction of canal, dam or other irrigation works provided to a Government, local authority or governmental authority - Respondent contended that the Government company was not a municipality and that exemption had to be read strictly - Whether the Petitioner is entitled to exemption from service tax - HELD - The definition of governmental authority covers a body established by Government with 90% or more participation or control to carry out any function entrusted to a municipality under Article 243W of the Constitution, and the Notification does not require the body to be a municipality as strictly defined. A lift irrigation project is meant to foster economic and social development of the area and falls within planning for economic development and social justice under Article 243W read with the Twelfth Schedule. An exemption notification, though construed strictly when determining whether the subject falls in it, calls for a wider and liberal construction once the subject falls within the notification, and a liberal interpretation includes lift irrigation as the project fulfils the objective of economic and social development - Point answered in favour of the Petitioner - Service Tax - Extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - Show cause notices were issued for the financial years 2015-16 and 2016-17 invoking the extended period on the allegation of suppression of value of taxable services, based only on Form 26AS - Petitioners denied suppression and contended that claim of exemption was interpretational and that the remand proceedings left only the question of inclusion of value of goods - Whether the demands are barred by limitation under Section 73 of the Finance Act, 1994 - HELD - Suppression must be wilful and postulates a positive act with intent to evade payment of tax, and mere failure to pay or mere omission to give correct information is not suppression where facts are known to both parties, the burden being on the Revenue to prove suppression. Laying claim to an exemption is purely interpretational in nature and cannot be a matter of suppression of facts, fraud, collusion or wilful misstatement with intention to evade payment of tax. The proviso to Section 73 could not have been invoked, and the notice issued beyond thirty months from the date of the relevant returns was barred by time. In the other petition, since the notice was based only on Form 26AS and, after remand, the only question remaining was inclusion of the value of goods on which VAT was paid, which was already answered, the ingredients of suppression did not arise and the extended period could not have been invoked - Point answered in favour of the Petitioners; both writ petitions are allowed, the impugned Orders-in-Original are set aside and the impugned show cause notice is quashed. [Read less]