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GST - Denial of input tax credit on account of default of supplier in depositing tax under Section 16(2)(c) of CGST Act, 2017 – Challenge to the vires of the provision of Section 16(2)(c) of the CGST Act, which denies ITC to the purchasing dealer if the tax charged in respect of such supply has not been paid to the Government by the supplier - Whether Section 16(2)(c) of the CGST Act is arbitrary, ultra vires and violative of Articles 14, 19(1)(g), 265, and 300A of the Constitution of India - HELD – The provision of Section 16(2)(c) is clear, self-explanatory and unambiguous, and its underlying intent is to ensure that... [Read more]

GST - Denial of input tax credit on account of default of supplier in depositing tax under Section 16(2)(c) of CGST Act, 2017 – Challenge to the vires of the provision of Section 16(2)(c) of the CGST Act, which denies ITC to the purchasing dealer if the tax charged in respect of such supply has not been paid to the Government by the supplier - Whether Section 16(2)(c) of the CGST Act is arbitrary, ultra vires and violative of Articles 14, 19(1)(g), 265, and 300A of the Constitution of India - HELD – The provision of Section 16(2)(c) is clear, self-explanatory and unambiguous, and its underlying intent is to ensure that the Government is not deprived of revenue on account of illegal or defaulting conduct on the part of the supplier. The GST regime, unlike the previous VAT regime, has a destination-based tax structure, and any reading down of Section 16(2)(c) would have cascading fiscal consequences across state boundaries – The clause (c) of Section 16(2) of the CGST Act clearly states that ITC will be available to the purchasing dealer only if the supplier has paid the tax to the Government. It is for the purchasing dealer to prove that the tax collected has been remitted to the Government by the supplier - The GST framework provides adequate safeguards for the purchasing dealer through Sections 41 and 53 of the CGST Act and Rule 37A of the CGST Rules, 2017. The burden of proof lies on the purchasing dealer to establish eligibility for ITC under Section 155 of the CGST Act - It is settled legal principle of statutory interpretation that a provision in the statute is not to be read in isolation rather it has to read along with other related provisions itself. The provision of Section 16(2)(c) cannot be read in isolation, but has to read with attendant provisions - The Court acknowledge the genuine concerns of the petitioners regarding the hardship faced by bona fide purchasers due to the supplier's default. The Government is urged to undertake a comprehensive re-evaluation of the situation and implement a robust, technology-driven tracking mechanism to alleviate the disproportionate burdens on purchasers. The Government is directed to take prompt steps for the recovery of tax from the erring suppliers, instead of compelling the purchasers to avail themselves of alternate cumbersome remedies – The Court expects that the Govt will address the issue of genuine purchasers at the earliest through appropriate legislative amendments or clarifications within the GST framework – The Section 16(2)(c) of the CGST Act is not arbitrary, ultra vires or violative of the Constitution. The challenge to the vires of Section 16(2)(c) of the CGST Act is rejected - The petitions are disposed of - Burden of Proof under Section 155 of the CGST Act - The Section 155 of the CGST Act places the burden of proof on the person claiming input tax credit to establish their eligibility, which is intrinsically linked to the actual payment of tax by the supplier. The expression "eligible" in Section 155 cannot be construed as dependent upon a unilateral act of claim by the purchaser; rather, it has a direct nexus with the actual payment of tax by the supplier - Doctrine of reading down of a provision – The doctrine of reading down is a judicial tool used to salvage the constitutionality of a statute by giving a provision a narrowed or limited interpretation, thereby mitigating potential conflicts with constitutional or legal principles. We do not find that the provision of Section 16(2)(c) if read with the scheme of GST regime as discussed, conflicts with constitutional or legal principles. The provision of Section 16(2)(c) cannot be read in isolation, but has to read with attendant provisions as discussed hereinabove, which enables the government to secure its interest in revenue, by keeping a check on fraudulent transactions while maintaining the interest of genuine purchasers. It is settled legal principle of statutory interpretation that a provision in the statute is not to be read in isolation rather it has to read along with other related provisions itself, more particularly when the subject matter interconnects within different sections or parts of the same statute. [Para 82] [Read less]

Central Excise – Valuation, Trade discount to bulk buyer, Additional consideration - Whether the trade discount extended by the appellant to a bulk buyer can be treated as an "additional consideration" to be included in the assessable value under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 – HELD - The entire case of the department rests on the assumption that bulk buyer (NMMT) provided its premises and infrastructure free of cost to the appellant, which is an additional consideration to the appellant. This foundational assumption of the department is factually incorre... [Read more]

Central Excise – Valuation, Trade discount to bulk buyer, Additional consideration - Whether the trade discount extended by the appellant to a bulk buyer can be treated as an "additional consideration" to be included in the assessable value under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 – HELD - The entire case of the department rests on the assumption that bulk buyer (NMMT) provided its premises and infrastructure free of cost to the appellant, which is an additional consideration to the appellant. This foundational assumption of the department is factually incorrect - The appellant had entered into a sub-lease agreement with NMMT for the land and had incurred the entire expenditure for setting up the CNG dispensing facility. In the absence of any evidence of additional consideration flowing from NMMT to the appellant, the trade discount extended to NMMT could not be treated as "additional consideration" under Rule 6 – The trade discount was a legitimate commercial discount and could not be loaded onto the assessable value - The impugned order upholding the duty demand is set aside and the appeal is allowed [Read less]

Central Excise - Inclusion of "type test charges" in the assessable value of transformers for the purpose of levy of Central Excise duty - Appellant, engaged in the manufacture of transformers, was not including the 'type test charges' recovered from customers under contractual arrangements in the assessable value of the transformers - Department issued show cause notice proposing recovery of duty on the ground that these charges formed part of the consideration for sale - Whether the "type test charges" collected by the appellant are liable to be included in the assessable value of transformers for the purpose of levy of ... [Read more]

Central Excise - Inclusion of "type test charges" in the assessable value of transformers for the purpose of levy of Central Excise duty - Appellant, engaged in the manufacture of transformers, was not including the 'type test charges' recovered from customers under contractual arrangements in the assessable value of the transformers - Department issued show cause notice proposing recovery of duty on the ground that these charges formed part of the consideration for sale - Whether the "type test charges" collected by the appellant are liable to be included in the assessable value of transformers for the purpose of levy of Central Excise duty – HELD - The "type test" is not a mandatory or routine test forming part of the manufacturing process, but is conducted only at the request of the customers for their own satisfaction or due to lack of testing facilities, and the cost of such testing is borne separately by the customers. The "type test charges" are in the nature of consideration for a distinct and optional service rendered to the customer after the completion of manufacture, and not intrinsically linked to the manufacture and sale of the goods - The "type test charges" are not includible in the assessable value of transformers for the purpose of levy of central excise duty - The impugned order, to the extent it upholds the inclusion of "type test charges" and confirms the duty demand, is set aside and the appeal is allowed [Read less]

Service Tax - Works contract vs Trading activity – Activity of laying pipes from river to plant to supply treated water on a Build, Own, Operate and Transfer (BOOT) basis - Whether the billing of goods, used in the project, by the sub-contractor to the appellant can be treated as "trading" or an "exempted service" for the purpose of CENVAT credit reversal under Rule 6 of the CENVAT Credit Rules, 2004 – HELD - The activity of the appellant reimbursing the sub-contractor for materials purchased and utilized in the project does not amount to "trading activity" or an "exempt service". The contract is a single, indivisible ... [Read more]

Service Tax - Works contract vs Trading activity – Activity of laying pipes from river to plant to supply treated water on a Build, Own, Operate and Transfer (BOOT) basis - Whether the billing of goods, used in the project, by the sub-contractor to the appellant can be treated as "trading" or an "exempted service" for the purpose of CENVAT credit reversal under Rule 6 of the CENVAT Credit Rules, 2004 – HELD - The activity of the appellant reimbursing the sub-contractor for materials purchased and utilized in the project does not amount to "trading activity" or an "exempt service". The contract is a single, indivisible BOOT contract for a water transmission project using pipelines, primarily for work and labour, and not a contract for sale of goods. The laying of pipeline, as in this case, is an example of works contract, where passing of property in the pipe is part of the works contract - The transfer of property in goods consumed while executing the contract is a part of the execution of the works contract, and not a separate activity of "trading". The legal fiction introduced by Article 366(29A)(b) of the Constitution, which divides the contract into a sale and service, should only be used for its intended purpose of levying tax on both sale and service in an indivisible contract, and cannot be used to convert the reimbursement of payment for goods by the sub-contractor into "trading" or treat the value of the deemed sale of goods as an "exempt service" - The appellant maintained separate records for availment and compliance of the inputs/input services, and the credit on works contract service invoices was used only to discharge output service tax on the works contract provided. Therefore, Rule 6(3) of the CENVAT Credit Rules, 2004, would not be applicable, and no reversal of CENVAT credit was required - The impugned order is set aside and the appeal is allowed [Read less]

Customs – Classification of Monodisperse Aerosol Generator – Whether Monodisperse Aerosol Generator falls under CTH 9032 as classified by the Department or CTH 9027 as declared by the Appellant – HELD - The imported product is an aerosol generator, which is used for producing mono-disperse droplets and aerosol particles for physical and chemical analysis. The product does not operate in isolation and forms a key component of the entire system apparatus, without which the system will be unable to generate its physical analysis experimental data. Once the aerosol is generated, the product has no in-built mechanism to m... [Read more]

Customs – Classification of Monodisperse Aerosol Generator – Whether Monodisperse Aerosol Generator falls under CTH 9032 as classified by the Department or CTH 9027 as declared by the Appellant – HELD - The imported product is an aerosol generator, which is used for producing mono-disperse droplets and aerosol particles for physical and chemical analysis. The product does not operate in isolation and forms a key component of the entire system apparatus, without which the system will be unable to generate its physical analysis experimental data. Once the aerosol is generated, the product has no in-built mechanism to measure, control or maintain its parameters on its own. Further, the product has no means to constantly or periodically measure the actual value or parameters of the generated aerosol, which is a pre-requisite for classifying an item under Chapter heading 9032. Hence, the entire system and apparatus, including the products, are classifiable under Chapter Heading 9027 - Further, the extended period of limitation invoked by the Department to confirm the demand and impose penalty was unsustainable, as there was no evidence of suppression or wilful misstatement of facts by the Appellant. The impugned order is set aside and the appeal is allowed [Read less]

GST – Demand of GST on settlement of Arbitral Award, Scope of Supply – Challenge to the show cause notice seeking to levy IGST on the settlement of an international commercial Arbitral award - Revenue sought to levy IGST on the damages paid by the Petitioner to Docomo, contending that Docomo's agreement to withdraw enforcement proceedings amounted to 'supply of service' under Section 7 read with Entry 5(e) of Schedule II of CGST Act, 2017 - Whether the settlement between Petitioner and Docomo in the enforcement proceedings filed by Docomo under Sections 47 and 48 of the Arbitration and Conciliation Act, 1996, under whi... [Read more]

GST – Demand of GST on settlement of Arbitral Award, Scope of Supply – Challenge to the show cause notice seeking to levy IGST on the settlement of an international commercial Arbitral award - Revenue sought to levy IGST on the damages paid by the Petitioner to Docomo, contending that Docomo's agreement to withdraw enforcement proceedings amounted to 'supply of service' under Section 7 read with Entry 5(e) of Schedule II of CGST Act, 2017 - Whether the settlement between Petitioner and Docomo in the enforcement proceedings filed by Docomo under Sections 47 and 48 of the Arbitration and Conciliation Act, 1996, under which the Arbitral Award for damages stood settled between the parties, would amount to "supply" within the definition of Section 7(1) of the CGST Act – HELD - The settlement between the parties in the enforcement proceedings, wherein petitioner discharged the arbitral award liability and Docomo agreed to withdraw the collateral enforcement proceedings, cannot be construed as an independent agreement amounting to 'supply of service' under the CGST Act. Mere satisfaction of a decree/award by the judgment debtor, and the decree-holder/award-creditor agreeing to withdraw the execution proceedings, which are incidental and integral to the decree/award, cannot be regarded as creating any independent agreement beyond the scope of the decree/award itself. The payment of damages under the arbitral award was a mere flow of money from the party who caused the breach to the party who suffered the loss, and did not constitute consideration for any "supply" under the GST law - The consent terms entered between the parties, recording the conditions for satisfaction of the arbitral award, does not bring about any independent obligation/agreement involving consideration, so as to attract the provisions of Section 7 read with Entry 5(e) of Schedule II of the CGST Act - The Circulars issued by the CBIC, which clarified that damages for breach of contract are not taxable, are binding on the revenue authorities and the demand for IGST was contrary to the law - The action on the part of the respondents in raising the impugned demand on the ground that Docomo agreed not to pursue the execution proceedings instituted before the Courts of different jurisdictions (UK and USA etc.) would amount to an independent agreement between Docomo and Tata, under which Docomo tolerated an act or a situation, is totally untenable - the settlement between Tata and Docomo in the enforcement proceedings of the arbitral award did not amount to "supply" under the GST law. Accordingly, the intimation under Form DRC-01A and the show cause notice issued by the DGGI are quashed – The writ petition is allowed - Whether the writ petition is maintainable despite the availability of an alternate remedy of appeal – HELD - The writ petition is maintainable despite the availability of an alternate remedy, as the designated officer had no jurisdiction to issue the show cause notice to levy GST on the settlement of the arbitral award. The Court rely on the principles laid down by the Supreme Court in Godrej Sara Lee Limited v. Excise and Taxation Officer, wherein it was held that the mere availability of an alternate remedy does not operate as an absolute bar to the maintainability of a writ petition, and the high courts have the discretion to entertain a writ petition based on the facts and circumstances of the case. [Read less]

GST - Cancellation and restoration of GST registration, Carrying out of business from mobile phone - Petitioner’s registration was initially cancelled, but later restored upon explanation - Respondents issued show cause notice and imposed penalties based on the fact that the petitioner was not operating from the registered principal place of business – HELD - There is no embargo on the right of the petitioner to carry out his business not only from the principal place of business, but also from the mobile phone. That by itself, would not disentitle him to carry on the business - Since the petitioner's GST registration ... [Read more]

GST - Cancellation and restoration of GST registration, Carrying out of business from mobile phone - Petitioner’s registration was initially cancelled, but later restored upon explanation - Respondents issued show cause notice and imposed penalties based on the fact that the petitioner was not operating from the registered principal place of business – HELD - There is no embargo on the right of the petitioner to carry out his business not only from the principal place of business, but also from the mobile phone. That by itself, would not disentitle him to carry on the business - Since the petitioner's GST registration was ultimately restored, the basis for issuing the show cause notice and imposing penalties was no longer valid. The restoration of registration meant the petitioner was entitled to carry on business not just from the principal place of business, but also from other locations - The impugned order imposing penalties is based on conjectures and surmises about the petitioner not operating from the registered principal place of business, which was proved to be incorrect - The impugned order imposing penalties is quashed and the authorities are directed to reconsider the matter after hearing the petitioner – The petition stands allowed [Read less]

GST - Demand against non-existent entity after merger - Petitioner was formed after the merger of Vodafone Mobile Services Ltd (VMSL) and Vodafone India Limited with Idea Cellular Limited as per an order of the National Company Law Tribunal. The GST authorities were duly informed about the merger at the time of amendment of the GST registration of Idea Cellular Limited - DGGI issued a show-cause notice to VMSL, even though VMSL had ceased to exist after the merger - Whether the DGGI had the jurisdiction to issue a show-cause notice and demand against the non-existent entity of VMSL after the merger – HELD - The principle... [Read more]

GST - Demand against non-existent entity after merger - Petitioner was formed after the merger of Vodafone Mobile Services Ltd (VMSL) and Vodafone India Limited with Idea Cellular Limited as per an order of the National Company Law Tribunal. The GST authorities were duly informed about the merger at the time of amendment of the GST registration of Idea Cellular Limited - DGGI issued a show-cause notice to VMSL, even though VMSL had ceased to exist after the merger - Whether the DGGI had the jurisdiction to issue a show-cause notice and demand against the non-existent entity of VMSL after the merger – HELD - The principles laid down by the Supreme Court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. apply to the present case. Once the proper officer was duly informed about the merger and its legal consequences, namely that the amalgamating company VMSL had ceased to exist upon the approval of the scheme of amalgamation/merger, the officer lacked jurisdiction to issue the notice against VMSL. The proceedings against a non-existent entity are void ab initio – Further, the provisions of Section 87 of the CGST Act, relied upon by the respondents, are not applicable to the facts of the present case as the ingredients stipulated therein are not attracted. The Section 87 only preserves the transactions between the amalgamating companies during the intervening period from the date on which the order takes effect till the date of the order, and does not empower the Department to issue a show-cause notice on a non-existent entity post merger/amalgamation. Post-merger or amalgamation the merged entity has no status in the eyes of law, and therefore no proceedings can be initiated against it - The impugned show-cause notice issued against the non-existent entity is quashed – The writ petition is allowed [Read less]

Central Excise - Extended period of limitation under Central Excise Act - The appellant had maintained proper records and filed them with the department, but the department did not scrutinize them – HELD - The extended period of limitation under section 11A(4) of the Central Excise Act could not have been invoked as the appellant had maintained proper records and filed them with the department, and the department did not scrutinize them. The Supreme Court has held that when the department has full knowledge about the manufacture of goods, the extended period of limitation cannot be invoked. Mere failure to declare does n... [Read more]

Central Excise - Extended period of limitation under Central Excise Act - The appellant had maintained proper records and filed them with the department, but the department did not scrutinize them – HELD - The extended period of limitation under section 11A(4) of the Central Excise Act could not have been invoked as the appellant had maintained proper records and filed them with the department, and the department did not scrutinize them. The Supreme Court has held that when the department has full knowledge about the manufacture of goods, the extended period of limitation cannot be invoked. Mere failure to declare does not amount to wilful suppression, and there must be a positive act from the assessee's side to find wilful suppression. In the present case, the department was aware in 2015 that the appellant had taken over the unit, but the show cause notice was issued only in 2020, after an inordinate delay. Therefore, the extended period of limitation could not have been invoked - The impugned order is set aside and the appeals are allowed - Relevance of statements recorded under section 14 of the Central Excise Act - The persons whose statements were recorded under section 14 were not examined as witnesses by the adjudicating authority as required under section 9D – HELD - The adjudicating authority could not have placed reliance on the statements recorded under section 14 of the Central Excise Act as the procedure contemplated under section 9D of the Act was not followed. Section 9D mandates that the persons whose statements were recorded under section 14 have to be examined as witnesses before the adjudicating authority, and the authority has to form an opinion that the statements should be admitted in evidence in the interests of justice. Failure to comply with this procedure would mean that no reliance can be placed on the statements recorded under section 14 - Imposition of penalty under rule 26 of the Central Excise Rules - There was no finding that the goods were liable to confiscation – HELD - The imposition of penalties under rule 26 of the Central Excise Rules on Jasraj Singh Kalra and Sarabjit Singh Kalra cannot be sustained as there was no finding in the impugned order that the goods were liable to confiscation. Rule 26 requires that the goods should be liable to confiscation for the penalty to be imposed, and in the absence of such a finding, the penalties under rule 26 could not have been imposed. [Read less]

Customs - Classification of Bluetooth Wireless Earphones/Headphones/Neckbands, Eligibility to benefit of Notification No. 57/2017 dated 30.06.2017 - Whether the goods imported by the appellant are classifiable under CTI 8517 62 90 (Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks) or under CTI 8518 30 00 (Headphones and earphones, whether or not combined with a microphone) – HELD - The primary function of the imported goods is audio reproduction (sound output) and not transmission or reception of voice/data in a wireless network. The Bluetooth connectivity is... [Read more]

Customs - Classification of Bluetooth Wireless Earphones/Headphones/Neckbands, Eligibility to benefit of Notification No. 57/2017 dated 30.06.2017 - Whether the goods imported by the appellant are classifiable under CTI 8517 62 90 (Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks) or under CTI 8518 30 00 (Headphones and earphones, whether or not combined with a microphone) – HELD - The primary function of the imported goods is audio reproduction (sound output) and not transmission or reception of voice/data in a wireless network. The Bluetooth connectivity is merely a technology by which the audio signal reaches the device and does not transform the earphones into a "data transmission machine" for classification purposes. Applying the principles laid down by the Supreme Court in Welkin Foods, the CTH 8518 (Headphones and earphones) is a classic eo nomine provision, which names the article, and the Bluetooth/Wireless connectivity is a technology that does not change the essential character of the product. Further, the use of the earphones with mobile phones is the "actual use" that cannot determine the classification, which must be based on the objective characteristics and properties of the goods at the time of import - The impugned order has correctly found that the primary function of the imported goods is audio reproduction (sound output) and not transmission or reception of voice/data in a wireless network. The fact that the earphones contain a Bluetooth chip to receive audio wirelessly does not make them “machines for transmission of data” any more than a radio receiver’s ability to receive electromagnetic waves makes it a “data transmission machine”. This is precisely the principle of the eo nomine identity of a product not being overridden by secondary functional characteristics - The goods imported by the appellant are classifiable under CTI 8518 30 00 and not under CTI 8517 62 90. As the goods are classifiable under CTH 8518 30 00, the demand is upheld for the normal period of limitation under section 28(1) of the Customs Act, but the demand confirmed for the extended period of limitation under section 28(4) is set aside. The imposition of penalty under section 114A is also set aside as the extended period of limitation could not have been invoked – The appeal is partly allowed [Read less]

GST - Grant of anticipatory bail in an economic offence case - Summons under Section 70 of the CGST Act, 2017 to appear and produce documents related to alleged wrongful availment of input tax credit - Whether the petitioner is entitled to the benefit of anticipatory bail in the present case – HELD - The petitioner is alleged to have committed a grave economic offence by wrongfully availing ITC through fake invoices and onward passing of credit, which has long-term and far-reaching ramifications on the financial health of the country and affects national interest at large. The petitioner has not cooperated with the ongoi... [Read more]

GST - Grant of anticipatory bail in an economic offence case - Summons under Section 70 of the CGST Act, 2017 to appear and produce documents related to alleged wrongful availment of input tax credit - Whether the petitioner is entitled to the benefit of anticipatory bail in the present case – HELD - The petitioner is alleged to have committed a grave economic offence by wrongfully availing ITC through fake invoices and onward passing of credit, which has long-term and far-reaching ramifications on the financial health of the country and affects national interest at large. The petitioner has not cooperated with the ongoing inquiry, as he has failed to appear pursuant to the summons issued under Section 70 of the CGST Act - The nature of the alleged offence necessitates the petitioner's custodial interrogation to facilitate effective investigation and to unearth the fraud in all facets. Any latitude may enable the petitioner to tamper with the evidence or manipulate the records by taking undue advantage of legal and procedural loopholes. Considering the huge amount of public money involved, the lack of cooperation by the petitioner, and the grave nature of the alleged offence, no exceptional or extraordinary circumstance has been made out in favor of the petitioner for the grant of anticipatory bail - The petition for anticipatory bail is dismissed [Read less]

Service Tax - Classification of services as Manpower Supply Services (MSS) or Business Auxiliary Service (BAS) - The appellant claimed that the services provided to ITC Ltd. for processing of unmanufactured tobacco were eligible for exemption under Notification 14/2004-ST and Mega Notification 25/2012-Service Tax as an agriculture-related service - Whether the services provided by the appellant are correctly classified as Manpower Supply Services or Business Auxiliary Service, and whether the services are eligible for exemption from service tax under the relevant notifications - HELD - The dominant and determinative factor... [Read more]

Service Tax - Classification of services as Manpower Supply Services (MSS) or Business Auxiliary Service (BAS) - The appellant claimed that the services provided to ITC Ltd. for processing of unmanufactured tobacco were eligible for exemption under Notification 14/2004-ST and Mega Notification 25/2012-Service Tax as an agriculture-related service - Whether the services provided by the appellant are correctly classified as Manpower Supply Services or Business Auxiliary Service, and whether the services are eligible for exemption from service tax under the relevant notifications - HELD - The dominant and determinative factors - direct supervision, disciplinary control, wage and statutory liability, and the express character of the arrangement as a job-work contract - establish that the Contract Workmen are employees of, and remain under the supervision and control of, the Contractor, and do not stand in an employer-employee relationship with ITC. The contract is therefore a 'contract for service' and not a 'contract of service', and the service is correctly classified under 'BAS' and not 'MSS' – Regarding appellant's claim for exemption from service tax, both under the pre-Negative List regime (Notification No. 14/2004-ST) and the post-Negative List regime (Mega Notification No. 25/2012-ST), the appellant's processing of unmanufactured tobacco, including incidental or auxiliary services, constitutes an intermediate production process in relation to agriculture or agricultural produce. Consequently, the services are eligible for exemption from service tax under the relevant notifications, both pre and post the Negative List - The impugned order is set aside and held that the appellant is eligible for the refund claimed. The appeal is allowed [Read less]

Andhra Pradesh General Sales Act, 1957 - Revision vs. Reassessment of assessment order - Passing of Reassessment order based on subsequent judgments of the Court - An assessment order was passed against the petitioner for the assessment year 2002-03. Later, based on observations made by the Audit party, the Commercial Tax Officer passed a revised/reassessment order under Section 14(4)(cc) of the APGST Act, 1957 - Whether the Assessing Officer had the power to revise/reassess the earlier assessment order – HELD – The distinction between a revisional proceeding and a reassessment proceeding is that the revisional authori... [Read more]

Andhra Pradesh General Sales Act, 1957 - Revision vs. Reassessment of assessment order - Passing of Reassessment order based on subsequent judgments of the Court - An assessment order was passed against the petitioner for the assessment year 2002-03. Later, based on observations made by the Audit party, the Commercial Tax Officer passed a revised/reassessment order under Section 14(4)(cc) of the APGST Act, 1957 - Whether the Assessing Officer had the power to revise/reassess the earlier assessment order – HELD – The distinction between a revisional proceeding and a reassessment proceeding is that the revisional authority is entitled to take a different view on the basis of the material which was available before the assessing officer. However, the assessing officer cannot pass an order of reassessment on the basis of the same material. An order of reassessment is permissible only where fresh material, which had not been considered by the assessing officer in the earlier assessment order, comes to light and such material is sufficient for conducting a reassessment - In the present case, the impugned order of reassessment had been passed only on the basis of the observations of the audit party that the subsequent judgment of the High Court had resulted in a change in law. This clearly indicates that there was no fresh material available with the assessing officer who had passed this order of reassessment - The subsequent judgments of the Court can never be treated as fresh material for taking up reassessment proceedings - the impugned reassessment order is set aside and the writ petition is allowed [Read less]

GST – Tamil Nadu AAAR - Taxability of post-sale non-monetary benefits (Cash discount through credit note and non-monetary benefits like Gifts, compliments, tickets for entertainment shows and trips) received by a wholesaler from manufacturers - The appellant had applied for an Advance Ruling, which held that the benefits received by the appellant is ‘consideration’ towards ‘supply of support service’ and therefore would be covered under Section 7 of CGST Act, 2017 - Whether the non-monetary benefits received by the appellant from the manufacturers and wholesale traders should be considered as a "supply" under the... [Read more]

GST – Tamil Nadu AAAR - Taxability of post-sale non-monetary benefits (Cash discount through credit note and non-monetary benefits like Gifts, compliments, tickets for entertainment shows and trips) received by a wholesaler from manufacturers - The appellant had applied for an Advance Ruling, which held that the benefits received by the appellant is ‘consideration’ towards ‘supply of support service’ and therefore would be covered under Section 7 of CGST Act, 2017 - Whether the non-monetary benefits received by the appellant from the manufacturers and wholesale traders should be considered as a "supply" under the GST Act and subject to GST – HELD - The appellant had initially provided incorrect facts to the Authority for Advance Ruling, stating that it was a franchise of the paint manufacturers and there was no prior agreement regarding the provision of non-monetary benefits. However, during the appeal proceedings, the appellant clarified that it purchases paints from the manufacturers on a principal-to-principal basis and sells them independently to various customers, and the manufacturers extend monetary or non-monetary post-sale benefits to the appellant under dealer schemes based on prior agreements - The change in facts presented by the appellant between the original application and the appeal proceedings made it difficult for the AAAR to pass an order on the ruling issued by the AAR. Accordingly, the matter is remanded to the original Authority for Advance Ruling to take up the matter afresh and pass a ruling by following the principles of natural justice, considering the correct facts presented by the appellant – Ordered accordingly [Read less]

Service Tax – Activity of coiling of steel wires supplied by principal manufacturers, demand of 5%/6% on job charges – Demand of 5%/6% of the value of exempted services under Rule 6(3) of the Cenvat Credit Rules, 2004 for the period 2010-11 to 2013-14 - Whether the demand of 5%/6% on the job charges under Rule 6(3) of the Cenvat Credit Rules, 2004 is justified – HELD - The appellant's activity of job work, which included specialized processes on the steel wires received from the principal manufacturers, cannot be treated as "exempted goods" when the duty is ultimately paid by the principal manufacturer - The purpose ... [Read more]

Service Tax – Activity of coiling of steel wires supplied by principal manufacturers, demand of 5%/6% on job charges – Demand of 5%/6% of the value of exempted services under Rule 6(3) of the Cenvat Credit Rules, 2004 for the period 2010-11 to 2013-14 - Whether the demand of 5%/6% on the job charges under Rule 6(3) of the Cenvat Credit Rules, 2004 is justified – HELD - The appellant's activity of job work, which included specialized processes on the steel wires received from the principal manufacturers, cannot be treated as "exempted goods" when the duty is ultimately paid by the principal manufacturer - The purpose of the Cenvat Credit Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Further, the exemption under Notification No. 8/2005-ST is available only in respect of goods on which central excise duty is paid by the principal manufacturer, which when read harmoniously with Rule 3 of the Cenvat Credit Rules, would make it clear that the job-worker could use the cenvatable input and input services. The scope of Rule 6 is limited in such a scenario and the demand of 5%/6% on the job charges under Rule 6(3) is not justified – The impugned order is set aside and the appeal is allowed [Read less]

Customs - Imposition of redemption fine and penalty for delayed submission of supporting documents like Legal Metrology Packaged Commodities [LMPC] certificate and the Steel Import Monitoring System [SIMS] certificate - Whether the imposition of redemption fine, penalty under Section 112(a)(i) and penalty under Section 114AA was justified for the delayed submission of the required documents - HELD - There is admittedly a violation of the DGFT import notification conditions by not submitting the documents in time. Nevertheless, these documents were submitted, subsequent to the filing of Bill of Entry, which can certainly be... [Read more]

Customs - Imposition of redemption fine and penalty for delayed submission of supporting documents like Legal Metrology Packaged Commodities [LMPC] certificate and the Steel Import Monitoring System [SIMS] certificate - Whether the imposition of redemption fine, penalty under Section 112(a)(i) and penalty under Section 114AA was justified for the delayed submission of the required documents - HELD - There is admittedly a violation of the DGFT import notification conditions by not submitting the documents in time. Nevertheless, these documents were submitted, subsequent to the filing of Bill of Entry, which can certainly be considered as a procedural lapse. Procedure lapses are minor errors or deviations from established procedures, that do not fundamentally alter the substantive outcome - It is evident that there was merely delayed submission of relevant certificates which establishes that there was no malafide intent on part of the appellant to violate the provision, or any intent to evade – The Section 114AA imposes penalty for knowingly or intentionally using false or incorrect document/statements in customs transactions. No such evidence had been led by the Revenue to establish that the appellant had knowingly or intentionally submitted false declarations. The redemption fine is reduced to Rs. 1,00,000/-, the penalty under Section 112(a)(i) to Rs. 50,000/-, and penalty under Section 114AA is set aside - The appeal is partly allowed [Read less]

Customs - Liability for Special Additional Duty (SAD) on imported silk fabrics - Appellant imported silk fabrics and claimed exemption from paying 4% SAD under Customs Notification No. 20/2006 – Recovery of non-payment of SAD as the exemption was withdrawn by the Finance Act, 2011 effective from 08.04.2011 - Whether the demand of 4% SAD on the imported silk fabrics is justified – HELD - At the time of import, the exemption from SAD stood deleted as per the Finance Act, 2011 and thus, the appellant was liable to pay the SAD – Though the appellant's argument is that since there was VAT exemption in Uttar Pradesh, SAD s... [Read more]

Customs - Liability for Special Additional Duty (SAD) on imported silk fabrics - Appellant imported silk fabrics and claimed exemption from paying 4% SAD under Customs Notification No. 20/2006 – Recovery of non-payment of SAD as the exemption was withdrawn by the Finance Act, 2011 effective from 08.04.2011 - Whether the demand of 4% SAD on the imported silk fabrics is justified – HELD - At the time of import, the exemption from SAD stood deleted as per the Finance Act, 2011 and thus, the appellant was liable to pay the SAD – Though the appellant's argument is that since there was VAT exemption in Uttar Pradesh, SAD should not be levied, the fact that there was an exemption from VAT in State of UP does not mean the same is valid throughout India, as long as the goods are sold anywhere in India – The SAD is a central levy which cannot be made inapplicable to a particular State just because VAT is exempted in that State. Further, no merit in the appellant's contention that the assessment was only provisional and hence, no demand under Section 28 of the Customs Act could be made - The demand of SAD is justified as the appellant did not pay the duty at the time of import and the exemption was no longer available - The demand of 4% SAD on the imported silk fabrics is upheld and the appeal is dismissed [Read less]

GST - Rejection of GST refund claim by non-speaking order – Petitioner is engaged in providing research and development services to its group entities located outside India, for which consideration is charged on a cost plus markup basis - Refund claims for the Input Tax Credit which were sanctioned for the period July 2017 to September 2022. However, for the period October 2022 to March 2023, the respondent rejected the refund application. The respondent also issued show cause notices for the financial years 2018-19 and 2019-20, seeking to recover the refunds that were earlier granted - HELD – The impugned order rejec... [Read more]

GST - Rejection of GST refund claim by non-speaking order – Petitioner is engaged in providing research and development services to its group entities located outside India, for which consideration is charged on a cost plus markup basis - Refund claims for the Input Tax Credit which were sanctioned for the period July 2017 to September 2022. However, for the period October 2022 to March 2023, the respondent rejected the refund application. The respondent also issued show cause notices for the financial years 2018-19 and 2019-20, seeking to recover the refunds that were earlier granted - HELD – The impugned order rejecting the refund claim was a non-speaking order and did not consider the submissions made by the petitioner that it was not an agent of its group entity, hence its services were zero-rated supplies eligible for refund. No specific finding has been recorded in the impugned order before rejecting the refund application. The impugned order suffers from the vice of being a non-speaking order vis-a-vis rejection of the refund claim – Further, the show cause notices issued for the financial years 2018-19 and 2019-20, seeking to deny the refunds that were earlier granted, were issued without considering the submissions of the petitioner - The impugned order and the corrigendum are quashed and the matter is remanded back to the respondent for de novo consideration of the refund claim for October 2022 to March 2023 and the show cause notices for the past periods, after providing the petitioner an opportunity of being heard - The petition stands disposed of [Read less]

Customs - Import of foreign vehicle by mis-declaring description, value, and origin to avail Customs duty concession - Petitioner declared a 10-seater Cadillac Escalade SUV as an 8-seater, misrepresented the country of origin as Australia instead of USA, and undervalued the goods - Whether the penalty under Section 114AA of the Customs Act, 1962 for use of false and incorrect materials is attracted, and (2) Whether the appropriation of the customs duty already paid is valid. HELD - The show cause notice clearly imputed knowledge to the importer that they had intentionally made and used false and incorrect declaration and d... [Read more]

Customs - Import of foreign vehicle by mis-declaring description, value, and origin to avail Customs duty concession - Petitioner declared a 10-seater Cadillac Escalade SUV as an 8-seater, misrepresented the country of origin as Australia instead of USA, and undervalued the goods - Whether the penalty under Section 114AA of the Customs Act, 1962 for use of false and incorrect materials is attracted, and (2) Whether the appropriation of the customs duty already paid is valid. HELD - The show cause notice clearly imputed knowledge to the importer that they had intentionally made and used false and incorrect declaration and documents to evade payment of legitimate customs duty, which is sufficient to attract penalty under Section 114AA. The importer failed to discharge the burden of proving their innocence – The Tribunal has erred in misreading the show cause notice to hold that there is no specific averment of falsification of documents to attract Section 114AA of the Customs Act, 1962. The order of re-export on payment of redemption fine will not absolve the penal consequence envisaged under the Customs Act, 1962. If this proposition of the CESTAT is to be approved, then all illegal importers, if caught, will offer to pay a paltry sum as fine in lieu of redemption of the goods and re-export the same without suffering any penalty or custom duty for their attempt to violate the Customs Act, 1962 - The appropriation of the Customs duty already paid is valid, as the importer is liable to pay the duty even after redeeming the confiscated goods by paying a fine under Section 125 of the Customs Act. The option to re-export the goods does not absolve the penal consequences under the Act. The Tribunal's order setting aside the penalty and appropriation is perverse and contrary to law and set aside – Revenue appeal is allowed [Read less]

GST – Tamil Nadu AAR - Liability to pay GST on supply of electrical energy - Applicant, an entity engaged in the development of solar power projects, has entered into a Power Purchase Agreement (PPA) with an off-taker to supply electrical energy generated from a solar power plant installed on the off-taker's factory rooftop - Whether the applicant is required to be registered under GST and collect and pay GST on the supply of electrical energy – HELD - The applicant is not required to be registered under GST, as it is engaged in the exclusive supply of exempted goods, namely 'Electrical Energy'. Under Section 23 of the... [Read more]

GST – Tamil Nadu AAR - Liability to pay GST on supply of electrical energy - Applicant, an entity engaged in the development of solar power projects, has entered into a Power Purchase Agreement (PPA) with an off-taker to supply electrical energy generated from a solar power plant installed on the off-taker's factory rooftop - Whether the applicant is required to be registered under GST and collect and pay GST on the supply of electrical energy – HELD - The applicant is not required to be registered under GST, as it is engaged in the exclusive supply of exempted goods, namely 'Electrical Energy'. Under Section 23 of the CGST Act, 2017 persons engaged exclusively in the supply of goods or services not liable to tax or wholly exempt from tax are not required to be registered - The supply of electrical energy by the applicant is a 'supply of goods' as per Section 7(1)(a) of the CGST Act. However, Electricity is classified under Tariff Heading 27160000 as ‘Electrical Energy’ attracting ‘Nil’ rate of GST vide Notification No. 02/2017-Central Tax (Rate) dated 28 June 2017. Therefore, the applicant is not required to collect and pay GST on the supply of electrical energy, whether it is an intra-state or inter-state transaction – Ordered accordingly - Applicability of the Advance Ruling - As per Section 103 of the CGST Act, the Advance Ruling pronounced shall be binding on the applicant, the concerned officer, and the jurisdictional officer, provided the law, facts, or circumstances supporting the original advance ruling have not changed. This advance ruling pronounced is applicable to the applicant only if the law, facts/circumstances contained in this application on the queries raised in any matter referred to in sub-section (2) of Section 97 of the Act, is same. [Read less]