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GST - Statutory requirement of Show Cause Notice, Form DRC-01 as summary cannot substitute SCN, Validity of adjudication proceedings without proper SCN - Appellant contended no proper SCN issued to them and entire proceedings invalid - Whether Form DRC-01, being summary of SCN, can substitute statutory requirement of SCN under Section 73(1) of CGST Act, 2017 - HELD - Show Cause Notice is bedrock of adjudication proceedings for determining tax, interest and penalty and serves important safeguard of natural justice. Section 73(1) mandates that proper officer shall serve notice on person chargeable requiring to show cause usi... [Read more]

GST - Statutory requirement of Show Cause Notice, Form DRC-01 as summary cannot substitute SCN, Validity of adjudication proceedings without proper SCN - Appellant contended no proper SCN issued to them and entire proceedings invalid - Whether Form DRC-01, being summary of SCN, can substitute statutory requirement of SCN under Section 73(1) of CGST Act, 2017 - HELD - Show Cause Notice is bedrock of adjudication proceedings for determining tax, interest and penalty and serves important safeguard of natural justice. Section 73(1) mandates that proper officer shall serve notice on person chargeable requiring to show cause using word shall which indicates promise or obligation that cannot be diluted by tax administration. Form DRC-01 is only summary of SCN and cannot stand independently dispensing with statutory requirement mandated by legislature. DRC-01 cannot replace proper Show Cause Notice - Validity of SCN requires examination of six points: who is person proceeded against, what tax or ITC alleged wrong, for which period, under which statutory provision, on what factual and evidentiary basis and whether taxpayer given real opportunity to answer allegation - In present case SCN attached with DRC-01 addressed to different taxpayer and no separate SCN issued to appellant. Appellant left in dark as to cause against which to address replies. Absence of proper SCN rendered appellant's opportunity being denied fundamental right of natural justice - Entire proceedings set aside as invalid and void ab initio due to absence of proper Show Cause Notice. Adjudication proceeding cannot sustain without statutory SCN properly issued to taxpayer. Orders-in-Original and Order-in-Appeal set aside – The appeal is allowed - GST - Demand of IGST arising from mismatch between GSTR-1 and GSTR-3B, Sustainability of demand in absence of reasoning and verification - Appellant reported taxable supply value of Rs.1,12,500/- in GSTR-3B but had reported only Rs.1,12,000/- in GSTR-1 creating difference of Rs.500/-. Corresponding difference in IGST created mismatch of Rs.20,250.54. Department issued DRC-01 and adjudicating authority demanded reversal of IGST - Whether demand of reversal of IGST can be sustained when no reasoning provided in adjudication order and mere upholding of demand without line of reasoning by appellate authority amounts to valid adjudication - HELD – In the absence of proper SCN and absent any line of reasoning in order-in-original justifying the amount as excess IGST, and bland upholding of order-in-original by first appellate authority without addressing merits, adjudication order cannot be sustained. Tribunal unable to appreciate how demand for IGST reversal can be justified when no factual or legal basis provided at any level of adjudication. Mere tabulation of figures without supporting reasoning or evidentiary foundation does not constitute valid adjudication order. Examination of applicability of case laws and principles necessarily becomes superfluous in case where foundational adjudication order lacks any substantive reasoning - Demand of IGST not sustainable. Order-in-original and Order-in-Appeal demanding reversal of IGST liability is set aside - Demand for reversal of CGST and SGST based on mismatch between GSTR-2A and GSTR-3B, Application of procedure under Circular No.183/15/2022-GST - Supplier inadvertently reported supply in GSTR-1 against different GSTIN instead of appellant's GSTIN resulting in mismatch between GSTR-2A and GSTR-3B – Demand for reversal of ITC based solely on mismatch without examining actual receipt or validity of invoice - Whether demand for reversal of CGST and SGST ITC based solely on mismatch between GSTR-2A and GSTR-3B can be sustained without compliance with procedure prescribed in Circular No.183/15/2022-GST requiring examination of conditions under Section 16 of CGST Act, 2017 - HELD - Circular No.183/15/2022-GST Para 4 prescribes that proper officer shall first seek details from registered person regarding invoices where ITC availed in GSTR-3B but not reflecting in GSTR-2A and then ascertain fulfilment of conditions under Section 16 of CGST Act for such ITC - Mere mismatch cannot be ground for denial of ITC without proper examination and verification per prescribed procedure. Respondent should have taken note of procedure prescribed in Circular before issuing demand – The demand for reversal of CGST and SGST ITC based on mismatch set aside. Mere mismatch between GSTR-2A and GSTR-3B not sufficient ground for ITC reversal without compliance with procedure prescribed in Circular requiring verification of conditions under Section 16 of CGST Act and examination of actual receipt of goods and invoices. [Read less]

GST - Availment of Input Tax Credit under incorrect tax head, Invocation of Section 73 for mismatch in ITC reporting - Appellant availed Input Tax Credit reflected as IGST in GSTR-2A but inadvertently claimed under CGST and SGST heads in GSTR-3B due to clerical error - Show cause notice issued under Section 73 alleging incorrect availment of ITC arising from mismatch in GSTR-2A and GSTR-3B - First appellate authority sustained the disallowance of CGST and SGST components of ITC while allowing only the IGST component - Whether Input Tax Credit can be disallowed merely because it was claimed under an incorrect tax head when ... [Read more]

GST - Availment of Input Tax Credit under incorrect tax head, Invocation of Section 73 for mismatch in ITC reporting - Appellant availed Input Tax Credit reflected as IGST in GSTR-2A but inadvertently claimed under CGST and SGST heads in GSTR-3B due to clerical error - Show cause notice issued under Section 73 alleging incorrect availment of ITC arising from mismatch in GSTR-2A and GSTR-3B - First appellate authority sustained the disallowance of CGST and SGST components of ITC while allowing only the IGST component - Whether Input Tax Credit can be disallowed merely because it was claimed under an incorrect tax head when the substantive eligibility of the credit is not disputed – Validity of invocation of provisions of Section 73 - HELD - Where ITC reflected in GSTR-2A under IGST head is claimed in GSTR-3B under CGST and SGST heads, such availment under incorrect heads constitutes a disallowable item regardless of whether the total amount was accounted for in returns and records. The statutory scheme does not permit reallocation of ITC between different tax heads merely because the taxpayer made an error in reporting. The substantive eligibility of credit cannot override the requirement that the credit must be claimed under the corresponding tax head for the inward supply - The provisions of Section 73 are attracted wherever there is incorrect availment of Input Tax Credit whether arising from intentional misstatement or inadvertent error. The distinction between fraudulent availment and bona fide error does not absolve the taxpayer of the tax demand but may be relevant only for consideration of penalty - Where a taxpayer has claimed ITC under incorrect tax heads, the reversal of such credit and the confirmation of tax liability under the appropriate head is justified. The authorities have correctly applied the law in reversing ITC claimed under CGST and SGST heads when the corresponding credit was available under IGST head - The absence of revenue loss to Government cannot be a ground to condone the incorrect availment of credit under wrong tax heads. Interest and penalty are rightly imposable when ITC is incorrectly claimed and subsequently reversed by the authorities - The disallowance of Input Tax Credit claimed under CGST and SGST instead of IGST, along with the levy of applicable interest and penalty, is upheld – The appeal is dismissed [Read less]

Central Excise - Denial of concessional rate notification benefit based on availment of CENVAT credit, Applicability of credit conditions to inputs used in waste processing - Whether concessional rate notification condition against CENVAT credit applies to inputs used in waste product processing when CENVAT credit availed only for manufacture of primary product Gelatin and not specifically for inputs going into waste product conversion - HELD – The Show Cause Notice and adjudication order neither specific nor established which inputs used exclusively in manufacture of Nutri Gold. Inputs used to clean waste product sludge... [Read more]

Central Excise - Denial of concessional rate notification benefit based on availment of CENVAT credit, Applicability of credit conditions to inputs used in waste processing - Whether concessional rate notification condition against CENVAT credit applies to inputs used in waste product processing when CENVAT credit availed only for manufacture of primary product Gelatin and not specifically for inputs going into waste product conversion - HELD – The Show Cause Notice and adjudication order neither specific nor established which inputs used exclusively in manufacture of Nutri Gold. Inputs used to clean waste product sludge were part of inputs used in Gelatin manufacture. Where inputs used in manufacture of final product also used for processing waste products to manufacture dutiable product, CENVAT credit cannot be denied - Supreme Court in Union of India v Hindustan Zinc held that terms used such as inputs, final products, by-product and waste products used taking into account commercial reality and that Rule did not contemplate application where by-product emerged as technological necessity. Notification condition against CENVAT credit cannot be applied unless evidence established that inputs were purchased and used exclusively for Nutri Gold manufacture - In the present case, there is no evidence on record to state that inputs were purchased and used exclusively for the manufacture of Nutri Gold. Accordingly, the impugned orders cannot be sustained and set aside – The appeal is allowed [Read less]

Service Tax - Limitation period for refund claims under Rule 5 of CENVAT Credit Rules, Application of Larger Bench decision in Span Infotech after amended notification - Appellant filed refund claims for CENVAT credit of Service Tax in respect of FIRCs received between first January 2017 and thirtieth June 2017 – Rejection of refund on ground that amended Notification No. 14/2016-CE dated first March 2016 expired limitation one year from receipt of individual FIRC - Whether limitation period for refund claims filed quarterly is computed from date of individual FIRC receipt or from end of quarter in which FIRC received an... [Read more]

Service Tax - Limitation period for refund claims under Rule 5 of CENVAT Credit Rules, Application of Larger Bench decision in Span Infotech after amended notification - Appellant filed refund claims for CENVAT credit of Service Tax in respect of FIRCs received between first January 2017 and thirtieth June 2017 – Rejection of refund on ground that amended Notification No. 14/2016-CE dated first March 2016 expired limitation one year from receipt of individual FIRC - Whether limitation period for refund claims filed quarterly is computed from date of individual FIRC receipt or from end of quarter in which FIRC received and whether Span Infotech principle applies after Notification No. 14/2016-CE - HELD - Larger Bench decision in Span Infotech held that where refund claims filed quarterly, relevant date for limitation is end of quarter in which FIRC received. This enables consolidation of all FIRCs during quarter in single claim without becoming time barred if FIRCs received near quarter end - Amended Notification No. 14/2016-CE was brought to give effect to Span Infotech decision not to reverse it. Statutory scheme permitting only one refund application per quarter remains unchanged. Principle laid down in Span Infotech remains applicable and unaltered even after amended notification. - The impugned order rejecting refund claim is set aside. The appellant entitled to refund with applicable interest – The appeal is allowed [Read less]

Service Tax - Taxability of delayed payment surcharges and meter-testing charges collected by electricity distribution utility - Notice proposing service tax on delayed payment charges as consideration for agreeing to tolerate an act or situation under Section 66E(e) and on meter-testing charges as an independent service under Section 65B(44) - Whether additional surcharges collected for delayed payment of electricity bills are taxable consideration for a declared service under Section 66E(e) of Finance Act - HELD - The scope of exemption available to electricity transmission and distribution utilities under Section 66D(k)... [Read more]

Service Tax - Taxability of delayed payment surcharges and meter-testing charges collected by electricity distribution utility - Notice proposing service tax on delayed payment charges as consideration for agreeing to tolerate an act or situation under Section 66E(e) and on meter-testing charges as an independent service under Section 65B(44) - Whether additional surcharges collected for delayed payment of electricity bills are taxable consideration for a declared service under Section 66E(e) of Finance Act - HELD - The scope of exemption available to electricity transmission and distribution utilities under Section 66D(k) extends not only to the principal service of distribution but also to all activities having direct and close nexus with transmission or distribution of electricity when naturally bundled with the principal service under Section 66F(3) - For Section 66E(e) to apply, there must be an agreement express or implied under which one party assumes obligation to tolerate an act or situation and consideration is paid for such tolerance. A mere flow of money consequent upon breach or default is not sufficient - Delayed payment surcharge is imposed only upon failure to comply with the statutory obligation to pay electricity bills by due date. Its object is to secure timely payment and discourage default. Neither consumer desires to purchase service of tolerance nor does respondent undertake delayed payment as activity for consumer. Continuation of electricity supply in accordance with Electricity Act cannot be regarded as agreement to tolerate delayed payment. Surcharge bears direct nexus with electricity bill and is collected as part of mechanism for recovery of charges for distribution - Delayed payment surcharges are not taxable as consideration under Section 66E(e). Meter-testing charges are directly connected and naturally bundled with distribution of electricity receiving same tax treatment as principal service. Extended period of limitation is not available. No interest or penalty is recoverable – The impugned dropping proceedings is upheld and Revenue appeal is dismissed - Whether meter-testing charges constitute an independent taxable service or form part of the exempted service of distribution of electricity under Section 66D(k) – HELD - Testing of meter is not unrelated consultancy service but undertaken in capacity as distribution utility in furtherance of statutory functions. Essential character of activity is not altered by fact that separately prescribed fee is recovered. Separate pricing and separate accounting does not result in separate taxable service when activity naturally bundled with and ancillary to principal service. [Read less]

Customs - Computation of limitation period for refund claim under Section 27(1B)(c) for provisionally paid duty, Date of communication versus date of passing order, Proof of service requirements - Respondent imported non-coking coal assessed provisionally. Order-in-Original dated thirtieth April 2014 finalized provisional assessment directing refund of. Respondent filed refund claim on thirteenth May 2015 - Department rejected as time barred contending limitation ran from thirtieth April 2014 - Whether limitation period of one year under Section 27(1B)(c) for refund of provisionally paid duty is computed from date order is... [Read more]

Customs - Computation of limitation period for refund claim under Section 27(1B)(c) for provisionally paid duty, Date of communication versus date of passing order, Proof of service requirements - Respondent imported non-coking coal assessed provisionally. Order-in-Original dated thirtieth April 2014 finalized provisional assessment directing refund of. Respondent filed refund claim on thirteenth May 2015 - Department rejected as time barred contending limitation ran from thirtieth April 2014 - Whether limitation period of one year under Section 27(1B)(c) for refund of provisionally paid duty is computed from date order is passed or from date order is communicated to the assessee - HELD - Limitation period runs from date order is communicated to person entitled to refund, not from date order is passed. Communication is essential element for limitation to commence as assessee cannot be bound by order before knowledge thereof - Mere despatch without proof of delivery is insufficient. Burden lies on Revenue to prove service as per prescribed method. Assessee's postal cover bearing postal department seal establishing receipt on tenth June 2015 cannot be disputed by bare surmise that it may have contained other correspondence. Refund claim filed fifteenth May 2015 falls within one year from tenth June 2015, the date of communication - The Order-in-Appeal allowing refund claim is upheld and the Revenue appeal is dismissed [Read less]

Customs - Adjustment of refund of Special Additional Duty against unfinalized demand for recovery of duty drawback under Section 142 of Customs Act - Whether refund of Special Additional Duty can be adjusted and appropriated under Section 142 of Customs Act against a demand for recovery of duty drawback that has not reached finality - HELD - Adjustment under Section 142 of Customs Act can be invoked only when the demands against which adjustment is sought have reached finality and should never be invoked at initial stage when the order is mere claim that gets confirmed through an appealable order. Demands that are subject ... [Read more]

Customs - Adjustment of refund of Special Additional Duty against unfinalized demand for recovery of duty drawback under Section 142 of Customs Act - Whether refund of Special Additional Duty can be adjusted and appropriated under Section 142 of Customs Act against a demand for recovery of duty drawback that has not reached finality - HELD - Adjustment under Section 142 of Customs Act can be invoked only when the demands against which adjustment is sought have reached finality and should never be invoked at initial stage when the order is mere claim that gets confirmed through an appealable order. Demands that are subject to appeal or revision cannot be regarded as having reached finality. Every Order-in-Original is appealable and subject to revision. Therefore at first stage of confirmation of demand no finality has been reached. Demands cannot be called as arrears until they have attained finality - Adjustment of refund against non-finalized or pending demands is against legal provisions and settled judicial pronouncements - Failure to release appropriated refund amount when the demand ceases to exist constitutes delayed refund for which interest is payable under Section 11BB of Customs Act - Respondent is directed to refund the SAD along with applicable interest as per law – The appeal is allowed [Read less]

Maharashtra VAT Act, 2002 - Periodicity of filing returns under MVAT Act, Levy of interest for alleged delayed payment of tax - Petitioner obtained registration voluntarily and became eligible to file six-monthly returns under Rule 17(4) read with Rule 41 of the MVAT Rules, 2005, based on previous year's tax liability being below the prescribed threshold - Petitioner filed six-monthly returns for the relevant financial year and discharged tax liability within the due dates - Respondent levied interest under Section 30(2) of the MVAT Act, 2002 on the premise that petitioner ought to have paid tax on monthly basis and had th... [Read more]

Maharashtra VAT Act, 2002 - Periodicity of filing returns under MVAT Act, Levy of interest for alleged delayed payment of tax - Petitioner obtained registration voluntarily and became eligible to file six-monthly returns under Rule 17(4) read with Rule 41 of the MVAT Rules, 2005, based on previous year's tax liability being below the prescribed threshold - Petitioner filed six-monthly returns for the relevant financial year and discharged tax liability within the due dates - Respondent levied interest under Section 30(2) of the MVAT Act, 2002 on the premise that petitioner ought to have paid tax on monthly basis and had thereby unjustly enriched itself by deferring substantial tax revenue. - Whether interest under Section 30(2) of the MVAT Act can be levied where the assessee has filed returns and paid tax in compliance with the statutory periodicity prescribed under Rule 17(4) and the due date prescribed under Rule 41 of the MVAT Rules - HELD - Section 30(2) provides for compensatory interest on the amount of tax not paid within the time specified by or under the Act, and the sine qua non for levy of interest is failure to pay tax within the time specified in the Act. Section 32 read with Rule 41 prescribe that tax be paid on or before the date specified for submission of return. Section 20 read with Rule 17 prescribe that every registered dealer whose tax liability during the previous year was below the threshold shall file a six-monthly return and thus is required to pay tax on a six-monthly basis - Once the Rules prescribe the periodicity of filing return and due date for payment of tax, the same are binding both on the assessee and the respondents. The respondent has no jurisdiction to decide or alter such periodicity based on his own surmises or perceptions unless supported by very cogent materials or the sanction of law - The MVAT Act does not create any concept of unjust enrichment in relation to return periodicity or timing of tax payment where the dealer has acted strictly in accordance with the prescribed Rules. Payment of tax within the legally prescribed due date cannot be characterised as deferment or enrichment merely because the turnover during the relevant year was substantial - The levy of interest is dehors the statutory provisions and therefore is constitutionally impermissible. The interest is a fiscal levy and can be imposed only with the authority of law – The levy of interest under Section 30(2) of the MVAT Act is set aside – The writ petition is allowed [Read less]

Central Excise – Failure to disclose shortages or excesses reflected in the Cost Audit Report, Invocation of extended period of limitation under proviso to Section 11A(1) for suppression of facts, Relevance of departmental knowledge - Despite possessing full information, Department issued Show Cause Notices invoking extended period claiming appellant suppressed facts by not disclosing shortages. Adjudicating Authority confirmed demand. Commissioner (Appeals) set aside on limitation - Tribunal reversed the order holding extended period available - Whether extended period of limitation under proviso to Section 11A(1) can b... [Read more]

Central Excise – Failure to disclose shortages or excesses reflected in the Cost Audit Report, Invocation of extended period of limitation under proviso to Section 11A(1) for suppression of facts, Relevance of departmental knowledge - Despite possessing full information, Department issued Show Cause Notices invoking extended period claiming appellant suppressed facts by not disclosing shortages. Adjudicating Authority confirmed demand. Commissioner (Appeals) set aside on limitation - Tribunal reversed the order holding extended period available - Whether extended period of limitation under proviso to Section 11A(1) can be invoked based on non-disclosure in statutory returns of matters not required to be disclosed - HELD - Extended period comes into play only when suppression is established or admitted as deliberate act of withholding information. Suppression presupposes person from whom something is kept back and one cannot suppress from another that which the other already possesses. Where Department attends stock verification at assessee's invitation and records physical position, conduct is antithesis of concealment - Statutory returns require no disclosure of shortages or excesses reflected in Cost Audit Report as no column prescribed disclosure thereof. Demand built entirely on statutory record which assessee bound to prepare, preserve and produce cannot simultaneously be demand built on suppression – The extended period unavailable where entire basis of demand is information in assessee's own books, financial statements or statutory records – Further, the Show Cause Notice must specifically plead ingredients of suppression so assessee may meet allegation. Single sentence averment identifying no fact suppressed, no obligation breached, no act of concealment and no intent to evade is insufficient. – The extended period not available and the demand is barred by limitation of one year – The order passed by the Tribunal is set aside and the appeal is allowed [Read less]

Central Excise - Excisability of waste materials and residues arising incidentally during manufacture, Distinction between manufacture and marketability - During manufacture of sponge iron waste material and iron ore fines emerged and were cleared without duty. Department contended materials were marketable excise goods - Commissioner (Appeals) set aside holding disputed materials did not arise as result of any process of manufacture. Department appealed contending goods have distinct names, commercial utility, sold for consideration and covered by tariff entries - Whether waste materials and residues arising inevitably du... [Read more]

Central Excise - Excisability of waste materials and residues arising incidentally during manufacture, Distinction between manufacture and marketability - During manufacture of sponge iron waste material and iron ore fines emerged and were cleared without duty. Department contended materials were marketable excise goods - Commissioner (Appeals) set aside holding disputed materials did not arise as result of any process of manufacture. Department appealed contending goods have distinct names, commercial utility, sold for consideration and covered by tariff entries - Whether waste materials and residues arising inevitably during manufacture of primary product can be subjected to Central Excise duty merely because they are marketable and specified in tariff - HELD - Manufacture or production is foundational taxable event. For activity to amount to manufacture, it must result in emergence of new and distinct commodity having different name, character or use from original inputs. Explanation to Section 2(d) of CEA, 1944 expands concept of goods and marketability but does not dispense with statutory requirement that goods must be manufactured or produced - Marketability and manufacture are separate conditions and existence of one does not establish other. Dolochar, partially burnt coal remaining in rotary kiln during sponge iron manufacture, emerges inevitably and not result of independent manufacturing process. Fly ash arises from burning coal for heat and burning does not amount to manufacture of residue. Burning coal to generate electricity does not constitute process for manufacture of fly ash. Iron ore fines arise through handling and screening without benefication - Mere reduction or segregation does not amount to manufacture. Subsequent payment of duty by respondent cannot constitute admission against correct legal position as there is no estoppel against law. Even if dolochar treated as excisable, unconditionally exempt under Notification No. 4/2006 and Notification No. 12/2012 as waste from manufacture of iron or steel - No positive fraud or deliberate suppression with intent to evade established. Mere non-payment without deliberate act cannot justify extended period – The impugned Order-in-Appeal upholding that disputed materials not liable to Central Excise duty affirmed – Revenue appeal is dismissed [Read less]

Service Tax - Classification of composite construction contract as Works Contract Service, Distinction between composite contract and statutory definition of taxable service - Appellant constructed residential flats under development agreements with land owners and individual agreements with perspective purchasers for period October 2007 to March 2013. Department issued Show Cause Notice proposing service tax demand on ground that construction contracts were composite contracts involving supply of goods and services classifiable as Works Contract Service - Whether contracts involving both supply of goods and construction s... [Read more]

Service Tax - Classification of composite construction contract as Works Contract Service, Distinction between composite contract and statutory definition of taxable service - Appellant constructed residential flats under development agreements with land owners and individual agreements with perspective purchasers for period October 2007 to March 2013. Department issued Show Cause Notice proposing service tax demand on ground that construction contracts were composite contracts involving supply of goods and services classifiable as Works Contract Service - Whether contracts involving both supply of goods and construction services necessarily constitute taxable Works Contract Service merely on account of being composite in nature - HELD - Supreme Court in Larsen & Toubro held that indivisible composite works contracts after first June 2007 taxable under Works Contract Service subject to satisfaction of statutory requirements. Mere existence of composite contract does not conclude question of taxability. To fall within Works Contract Service in relation to residential construction, subject construction must satisfy statutory description of Residential Complex as defined in Section 65(91a). Composite nature of contract cannot enlarge or override statutory meaning of taxable service categories - Construction for taxability under Works Contract Service must satisfy statutory definition of Residential Complex - Service Tax - Definition and statutory scope of Residential Complex, Requirement of more than twelve residential units - Whether construction of building or independently identifiable project comprising twelve or fewer residential units can be subjected to service tax under Works Contract Service category when statutory definition requires more than twelve residential units - HELD - Section 65(91a) as applicable during material period contemplated complex comprising building or buildings having more than twelve residential units, common area and one or more prescribed common facilities. Where project or independently identifiable building consists of twelve or fewer residential units and does not otherwise constitute residential complex as statutorily defined, construction cannot be subjected to tax merely by describing as works contract. Special entry of Works Contract Service cannot enlarge statutory meaning of Residential Complex - Construction of building or independently identifiable project having twelve or fewer residential units outside scope of construction of residential complex service and not taxable under Works Contract Service - Service Tax - Effect of deeming explanation inserted on 01.07.2010, Retrospective application of statutory provisions to earlier periods - Appellant's construction services for period prior to first July 2010 were treated as taxable. Department relied on explanation to Section 65(105)(zzzh) which deemed construction by builder to be taxable service where amount received from perspective buyer before grant of completion certificate - Whether deeming explanation inserted on first July 2010 deeming construction by builder as taxable service can be applied retrospectively to construction services undertaken prior to that date - HELD - Explanation to Section 65(105)(zzzh) creating deeming fiction that construction by builder taxable where amount received before completion certificate was inserted with effect from first July 2010. Said provision created deeming fiction and cannot be applied retrospectively to earlier period - Issue stands covered by consistent decisions of Tribunal that construction of residential flats by builder for perspective buyers was not liable to service tax prior to first July 2010 in absence of statutory deeming provision. Mere fact that contracts involved composite elements does not substitute requirement of statutory deemed taxability for earlier period - Demand under Construction of Residential Complex Service for period prior to first July 2010 not sustainable - Service Tax - Construction under individual agreements for personal residential use, Scope of statutory exclusion for residential units intended for personal use - Appellant entered into separate individual agreements with perspective purchasers for completion and finishing of residential units. Department contended all construction was taxable service - Whether construction undertaken under separate individual agreements with purchasers for completion of residential units intended for personal use of purchaser falls within statutory exclusion from Construction of Residential Complex Service even where multiple units form part of same development - HELD - Definition of Residential Complex excluded complex constructed by person directly engaging another for designing, planning and construction where complex intended for personal use as residence by that person. Explanation clarified that personal use includes permitting complex for use as residence by another person on rent or without consideration. Residential Unit separately defined to mean single house or apartment intended for use as place of residence. Construction undertaken pursuant to individual contracts for completing residential units intended for personal use of respective purchasers falls within exclusion. Immaterial whether individual purchaser personally occupies unit or permits another person to use as residence on rent. Mere fact that several individual units form part of one development does not negate personal-use exclusion where separate construction agreements entered with individual purchasers for completion of respective residences - Demand on construction undertaken under separate individual agreements with purchasers for completion of residential units intended for personal use set aside. Service Tax not payable on consideration received under such individual agreements for construction or completion of residential units intended for personal use - Service Tax - Taxability of construction rendered for land owners under development agreements, Valuation of non-monetary consideration in form of development rights, Prevention of double taxation - Appellant under development agreements with land owners provided flats to land owners without monetary consideration. Department sought to levy service tax on value of flats allotted to land owners - Whether service tax can be levied on consideration received in form of flats allotted to land owners under development agreements when value of development rights or land already incorporated in assessable value on which appropriate tax discharged - HELD - Tribunal in Vasantha Green Projects examined comparative joint-development arrangement and held that where value attributable to development rights or acquisition of land embedded in value of flats sold to independent purchasers and appropriate service tax discharged on gross amount, separate demand on flats allotted to land owners would result in double taxation. Principle subject to verification that value of land or development rights was in fact incorporated in assessable value and appropriate tax discharged on such value. Blanket conclusion that land owner's share invariably non-taxable without examining manner of valuation not correct - In present case impugned order does not establish that any part of consideration escaped taxation despite corresponding value having already been included in assessable value of developer's share. In absence of such evidence second levy upon land owner's share cannot be sustained - Separate demand on flats allotted to land owners unsustainable where value of development rights or land embedded in value subjected to service tax. Where value of development rights or land already incorporated in assessable value of developer's share and appropriate tax discharged, further demand results in double taxation and not permissible - Service Tax - Applicability of extended period for limitation - HELD - Dispute involves classificati [Read less]

GST - Validity of show cause notice under Section 74(9), Requirement to disclose foundational facts establishing fraud or wilful misrepresentation - Petitioners challenged show cause notices alleging availment of input tax credit by issuing fake invoices without actual supply of goods - Whether show cause notices issued under Section 74(9) of GST Act for invoking extended period of limitation can be sustained when they mechanically employ words indicating fraud or wilful misrepresentation without disclosing foundational facts and specific evidence supporting such allegations - HELD - The extended limitation period provided... [Read more]

GST - Validity of show cause notice under Section 74(9), Requirement to disclose foundational facts establishing fraud or wilful misrepresentation - Petitioners challenged show cause notices alleging availment of input tax credit by issuing fake invoices without actual supply of goods - Whether show cause notices issued under Section 74(9) of GST Act for invoking extended period of limitation can be sustained when they mechanically employ words indicating fraud or wilful misrepresentation without disclosing foundational facts and specific evidence supporting such allegations - HELD - The extended limitation period provided under Section 74(9) for recovery of excess benefit availed, short payment or excess refund is made available only when foundational facts establishing fraud, wilful misrepresentation or suppression are evident from the notice itself - The words fraud, wilful misrepresentation and suppression are not to be mechanically recited in the notice merely as lip service to the statutory provisions. Mere employment of such terminologies without assignment of sufficient reasons and without disclosure of foundational facts underlying the allegations does not indicate any application of mind by the authority and does not constitute the satisfaction required under the statute for invoking the extended period - The requirement to disclose foundational facts is mandatory and cannot be circumvented through mechanical recitation of allegations without supporting evidence or reasoning – The SCNs issued under Section 74(9) of CGST Act, 2017 are quashed for failure to disclose foundational facts establishing fraud, wilful misrepresentation or suppression. Respondent authority is at liberty to issue fresh notices strictly in accordance with law and with proper disclosure of foundational facts if so advised – The writ petitions are allowed [Read less]

GST – West Bengal AAR - Classification of works contract services, Determination of applicable SAC and GST rate, Interpretation of exemption notifications for services to governmental authorities, Distinction between supply of services and activities ancillary to specified services - Applicant executed composite works contract services for setting up new main water pipeline for upcoming campus and revamping water pipeline distribution network at educational institute. Material component constituted approximately 75% of total contract value and service component constituted approximately 25% - Whether the works undertaken... [Read more]

GST – West Bengal AAR - Classification of works contract services, Determination of applicable SAC and GST rate, Interpretation of exemption notifications for services to governmental authorities, Distinction between supply of services and activities ancillary to specified services - Applicant executed composite works contract services for setting up new main water pipeline for upcoming campus and revamping water pipeline distribution network at educational institute. Material component constituted approximately 75% of total contract value and service component constituted approximately 25% - Whether the works undertaken by Applicant for setting up water pipeline and revamping water pipeline distribution network should be classified under composite works contract services - HELD - The works done by applicant constitute works contract as defined in Section 2(119) of CGST Act, 2017 as they involve construction, fabrication, completion, erection and maintenance of immovable property wherein transfer of property in goods is involved in execution of contract. For the supply of works contract services involving construction of water mains and lines, the appropriate SAC is 995422. For revamping of water pipeline which is essentially repair and maintenance service, the appropriate SAC is 995429 - The recipient, being an institute set up by an Act of Parliament, is a Governmental Authority within the meaning of Notification No. 12/2017. However, exemption from GST under specified exemption entries cannot be claimed because neither the supply of pure services excluding works contract services is involved nor can the supply be classified as direct supply by way of water supply within the narrow construction of phrase by way of specified in the notification - The revamping of water pipeline distribution network and setting up of new water pipeline are ancillary to water supply infrastructure but do not constitute direct supply by way of water supply. The supply being taxable service under serial number 3(ii) of Notification 11/2017-CT(Rate), it attracts 18% GST – Ordered accordingly [Read less]

GST - West Bengal AAR - Classification of electrically operated vehicles, Requirement of battery fitting as mandatory precondition for classification as electric vehicle - Classification and applicable GST rate on battery-operated two-wheeled and three-wheeled vehicles, whether supplied with or without battery pack - Whether battery-operated two-wheeled and three-wheeled vehicles sold with or without battery attachment are classifiable under tariff headings 8703 and 8711 and are taxable at five percent GST rate - HELD - Electrically operated vehicles are those which derive their traction energy solely from electrical energ... [Read more]

GST - West Bengal AAR - Classification of electrically operated vehicles, Requirement of battery fitting as mandatory precondition for classification as electric vehicle - Classification and applicable GST rate on battery-operated two-wheeled and three-wheeled vehicles, whether supplied with or without battery pack - Whether battery-operated two-wheeled and three-wheeled vehicles sold with or without battery attachment are classifiable under tariff headings 8703 and 8711 and are taxable at five percent GST rate - HELD - Electrically operated vehicles are those which derive their traction energy solely from electrical energy derived from an external source or one or more electrical batteries fitted to such road vehicles and run entirely on battery-powered electric drivetrain. If an electrically operated vehicle has motor, inverter, control module and drivetrain fitted on a chassis along with the body and is capable of transporting people and goods, it retains its original character as goods referred to in customs tariff heading 8703 in case it is a three-wheeled vehicle and 8711 in case it is a two-wheeled vehicle. It is immaterial whether battery is fitted or not with the vehicle at the time of supply - The explanation to the entry for electrically operated vehicles makes it evident that a vehicle runs solely on electrical energy derived from an external source or from electrical batteries and therefore the fitting of batteries cannot be considered as a concomitant factor for defining a vehicle as an electrically operated vehicle - The HSN Explanatory Notes have not considered batteries to be a component whose absence changes the essential character of an incomplete, unfinished or unassembled vehicle. Where an electrically operated vehicle has all essential components in place including motor, drivetrain and control module, the absence of battery pack does not convert the vehicle into a mere chassis or strip it of its essential character as an electrically operated vehicle – Further, the Circular No. 179/11/2022-GST dated 03.08.2022 specifically clarifies that electrically operated vehicles are to be classified under HSN 8703 even if the battery is not fitted to such vehicle at the time of supply - All battery-operated two-wheeled and three-wheeled vehicles, whether supplied with or without battery attachment, are classifiable under tariff headings 8703 and 8711 as electrically operated vehicles and are taxable at 5% GST – Ordered accordingly [Read less]

GST – West Bengal AAR - Valuation of imported services from related foreign entity under reverse charge mechanism, Applicability of deeming provision where full input tax credit available, Distinction between commercial invoice value and self-invoice value – Applicant received IT support services comprising software and IT infrastructure maintenance from related foreign entity on cost-to-cost basis. Applicant discharges tax under RCM by issuing self-invoice under Section 31(3)(f) of CGST Act, 2017 claiming full input tax credit - Whether value mentioned in self-invoice raised by Applicant for discharging reverse charge... [Read more]

GST – West Bengal AAR - Valuation of imported services from related foreign entity under reverse charge mechanism, Applicability of deeming provision where full input tax credit available, Distinction between commercial invoice value and self-invoice value – Applicant received IT support services comprising software and IT infrastructure maintenance from related foreign entity on cost-to-cost basis. Applicant discharges tax under RCM by issuing self-invoice under Section 31(3)(f) of CGST Act, 2017 claiming full input tax credit - Whether value mentioned in self-invoice raised by Applicant for discharging reverse charge liability can be deemed as open market value for GST purposes where such value differs from commercial invoice value from related foreign supplier - HELD - Import of services from related foreign person where supplier located outside India and recipient located in India constitutes supply under Section 7(1)(b) of CGST Act and falls within scope of RCM under Notification No. 10/2017 - Valuation of supply between related persons is governed by Rule 28 of CGST Rules, 2017. Second proviso to Rule 28(1) provides that where recipient is eligible for full ITC, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Circular No. 210/4/2024-GST dated 26.06.2024 clarifies that this deeming provision applies equally to import of services from foreign related entities where full input tax credit is available to domestic recipient - The self-invoice issued by recipient under Section 31(3)(f) of CGST Act constitutes the relevant invoice for purposes of applying second proviso to Rule 28(1). The deeming provision operates on the basis of recipient's eligibility for full ITC and operates independently of whether value declared in self-invoice corresponds with commercial amount charged by foreign supplier. Once recipient is eligible for full input tax credit and has declared value in self-invoice, that value is required to be treated as deemed open market value for GST purposes - Value mentioned in self-invoice raised by applicant can be deemed as open market value for payment of GST under RCM, subject to condition that applicant is eligible to avail full amount of Input Tax Credit – Ordered accordingly [Read less]

GST – West Bengal AAR - Transfer of business from proprietorship to partnership as going concern, Scope of supply, Applicability of exemption for going concern transfers – Proprietor proposed transfer of entire proprietorship business as going concern to LLP firm in which proprietor is partner - Whether permanent transfer of proprietorship business to partnership firm by merger without consideration, involving transfer of all assets, liabilities and employees for continuation of business, constitutes supply under GST and, if so, whether it qualifies for exemption under Entry No. 2 of Notification No. 12/2017-Central Ta... [Read more]

GST – West Bengal AAR - Transfer of business from proprietorship to partnership as going concern, Scope of supply, Applicability of exemption for going concern transfers – Proprietor proposed transfer of entire proprietorship business as going concern to LLP firm in which proprietor is partner - Whether permanent transfer of proprietorship business to partnership firm by merger without consideration, involving transfer of all assets, liabilities and employees for continuation of business, constitutes supply under GST and, if so, whether it qualifies for exemption under Entry No. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - HELD - Transfer of business by way of merger, even if made without consideration and not in the usual course of business, constitutes supply within the scope of Section 7 of CGST Act by virtue of the inclusive definition of supply which goes beyond the normal course or furtherance of business. The transaction does not constitute supply of goods because business itself cannot be regarded as movable property and therefore does not meet definition of goods. By operation of Schedule II, where transfer of business as going concern to another person is effected, such transfer cannot be supply of goods. Since anything other than goods, money and securities constitutes services under the Act, the transfer of business must be treated as supply of services - Transfer of business is covered under Entry No. 2 of Notification No. 12/2017-CT (Rate) providing exemption for services by way of transfer of going concern, subject to the essential condition that the business qualifies as going concern by all standards - Going concern is not defined in the GST Act but must be understood in common parlance and financial standards. If the business fails to qualify as going concern, the transfer of stock, closing stock of assets and fixed assets would be treated as supply of goods under Schedule II Entry 4(c) and taxed at rates applicable to respective goods - Transfer of proprietorship business to partnership firm as going concern constitutes supply of services and is covered under Entry No. 2 of Notification No. 12/2017 providing for nil rate of tax, subject to condition that business qualifies as going concern. If business does not qualify as going concern, transfer of goods and assets would be taxable as supply of goods under respective applicable rates – Ordered accordingly [Read less]

GST - Requirement of notice under Section 61 as precondition to proceed under Section 74, Application of Section 279 of Companies Act to pending proceedings after winding-up order - Disposal of appeals in ex-parte manner without hearing the liquidator - Whether notice under Section 61(3) is a mandatory precondition before proceeding under Section 74 of the CGST Act, 2017 and whether Section 279 of Companies Act, 2013 restricts continuation of pending legal proceedings after winding-up order and whether counsel appointed by company can continue representation after liquidation - HELD - Section 61 regulating scrutiny of retu... [Read more]

GST - Requirement of notice under Section 61 as precondition to proceed under Section 74, Application of Section 279 of Companies Act to pending proceedings after winding-up order - Disposal of appeals in ex-parte manner without hearing the liquidator - Whether notice under Section 61(3) is a mandatory precondition before proceeding under Section 74 of the CGST Act, 2017 and whether Section 279 of Companies Act, 2013 restricts continuation of pending legal proceedings after winding-up order and whether counsel appointed by company can continue representation after liquidation - HELD - Section 61 regulating scrutiny of returns and Section 74 dealing with fraud or wilful misstatement are two separate and distinct statutory exigencies. The scrutiny proceedings under Section 61 and proceedings under Section 74 are independent of each other. Issuance of notice under Section 61(3) disclosing deficiency is not a condition precedent for initiation of action under Section 74. The statutory scheme contemplates that department can directly proceed under Section 74 without first issuing notice under Section 61 where proper tax has not been deposited Section 279 of Companies Act, 2013 employs the expression if pending at the date of winding up order meaning that the bar applies equally to pending proceedings as well as fresh proceedings - Once company stands liquidated and winding-up order passed, the only competent authority to appoint or engage lawyer or advocate for prosecution of proceedings is the liquidator. The counsel appointed by company or directors prior to liquidation does not retain the authority to represent the company after winding-up without appointment by liquidator. Appeals cannot be decided in ex-parte manner without hearing the liquidator who is the legal representative of the company post-liquidation, as this violates principles of natural justice – Impugned orders are set aside and matter is remitted back to the appellate authority to pass fresh orders – The petition is disposed of [Read less]

Central Excise - Statutory interest payable on refunds - Whether statutory interest under Section 11BB of CEA, 1944 accrues from the date of favourable appellate order or from the expiry of three months from the date of receipt of the original refund application under Section 11B of the Act - HELD - Section 11BB of CEA, 1944 Act comes into play only after an order for refund has been made under Section 11B of the Act. The provision provides that if duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application submitted under Section 11B, then the a... [Read more]

Central Excise - Statutory interest payable on refunds - Whether statutory interest under Section 11BB of CEA, 1944 accrues from the date of favourable appellate order or from the expiry of three months from the date of receipt of the original refund application under Section 11B of the Act - HELD - Section 11BB of CEA, 1944 Act comes into play only after an order for refund has been made under Section 11B of the Act. The provision provides that if duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application submitted under Section 11B, then the applicant shall be paid interest at the fixed rate on expiry of three months from the date of receipt of the application. The Explanation to Section 11BB introduces a deeming fiction regarding when an order is deemed made for purposes of this Section, but it has nothing to do with postponement of the date from which interest becomes payable. Interest under Section 11BB becomes payable on the expiry of three months from the date of receipt of the application under Section 11B of the Act and not from the date of the favourable order passed by the Appellate Tribunal or higher authority - A communication after the original application, even if styled as a reminder or continuation, cannot be construed as a fresh refund claim to reset the three-month period for interest accrual - Order denying statutory interest is quashed and set aside. Respondent directed to refund the amount alongwith statutory interest thereon till the date of actual refund – The writ petition is allowed [Read less]