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Service Tax - Refund of service tax paid on exempt service and applicability of bar of unjust enrichment under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - Appellant provided erection, commissioning and installation service to Government undertakings, paid service tax during pendency of proceedings as a matter of abundant caution and filed a refund claim within time claiming exemption under a Notification - Original authority rejected the claim on the ground that the Appellant had charged and collected service tax from the service recipients, and the Commissioner (Appeals) hel... [Read more]

Service Tax - Refund of service tax paid on exempt service and applicability of bar of unjust enrichment under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - Appellant provided erection, commissioning and installation service to Government undertakings, paid service tax during pendency of proceedings as a matter of abundant caution and filed a refund claim within time claiming exemption under a Notification - Original authority rejected the claim on the ground that the Appellant had charged and collected service tax from the service recipients, and the Commissioner (Appeals) held the Appellant eligible for the benefit of the Notification but upheld rejection on unjust enrichment as no documents were produced to contradict the finding of collection - Appellant contended that unjust enrichment was not alleged in the SCN, that the contract price was inclusive of all applicable taxes, and that no service tax was charged in the invoices - Respondent contended that every refund claim must undergo scrutiny under Section 11B - Whether the refund claim was rightly rejected on the ground of unjust enrichment - HELD - The plea that unjust enrichment was not part of the SCN is misplaced, since it is settled by the Hon'ble Supreme Court that all refund claims have to be processed to examine the element of unjust enrichment. Once the Appellant was held not liable to pay service tax under the exemption Notification, no presumption can be drawn that it collected service tax while receiving the gross amount, and the records produced show no evidence of such collection. However, these documents were not placed before the original authority and it cannot be identified that they relate to the same transactions for which refund is claimed, so the question needs further verification - The Appellant is directed to produce all necessary documents along with a Chartered Accountant certificate for the relevant period, the impugned order is set aside and the appeal is allowed by way of remand to the original authority to decide the issue of unjust enrichment only [Read less]

Service Tax - Taxability of supply of food within hospital premises as Outdoor Catering Service - Appellant supplied food to patients, their relatives, doctors and staff of a hospital from premises provided by the hospital, paid VAT on the sales treating them as sale of goods, and was not registered with the service tax authorities - SCN was issued for the period from March 2006 to September 2010 and the demand was confirmed with penalties - Appellant contended that payment of VAT indicates a sale of goods and that service tax is not leviable on such a transaction - Respondent contended that the activity was a catering arr... [Read more]

Service Tax - Taxability of supply of food within hospital premises as Outdoor Catering Service - Appellant supplied food to patients, their relatives, doctors and staff of a hospital from premises provided by the hospital, paid VAT on the sales treating them as sale of goods, and was not registered with the service tax authorities - SCN was issued for the period from March 2006 to September 2010 and the demand was confirmed with penalties - Appellant contended that payment of VAT indicates a sale of goods and that service tax is not leviable on such a transaction - Respondent contended that the activity was a catering arrangement and that payment of VAT does not bar levy of service tax on the service aspect - Whether the activity is classifiable as Outdoor Catering Service and whether payment of VAT bars the demand of service tax - HELD - Outdoor caterer under Section 65(76a) means a caterer providing services in connection with catering at a place other than his own, including a place provided by the person receiving such services, and caterer under Section 65(24) includes any person who supplies food directly or indirectly. The definition was expanded to cover all types of canteen contractors with effect from 16.06.2005 and it is admitted that the Appellant supplied food from the hospital premises, so the plea that the activity is only sale of food is not tenable. Payment of VAT shows only that the goods component suffered VAT, and as statutory abatements on the value of goods were already extended, the demand pertains only to the service portion. The exemption earlier available to outdoor caterers in medical establishments was rescinded with effect from 01.03.2006 - The activity is classifiable as Outdoor Catering Service and the Appellant is liable to pay service tax for the normal period - Invocation of extended period of limitation and imposition of penalty on an unregistered outdoor caterer - Demand for the entire period was confirmed by invoking the extended period along with penalties - Respondent contended that failure to register and file returns amounts to suppression with intent to evade tax - Whether the extended period is invocable and whether penalties are sustainable - HELD - The entire demand was made on the basis of the records maintained by the Appellant. Following the Hon'ble Supreme Court, mere failure to declare facts does not amount to wilful suppression, and the extended period cannot be invoked unless the omission is deliberate to escape payment of duty with intention to evade proved. Penalty is not imposable where non-payment is on account of reasonable cause under Section 80 of the Finance Act, 1994 - The extended period and penalties are unsustainable, the demand is confirmed only for the normal period with interest as applicable, and all penalties are set aside. [Read less]

GST - Denial of input tax credit on supplies from suppliers whose registrations were cancelled retrospectively – Validity of SCN and Order-in-Original that are cryptic and non-speaking - Violation of principles of natural justice – Appellant availed input tax credit on inward supplies from registered suppliers later categorised as non-genuine taxpayers whose registrations were cancelled ab initio - SCNs under Section 73 issued solely on supplier-side cancellations stated only ‘As per attachment under the brief facts and grounds’ - The Appellant did not reply and ex-parte orders confirming tax, interest and penalty ... [Read more]

GST - Denial of input tax credit on supplies from suppliers whose registrations were cancelled retrospectively – Validity of SCN and Order-in-Original that are cryptic and non-speaking - Violation of principles of natural justice – Appellant availed input tax credit on inward supplies from registered suppliers later categorised as non-genuine taxpayers whose registrations were cancelled ab initio - SCNs under Section 73 issued solely on supplier-side cancellations stated only ‘As per attachment under the brief facts and grounds’ - The Appellant did not reply and ex-parte orders confirming tax, interest and penalty were passed describing the issue in a single line - Whether denial of input tax credit under Section 16 through SCNs and orders that are cryptic, non-speaking and devoid of independent reasoning violates the principles of natural justice - HELD – Though the burden of proving eligibility to input tax credit lies on the claimant under Section 155, the revenue authorities are equally bound to afford a fair opportunity to discharge it, which begins with a valid, detailed and speaking SCN - The SCNs showed a glaring lack of substantive reasoning and did not elaborate any specific finding or the nature of the alleged contravention. The Adjudicating Authority confirmed substantial demands without recording any independent analysis or factual findings. Every quasi-judicial authority must pass a speaking order and recording of reasons is an essential facet of natural justice. The Department cannot rely solely on retrospective cancellation of the suppliers' registrations to confirm a demand without independently verifying the facts and giving the Appellant a fair and transparent opportunity of being heard - The orders of the adjudicating authority are vitiated for violation of natural justice and are set aside - The matter remanded for fresh adjudication without expressing any opinion on the merits of admissibility of credit - The appeals are allowed by way of remand to the adjudicating authority - Dismissal of appeal by First Appellate Authority on the ground of non-prosecution without deciding the merits - Section 107(11) and 107(12) of the CGST Act, 2017 - The FAA rejected the appeals on merits for want of transport documents such as lorry receipts and toll receipts and also on the ground of non-prosecution for non-attendance at the scheduled hearings - Whether the FAA can dismiss a statutory appeal for non-prosecution or default in appearance without independently adjudicating the documentary evidence on record - HELD - Section 107(11) requires the Appellate Authority, after making such further inquiry as may be necessary, to pass such order as it thinks just and proper confirming, modifying or annulling the order appealed against. Section 107(12) requires the order to be in writing stating the points for determination, the decision thereon and the reasons for such decision - The Appellate Authority has a statutory duty to examine the merits and the grounds raised even if the appellant is not present. Dismissal of an appeal for non-prosecution amounts to abdication of statutory powers and is legally unsustainable. As the adjudication orders had no legal or factual reasoning and the appellate orders failed to cure the defect, there was gross violation of the principles of natural justice - The orders of the FAA are set aside and the appeals are allowed by way of open remand to the adjudicating authority for fresh adjudication. [Read less]

GST - Partial rejection of refund of accumulated input tax credit without issuing notice in FORM GST RFD-08 and without opportunity of being heard – Violation of mandatory procedure under Rule 92(3) of the CGST Rules, 2017 – Appellant-EOU exporting its products without payment of tax, filed refund claims of accumulated ITC under Section 16(3)(a) of the IGST Act, 2017 - The adjudicating authority sanctioned the refund in part and rejected the remaining portion in FORM GST RFD-06 on the sole ground of Mismatch of ITC - The FAA recorded that Rule 92(3) was not followed but still confirmed the rejection - Whether the parti... [Read more]

GST - Partial rejection of refund of accumulated input tax credit without issuing notice in FORM GST RFD-08 and without opportunity of being heard – Violation of mandatory procedure under Rule 92(3) of the CGST Rules, 2017 – Appellant-EOU exporting its products without payment of tax, filed refund claims of accumulated ITC under Section 16(3)(a) of the IGST Act, 2017 - The adjudicating authority sanctioned the refund in part and rejected the remaining portion in FORM GST RFD-06 on the sole ground of Mismatch of ITC - The FAA recorded that Rule 92(3) was not followed but still confirmed the rejection - Whether the partial rejection of a refund claim under Section 54 without issuing the notice in FORM GST RFD-08 and without an opportunity of being heard violates the principles of natural justice and Rule 92(3) - HELD - The language of Rule 92(3) is unambiguous and mandatory. The use of the word ‘shall’, combined with the absolute embargo in the proviso that no application for refund shall be rejected without giving the applicant an opportunity of being heard, leaves the adjudicating authority with no jurisdiction or discretion to reject a refund claim wholly or partially without first issuing FORM GST RFD-08 and affording a hearing - It is an admitted and undisputed fact that the order in FORM GST RFD-06 was issued directly. The Appellant is thereby deprived of the right to know the precise grounds of the alleged mismatch and to furnish a document-backed reply in FORM GST RFD-09. An order passed in defiance of a mandatory statutory procedure is void ab initio, in line with the principle that quasi-judicial authorities must follow prescribed procedure and pass reasoned orders - The rejection of refund without compliance with Rule 92(3) is bad in law and the orders of the adjudicating authority and the FAA are set aside - The matters are remanded to the Adjudicating Authority keeping all the issues open for fresh, de novo processing of the refund applications – The appeals are allowed by remand - Whether a hearing at the appellate stage cures the non-issuance of notice in FORM GST RFD-08 at the adjudication stage - Whether a foundational procedural defect of bypassing the original adjudication procedure can be cured by affording a hearing at the appellate stage - HELD - The right to a notice and a hearing before an adverse civil consequence is a fundamental statutory right rooted in the principle of audi alteram partem. A post-decisional hearing at the appellate stage cannot serve as a substitute for a pre-decisional statutory notice. The FAA, having noted the violation of Rule 92(3), ought to have remanded the matter instead of demanding documents and deciding the case on merits. [Read less]

Central Excise - Admissibility of CENVAT credit of service tax paid by job workers on exempted job work under Notification No. 25/2012-ST - Rule 2(l)(ii) of CENVAT Credit Rules, 2004 read with Section 5A(1A) of Central Excise Act, 1944 – Appellant took CENVAT credit of service tax charged by job workers on job work charges. The Department held that the job work was exempt from the whole of the service tax under Notification No. 25/2012-ST, and so could not be an input service under Rule 2(l)(ii) - Whether the Appellant can be denied CENVAT credit of the service tax paid by its job workers on the ground that the job work ... [Read more]

Central Excise - Admissibility of CENVAT credit of service tax paid by job workers on exempted job work under Notification No. 25/2012-ST - Rule 2(l)(ii) of CENVAT Credit Rules, 2004 read with Section 5A(1A) of Central Excise Act, 1944 – Appellant took CENVAT credit of service tax charged by job workers on job work charges. The Department held that the job work was exempt from the whole of the service tax under Notification No. 25/2012-ST, and so could not be an input service under Rule 2(l)(ii) - Whether the Appellant can be denied CENVAT credit of the service tax paid by its job workers on the ground that the job work was exempt and the tax ought never to have been paid - HELD - The case of the Revenue holds only if the law compels the provider of an exempt service to avail the exemption. Section 5A(1A) of the Act, which forbids a manufacturer to pay duty where an exemption has been granted absolutely, does not travel into the Finance Act, 1994. Section 83 of the Finance Act, 1994 takes in only sub-section (2A) of Section 5A. The omission of sub-section (1A) must be taken to be deliberate and cannot be supplied by construction. A provider of a taxable service is therefore under no obligation to avail an exemption, and tax paid by it is not tax paid without the authority of law - Nothing in Rule 2(l)(ii) makes the character of a service as an input service depend on whether the service is taxable in the hands of its provider. The SCN did not doubt that the job work was used in or in relation to the manufacture of the final products, and the objection therefore reads into the definition a condition which it does not contain - Further, the tax paid by the job workers was accepted by the Department without demur, and nothing on record showed that their assessments were reopened or that the tax was refunded. The Revenue cannot retain the tax as validly paid at the end of the provider and treat it as tax which ought not to have been paid when the recipient claims credit - The credit having been rightly availed, the demand fails. Interest, being accessory to the demand, cannot survive. The penalty under Rule 15(1) presupposes that credit has been wrongly taken or utilised and becomes untenable - The impugned order is set aside and the appeal is allowed [Read less]

Service Tax - Exemption to works contract services for construction provided to Railways - Entry 14(a) of Notification No. 25/2012-ST - Adjudication beyond the scope of remand - Appellant provided works contract services for construction of a training school and a hostel to Railways - Whether the services provided to Railways are liable to service tax and whether the Adjudicating Authority could re-open the issue in de novo proceedings - HELD - The services are exempt under Entry 14(a), which covers construction of original works pertaining to railways. The Railways Act, 1989 defines railway to include stations, offices, h... [Read more]

Service Tax - Exemption to works contract services for construction provided to Railways - Entry 14(a) of Notification No. 25/2012-ST - Adjudication beyond the scope of remand - Appellant provided works contract services for construction of a training school and a hostel to Railways - Whether the services provided to Railways are liable to service tax and whether the Adjudicating Authority could re-open the issue in de novo proceedings - HELD - The services are exempt under Entry 14(a), which covers construction of original works pertaining to railways. The Railways Act, 1989 defines railway to include stations, offices, hostels and other works constructed for the purpose of or in connection with a railway. The training school and the hostel fall within that definition. By confirming the demand, the Adjudicating Authority acted beyond the scope of the remand directions. An authority acting on remand is bound by the directions of the Appellate Authority and cannot revisit settled issues. The finding of exemption, not having been challenged by the Department, had attained finality, and the Department is barred by estoppel from re-agitating it - The demand is set aside and the appeal is allowed - Exemption to works contract services for construction of government buildings provided to State Government corporations - Entries 12/12A and 29(h) of Notification No. 25/2012-ST - Section 102 of Finance Act, 1994 - Contracts entered prior to 01.03.2015 - Appellant provided works contract services to State Government undertakings for construction of Government clinical and educational establishments, offices and residential buildings for Government staff. The lower authorities denied the exemption on the ground that mere Government ownership does not make the entity a Governmental Authority and that the entities did not carry out functions entrusted to a municipality - Whether exemption under Entry 12A can be extended to these works contract services for contracts awarded prior to 01.03.2015 - HELD - The State Government undertakings having over 90% equity are a Governmental Authority as defined in the Notification. The services were for construction of non-commercial Government buildings, which are covered by Entry 12/12A read with the retrospective validation under Section 102. The Appellant is also eligible for exemption as a sub-contractor under Entry 29(h), as the main contractors provided exempt services to the Government. Taxability has to be decided according to the service rendered to the client, whether rendered directly by the main contractor or through a sub-contractor. The Hon'ble Supreme Court has held that the exemption cannot be restricted to authorities carrying out functions entrusted to a municipality, as plain and unambiguous provisions must be interpreted as they stand - The demand on these services is set aside and the appeal is allowed - Cum-tax benefit under Section 67(2) of Finance Act, 1994 - Works contract services under contracts awarded after 01.03.2015 - The first Adjudicating Authority allowed cum-tax benefit on the strength of a certificate from the service recipient and the work orders and payment certificates, which showed that no service tax was paid. The Department did not challenge this. In the de novo proceedings, the benefit was denied on the ground that the Appellant failed to conclusively establish that the amounts received were inclusive of service tax - Whether the Appellant is entitled to cum-tax benefit - HELD - The Appellant had not collected any service tax separately from its clients, and the Department failed to produce any document showing that service tax was charged or received. The gross amount received must therefore be treated as inclusive of service tax in terms of Section 67(2). The benefit, having been correctly allowed in the first Order-in-Original and not challenged by the Department, had attained finality and could not be denied in the de novo proceedings - The Appellant is entitled to cum-tax benefit and the appeal is allowed on this issue - Demand on differential between receipts as per Income Tax Return and Form 26AS - Determination of value of services - The Adjudicating Authority in de novo proceedings treated the gross receipts declared in the ITR as higher than the receipts in Form 26AS and confirmed demand at the full rate on the differential. The FAA had earlier recorded the gross receipts in the ITR as a lower figure - Whether service tax is leviable on the alleged differential between the ITR and Form 26AS - HELD - The ITR for the relevant year shows a total gross receipt lower than the figure adopted by the Adjudicating Authority, as already noted by the FAA. The alleged differential does not exist, as the ITR figure was wrongly quoted by the Department. The demand on the differential is improper and illegal - The demand is set aside and the appeal is allowed on this issue - Threshold exemption under Notification No. 33/2012-ST for the financial year 2016-17 - The FAA denied the threshold exemption on the ground that it is not available once the taxable turnover exceeds the prescribed limit. The Appellant contended that its services in the preceding year were entirely exempt - Whether the Appellant is entitled to threshold exemption in the financial year 2016-17 - HELD - Eligibility for the exemption is determined based on the taxable turnover of the preceding financial year. In the preceding year, the Appellant's services were entirely exempt and the aggregate value of taxable services was nil. The Appellant is therefore entitled to the threshold exemption. The authorities below failed to grant this statutory exemption without any valid reason - The appeal is allowed on this issue - Invocation of extended period of limitation and imposition of penalties under Sections 77, 78 and 70 of Finance Act, 1994 - Bona fide belief on exemption - The exemption under Entry 12(a) for works contract services of construction of Government buildings was omitted by Notification No. 6/2015-ST and reinserted by Notification No. 9/2016-ST as Entry 12A with retrospective effect, subject to a condition regarding contracts entered into prior to 01.03.2015. The Appellant did not take registration or file ST-3 returns, believing its services to be exempt, but declared all its receipts in its financial statements and ITRs. The SCN invoked the extended period and proposed penalties, and a late fee under Section 70 was also imposed - Whether the extended period and penalties can be sustained - HELD - The SCN was issued without any tangible evidence of fraud, collusion, willful misstatement or suppression of facts with intent to evade tax. It merely reproduces statutory language, and the burden of proving willful intent lies on the Department. Suppression of facts must be construed strictly and requires a deliberate and willful act to evade tax, not mere omission or non-payment. The withdrawal and reinstatement of the exemption created an impression that the exemption was still available, and the case is one of bona fide belief arising from an interpretational dispute. The extended period and penalty under Section 78 cannot be invoked in such a case. Penalties under Section 77 are also not imposable. The late fee under Section 70 read with Rule 7C of the Service Tax Rules, 1994 is illegal, as Rule 7C prescribes a penalty for delay in filing returns and not for non-filing of returns - The extended period is not invocable, the penalties and late fee are set aside, and the appeal is allowed - Validity of SCN issued without pre-SCN consultation - Board Instruction and Master Circular - SCN proposed a demand above the monetary threshold prescribed in the Board's instructions and circulars, for which pre-SCN consultation is mandatory. The record did not show that any consultation was held. The FAA held that pre-SCN consultation was not necessary, as the Board had excluded fraud and collusion cases from the process - W [Read less]

GST - Excess Input Tax Credit alleged on comparison of GSTR-3B with GSTR-2A without determining net Input Tax Credit position – ex parte order confirmed the demand, which was upheld ex parte by the FAA owing to non-appearance - Appellant contended that the Input Tax Credit reversals already made in GSTR-3B were ignored and that the Department's own figures showed lower availment under CGST and SGST heads - Whether the demand of excess Input Tax Credit can be raised merely by matching GSTR-3B with GSTR-2A, without considering reversals made in the returns - HELD - The law does not permit the Revenue to look at return figu... [Read more]

GST - Excess Input Tax Credit alleged on comparison of GSTR-3B with GSTR-2A without determining net Input Tax Credit position – ex parte order confirmed the demand, which was upheld ex parte by the FAA owing to non-appearance - Appellant contended that the Input Tax Credit reversals already made in GSTR-3B were ignored and that the Department's own figures showed lower availment under CGST and SGST heads - Whether the demand of excess Input Tax Credit can be raised merely by matching GSTR-3B with GSTR-2A, without considering reversals made in the returns - HELD - The law does not permit the Revenue to look at return figures in isolation. Once an amount has been accounted for or adjusted through reversal of Input Tax Credit within the statutory returns, a duplicate demand cannot be raised without giving credit for such reversal. The adjudicating authority must determine the net credit position and evaluate whether any actual revenue loss has occurred - The Table in GSTR-3B showed substantial Input Tax Credit reversed; the lower authorities failed to examine whether the alleged excess claim was already neutralised by such reversals. The demand suffers from patent factual and legal error and total lack of verification - The orders of both the lower authorities are set aside and the matter is remanded to the Proper Officer for fresh adjudication after verification – The appeal is allowed by remand - Demand based on difference between tax figures in Table 9 of GSTR-9 and Table 9P of GSTR-9C - Appellant contended that the difference was not unpaid tax since one field reflected tax paid through returns including the effect of Input Tax Credit reversal while the other reflected tax payable on outward supplies, and that this explanation was disclosed in Table 10 of GSTR-9C - Revenue treated the variance as an unreconciled shortfall in output tax as the Appellant gave no explanation before the lower authorities - Whether a tax demand can be confirmed merely on a mismatch between the two statutory returns - HELD - The Proper Officer failed to scrutinise the flow of entries and treated a balancing reconciliation figure as short-paid tax. Determination of tax liability requires independent verification of sales ledgers, tax invoices and financial books rather than a simplistic comparison of two fields on the portal, and confirming a demand purely on system-generated discrepancies without one-to-one financial reconciliation violates the spirit of law and fairness. Thorough re-verification by the Proper Officer is essential - The impugned orders are set aside and the matter is remanded for de novo adjudication - Alleged short reversal of Input Tax Credit under Rules 42 and 43 of the CGST Rules, 2017 - Revenue alleged short reversal of Input Tax Credit attributable to exempt supplies, while the Appellant demonstrated by documentary records that the reversal shown in GSTR-9 and in Table 4(B) of GSTR-3B was substantially higher than the amount alleged to be short-reversed - Whether the demand under Rules 42 and 43 raised by treating the entire Input Tax Credit as common credit is sustainable - HELD - The Department raised the demand by treating the entire Input Tax Credit as common credit, discarding the mandatory requirement of identifying and segregating the actual common credit from specific credit. A valid determination under Rules 42 and 43 cannot be made without first segregating specific credit from common credit and then mapping the ratio of exempt to taxable turnover against the common input tax pool, and this statutory exercise was entirely omitted. The reversals already made were also not reconciled - The demand was raised without proper verification and suffers from non-application of mind, the impugned orders are set aside and the appeal is allowed by way of remand for fresh verification. [Read less]

GST - Compensation Cess - Condition of being popularly known as SUV under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) – Respondent-assessee supplied motor vehicles of Heading 8703 having engine capacity exceeding 1500 cc, and discharged Compensation Cess at 20% - The Department alleged liability at 22% under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017 for the period from 11.09.2017 to 14.03.2024 - The Order-in-Original confirming the differential cess was set aside by the FAA - Whether the disputed models are motor vehicles popularly known as SUVs for the purposes of... [Read more]

GST - Compensation Cess - Condition of being popularly known as SUV under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) – Respondent-assessee supplied motor vehicles of Heading 8703 having engine capacity exceeding 1500 cc, and discharged Compensation Cess at 20% - The Department alleged liability at 22% under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017 for the period from 11.09.2017 to 14.03.2024 - The Order-in-Original confirming the differential cess was set aside by the FAA - Whether the disputed models are motor vehicles popularly known as SUVs for the purposes of Entry 52B - HELD - The taxpayer supplied vehicles falling under Heading 8703. The relevant entry prescribing the higher rate of Compensation Cess applies where the vehicle satisfies the specified conditions relating to engine capacity exceeding 1500cc, length exceeding 4000 mm, ground clearance of at least the prescribed threshold, and being popularly known as an SUV - The taxpayer has contended that all these conditions must be satisfied cumulatively and that its vehicles do not fulfil the prescribed ground-clearance requirement. However, the taxpayer's contention that the vehicles are not covered by the higher rate cannot be accepted merely on the basis of its own classification or the rate of Cess charged by the manufacturer - The expression used in the pre-amendment Entry 52B is popularly known as Sports Utility Vehicles, and hence commercial identity and the manner in which the manufacturer presents the product to consumers are directly relevant. The models were represented and marketed by the manufacturer itself as SUVs, and brochures, press releases, advertisements and specifications constitute relevant evidence for determining how a product is understood in commercial and common parlance. The Respondent cannot contend that the models are outside Entry 52B merely because some technical document employs a different description - On the material placed on record, the Creta, Alcazar and Tucson satisfy the condition of being popularly known as SUVs, which however is not by itself sufficient as the prescribed ground clearance requirement must independently be satisfied - Levy of Compensation Cess - Measurement of ground clearance in laden or unladen condition for the period prior to Notification No. 03/2023-Compensation Cess (Rate) - Evidentiary value of ARAI certificates - The FAA held that for the period prior to 26.07.2023 ground clearance was to be examined in laden condition, whereas the Department relied on the manufacturer's specifications showing ground clearance above 170 mm and contended that ARAI certification is meant only for safety compliance - Whether ground clearance for the pre-amendment period is to be determined in laden or unladen condition and whether the demand is sustainable - HELD - The earlier Entry 52B did not expressly employ the words laden or unladen, and the Explanation defining ground clearance as ground clearance in unladen condition was inserted by the amendment effective 26.07.2023. The CBIC Circular only clarifies that the amendment applies on or after 26.07.2023 and does not validate a laden standard for the earlier period - Taxing statutes are strictly construed, no words can be added by implication, and any claim of a lower rate within a classification entry must be construed strictly against the assessee, so that in the absence of explicit words directing laden measurement, the unladen condition, being the default state in which a vehicle is delivered from the factory, is the only sustainable baseline - ARAI certificates are issued for safety compliance under the Central Motor Vehicles Rules and cannot be treated as conclusive for tariff classification, though they remain relevant technical evidence of physical measurement. The manufacturer's own specifications showing ground clearance above the threshold cannot be discarded as irrelevant - The Respondent's explanation that it followed the rate in the manufacturer's invoices does not absolve it of its independent statutory responsibility to determine the correct tax liability - The vehicles are liable to Compensation Cess at the higher rate and the differential cess is recoverable - Compensation Cess - Invocation of Section 74 for short payment of cess - Respondent contended that the dispute was one of interpretation of the notification, that supplies were disclosed in statutory records and that fraud, wilful misstatement or suppression was not established, while the Department alleged that a lower rate was charged to reduce tax liability and the discrepancy came to light only after investigation - Whether the differential cess is recoverable along with interest and penalty under Section 74 read with Section 11 of the Compensation to States Act - HELD - The allegations of lower rate being charged to reduce tax liability must be supported by evidence establishing the requisite intent. It was found that the Department has established that the differential Compensation Cess was short paid by reason of suppression of facts with intent to evade tax - The Order-in-Appeal passed by the FAA is quashed and set aside - The Order-in-Original confirming the differential Compensation Cess demand is fully restored – The appeal filed by the Revenue is allowed [Read less]

Service Tax - Validity of SCN issued on reconciliation of figures in ST-3 returns and permissibility of grounds raised by Revenue in appeal - SCN was issued on the basis of short payment noticed on scrutiny of the returns, including an amount deposited as arrears without clarification of the payment or period to which it related - Respondent was asked by letter and reminder to furnish information but did not reply - Adjudicating authority confirmed the demand only in part and dropped the rest, and Revenue appealed - Respondent contended that SCN contained no allegation regarding the nature, place, manner or taxability of a... [Read more]

Service Tax - Validity of SCN issued on reconciliation of figures in ST-3 returns and permissibility of grounds raised by Revenue in appeal - SCN was issued on the basis of short payment noticed on scrutiny of the returns, including an amount deposited as arrears without clarification of the payment or period to which it related - Respondent was asked by letter and reminder to furnish information but did not reply - Adjudicating authority confirmed the demand only in part and dropped the rest, and Revenue appealed - Respondent contended that SCN contained no allegation regarding the nature, place, manner or taxability of any transaction and that Revenue was building a new case in appeal - Whether the SCN is valid and whether the grounds urged by Revenue travel beyond the SCN - HELD - The impugned order itself records that the Respondent did not reply to the information sought by the jurisdictional office. In view of such lack of cooperation, with documents on the nature of services not furnished, the contention that the SCN does not contain specific allegations or that the grounds taken by Revenue were not taken in the SCN cannot be accepted - The SCN is held to be valid - Taxability of services rendered in alleged non-designated areas beyond twelve nautical miles and services rendered to an oil company at a centre in India - Demand on services provided to contractors of an oil company at installations under agreements for cementing and well stimulation, and on services under a contract for operating an optimisation centre located in India, was dropped on the ground that the wells were in non-designated areas beyond twelve nautical miles - Revenue contended that the earlier Circular stood superseded by a Notification under which areas of the continental shelf and exclusive economic zone where installations are situated are designated areas, that services at the centre in India were taxable irrespective of the location of wells, and that the Respondent had itself charged and collected service tax in the invoice - Whether the services are outside the levy on the ground that they were rendered beyond the designated areas - HELD - Other than the bare assertion that services were provided beyond the designated area, no evidence was placed to establish the claim, and the adjudicating authority accepted the submissions without documents. There is no discussion on the service agreements with the contractors and the impugned order failed to notice the invoice wherein service tax was charged and collected, which is contrary to the claim of non-liability - The Respondent is to be given an opportunity to submit relevant documents before the adjudicating authority to substantiate that the services were provided beyond the designated area - Liability on training services provided partly in India and partly overseas and claim of payment by the service recipient under reverse charge - Training programme for managers of a recipient company ran for seven weeks, of which six weeks were classroom training in the taxable territory of India and the seventh week was an overseas visit, with consideration received for the whole programme - Adjudicating authority held the recipient liable under reverse charge on the strength of its email, and Revenue contended that the nature of services in the first six weeks and the remuneration for them were not examined and the emails were not cross-checked with challans - Whether the demand on training services can be dropped on the ground that the recipient paid the tax - HELD - The liability for the initial six weeks conducted in the taxable territory has to be examined, and the impugned order failed to discuss the nature of services rendered in that period and the remuneration received. No evidence was led to show payment under reverse charge and the veracity of the emails was not verified against the payment challans - All the issues need to be relooked into by the adjudicating authority, who shall give the Respondent an opportunity to submit documents and be heard in person, the impugned order is set aside and the appeal is allowed by way of remand. [Read less]

Customs - Applicability of Notification amending import policy of studded platinum jewellery from Free to Restricted under Foreign Trade Policy to goods which arrived in India before publication of the Notification but for which Bills of Entry were filed after publication - Petitioner imported goods under Airway Bills dated 30th and 31st March 2026, which arrived in India prior to publication of the Notification in the Official Gazette on 2nd April 2026, while the Bills of Entry were filed after the Notification - Respondent refused release on the ground that the goods were restricted and pending clearance for home consump... [Read more]

Customs - Applicability of Notification amending import policy of studded platinum jewellery from Free to Restricted under Foreign Trade Policy to goods which arrived in India before publication of the Notification but for which Bills of Entry were filed after publication - Petitioner imported goods under Airway Bills dated 30th and 31st March 2026, which arrived in India prior to publication of the Notification in the Official Gazette on 2nd April 2026, while the Bills of Entry were filed after the Notification - Respondent refused release on the ground that the goods were restricted and pending clearance for home consumption - Whether the date of import for applicability of restriction is to be reckoned as per the Foreign Trade Policy or the Customs Act, 1962 and the Notification applies to goods which arrived before its publication - HELD - Paragraph 1.05(b) of the Foreign Trade Policy defines the date of import for the purpose of policy, and provides that import already made before the date of such restriction will not be affected. Paragraph 2.17(a) read with paragraph 11.11 of the Handbook of Procedures reckons the date of import with reference to the date of shipment or dispatch from the supplying country, which in case of import by air is the date of the relevant Airway Bill, and not the date of arrival or of clearance for home consumption - Once the date of import is defined under the Foreign Trade Policy, the date of import under the Customs Act cannot be applied, otherwise the date defined in the policy would be redundant and meaningless - The Hon'ble Apex Court decisions relied upon by the Respondent dealt with the rate of duty under Section 15 of the Customs Act and are distinguishable. The date of filing of B/E or the clearance post the restriction is wholly irrelevant to applicability of a change in the Foreign Trade Policy - The Notification, which is admittedly not retrospective, can be applied only to goods dispatched after its publication - The Notification is declared not applicable to goods arrived in India before its publication, the Respondent is directed to release the goods expeditiously and to permit submission of the Bill of Entry without insisting on Import Authorisation - The writ petition is allowed - Validity of Office Memorandum issued by the DGFT after filing of the writ petition clarifying that any import consignment not cleared before the date of Notification is governed by the Restricted policy irrespective of date of arrival of goods or filing of Bills of Entry, and effect of Import Authorisation issued thereunder - Respondent relied on the Office Memorandum dated 13th May 2026 to contend that the restriction applies irrespective of arrival of goods, and Import Authorisations were issued to the Petitioner on an interim basis pursuant to directions of the Hon'ble Apex Court - Whether the Office Memorandum can override the Foreign Trade Policy and the definition of date of import therein, and whether the Import Authorisation redresses the grievance of the Petitioner - HELD - The Office Memorandum is contrary to the Foreign Trade Policy and in the teeth of the decisions of the Gujarat and Delhi High Courts. It has no statutory force, is not even subordinate legislation, and no authority of law was pointed out for its issue. Relying on the Hon'ble Apex Court, a clarification contrary to statutory provisions or to law declared by the Courts is not binding and has no existence in law - The Foreign Trade Policy can be amended only by the Central Government in exercise of powers under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, and the purported clarification would literally amount to amending the policy and giving retrospective effect to the Notification, which is beyond the jurisdiction of the issuing authority - The Import Authorisation cannot be treated as redressal of the grievance of the Petitioner, since the conditions imposed therein were beyond the jurisdiction and authority of the Director General of Foreign Trade - The Office Memorandum is held to be of no effect on the goods. The writ petitions are allowed. [Read less]

GST - Penalty under Section 125 of the CGST Act, 2017 imposed for delayed furnishing of return in FORM GSTR-3B - Penalty exceeding the maximum limit provided under Section 125 - Whether the show cause notice and the penalty order imposing the maximum general penalty under Section 125 can be sustained where the return was filed and late fee paid - HELD - The Petitioner had already filed the return and paid the late fees in accordance with law. The impugned penalty order was for a sum which exceeded the maximum limit provided under the Act - The impugned show cause notice and the penalty order are quashed and set aside and t... [Read more]

GST - Penalty under Section 125 of the CGST Act, 2017 imposed for delayed furnishing of return in FORM GSTR-3B - Penalty exceeding the maximum limit provided under Section 125 - Whether the show cause notice and the penalty order imposing the maximum general penalty under Section 125 can be sustained where the return was filed and late fee paid - HELD - The Petitioner had already filed the return and paid the late fees in accordance with law. The impugned penalty order was for a sum which exceeded the maximum limit provided under the Act - The impugned show cause notice and the penalty order are quashed and set aside and the writ petition is disposed of [Read less]

GST – Validity of Remand order by the First Appellate Authority directing the adjudicating authority to verify reconciliation statements and delete the demand - Violation of Section 107(11) of the CGST Act - The adjudicating authority confirmed the demand of ITC along with interest and imposed penalty - The FAA partially allowed assessee's appeal and directed it to submit reconciliation statements and workings for the relevant financial years before the adjudicating authority – Appellant-Revenue contended that the order contravenes Section 107(11) of the CGST Act and Rule 113 of the CGST Rules, 2017 - Whether the FAA c... [Read more]

GST – Validity of Remand order by the First Appellate Authority directing the adjudicating authority to verify reconciliation statements and delete the demand - Violation of Section 107(11) of the CGST Act - The adjudicating authority confirmed the demand of ITC along with interest and imposed penalty - The FAA partially allowed assessee's appeal and directed it to submit reconciliation statements and workings for the relevant financial years before the adjudicating authority – Appellant-Revenue contended that the order contravenes Section 107(11) of the CGST Act and Rule 113 of the CGST Rules, 2017 - Whether the FAA can remand the matter back to adjudicating authority for verification of the reconciliation statements - HELD - Section 107(11) empowers the FAA, after making such further inquiry as may be necessary, to pass such order as it thinks just and proper confirming, modifying or annulling the decision or order appealed against. It expressly prohibits referring the case back to the adjudicating authority that passed the decision or order. The statute gives the FAA enough powers to make further inquiry, which was not done, instead the FAA embarked on a course of action expressly forbidden - There was no dispute on the merits of the need for verification of the reconciliation statements. The dispute was only that the verification should have been done by the FAA himself - The order in appeal is set aside and the matter is remanded to the Appellate Authority for fresh consideration - The appeal is allowed [Read less]

GST - Cancellation of registration with retrospective effect - Order travelling beyond the scope of SCN - SCN proposing cancellation of registration under Rule 21(a) on the ground that no business was conducted from the declared place of business – Cancellation of registration retrospectively from the date of registration - Earlier, an SCN on the same ground had led to cancellation which was revoked - Whether the order cancelling registration retrospectively, when the SCN did not propose retrospective cancellation, can be sustained - HELD - The SCN nowhere referred to the inclination of the authorities to cancel the regi... [Read more]

GST - Cancellation of registration with retrospective effect - Order travelling beyond the scope of SCN - SCN proposing cancellation of registration under Rule 21(a) on the ground that no business was conducted from the declared place of business – Cancellation of registration retrospectively from the date of registration - Earlier, an SCN on the same ground had led to cancellation which was revoked - Whether the order cancelling registration retrospectively, when the SCN did not propose retrospective cancellation, can be sustained - HELD - The SCN nowhere referred to the inclination of the authorities to cancel the registration with retrospective effect, hence the impugned order travelled beyond the scope and contents of the SCN. For the very same period, the earlier cancellation was restored upon being satisfied with the reasons in the revocation application - In the proceedings for penalty under Section 122, it was observed that the Input Tax Credit availed by the Petitioner was genuine, and the material indicated that the Petitioner may not be a fake supplier, the absence from the place of business being due to proceedings initiated by the lender bank. In such circumstances an opportunity needed to be given to the Petitioner to respond to the SCN in the interest of justice - The impugned order is quashed and set aside and the petitioner is directed to appear with reply and documents - Respondent is directed to adjudicate the SCN afresh on its own merits and the registration of the Petitioner stands revived - The Writ Petition is allowed [Read less]

GST - Penalty under Section 129(1)(a) of the CGST Act, 2017 for goods transported after expiry of e-way bill - The vehicle was intercepted about three days after the e-way bills had expired and a notice in FORM GST MOV-09 was issued - Penalty equal to twice the amount of tax was imposed - The Appellant contended that the documents were produced, the vehicle was only about four kilometres short of the destination and there was no evidence of intent to evade tax - Whether penalty under Section 129(1)(a) is not attracted in absence of intent to evade tax - HELD - A taxing statute is to be construed strictly and its intention ... [Read more]

GST - Penalty under Section 129(1)(a) of the CGST Act, 2017 for goods transported after expiry of e-way bill - The vehicle was intercepted about three days after the e-way bills had expired and a notice in FORM GST MOV-09 was issued - Penalty equal to twice the amount of tax was imposed - The Appellant contended that the documents were produced, the vehicle was only about four kilometres short of the destination and there was no evidence of intent to evade tax - Whether penalty under Section 129(1)(a) is not attracted in absence of intent to evade tax - HELD - A taxing statute is to be construed strictly and its intention is gathered from the words used. Section 129(1) does not provide that intent to evade tax is mandatory for invoking the provision or imposing penalty, unlike Section 130 of the Act. Mens rea is an essential element only for criminal offences and is not an essential element for imposing penalty for breach of civil obligations or liabilities - Proceedings under Section 129 are adjudicatory in nature and determine a civil liability. The Circular No. 64 dated 14.09.2018 does not provide that no proceeding under Section 129 be initiated where the e-way bill has expired, and the case of the Appellant does not fall in any of its exceptions - For invoking the of provision of section 129(1) or/and imposing penalty under this section the proof or facts, circumstances or material on record which shows intent to evade tax are not required – Ordered accordingly - Movement of goods after expiry of e-way bill on plea of vehicle breakdown - Rule 138(10) of the CGST Rules, 2017 - Evidentiary value of GPS report, repair bills and FORM GST DRC-03 - The Appellant contended that the e-way bills expired because the vehicle broke down on three occasions and relied on GPS records, vehicle repair bills and a mention of breakdown in FORM GST DRC-03 - Whether the Appellant established a genuine circumstance justifying movement of goods after expiry of the e-way bill - HELD - Documents were produced at the time of inspection and there was no discrepancy in description, quantity, value or names of the parties. The Appellant did not amend or extend the validity of the e-way bill, which under the third proviso to Rule 138(10) may be extended within eight hours from the time of its expiry. The disclaimer in the GPS report was not a correct reason for disbelieving it. However, the GPS report did not pertain to the vehicle involved and was generated after the interception, so it was not relevant - The Tribunal, being the final authority of fact finding, examined the repair bills. Some were estimates and not cash memos, one was a credit memo without signature of an authorised person and one was a simple paper. These bills have no evidentiary value. The breakdown was first mentioned in FORM GST DRC-03 nine days after interception, without mentioning three breakdowns, and no explanation was given for the silence. The Appellant could have obtained the statement of the driver under the RTI Act, 2005 or filed an affidavit of the driver, but did not - The plea of breakdown is not established and the order of the FAA is upheld - The appeal is disallowed [Read less]

Service Tax - Eligibility to CENVAT credit of input services used for both taxable and exempted output services - Rule 6(5) of CENVAT Credit Rules, 2004 - Period from 16.06.2005 to 01.06.2007 - Respondent, engaged in development and maintenance of an IT Park, was registered for Management, Maintenance and Repair Service (MMR) and Renting of Immovable Property Service (RIP). It did not maintain a bifurcation of credit and availed the credit in toto under Rule 6(5). SCN proposed to disallow and recover the credit with interest and penalty on the ground that the credit related to RIP, which was exempt for the period. The Trib... [Read more]

Service Tax - Eligibility to CENVAT credit of input services used for both taxable and exempted output services - Rule 6(5) of CENVAT Credit Rules, 2004 - Period from 16.06.2005 to 01.06.2007 - Respondent, engaged in development and maintenance of an IT Park, was registered for Management, Maintenance and Repair Service (MMR) and Renting of Immovable Property Service (RIP). It did not maintain a bifurcation of credit and availed the credit in toto under Rule 6(5). SCN proposed to disallow and recover the credit with interest and penalty on the ground that the credit related to RIP, which was exempt for the period. The Tribunal allowed the Respondent's appeal against the order disallowing the credit - Whether the Respondent was entitled to credit of the whole of the service tax under Rule 6(5) when it was also engaged in exempted services - HELD - Rule 6(5) is a code by itself and allows credit of the whole of the service tax paid on the specified taxable services, including MMR. Credit is available unconditionally, barring a situation where the services have been used exclusively in relation to provision of exempted services. The RIP services were admittedly exempt for the period. However, the credit was used for all output services including MMR and RIP, and not exclusively for RIP. As the Respondent is engaged in rendition of taxable services as well, the condition of exclusivity is not attracted - The High Court concurred with the Tribunal and answered the question in favour of the Respondent-assessee - Eligibility to CENVAT credit of input services used for Renting of Immovable Property Service - Reliance on Board Circular - Period post 01.06.2007 - Respondent availed credit of input services for the output service of renting of immovable property, which became taxable post 01.06.2007. The credit was denied on the basis of a Board Circular, which clarified that credit cannot be taken as immovable property is subject neither to Central Excise duty nor to Service Tax. The Tribunal rejected the reliance on the Circular and allowed the credit - Whether the Tribunal erred in treating the Board Circular as erroneous and irrelevant for the period post 01.06.2007 - HELD - The Circular erroneously focussed on the eligibility of input services for immovable property, whereas it should have addressed their eligibility for the output service of Renting of Immovable Property. The clarification has therefore to be disregarded and is in any case not binding on the Tribunal. What is required to be seen is whether the input services have the necessary nexus with the output service and fall within the definition of input services in Rule 2(l) of the CENVAT Credit Rules, 2004, as it existed during that period - The High Court concurred with the Tribunal and answered the question in favour of the Respondent - Liability to service tax on fit-out charges forming part of consideration for renting of immovable property - Payment of VAT on fit-outs - Respondent, engaged in management of an IT Park, provided fit-outs such as work stations, cabins and meeting rooms along with the office space rented to its clients under lease agreements. The Respondent contended that VAT had been paid on the fit-outs and service tax was therefore not payable. The authority held that the fit-outs form part of the value of the immovable property rented out. The Tribunal reversed the order on the ground that the fit-outs were movable items on which VAT was remitted, and that VAT and service tax are exclusive - Whether the erroneous payment of sales tax on fit-out charges would immune the Respondent from liability to service tax - HELD - There are both factual and legal errors in the conclusion of the Tribunal. On facts, the fit-outs did not relate only to movables but also to other infrastructure such as work stations, which formed part of the lease agreements, so a portion of the consideration has necessarily to be earmarked to them. On law, mere payment of VAT does not lead to the conclusion that no service tax is payable. The Hon'ble Supreme Court has held that service tax and VAT assessments are both possible in respect of the same transaction, if the foundational requirements for such assessments are justified on the facts. Further, no proof was produced that VAT had been paid on the fit-outs - The question is answered in favour of the Appellant-Department and the Tribunal's order on this issue is reversed. [Read less]

Central Excise - Denial of Cenvat Credit on the allegation of receipt of invoices without goods from first stage and second stage dealers - Reliance on statements recorded during investigation without following Section 9D of Central Excise Act, 1944 – Appellant availed Cenvat Credit on invoices issued by two second stage dealers. On the basis of an investigation, it was alleged that the dealers were non-existent and had issued fake invoices without supplying goods - Whether Cenvat Credit can be denied to the Appellant on the basis of statements of the dealers, recorded during investigation, when the procedure under Secti... [Read more]

Central Excise - Denial of Cenvat Credit on the allegation of receipt of invoices without goods from first stage and second stage dealers - Reliance on statements recorded during investigation without following Section 9D of Central Excise Act, 1944 – Appellant availed Cenvat Credit on invoices issued by two second stage dealers. On the basis of an investigation, it was alleged that the dealers were non-existent and had issued fake invoices without supplying goods - Whether Cenvat Credit can be denied to the Appellant on the basis of statements of the dealers, recorded during investigation, when the procedure under Section 9D was not followed and no other evidence was produced to show that the goods were not received - HELD - The Appellant is a manufacturer of dutiable goods paying duty on its finished goods. If the allegation is that the inputs were not received, the investigation could not find out from where the inputs used for manufacture of the finished goods were procured. No investigation was conducted with the transporters who could have brought out from the records whether the goods were transported or not - The allegation that the first stage and second stage dealers were non-existent is controverted by the SCN itself, as the dealers appeared before the investigating team and their statements were recorded. The only evidence being the statements of the dealers that they had not supplied goods and had issued fake invoices, the provisions of Section 9D of Central Excise Act were required to be followed to rely on them. As that was not done, the statements recorded during investigation are not reliable. The Revenue produced no other evidence to allege that the Appellant had availed Cenvat Credit without receiving the goods. The impugned proceedings are therefore not sustainable against the Appellant - The impugned order is set aside and the appeal is allowed [Read less]

GST – Maharashtra AAR - Taxability of maintenance services provided by a promoter under the Maharashtra Ownership Flats Act before formation of a co-operative housing society, company or resident welfare association - Applicant, a developer, maintained the building by paying for common area electricity, housekeeping, security, garden, gym and other services without a formal maintenance agreement with flat owners - Whether maintenance provided by the promoter as a statutory duty is a taxable supply under Section 7 of the CGST Act, 2017 - HELD - GST is a supply-based tax, and whether an activity is mandated by law is irrel... [Read more]

GST – Maharashtra AAR - Taxability of maintenance services provided by a promoter under the Maharashtra Ownership Flats Act before formation of a co-operative housing society, company or resident welfare association - Applicant, a developer, maintained the building by paying for common area electricity, housekeeping, security, garden, gym and other services without a formal maintenance agreement with flat owners - Whether maintenance provided by the promoter as a statutory duty is a taxable supply under Section 7 of the CGST Act, 2017 - HELD - GST is a supply-based tax, and whether an activity is mandated by law is irrelevant if it falls within the definition of supply, which requires supply of goods or services, a consideration and the course or furtherance of business. Maintenance of common areas, utilities and facilities is a service supplied in the course of business, and the charges collected from flat purchasers constitute consideration under Section 2(31) - The decision rendered in the context of taxable service under the Finance Act, 1994, a framework that no longer exists, and under GST all goods and services are taxable unless specifically exempted, with no exemption for activities performed under statutory obligation - The Maharashtra Ownership Flats Act governs civil obligations while GST governs taxability of supply, and Schedule III provides no exemption for promoters. The exemption under Entry 77 of Notification No. 12/2017-Central Tax (Rate) is not available as the Applicant is a promoter and not a resident welfare association or society - Maintenance services provided by the Applicant constitute supply under Section 7 and are taxable even though undertaken pursuant to statutory obligation – Ordered accordingly - Levy of GST on advance maintenance collected for eighteen months at the time of agreement for sale - Applicant collected advance maintenance from flat purchasers along with GST and contended that no tax could be levied since it was discharging a statutory obligation before formation of a society or association - Whether GST can be levied on the advance maintenance collected from flat owners - HELD - The advance maintenance is not a refundable deposit but an advance against identifiable future services such as security, housekeeping, electricity for common areas and repairs, and is appropriated periodically for maintenance. It is therefore advance consideration for supply of maintenance services, taxable under Section 13 of the CGST Act at the time of receipt - The Applicant is liable to charge GST on the advance maintenance collected - Levy of GST on monthly maintenance charges collected by the promoter before formation of a co-operative housing society, company or resident welfare association - Whether GST can be levied and collected on monthly maintenance charges paid by flat owners - HELD - Monthly charges are recurring consideration for maintenance services supplied in the course of business. The absence of a society, company or association and the statutory nature of the duty under the Maharashtra Ownership Flats Act do not affect taxability. The principles laid down under the service tax regime cannot be applied to exempt such services under GST - Monthly maintenance charges collected by the promoter constitute consideration for supply of services and are liable to GST. [Read less]

GST – Maharashtra AAR - Reversal of Input Tax Credit on goods damaged by flood under Section 17(5)(h) of the CGST Act, 2017, Scope of expression "goods lost" in Section 17(5)(h) - Stock stored in the warehouse was partly damaged by flood water, resulting in broken terminals, corrosion, spoiled packing, loss of supplier warranty and reduction in market value, though the goods remained saleable as batteries and cells at reduced price - Applicant received insurance compensation assessed without considering tax and contended that Input Tax Credit reversal is required only where goods are lost, stolen, destroyed, written off ... [Read more]

GST – Maharashtra AAR - Reversal of Input Tax Credit on goods damaged by flood under Section 17(5)(h) of the CGST Act, 2017, Scope of expression "goods lost" in Section 17(5)(h) - Stock stored in the warehouse was partly damaged by flood water, resulting in broken terminals, corrosion, spoiled packing, loss of supplier warranty and reduction in market value, though the goods remained saleable as batteries and cells at reduced price - Applicant received insurance compensation assessed without considering tax and contended that Input Tax Credit reversal is required only where goods are lost, stolen, destroyed, written off or gifted, and that a mere write-down of value is not covered - Whether the Applicant is obligated to reverse Input Tax Credit on the damaged goods to the extent of reduction in value - HELD - The expression ‘goods lost’ is not defined in the CGST Act and must be understood in its ordinary commercial sense. Goods may be regarded as lost when they suffer damage or impairment such that their intended commercial value and utility are substantially diminished by an unforeseen event such as flood. The provision is not restricted to total annihilation or conversion into scrap; the term written off in commercial and accounting practice covers diminution in value recognised due to damage. This was not a normal market-driven price reduction or obsolescence but a specific identifiable loss for which insurance compensation was claimed and received - Legislative intent behind Section 17(5)(h) intends to deny ITC where goods do not ultimately contribute fully to taxable outward supply due to loss or destruction. Allowing ITC on goods that have lost substantial value due to flood would defeat the legislative intent of linking ITC to effective use in business. Flood is an extraneous and abnormal event, and losses arising therefrom cannot be equated with normal business depreciation or market-driven price reduction – Further, the applicant has effectively recovered the value of damaged goods through insurance. Allowing retention of full ITC would result in unjust enrichment, which is not the intent of GST law - Applicant is required to reverse Input Tax Credit attributable to the damaged goods under Section 17(5)(h) to the extent of reduction in value – Ordered accordingly - Liability to GST on insurance compensation received for damaged stock - Applicant contended that the insurance claim amount is an actionable claim excluded under Entry 6 of Schedule III and is a pure financial transaction of claim settlement - Whether GST is payable on the insurance claim amount received - HELD - Insurance claim settlement represents monetary compensation for loss/damage to goods. The receipt of an insurance claim does not fall under the definition of "supply" as defined in Section 7 of the CGST Act - Quantum and timing of reversal of Input Tax Credit under Section 17(5) of the CGST Act, 2017 - Whether the reversal is to be made in the period of claim settlement or in another period - HELD - The eventuality in clause (h) arises usually after ITC has already been availed, and reversal is required in the return for the month in which the eventuality arises. Where the event happens over a period of time or its time is not known, reversal is required when the event is recognised or becomes known to the taxpayer. Documentation such as a damage assessment report prepared for submission to the insurer establishes that the event is known - ITC attributable to the value of inputs damaged, to the extent of reduction in value, is required to be reversed in the tax period in which such ineligibility arises, being the period in which the event of loss is known or recognised in the books of account, whichever is earlier. [Read less]

GST - Maharashtra AAR - Section 2(68) of CGST Act, 2017 - Classification of body building activity on chassis supplied by the principal, Job Work or Composite supply - Applicant carried out fabrication of load bodies, tippers and special purpose bodies using its own materials, mounted them on chassis owned and supplied by customers and charged a lump-sum consideration - Whether body building activity on the chassis owned and provided by the principal qualifies as job work and supply of services falling under SAC 998881 - HELD - The activity can be called 'job work' only in cases where the activity is confined to treatment ... [Read more]

GST - Maharashtra AAR - Section 2(68) of CGST Act, 2017 - Classification of body building activity on chassis supplied by the principal, Job Work or Composite supply - Applicant carried out fabrication of load bodies, tippers and special purpose bodies using its own materials, mounted them on chassis owned and supplied by customers and charged a lump-sum consideration - Whether body building activity on the chassis owned and provided by the principal qualifies as job work and supply of services falling under SAC 998881 - HELD - The activity can be called 'job work' only in cases where the activity is confined to treatment or processing of goods belonging to another person - In the present case, the Applicant contributes substantial goods of its own and brings into existence a new and distinct commodity, namely a motor vehicle body, and therefore the activity clearly transcends the scope of job work and falls within the ambit of supply of goods. The statutory fiction of job work under Section 2(68) of the CGST Act, 2017 is not attracted where the activity results in the emergence of a new commodity distinct from the goods supplied by the principal - The Applicant procured steel, sheets, fittings, paint and other materials on its own account, undertook design, fabrication, assembly, mounting and finishing, and brought into existence a new and distinct commodity, with the chassis merely serving as a base. The purchase orders specified supply of body assemblies in units at a fixed price per finished unit, with inspection, rejection and replacement risk borne by the supplier, and contained no job work clause. Clause 3 of Schedule II applies only to pure processing activity that does not result in a new and distinct commodity - The activity is not job work and is not a supply of services under SAC 998881 - The Applicant's activity constitutes a composite supply comprising the supply motor vehicle body independently classifiable as goods under HSN 8707 and mounting of the same on chassis and incidental finishing activities. Therefore, in terms of Section 8(a) of the CGST Act, 2017, the entire composite supply is required to be treated as a supply of motor vehicle body which is principal supply and determine tax liability based on the principal supply. Consequently, as the principal supply is the motor vehicle body, the entire transaction is taxable as a supply of goods under HSN 8707 at the rate of 28% GST – Ordered accordingly - Applicability of CBIC Circular dated 09.08.2018 and Notification No. 26/2019-Central Tax (Rate) to body building on customer-owned chassis - Whether the Circular and the Notification convert the Applicant's activity into a supply of services taxable under Serial No. 26 of Notification No. 11/2017-Central Tax (Rate) - HELD - The Notification operates in the field of classification of services and presupposes that the activity is otherwise a supply of service, and it cannot expand the statutory definition of job work under Section 2(68) or dilute Section 8 relating to composite supply. Its applicability depends on the substance of the transaction, including the extent of goods supplied by the body builder, the emergence of a new commercially distinct product, the dominant intention of the parties and the character of the supply. The Circular concerns transactions where the object of the contract is fabrication of a bus body, whereas here the object of the contract is the supply of vehicle bodies - Reliance on the Circular and the Notification is misplaced and they do not apply to the facts of the case - Composite supply of vehicle bodies with mounting on customer-supplied chassis, classification under Heading 8707 and applicable rate - Applicant supplied vehicle bodies fabricated with its own materials, mounted on the chassis and finished, for a consolidated lump-sum consideration - Whether the supply is a composite supply - HELD - The fabrication, assembly and finishing activities cannot be rendered independently of the goods, and the goods cannot be supplied without such processes, so that the supplies are naturally bundled in a single continuous activity culminating in delivery of a finished body mounted on the chassis, constituting a composite supply under Section 2(30). The predominant element under Section 2(90) is the vehicle body, while fabrication, fitment and documentation are ancillary and incidental. Under Section 8(a), tax liability is determined as that of the principal supply, which is classifiable under Heading 8707 as bodies for motor vehicles of headings 8701 to 8705 - The supply is a composite supply of vehicle bodies and incidental services with the principal supply being vehicle bodies, to be regarded as supply of goods under Heading 8707 attracting 28% GST and with effect from 22.09.2025, 18% GST. [Read less]

GST – Maharashtra AAR - Eligibility to concessional rate of 5% on marine engines and their parts supplied as parts of fishing vessels of heading 8902, Sl. No. 252 of Schedule I of Notification No. 1/2017-Central Tax (Rate) - Applicant proposed to import marine propulsion engines of heading 8407 and 8408 and their spare parts of heading 8409 and to sell them to fishermen for use in fishing boats - Whether marine engines and their parts attract the concessional rate of 5% when supplied as parts of fishing vessels of heading 8902 - HELD - The word part is not defined in GST law, so its meaning was examined as understood in ... [Read more]

GST – Maharashtra AAR - Eligibility to concessional rate of 5% on marine engines and their parts supplied as parts of fishing vessels of heading 8902, Sl. No. 252 of Schedule I of Notification No. 1/2017-Central Tax (Rate) - Applicant proposed to import marine propulsion engines of heading 8407 and 8408 and their spare parts of heading 8409 and to sell them to fishermen for use in fishing boats - Whether marine engines and their parts attract the concessional rate of 5% when supplied as parts of fishing vessels of heading 8902 - HELD - The word part is not defined in GST law, so its meaning was examined as understood in common parlance through dictionary definitions and judicial decisions. A marine engine is an essential part of a ship or vessel without which the vessel would not be complete and cannot sail, as it is essential for main propulsion and for providing auxiliary power. Sl. No. 252 covers parts of goods of heading 8902 falling under any chapter. Hence any goods, irrespective of classification, must satisfy the condition of being a part of a vessel of the specified headings - Circular No. 52/26/2018-GST also clarifies that marine engines supplied for fishing vessels attract 5% GST by virtue of Sl. No. 252. The concessional rate is conditional upon use as a part of such vessels and is not available if the goods are used in goods other than those of the specified headings. A supplier must demonstrably know and prove the end-use at the time of supply. Mere possibility of use or a buyer's declaration is insufficient unless supported by verifiable documentation - GST at 5% is applicable only when marine engines or their parts are supplied as parts of fishing vessels of heading 8902 and the applicant establishes such end-use through verifiable documentary evidence. In absence of such evidence, the normal rate applicable to heading 8407, 8408 and 8409 remains applicable – Ordered accordingly - Eligibility to concessional rate of 5% on marine engines and their parts supplied for vessels used for defence, patrolling, flood relief and rescue operations under Sl. No. 252 of Schedule I of Notification No. 1/2017-Central Tax (Rate) - Whether 5% GST can be charged on marine engines and their parts supplied for use in vessels of heading 8901, 8904, 8905, 8906 and 8907 for defence, patrolling, flood relief and rescue operations - HELD - Entry at Sl. No. 252 covers parts of goods of the specified headings falling under any chapter. Any goods, irrespective of classification, must therefore satisfy the condition of being a part of a vessel of the said headings. Marine engines are essential parts of a ship or vessel as a vessel cannot sail without them - Engines of heading 8407 and 8408 and their parts therefore attract 5% GST when supplied as parts of vessels of heading 8901, 8904, 8905, 8906 and 8907. The benefit is not available if the goods are used in goods other than those of the specified headings. The concessional rate is conditional upon proof of end-use. Mere possibility of use or a buyer's declaration is insufficient unless supported by verifiable documentation - GST at 5% is applicable only when the marine engines or their parts are supplied as parts of vessels used for defence, patrolling, flood relief or rescue operations of heading 8901, 8904, 8905, 8906 and 8907 and the applicant adequately establishes such end-use through verifiable documentary evidence. In absence of verification or clear end-use evidence, the normal rate applicable to heading 8407, 8408 and 8409 remains applicable. [Read less]

GST – Maharashtra AAR - Liability to pay GST on transfer of reward goods against redemption of reward points under a dealer incentive scheme - Applicant launched a scheme under which dealers and retailers earn reward points on purchases and redeem them through an app for goods such as mobile, refrigerator and television - The Applicant purchases these goods from suppliers and transfers them under delivery challan without issuing a tax invoice or realising any monetary consideration - Whether the Applicant is liable to discharge GST on supply of reward goods to dealers and retailers against redemption of points under the ... [Read more]

GST – Maharashtra AAR - Liability to pay GST on transfer of reward goods against redemption of reward points under a dealer incentive scheme - Applicant launched a scheme under which dealers and retailers earn reward points on purchases and redeem them through an app for goods such as mobile, refrigerator and television - The Applicant purchases these goods from suppliers and transfers them under delivery challan without issuing a tax invoice or realising any monetary consideration - Whether the Applicant is liable to discharge GST on supply of reward goods to dealers and retailers against redemption of points under the scheme - HELD - The scheme is a sales promotional scheme meant to promote sale of the Applicant's products and is not mandatory, as participation is left to the discretion of dealers and retailers. The reward points are not in the nature of an actionable claim. They are only a mechanism to identify the persons to be rewarded commensurate with their purchases - The scheme terms provide that the Applicant is not liable for compensation or damages, that rewards may change with or without notice, and that the Applicant's decision is final. No contract is signed that bestows an actionable claim on dealers and retailers. The goods are given voluntarily on fulfilment of criteria decided solely by the Applicant and are in the nature of gifts – The supply of promotional goods against redemption of reward points, cannot be said to be against any actionable claim or extinguishment of such claim against the applicant. As there is not monetary or valuable consideration in the transaction of supply of promotional goods, these transactions cannot be considered as supply under Section 7 of the CGST Act - The Applicant is not liable to discharge GST on transfer of reward goods against redemption of points – Ordered accordingly - Eligibility to input tax credit on promotional goods given as rewards against redemption of points - Blocked credit under Section 17(5)(h) of the CGST Act, 2017 - Applicant purchased goods from suppliers on which GST was charged and transferred them to dealers and retailers against redemption of reward points under its scheme - Whether the Applicant is eligible to avail input tax credit of tax charged by suppliers on goods subsequently given as rewards under the scheme - HELD - Section 17(5) begins with a non obstante clause. Even if Section 16(1) allows credit, Section 17(5)(h) blocks it in respect of goods disposed of by way of gift or free samples - The linking of reward points to the extent of purchases is an incentive scheme for promoting sales and brand loyalty, and the products are clearly in the nature of gifts. The Madras High Court has held that credit on goods purchased for sales promotional activity is not available under Section 17(5)(h) - The promotional goods that are transferred by the applicant to various persons against redemption of points under 'Dhan Barse Scheme' of the applicant, are 'gifts' and are covered by section 17(5)(h) of GST Act and not eligible for input tax credit. [Read less]

GST – Maharashtra AAR - Classification of long-term leasing of electric vehicles without operator - Financial leasing services under heading 9971 or leasing or rental services without operator under heading 9973 - Applicant, engaged in leasing electric vehicles, entered into a Vehicle Lease Agreement with a lessee for leasing e-bikes without operator for a period of forty eight months - The lessee uses the vehicles for renting out to its customers, bears maintenance, repairs, insurance and statutory compliance and has an option to purchase the vehicles on expiry of the lease - Whether leasing of electric vehicles without... [Read more]

GST – Maharashtra AAR - Classification of long-term leasing of electric vehicles without operator - Financial leasing services under heading 9971 or leasing or rental services without operator under heading 9973 - Applicant, engaged in leasing electric vehicles, entered into a Vehicle Lease Agreement with a lessee for leasing e-bikes without operator for a period of forty eight months - The lessee uses the vehicles for renting out to its customers, bears maintenance, repairs, insurance and statutory compliance and has an option to purchase the vehicles on expiry of the lease - Whether leasing of electric vehicles without operator is classifiable under heading 9973-Leasing or rental services without operator under Sl. No. 17 of Notification No. 11/2017-CT (Rate) - HELD - The arrangement between the Applicant and the lessee does not merely involve short-term rental of vehicles. Instead, the agreement creates a structured leasing arrangement extending over a substantial period of forty-eight months, during which the lessee utilizes the vehicles for its commercial operations. Further, the lessee assumes substantial responsibilities relating to operation of the vehicles. Such features indicate that the arrangement goes beyond mere rental of goods. Therefore, the present transaction does not fit squarely within the typical scope of Heading 9973 – The arrangement is in substance a finance lease where the lessor finances the acquisition of equipment and recovers the cost through lease rentals. If the agreement is Financial Lease agreement, then it would be squarely falls under Heading 9971 - Financial and related services Sl. No. 15(ii)- Financial leasing services including equipment leasing and hire purchase of Notification No. 11/2017-CT (Rate) dated 28.06.2017 and the applicable rate of tax shall be the same rate of tax as applicable on supply of like goods involving transfer of title in goods – The leasing of Electric Vehicles (E-Bikes/EVs) without operator by the Applicant is classifiable under SAC 9971 - Financial and related services and covered under Sl. No. 15(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 and the applicable rate of tax will be the same rate as applicable on supply of like goods involving transfer of title in goods – Ordered accordingly [Read less]

GST – Maharashtra AAR - Rate of tax on maintenance, repair and overhaul services of Reverse Osmosis plant installed on warships and other vessels - Entry 25(ib) and entry 25(ii) of Notification No. 11/2017-Central Tax (Rate) - Applicant executed contracts with the Indian Navy and Indian Coast Guard for maintenance and repair of RO plants installed on board ships, involving preventive and routine maintenance, inspection of safety controls, supply of consumables and replacement of parts wherever required - Whether maintenance, repair and overhaul services of RO plant installed on ships fall under entry ‘services in respe... [Read more]

GST – Maharashtra AAR - Rate of tax on maintenance, repair and overhaul services of Reverse Osmosis plant installed on warships and other vessels - Entry 25(ib) and entry 25(ii) of Notification No. 11/2017-Central Tax (Rate) - Applicant executed contracts with the Indian Navy and Indian Coast Guard for maintenance and repair of RO plants installed on board ships, involving preventive and routine maintenance, inspection of safety controls, supply of consumables and replacement of parts wherever required - Whether maintenance, repair and overhaul services of RO plant installed on ships fall under entry ‘services in respect of ships and other vessels, their engines and other components or parts’ - HELD - An earlier ruling of the Authority has held that RO plants are independent machinery used for purification of water, classifiable under HSN 8421, and are not integral parts of ships as ships can exist and function without them - The expression ‘in respect of used’ in entry 25(ib) has a wide connotation but cannot be read in isolation. The service must still be in respect of the ship, its engines or its components or parts. As the RO plant is not a component or part of the vessel, its maintenance is maintenance of independent machinery. The mere location of the RO plant on a vessel does not alter the essential character of the supply - The doctrine of noscitur a sociis applies only where the statutory expression is ambiguous and is of limited application here. Where spare parts are supplied along with maintenance, the transaction is a composite supply with maintenance of machinery as the principal supply and the entire supply is taxable at the rate applicable to such principal supply. The activity cannot be treated as works contract as RO plants installed on ships are movable machinery - The RO system is a separate plant and not a component or part of the vessel. The services of repair, maintenance and overhaul of RO plant do not fall under entry 25(ib) and are liable to GST at 18% under entry 25(ii) of Notification No. 11/2017-Central Tax (Rate) – Ordered accordingly [Read less]

Central Excise - Determination of Annual Capacity of Production and applicable rate of duty under compounded levy scheme - Rule 96ZP(3) of Central Excise Rules read with Section 3A of Central Excise Act, 1944 - Appellant's Unit II opted to pay duty under Rule 96ZP(3) for re-rolled products of non-alloy steel and furnished the re-measured parameters, which were verified by the officers of the Department. The Appellant calculated the capacity on that basis, with the 'd' measurement within 160mm, and sought final determination at the lower rate. The Commissioner nevertheless finalised a much higher capacity without any break-... [Read more]

Central Excise - Determination of Annual Capacity of Production and applicable rate of duty under compounded levy scheme - Rule 96ZP(3) of Central Excise Rules read with Section 3A of Central Excise Act, 1944 - Appellant's Unit II opted to pay duty under Rule 96ZP(3) for re-rolled products of non-alloy steel and furnished the re-measured parameters, which were verified by the officers of the Department. The Appellant calculated the capacity on that basis, with the 'd' measurement within 160mm, and sought final determination at the lower rate. The Commissioner nevertheless finalised a much higher capacity without any break-up and confirmed the demand at the higher rate - Whether the Annual Capacity of Production was correctly determined and the Appellant was liable to duty at the rate applicable under Rule 96ZP(3) - HELD - The determination of Annual Capacity of Production was not made correctly by the Commissioner. It is required to be made on the basis of the verification made by the Assistant Commissioner and the Technical Expert, and on that basis the capacity of the rolling mill comes to the figure computed by the Appellant. Since the measurement of 'd' was within 160mm and the Appellant had declared to pay duty under Sub-rule (3) of Rule 96ZP, the lower rate specifically provided in that Sub-rule applies instead of the higher rate. As the determination of capacity by the Commissioner was not correct, the demand founded on it is not sustainable - The impugned order is set aside and the appeal is allowed - Liability to duty for the period of closure of factory and entitlement to refund of excess payment under compounded levy scheme - Rule 96ZP of Central Excise Rules - Unit II of the Appellant did not run after February, 1999 and the Unit I rolling mill ran only up to March, 1999, after which the factory was permanently closed with no production in either rolling mill. The demand was raised for a period of 31 months, whereas the Appellant contended that the factory had run for a shorter period and that excess duty had been paid - Whether duty is payable for the period when the factory was closed and whether the Appellant is entitled to refund of the excess payment - HELD - The rolling mills and the factory ran only for the period from 01.09.1997 to 31.03.1999, and thereafter the factory was permanently closed with no production. The demand for the entire period of 31 months, which includes the period of closure, is therefore not sustainable. The Appellant, having paid duty in excess of the amount payable for the period of actual running on the correct capacity and rate, is eligible for refund of the excess payment - The impugned order is set aside and the appeal is allowed - Adjudication beyond the scope of Show Cause Notice - Confirmation of demand on a capacity figure not proposed in SCN - The SCN proposed the demand on the basis of a particular Annual Capacity of Production finally determined by the Department. The Adjudicating Authority, without considering the reply to the SCN, arrived at a new figure of Annual Capacity of Production which was not mentioned in the SCN and confirmed the demand for 31 months - Whether the Adjudicating Authority could confirm the demand on a basis different from that set out in the SCN - HELD - The Adjudicating Authority has travelled beyond the scope of the SCN, which is not permissible in law. The demand confirmed on a figure of capacity that was not part of the SCN cannot be sustained, and on this ground alone the impugned order cannot be sustained. The impugned order is set aside and the appeal is allowed - Interest and penalty under Rule 96ZP of Central Excise Rules - Validity of provisions relating to interest and penalty under compounded levy scheme - Interest and penalty were imposed on the Appellant under Rule 96ZP in the proceedings relating to the compounded levy scheme - Whether interest and penalty can be sustained under Rules 96ZO, 96ZP and 96ZQ - HELD - The Hon'ble Supreme Court has declared the provisions pertaining to interest and penalty contained in Rules 96ZO, 96ZP and 96ZQ of the Rules to be ultra vires. Interest and penalty imposed under Rule 96ZP therefore cannot be sustained - The impugned order is set aside and the appeal is allowed. [Read less]

Service Tax - Issuance of SCN where Cenvat credit is reversed and tax under Reverse Charge Mechanism is paid with interest before SCN - Section 73(3) of Finance Act, 1994 - Audit of the Appellant's books for the relevant period revealed inadmissible Cenvat credit availed on car hire and health insurance charges and non-payment of Service Tax under Reverse Charge Mechanism on certain services - Whether the SCN was required to be issued when the Appellant had reversed the credit and paid the tax with interest before its issuance - HELD - The Appellant had taken Cenvat credit wrongly and reversed the same along with interest ... [Read more]

Service Tax - Issuance of SCN where Cenvat credit is reversed and tax under Reverse Charge Mechanism is paid with interest before SCN - Section 73(3) of Finance Act, 1994 - Audit of the Appellant's books for the relevant period revealed inadmissible Cenvat credit availed on car hire and health insurance charges and non-payment of Service Tax under Reverse Charge Mechanism on certain services - Whether the SCN was required to be issued when the Appellant had reversed the credit and paid the tax with interest before its issuance - HELD - The Appellant had taken Cenvat credit wrongly and reversed the same along with interest before issuance of the SCN. The tax liability under Reverse Charge Mechanism was likewise discharged and intimated to the Department before the SCN. In these circumstances the SCN was not required to be issued to the Appellant in terms of Section 73(3) of the Finance Act, 1994. The impugned proceedings are therefore not sustainable against the Appellant and are void ab initio - The impugned order is set aside and the appeal is allowed - Imposition of penalty under Section 78 of Finance Act, 1994 where payment is made under Section 73(3) before SCN - Absence of willful misstatement or suppression of facts - The Appellant paid the Service Tax and interest at the instance of the Department before the issue of SCN and intimated such payment to the Department. Penalty under Section 78 was nevertheless imposed on the ground of deliberate suppression of facts with intent to evade payment of Service Tax - Whether penalty under Section 78 can be imposed on the Appellant - HELD - For the removal of doubts, it is declared that no penalty under any of the provisions of the Act or rules made thereunder shall be imposed in respect of payment of Service Tax under Section 73(3) and interest thereon. If payment is made under Sub-section (3) of Section 73, whether suo motu or at the instance of the Department before issue of the SCN, and such payment is intimated to the Department, no penalty under Section 76, Section 77 or Section 78 can be imposed. Further, no evidence of deliberate short payment was adduced in the SCN, and no conclusive findings were recorded in the Order-in-Original and the impugned order with respect to willful misstatement or suppression of facts. Imposition of penalty under Section 78 is therefore unwarranted and bad in law - The penalty is set aside and the appeal is allowed - Invocation of extended period of limitation - Suppression of facts - The adjudicating authority invoked the extended period of limitation under the proviso to Section 73(2) of the Finance Act, 1994 to confirm the demand of Service Tax under Reverse Charge Mechanism and the recovery of Cenvat credit on the allegation of suppression of facts - Whether the allegation of suppression and the invocation of the extended period can be sustained - HELD - The issue is covered by the decision of the Hon'ble Supreme Court, which held that the allegation of suppression and invocation of the larger period cannot be sustained when all relevant facts are well within the knowledge of the Authority. The issue is also squarely covered by a decision of this Tribunal, which has been affirmed by the Hon'ble Calcutta High Court. No evidence of willful misstatement or suppression of facts is adduced in the SCN or recorded in the impugned order - The impugned order is set aside and the appeal is allowed. [Read less]

Central Excise – Admissibility of statements recorded during investigation under Section 14 of the Central Excise Act, 1944 in the absence of compliance with Section 9D – Appellant company, a manufacturer of sponge iron and charcoal, was alleged on the basis of searches to have cleared finished goods clandestinely without invoices and duty, the allegation resting on statements of its manager, plant-in-charge and assistant accountant together with data retrieved from seized computers, and duty, interest and equal penalty were confirmed on the company with personal penalty on its director under Rule 26 of the Central Exc... [Read more]

Central Excise – Admissibility of statements recorded during investigation under Section 14 of the Central Excise Act, 1944 in the absence of compliance with Section 9D – Appellant company, a manufacturer of sponge iron and charcoal, was alleged on the basis of searches to have cleared finished goods clandestinely without invoices and duty, the allegation resting on statements of its manager, plant-in-charge and assistant accountant together with data retrieved from seized computers, and duty, interest and equal penalty were confirmed on the company with personal penalty on its director under Rule 26 of the Central Excise Rules, 2002 – Appellants contended that the statements were never tested by cross-examination and some were recorded under coercion – Whether the statements are admissible as evidence in the absence of compliance with the procedure under Section 9D – HELD – The statements relied upon by Revenue were never tested by examination-in-chief before the adjudicating authority or by cross-examination. Following the Hon'ble High Court of Punjab and Haryana, Section 9D(1) is mandatory, and unless the circumstances in clause (a) exist, the maker of the statement must be examined as a witness before the adjudicating authority who must then form the opinion that the statement should be admitted in the interests of justice, failing which the statement is to be eschewed from consideration as not relevant for proving the truth of its contents. The Tribunal in earlier decisions has taken the same view – The statements recorded during investigation are inadmissible as evidence - Admissibility of data retrieved from seized CPUs and pen drives without compliance with Section 36B of the Central Excise Act, 1944 – Department relied upon data and printouts retrieved from computers and a pen drive seized from the factory, office and residence of the director to allege clandestine clearance – Appellants contended that the printouts were not accompanied by the certificate under Section 36B(4) and that the persons who made the entries, some being ex-employees, were not examined – Whether the data retrieved from CPUs and pen drives is admissible as evidence – HELD – The data was never tested in terms of Section 36B(2) and Section 36B(4). Section 36B(4) mandatorily requires a certificate identifying the document, describing the manner of its production and the particulars of the device, signed by a person in a responsible official position in relation to the operation of the device, on the same footing as the corresponding provision of the Evidence Act as laid down by the Hon'ble Supreme Court. Pen drives being floating devices, the data cannot be relied upon unless the persons who entered it are identified and the certificate is produced – The data and printouts are not admissible evidence to sustain the charge of clandestine clearance - Sustainability of demand for clandestine manufacture and clearance and consequent penalties on the company and its director – Demand was confirmed along with equal penalty under Section 11AC and personal penalty on the director under Rule 26 – Appellants contended that there was no tangible corroborative evidence such as stock discrepancy, excess electricity consumption, statements of buyers, transport documents or proof of movement of goods – Whether the charge of clandestine clearance is sustainable and whether penalties can be imposed – HELD – Clandestine manufacture and removal requires tangible evidence and not inferences or assumptions, such as excess raw materials, actual removal of unaccounted goods, sale to identified parties, receipt of sale proceeds, excess use of electricity, statements of buyers and proof of transportation. Neither the manufacturing capacity of the Appellant was examined nor was any proper investigation conducted of the buyers, the suppliers of raw materials, the labour required or the electricity needed for such production. Once the statements and the computer data are held inadmissible and no other evidence remains, the charge is not sustainable – The demand is set aside, no penalty can be imposed on the company or its director, and the appeals are allowed. [Read less]

Central Excise – Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 to electricity generated from bagasse and to press-mud emerging as by-products in the manufacture of sugar and molasses – Appellant, a manufacturer of sugar and molasses on which duty was paid, used bagasse to produce electricity, part of which was used within the factory and part sold to the State power distribution company, and distributed press-mud free of cost to cane growers as manure, without maintaining separate accounts of inputs and input services used for dutiable and non-dutiable goods – SCN proposed recovery under Rule 6(3) on th... [Read more]

Central Excise – Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 to electricity generated from bagasse and to press-mud emerging as by-products in the manufacture of sugar and molasses – Appellant, a manufacturer of sugar and molasses on which duty was paid, used bagasse to produce electricity, part of which was used within the factory and part sold to the State power distribution company, and distributed press-mud free of cost to cane growers as manure, without maintaining separate accounts of inputs and input services used for dutiable and non-dutiable goods – SCN proposed recovery under Rule 6(3) on the value of electricity sold and on press-mud, which was confirmed by the Commissioner with interest and penalty – Appellant contended that Revenue cannot choose one of the options under Rule 6 and demand recovery under it, that bagasse is agricultural waste not resulting from manufacture so that Rule 6 does not apply, and that proportionate Cenvat credit had anyway been reversed – Whether demand under Rule 6(3) is sustainable in respect of electricity generated from bagasse and press-mud – HELD – The facts are identical to those decided by the Hon'ble Supreme Court, which held that bagasse is only agricultural waste or residue not resulting from any process of manufacture, that it does not fall within the definition of manufacture under Section 2(f) even after the 2008 amendments as no process in respect of it is specified in the Section or Chapter Notes, and that Rule 6 consequently has no application, the denial of credit on electricity having been based only on the erroneous premise that bagasse attracts duty. On this ground alone the impugned order deserves to be set aside. The contention that Revenue cannot raise a demand under Rule 6(3) of its own choice among the options available to the assessee also has force in view of the decision of the jurisdictional High Court, and reversal of proportionate Cenvat credit is as good as not availing the credit at all, as held by the Hon'ble Supreme Court – The demand, interest and penalty are not sustainable, the impugned order is set aside and the appeal is allowed [Read less]

Customs - Confiscation, redemption fine and penalty on goods imported in a container where the supplier mistakenly loaded different goods than ordered - Appellant imported goods including children's garments, and on examination the goods were found to be men's under garments in larger quantity than declared, the declaration having been made as per the supplier's invoice and import documents - Department alleged misdeclaration, misclassification and undervaluation, and the goods were confiscated under Sections 111(d), 111(l) and 111(m) with redemption fine and penalty under Section 112(a), which was upheld by the Commission... [Read more]

Customs - Confiscation, redemption fine and penalty on goods imported in a container where the supplier mistakenly loaded different goods than ordered - Appellant imported goods including children's garments, and on examination the goods were found to be men's under garments in larger quantity than declared, the declaration having been made as per the supplier's invoice and import documents - Department alleged misdeclaration, misclassification and undervaluation, and the goods were confiscated under Sections 111(d), 111(l) and 111(m) with redemption fine and penalty under Section 112(a), which was upheld by the Commissioner (Appeals) - Appellant contended that the supplier had admitted that goods meant for another buyer were mistakenly loaded and sought to take them back - Whether confiscation, redemption fine and penalty are sustainable where the change in goods occurred due to supplier's mistake - HELD - There was a mix-up of goods in the container beyond the control of the Appellant, and the resultant change in classification cannot be treated as misclassification. The goods were declared as per the supplier's invoice and import documents, the Department produced no other evidence of misdeclaration, and there is no material to show fraud, suppression, wilful misstatement or intent to evade duty. A coordinate Bench has held that wrongly shipped goods could be released on the strength of bona fides, and the Board Circular on re-export of goods imported under bona fide mistake requires such cases to be considered on merits. Since the goods were free of azo dyes, they can be cleared on payment of appropriate duty - The bona fides of the Appellant having been proved, there is no ground for redemption fine on goods other than non-releasable goods or for penalty, and the impugned order to this extent is set aside - Confiscation of imported goods for non-compliance with BIS requirements and Legal Metrology (Packaged Commodities) Rules - Amplifiers not registered with the Bureau of Indian Standards by the foreign supplier were treated as non-releasable, and other goods lacked mandatory labelling declarations, with redemption fine imposed on non-releasable goods subject to re-export - Appellant sought re-export of the non-releasable goods - Whether the confiscation and redemption fine on such goods are sustainable - HELD - The mandatory labelling requirements are to be fulfilled before clearance for home consumption, and a Public Notice permits labels to be affixed before clearance with permission of the Deputy or Assistant Commissioner. Since the Department itself examined the goods before normal examination, the Appellant could not have sought such permission earlier, so the labelling lapse is curable. The amplifiers lacked compulsory BIS registration and were rightly treated as non-releasable, and the Appellant's willingness to re-export was accepted by the competent authority - The redemption fine on non-releasable goods subject to re-export is not disturbed and the appeal is partly allowed. [Read less]

Customs - Denial of concessional duty and confiscation of a car imported under the EPCG Scheme alleged to be used for personal purposes in violation of authorisation conditions - Appellant company, engaged in hotel related services, imported cars under EPCG Authorizations availing concessional duty under a Notification, the car in question being cleared at one port while three similar cars were cleared at another port - Department alleged on specific information that the cars were used as private vehicles of the Managing Director and his family and not to earn foreign exchange towards export obligation, and the duty demand... [Read more]

Customs - Denial of concessional duty and confiscation of a car imported under the EPCG Scheme alleged to be used for personal purposes in violation of authorisation conditions - Appellant company, engaged in hotel related services, imported cars under EPCG Authorizations availing concessional duty under a Notification, the car in question being cleared at one port while three similar cars were cleared at another port - Department alleged on specific information that the cars were used as private vehicles of the Managing Director and his family and not to earn foreign exchange towards export obligation, and the duty demand with interest, confiscation under Sections 111(d) and 111(o), redemption fine and penalties on the company and the Managing Director were confirmed and upheld by the Commissioner (Appeals) - Appellants contended that the identical issue on the three cars was decided in their favour by a coordinate Bench - Whether there is any violation of the EPCG Authorization conditions so as to sustain the duty demand, redemption fine and penalties - HELD - The authorization conditions in respect of this car are identical to those considered by the coordinate Bench in the case of the same appellants, and the facts being exactly similar, this Bench cannot decide the issue differently. The coordinate Bench had found that the allegation of non-fulfilment of export obligation was premature as the period for fulfilment had not expired when the SCN was issued, that the actual user test stood satisfied by the substantial foreign exchange earnings declared and not disputed, that violations relating to vehicle registration and insurance are the concern of the authorities concerned and not Customs, and that Revenue produced no documentary evidence beyond mere allegations. The Appellants had submitted the installation certificate, registration as a tourist taxi, certificate of foreign exchange earnings and requests for Export Obligation Discharge Certificate, and the competent authority confirmed fulfilment and later issued the certificate, the non-production of which at adjudication was beyond the control of the Appellants - Non-compliance with the conditions of the EPCG Scheme cannot legally be sustained, the duty demand, redemption fine and penalties are not sustainable, the impugned order is set aside and the appeals are allowed [Read less]

Customs - Penalty on Customs Broker under Section 114(i) of the Customs Act, 1962 for alleged failure to verify antecedents and KYC particulars of the exporter in an attempted export of prohibited goods - Appellant, a Customs Broker, handled a Shipping Bill for export of floor mats, and the container, after leaving the CFS, was found to contain red sanders allegedly substituted for the declared cargo - Appellant had obtained authorisation, verified the exporter's IEC through DGFT and ICEGATE and examined the previous shipping bill, while the adjudicating authority found inadequate verification of antecedents and imposed pe... [Read more]

Customs - Penalty on Customs Broker under Section 114(i) of the Customs Act, 1962 for alleged failure to verify antecedents and KYC particulars of the exporter in an attempted export of prohibited goods - Appellant, a Customs Broker, handled a Shipping Bill for export of floor mats, and the container, after leaving the CFS, was found to contain red sanders allegedly substituted for the declared cargo - Appellant had obtained authorisation, verified the exporter's IEC through DGFT and ICEGATE and examined the previous shipping bill, while the adjudicating authority found inadequate verification of antecedents and imposed penalty, which was upheld in appeal - Appellant contended that there was no evidence of knowledge, participation or control over the container after clearance - Respondent contended that a Customs Broker must know its client and that mens rea is not essential - Whether the alleged failure to verify antecedents and KYC particulars rendered the goods liable to confiscation or amounted to abetment so as to attract penalty under Section 114(i) - HELD - Section 114(i) requires an identifiable act, omission or abetment attributable to the person which rendered the goods liable to confiscation under Section 113, and a mere regulatory lapse is not sufficient. The SCN does not allege that the Appellant participated in the substitution or knowingly filed false documents, the substitution took place after the container left the CFS, and no material connects the Appellant with it. Absence of direct contact with the exporter does not by itself establish knowledge, collusion or facilitation, and the decision relied upon by Revenue is distinguishable since the broker therein acted through a proxy and signed blank documents. Although mens rea is not essential, proof of an intended act, omission or abetment is not dispensed with - The Department failed to establish the requisite nexus and the penalty under Section 114(i) is not sustainable - Penalty under Section 117 of the Customs Act, 1962 on Customs Broker where the alleged omission is insufficient for penalty under Section 114(i) - Whether penalty under Section 117 can be sustained independently - HELD - Section 117 is a residuary provision and cannot be invoked in the absence of an identifiable contravention of the Customs Act or failure to comply with a statutory obligation attracting such penalty. Once the alleged omission is found insufficient to attract Section 114(i), it cannot, without an independently established contravention, sustain a penalty under Section 117 - The penalty imposed under Section 114(i) read with Section 117 is set aside and the appeal is allowed. [Read less]

Kerala Value Added Tax Act, 2003 - Credit for tax deducted at source by the awarder under Section 10 of the KVAT Act, 2003 - Assessment completed without extending credit for tax deducted and remitted – Petitioner, engaged in execution of works contract, raised invoices on the 4th Respondent-awarder, who deducted tax at source while making payments on periodical bills and remitted it to the Government - Petitioner claimed credit for such tax in the returns, but the assessment for the relevant year was completed granting credit only to the extent reflected in the portal of the department and raising a demand along with in... [Read more]

Kerala Value Added Tax Act, 2003 - Credit for tax deducted at source by the awarder under Section 10 of the KVAT Act, 2003 - Assessment completed without extending credit for tax deducted and remitted – Petitioner, engaged in execution of works contract, raised invoices on the 4th Respondent-awarder, who deducted tax at source while making payments on periodical bills and remitted it to the Government - Petitioner claimed credit for such tax in the returns, but the assessment for the relevant year was completed granting credit only to the extent reflected in the portal of the department and raising a demand along with interest - Petitioner challenged the assessment on the ground that credit for the tax deducted and paid by the 4th Respondent was not extended - The Court by an earlier order noted that the 4th Respondent had remitted the amount and issued a certificate to the Petitioner - Whether the assessment, completed without extending credit for the tax deducted at source and remitted by the awarder, can be sustained - HELD - In view of the earlier order, the assessment requires to be revisited, especially as the Petitioner contends that the required certificates in Form 20F under the Kerala Value Added Tax Rules, 2005 were available with it. Pursuant to the orders of the Court, the awarder has provided the details of the tax remitted by it - The assessment order is set aside. The assessing authority shall pass fresh orders, reckoning the details of the tax payments effected by the 4th Respondent and extending credit to the Petitioner for the tax deducted at source - The writ petition is allowed [Read less]

Customs - Evidentiary value of statement of the director of a Custom House Agent recorded under Section 108 of the Customs Act, 1962 where procedure under Section 138B was not followed - Importers imported broken substandard areca nuts declared under a tariff item for processed preparations to claim an exemption Notification, the goods were seized as liable to confiscation and prohibited, and the director of the Appellant, the common CHA, admitted in his statement that the importers were advised to adopt the declared tariff item to clear goods at minimum duty - Appellant contended that a statement which has not undergone t... [Read more]

Customs - Evidentiary value of statement of the director of a Custom House Agent recorded under Section 108 of the Customs Act, 1962 where procedure under Section 138B was not followed - Importers imported broken substandard areca nuts declared under a tariff item for processed preparations to claim an exemption Notification, the goods were seized as liable to confiscation and prohibited, and the director of the Appellant, the common CHA, admitted in his statement that the importers were advised to adopt the declared tariff item to clear goods at minimum duty - Appellant contended that a statement which has not undergone the test of Section 138B cannot be the sole basis for penalty - Whether the statement recorded under Section 108 can be relied upon to impose penalty on the CHA - HELD - Section 108 treats the proceedings as judicial proceedings and a voluntary confession made to a customs officer is admissible as substantive evidence, since customs officers are not police officers and the bar under the Indian Evidence Act on police confessions does not apply, as reaffirmed by the Hon'ble Supreme Court. There was no retraction of the statement by the Appellant, its director or the importers, and no evidence of coercion was produced. The statement stood corroborated by laboratory reports on the nature and moisture content of the goods and by the unretracted statements of the importers - The statement is voluntary, admissible and reliable, and the objection based on Section 138B is rejected - Penalty on Custom House Agent under Sections 112(a) and 114AA of the Customs Act, 1962 for advising misclassification of imported goods - Penalties were imposed on the Appellant CHA and its director for abetting improper importation by knowingly advising incorrect classification to wrongly avail an exemption Notification - Appellant contended that it only reproduced the importers' documents while filing Bills of Entry and that there was no proof of knowledge, intent or mens rea - Whether penalties under Sections 112(a) and 114AA are imposable on the Appellant - HELD - The Appellant admitted advising the importers to adopt the incorrect tariff item to remain competitive and obtain more clearance business, which establishes that the advice was given knowingly and intentionally, and the decisions relied upon are inapplicable as they concern absence of knowledge. A CHA occupies a position of trust and the Hon'ble Supreme Court has held that contravention of its obligations, even without intent, invites punishment under the Regulations. Penalties under Sections 112(a) and 114AA are imposable where there is knowledge and intention on the part of the CHA to let the importer make illegal imports, which the Respondent has proved - The penalties on the Appellant and its director are upheld and the appeals are dismissed. [Read less]

Central Excise - Includibility of sales tax subsidy received under a State Investment Promotion Scheme in the assessable value of goods under Section 4 of the Central Excise Act, 1944 - Appellant, a manufacturer of cement, paid VAT/CST on its sales and was entitled under the Scheme to an investment subsidy and an employment generation subsidy computed as a percentage of the VAT/CST paid, which was not paid in cash but received by way of VAT challans used to discharge output VAT/CST liability of subsequent periods - SCN alleged that the subsidy amounted to retention of the VAT/CST collected from customers and was includible... [Read more]

Central Excise - Includibility of sales tax subsidy received under a State Investment Promotion Scheme in the assessable value of goods under Section 4 of the Central Excise Act, 1944 - Appellant, a manufacturer of cement, paid VAT/CST on its sales and was entitled under the Scheme to an investment subsidy and an employment generation subsidy computed as a percentage of the VAT/CST paid, which was not paid in cash but received by way of VAT challans used to discharge output VAT/CST liability of subsequent periods - SCN alleged that the subsidy amounted to retention of the VAT/CST collected from customers and was includible in the transaction value, the adjudicating authority dropped the demand, and the Commissioner (Appeals) set aside that order and confirmed the demand - Appellant contended that the issue is no longer res integra in view of the decisions of the Tribunal in its favour - Whether the sales tax subsidy is includible in the assessable value of the goods cleared during the relevant period - HELD - The Principal Bench of the Tribunal, on a reference to resolve a difference of opinion, held that the subsidy under the promotion policy does not reduce the selling price, is not an additional consideration, and that the decision of the Hon'ble Supreme Court on subsidy relied upon by Revenue and Section 9 of the State VAT Act have no application. The subsidy does not reduce the sales tax payable by the assessee, since the entire amount of sales tax collected from the customer is paid and not retained, and VAT paid using such challans is to be construed as actual payment of VAT, which cannot be included in the transaction value under Section 4(3)(d). This view has been followed in later decisions of the Tribunal - The sales tax subsidy is not includible in the assessable value, no duty is payable and consequently no penalty is imposable, the impugned order is set aside and the appeal is allowed [Read less]