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Central Excise – Quantum of Cenvat Credit – Eligibility to CENVAT credit on services used in handling, transporting and crushing ore in captive mines – Dept of the view that CENVAT credit of the service tax paid on the input services in handling, transporting and crushing ore in the mines can be allowed only to the extent the ore was transported to and used in the factory - Whether CENVAT credit for service tax paid on input services in handling, transporting and crushing ore in captive mines can be claimed only to the extent that the ore was physically transported to and used in the factory, or whether credit is ava... [Read more]

Central Excise – Quantum of Cenvat Credit – Eligibility to CENVAT credit on services used in handling, transporting and crushing ore in captive mines – Dept of the view that CENVAT credit of the service tax paid on the input services in handling, transporting and crushing ore in the mines can be allowed only to the extent the ore was transported to and used in the factory - Whether CENVAT credit for service tax paid on input services in handling, transporting and crushing ore in captive mines can be claimed only to the extent that the ore was physically transported to and used in the factory, or whether credit is available for services rendered on the entire quantity of ore extracted, including the portion that was discarded as waste in the mines – HELD - The manufacturer is entitled to CENVAT credit for the entire service tax paid on handling, transporting and crushing services of ore, including the portion that was ultimately discarded. The definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 encompasses any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products - The term manufacture includes any process incidental or ancillary to the completion of a manufactured product. The scope of input service extends to services used in processes incidental to manufacture through the expressions directly or indirectly and in or in relation to manufacture. Almost all manufacturing processes involve removal of excess or unwanted material, and the crushing and handling of ore in the mines constitute essential processes incidental and ancillary to the ultimate manufacture of final products. The services rendered on the material that is eventually discarded are integral to the overall manufacturing process as they cannot be separated from the process that produces the useful output. The finding that credit should be limited only to the quantum of ore reaching the factory was incorrect in principle as it improperly bifurcates a single service based on the physical yield rather than evaluating whether the service itself was used in the manufacturing process - The impugned order is set aside and the appeal is allowed [Read less]

Customs - Imposition of Penalty under Section 112(a) of the Customs Act, 1962 when goods are not liable to confiscation – Commissioner (Appeals) dropped proceedings initiated against respondents-importer imposing penalty under section 112(a) of the Customs Act on the ground that the imported goods were held not liable for confiscation as their value was at arm's length and correctly declared, and therefore did not violate section 111(m) of the Customs Act - Whether penalty under section 112(a) of the Customs Act can be imposed when the goods in question are held not liable to confiscation – HELD - The penalty under sec... [Read more]

Customs - Imposition of Penalty under Section 112(a) of the Customs Act, 1962 when goods are not liable to confiscation – Commissioner (Appeals) dropped proceedings initiated against respondents-importer imposing penalty under section 112(a) of the Customs Act on the ground that the imported goods were held not liable for confiscation as their value was at arm's length and correctly declared, and therefore did not violate section 111(m) of the Customs Act - Whether penalty under section 112(a) of the Customs Act can be imposed when the goods in question are held not liable to confiscation – HELD - The penalty under section 112(a) of the Customs Act can be imposed only if the goods are held liable to confiscation. The goods which are neither prohibited nor have any duty implications cannot be confiscated under section 111(m) of the Customs Act for misdeclaration of value. As the charges of over-invoicing of import goods were held as not maintainable and the value of imported goods was determined to be at arm's length without any duty implications, the goods were not liable for confiscation. Consequently, since the foundational requirement for imposing penalty under Section 112(a) was absent, the imposition of such penalty is not permissible. There was no error in the order dropping the proceedings against the respondents as the condition precedent for the penalty did not exist. - The appeals filed by the department are dismissed [Read less]

Customs – Eligibility to benefit of exemption under Notification No. 24/2005-Cus - Non-fulfillment of Conditions – Appellant imported printed circuit board assemblies under Customs Tariff Item 8517 79 10 claiming exemption under Notification No. 24/2005-Cus, Entry 13S - Denial the exemption alleging non-compliance with the prescribed procedure under the Customs (Imports of Goods at Concessional Rate of Duty) Rules, 2017, which requires the importer to furnish an undertaking to the Deputy Commissioner or Assistant Commissioner of Customs that the goods shall not be used in manufacturing specified products and to follow ... [Read more]

Customs – Eligibility to benefit of exemption under Notification No. 24/2005-Cus - Non-fulfillment of Conditions – Appellant imported printed circuit board assemblies under Customs Tariff Item 8517 79 10 claiming exemption under Notification No. 24/2005-Cus, Entry 13S - Denial the exemption alleging non-compliance with the prescribed procedure under the Customs (Imports of Goods at Concessional Rate of Duty) Rules, 2017, which requires the importer to furnish an undertaking to the Deputy Commissioner or Assistant Commissioner of Customs that the goods shall not be used in manufacturing specified products and to follow the requisite documentation and bond procedures – HELD - Appellant contends that although the procedural conditions were not met due to a publisher's error in their reference material, the substantive purpose of the condition was achieved as they were only a trader who sold the goods without using them for manufacturing the excluded items - The exemption Notification No. 24/2005-Cus is a bit unusual as the exemption is available not on the condition that they will be used in a particular fashion but on the condition that they will not be used in a particular fashion viz., in the manufacture of the goods mentioned in clauses (b) to (i) of the entry - While the appellant failed to follow the prescribed procedure and did not furnish the mandatory undertaking, the fundamental purpose underlying the condition—ensuring that the goods were not used to manufacture the excluded products—was actually satisfied in the particular facts of the case as the appellant was merely a trader and had only sold the imported goods without any manufacturing activity - The IGCR Rules scheme is designed to monitor actual use of exempted goods, and when evidence conclusively demonstrates that the goods were not put to prohibited use regardless of procedural non-compliance, the substantive object of the exemption condition stands fulfilled - The demand of duty denying the benefit of the Notification No. 24/2005-Cus cannot be sustained and set aside. Consequently, the demand of interest and the penalties imposed on the appellant also cannot be sustained - The impugned order is set aside and the appeal is allowed [Read less]

Central Excise - Lapsing of CENVAT credit balance under Rule 11(3) of CENVAT Credit Rules, 2004 – Respondent-assessee produced both dutiable and exempted final products from common inputs and had a credit balance as on the date when one product became exempted - Whether the CENVAT credit balance lying as on the date of exemption lapses under Rule 11(3) of the CENVAT Credit Rules, 2004 when more than one final product is manufactured from common inputs and only some products become exempted while others remain dutiable – HELD - The Rule 11(3) applies only when all final products manufactured from the credited inputs bec... [Read more]

Central Excise - Lapsing of CENVAT credit balance under Rule 11(3) of CENVAT Credit Rules, 2004 – Respondent-assessee produced both dutiable and exempted final products from common inputs and had a credit balance as on the date when one product became exempted - Whether the CENVAT credit balance lying as on the date of exemption lapses under Rule 11(3) of the CENVAT Credit Rules, 2004 when more than one final product is manufactured from common inputs and only some products become exempted while others remain dutiable – HELD - The Rule 11(3) applies only when all final products manufactured from the credited inputs become fully exempted from duty. When multiple final products are manufactured from common credited inputs and some become exempted while others remain dutiable, Rule 11(3) does not apply because the credit can still be utilized for payment of duty on the dutiable products in terms of Rule 3(4) of the CENVAT Credit Rules, 2004. The Rule 3(4) of the CCR, 2004 provides that CENVAT credit may be utilised for payment of any duty of excise product. This means that if out of the same CENVAT credit availed inputs, more than one final product is manufactured and out of those final products, one is exempted from duty, CENVAT credit can be utilised for payment of duty for the other final products which are dutiable - The credit balance does not lapse merely because one product becomes exempted. Thus, the CENVAT credit balance as on 01.03.2008 shall not lapse under Rule 11(3) of the CCR, 2004. The Principal Commissioner did not commit any illegality in dropping the demand - The demand for recovery of credit balance as on the exemption date is not sustainable. The Revenue appeal is dismissedrnrn^Recovery of amount equal to percentage of value of exempted goods cleared for domestic market under Rule 6(3) of CENVAT Credit Rules, 2004 - Whether the department can demand recovery of an amount equal to ten percent to five percent of the value of exempted final products cleared for domestic consumption under Rule 6(3) of CENVAT Credit Rules, 2004 when the manufacturer has not exercised such an option and has maintained separate accounts without wrongly availing credit on inputs used for exempted goods – HELD – The Rule 6(3) merely offers options to manufacturers who do not maintain separate accounts for inputs used in manufacture of dutiable and exempted goods. When a manufacturer maintains proper separate accounts and has not taken credit on inputs used for exempted goods, the Department cannot demand the percentage amount under Rule 6(3) as the manufacturer has not exercised any such option. The statutory scheme does not vest the department with power to choose an option on behalf of the manufacturer - Further, the Department's acceptance in permitting re-credit of amounts mistakenly paid for a few months estops it from contending that an option was exercised for the entire year. Merely depositing the percentage amount out of abundance of caution for certain months cannot be construed as exercise of an option binding for the entire financial year - The demand for recovery under Rule 6(3) for domestic clearances is not sustainable.rnrn^Recovery of CENVAT credit for inputs used in manufacture of exempted goods exported under bond under Rule 6(3) of CENVAT Credit Rules, 2004 - Whether the department can demand recovery of CENVAT credit or amount equal to percentage of value of exempted final products that have been exported under bond when such exports were properly authorized and Rule 6(6)(v) of CENVAT Credit Rules, 2004 provides exemption from the bar on credit for exported goods – HELD - The Rule 6(6)(v) of the CCR, 2004 creates an exemption from the bar on CENVAT credit imposed by Rule 6(1) to 6(4) specifically in respect of excisable goods removed without payment of duty for export under bond. The non-allowability of input credit under Rules 6(1) to 6(4) applies only when inputs used in manufacture of exempted final products are cleared for home consumption, not when exempted final products are cleared for export under bond – Further, the SCN failed to allege that specific notifications prohibited export of exempted goods under bond, making it improper to raise this contention in appeal. All exports were properly authorized through ARE certificates countersigned by proper officers and accepted by the department without challenge. The Department's acceptance in approving exports under bond precludes it from subsequently demanding credit reversal - The demand for recovery of credit for exempted goods exported under bond is set aside. [Read less]

Customs – Valuation, Related Party Transactions – Supply from an associated enterprise - Rejection of Declared Transaction Value based on International Competitive Bidding – Import of goods under comprehensive engineering, procurement and construction contracts following international competitive bidding process for Solar Photovoltaic Power Project - Rejection of declared value of imported goods redetermination under Rule 12 of the Customs Valuation Rules – HELD - Where contracts between importers and suppliers encompass both supply and service components including design, engineering, manufacturing, procurement, ... [Read more]

Customs – Valuation, Related Party Transactions – Supply from an associated enterprise - Rejection of Declared Transaction Value based on International Competitive Bidding – Import of goods under comprehensive engineering, procurement and construction contracts following international competitive bidding process for Solar Photovoltaic Power Project - Rejection of declared value of imported goods redetermination under Rule 12 of the Customs Valuation Rules – HELD - Where contracts between importers and suppliers encompass both supply and service components including design, engineering, manufacturing, procurement, packing, forwarding, supply, transportation, installation, testing, commissioning and performance guarantees at a lump-sum price determined through international competitive bidding awarded to the lowest bidder, the relationship between the parties does not influence pricing, thus making the declared transaction value acceptable under Rule 3 of the Customs Valuation Rules - The contractual obligations encompass comprehensive engineering, procurement, construction services and performance guarantees at lump-sum prices determined through transparent and independent decision-making. The evidence relied upon by the Revenue comprises computer printouts of overseas banker letters lacking certification under Section 138C(4) of the Customs Act, 1962, thereby losing evidentiary value. The identical factual situations in earlier appeals involving the same investigation and evidence have been decided by the Tribunal and upheld by the Supreme Court, establishing that declared transaction values could not be rejected - The Principal Commissioner correctly accepted the declared transaction value and rejected the proposed rejection under Rule 12 of the Customs Valuation Rules, 1962, as there exists no valid basis to challenge the genuineness or accuracy of the invoiced values when derived from arms length transactions conducted through competitive international bidding - The impugned order rejecting the show cause notice is upheld and the Revenue appeals are dismissedrnrnConfiscation and Penalties - Whether goods are liable to confiscation and whether penalties can be imposed when there is no misdeclaration of value – HELD - Since the imported goods were established to be correctly valued and declared by the importers, confiscation under Section 111(m) of the Customs Act is not permissible as the goods are neither prohibited nor have any duty implications - Consequently, penalty under Section 112(a) of the Customs Act cannot be imposed as it is contingent upon confiscation of goods - Further, penalty under Section 114AA of the Customs Act cannot be imposed on the importer parties since the charges of over-invoicing have been found unmaintainable and no false or incorrect declarations exist in the import documentation - When goods are held not liable for confiscation due to correct valuation and declaration, no ancillary penalties can follow - The appeals are dismissed. [Read less]

GST - Intermediary Services or Import of Service, Procurement Hub Services - Appellant-company entered into a procurement agreement with Foreign Company to provide comprehensive procurement services including identification, selection, and approval of suppliers, negotiation of terms, and facilitation of supply from selected suppliers - Appellant initially pays IGST under reverse charge treating it as import of services, subsequently seeks refund claiming the services constitute intermediary services with place of supply outside India - Whether services provided by a foreign entity comprising supplier identification, selec... [Read more]

GST - Intermediary Services or Import of Service, Procurement Hub Services - Appellant-company entered into a procurement agreement with Foreign Company to provide comprehensive procurement services including identification, selection, and approval of suppliers, negotiation of terms, and facilitation of supply from selected suppliers - Appellant initially pays IGST under reverse charge treating it as import of services, subsequently seeks refund claiming the services constitute intermediary services with place of supply outside India - Whether services provided by a foreign entity comprising supplier identification, selection, approval, negotiation of procurement terms, and facilitation of supply between the recipient and third-party suppliers constitute intermediary services under section 2(13) of the IGST Act, 2017, or constitute import of services – HELD - The CBIC Circular 159/15/2021-GST establishes that intermediary services require four essential prerequisites: minimum of three parties in the transaction, two distinct supplies with ancillary supply being merely facilitative, the service provider maintaining character of agent or broker with only supportive role, and crucially, the service provider must not supply goods or services on principal-to-principal basis on its own account - In the present case, although three parties exist in form, the foreign entity renders comprehensive procurement services on its own account as an independent contractor functioning as centralized procurement hub for the entire multinational group, providing core services to the group rather than merely arranging or facilitating supplies between two independent principals. The relationship constitutes principal-to-principal service provision on own account rendering the definition's exclusionary clause applicable, distinguishing it from true intermediary arrangements where the facilitator merely connects unrelated parties without providing substantive services independently - The outsourcing or sub-contracting of services on principal-to-principal basis does not constitute intermediary services – The services received by the appellant are in the nature of an import of service and the place of supply shall be in India. Thus, it will not come within the purview of Section 13(8)(b) of the IGST Act, and definition provided in Section 2(13) of the Act - The orders of first appellate authority is confirmed and the appeal is dismissed [Read less]

Customs - Retrospective application of Notification to pre-notification shipments – Petitioner imports platinum alloy jewellery which was dispatched on 30th and 31st March 2026 and arrived at Indian ports on 1st and 2nd April 2026 at 01:39 AM – The Notification No. 02/2026-27 dated 01st April, 2026 changing the import policy from "free" to "restricted" for such goods is published in the e-Official Gazette on 2nd April 2026 at 20:52:28 hours - Customs authorities refuse to clear the goods citing the new restriction, though the goods had arrived before the notification was published - Whether a notification restricting i... [Read more]

Customs - Retrospective application of Notification to pre-notification shipments – Petitioner imports platinum alloy jewellery which was dispatched on 30th and 31st March 2026 and arrived at Indian ports on 1st and 2nd April 2026 at 01:39 AM – The Notification No. 02/2026-27 dated 01st April, 2026 changing the import policy from "free" to "restricted" for such goods is published in the e-Official Gazette on 2nd April 2026 at 20:52:28 hours - Customs authorities refuse to clear the goods citing the new restriction, though the goods had arrived before the notification was published - Whether a notification restricting imports can be applied retrospectively to goods that have already been dispatched and arrived at Indian ports before the notification was published in the Official Gazette – HELD – The said Notification cannot be applied retrospectively to the goods in question. A notification or subordinate legislation becomes enforceable only upon publication in the Official Gazette in a manner reasonably calculated to bring it to the notice of all affected persons - The requirement of publication in the Gazette is not an empty formality but an act by which an executive decision is transformed into law. With the shift from analog to digital publication of gazettes, the exact date and time of electronic publication assumes significance. Delegated legislation can only be prospective in nature unless the parent statute expressly vests the authority with power to make rules with retrospective effect. Under the Foreign Trade (Development & Regulation) Act, 1992, no such power exists to make amendments retrospectively - Since the goods arrived at Indian ports on 2nd April 2026 at 01:39 AM, approximately twenty hours before the Notification was published at 20:52:28 hours on the same date, the Notification cannot travel backward in time to affect these consignments. The goods were imported prior to the notification coming into force and are therefore liable to be cleared in accordance with the conditions that prevailed before the notification's issuance - The petitioner's goods be processed for release immediately without requiring import authorization or license under the impugned notification, subject to fulfillment of other official procedures - The writ petition is allowed [Read less]

Service Tax - Classification of service - Support Service vs. Renting of Immovable Property Service - Service Tax liability on licensing of Railway Space for advertisement – Respondent is engaged in providing advertisement services through hoardings and billboards obtained space from railways under license agreements by tender process and paid license fees for the right to display advertisements at railway stations – Demand of service tax under Reverse Charge contending that railways were providing Business Support Services - The adjudicating authority dropped the proceedings holding that the activity does not constitu... [Read more]

Service Tax - Classification of service - Support Service vs. Renting of Immovable Property Service - Service Tax liability on licensing of Railway Space for advertisement – Respondent is engaged in providing advertisement services through hoardings and billboards obtained space from railways under license agreements by tender process and paid license fees for the right to display advertisements at railway stations – Demand of service tax under Reverse Charge contending that railways were providing Business Support Services - The adjudicating authority dropped the proceedings holding that the activity does not constitute support service but falls under renting of immovable property service – HELD - The definition of support service under section 65B(49) contemplates outsourcing of functions that entities ordinarily carry out themselves. For an activity to qualify as support service including advertisement and promotion, the service provider must be ordinarily engaged in such activity but may obtain it through outsourcing - In the present factual matrix, there is no evidence that railways were engaged in carrying out advertisement or promotion activities that they subsequently outsourced to the respondent. The agreements do not categorically state that railways would provide support services; rather, they clearly indicate the letting out of specified demarcated space for installation of hoardings and display of advertisements - Once it is established that railways as service provider are not providing support services, the service tax, if any, would be payable on forward charge basis and not under RCM - The alternative classification of the activity as renting of immovable property service is correct, as railways provided specified demarcated space to the respondent for putting up hoardings and billboards against payment of license fee, which falls squarely within the definition of renting of immovable property service – Further, invocation of extended period was not tenable as there was no statutory requirement to declare services received not under RCM in service tax returns, and therefore non-declaration of license fees would not constitute suppression of material facts - The demand of service tax is not sustainable as the activity does not constitute support service but falls under renting of immovable property service which is payable on forward charge basis. The proceedings initiated are rightly dropped – The Revenue appeal is dismissed [Read less]

Service tax liability on royalty received from franchisees - Whether service tax demand can be sustained on royalty received from franchisees when the appellant claims that not all royalty amounts were received by it and that it had paid full service tax on amounts actually received – HELD - The relied upon document clearly indicated the amounts received by the appellant and the demand of service tax was calculated only on such received amounts as recorded in the statement. The appellant failed to maintain details of royalty amounts in its accounting system and admitted during statement that the listed amounts represente... [Read more]

Service tax liability on royalty received from franchisees - Whether service tax demand can be sustained on royalty received from franchisees when the appellant claims that not all royalty amounts were received by it and that it had paid full service tax on amounts actually received – HELD - The relied upon document clearly indicated the amounts received by the appellant and the demand of service tax was calculated only on such received amounts as recorded in the statement. The appellant failed to maintain details of royalty amounts in its accounting system and admitted during statement that the listed amounts represented gross receipts of franchisee centers on which royalty was received. The appellant's submission that some payments were not received is rejected as the appellant provided no supporting details for this claim. Mere assertions without documentary evidence cannot override the established facts on record that royalty amounts were actually received – The appeal is dismissed [Read less]

Customs - Abetment in smuggling - Applicability of Section 112(a) of the Customs Act, 1962 when actual importer is not identified or prosecuted - Show cause notice proposing confiscation of smuggled goods and imposition of penalties against the appellants alleging involvement in attempted smuggling of foreign cigarettes concealed in declared cargo - Whether penalty for abetment under Section 112(a) of the Customs Act, 1962 can be imposed against persons when the actual importer of the goods is neither identified nor prosecuted, and when the evidence against them consists only of uncorroborated and subsequently retracted st... [Read more]

Customs - Abetment in smuggling - Applicability of Section 112(a) of the Customs Act, 1962 when actual importer is not identified or prosecuted - Show cause notice proposing confiscation of smuggled goods and imposition of penalties against the appellants alleging involvement in attempted smuggling of foreign cigarettes concealed in declared cargo - Whether penalty for abetment under Section 112(a) of the Customs Act, 1962 can be imposed against persons when the actual importer of the goods is neither identified nor prosecuted, and when the evidence against them consists only of uncorroborated and subsequently retracted statements without proper investigation – HELD - The penalty under Section 112(a) cannot be sustained when the actual committer i.e. the actual importer is not found or charges against him for improper importation are not established. The legal definition of abetment requires the existence of at least two persons involved - one committer and one abetter. Abetment occurs only when there is active assistance, encouragement, command or procurement by one person to another for commission of an offence. An abetter cannot conspire with himself to commit a crime - In customs smuggling cases, the alleged crime is the improper importation and the importer is the committer. In the absence of the identification and prosecution of the actual importer, there cannot be any penal action for abetment merely on other persons who are otherwise least interested in the act of import. The court further observes that uncorroborated statements which are subsequently retracted, coupled with half-hearted investigation that fails to pursue crucial leads such as verification of call history and interrogation through cross-examination, cannot form the basis for imposing penalty on appellants - The investigative process in the instant case appeared to be carried out as a formality to exonerate the person whose phone number was mentioned while targeting other parties, which does not constitute fair and lawful investigation. The adjudicating authority's failure to consider the detailed replies and explanations filed by the appellants and the omission to mention the actual importer further demonstrates procedural irregularity and absence of proper evidence - The impugned order levying penalty under Section 112(a) against the appellants is set aside – The appeal is allowed [Read less]

Customs - Customs Broker Licensing Regulations, 2013 - The licence was initially suspended, then revoked, and thereafter a show cause notice was issued proposing revocation of licence and forfeiture of security deposit. The inquiry officer established violations of Regulations 11(a), 11(b), 11(n) and 17(9) of the Customs Broker Licensing Regulations, 2013 – HELD - The materials on record sufficiently establish failure of due diligence, supervision and verification expected under the regulations - The statements recorded under Section 108 of the Customs Act indicate that Delhi operations relating to customs clearance acti... [Read more]

Customs - Customs Broker Licensing Regulations, 2013 - The licence was initially suspended, then revoked, and thereafter a show cause notice was issued proposing revocation of licence and forfeiture of security deposit. The inquiry officer established violations of Regulations 11(a), 11(b), 11(n) and 17(9) of the Customs Broker Licensing Regulations, 2013 – HELD - The materials on record sufficiently establish failure of due diligence, supervision and verification expected under the regulations - The statements recorded under Section 108 of the Customs Act indicate that Delhi operations relating to customs clearance activities were substantially coordinated through intermediaries with inadequate supervision by the licence holder. The evidence further indicates that exporters connected with the disputed exports were processed without adequate verification of antecedents and credentials, and the customs work was being carried out through freight forwarding associates and G-card holders whose activities were not effectively monitored - While the evidence falls short of conclusively establishing deliberate collusion, sharing of drawback amounts, or conscious participation in fraudulent scheme, permitting customs work to be carried out through inadequately supervised intermediaries and failure to properly verify exporters constitute serious lapses attracting disciplinary action under CBLR - The Regulation 20(7) confers discretion upon the adjudicating authority either to revoke licence or impose lesser penal consequences depending upon the gravity of violations established in a given case. The adjudicating authority consciously refrained from revoking the licence after noticing absence of conclusive evidence establishing deliberate collusion, and instead exercised discretion by ordering forfeiture of security deposit, which in the facts and circumstances cannot be said to be arbitrary, disproportionate or contrary to law - The appeal filed by the customs broker stands dismissed, and the departmental appeals challenging revocation of suspension and non-revocation of licence are also dismissed – The appeal is disposed of [Read less]

Customs - Valuation - Rejection of Declared Transaction Value under Rule 12 of the Customs Valuation Rules, 2007 and re-determination under Rule 5 – HELD - The rejection of declared transaction value cannot be sustained merely on the ground that it appears lower than certain other imports without producing reliable evidence demonstrating that the declared value is incorrect or that additional consideration has flowed from the importer to the supplier. The acceptance of enhanced value at the time of clearance under compulsion to secure release of goods does not preclude the importer from subsequently challenging the same,... [Read more]

Customs - Valuation - Rejection of Declared Transaction Value under Rule 12 of the Customs Valuation Rules, 2007 and re-determination under Rule 5 – HELD - The rejection of declared transaction value cannot be sustained merely on the ground that it appears lower than certain other imports without producing reliable evidence demonstrating that the declared value is incorrect or that additional consideration has flowed from the importer to the supplier. The acceptance of enhanced value at the time of clearance under compulsion to secure release of goods does not preclude the importer from subsequently challenging the same, as there is no estoppel in taxation matters. Where goods consist of mixed consignments of used garments which inherently vary in quality, condition and composition, adoption of a uniform benchmark value without establishing comparability of goods in terms of quality, condition or commercial level is contrary to the scheme of the valuation rules. In the absence of any detailed comparison or market survey conducted to appraise the value, rejection of transaction value is liable to be set aside - The enhancement of value carried out is set aside and the declared value is ordered to be accepted – The appeal is partly allowedrnrnConfiscation - Restricted Goods without License - Import of second-hand garments restricted under Foreign Trade Policy without valid DGFT license – HELD - Import of goods without requisite authorization or license under the Foreign Trade Policy constitutes a violation of import policy and renders the goods liable to confiscation under Section 111(d) of the Customs Act, 1962. While procedural requirements such as fumigation and compliance with health and safety regulations are prescribed, these do not override the substantive requirement under the Foreign Trade Policy that import of second-hand goods other than capital goods is restricted and requires valid license. However, in the absence of any evidence of misdeclaration with respect to description, quantity or value, confiscation under Section 111(m) is not sustainable. Accordingly, confiscation is upheld only under Section 111(d) of the Customs Act.rnrnRedemption Fine - Section 125 of the Customs Act, 1962 - Proportionality and quantum – HELD - Redemption fine should correspond broadly to the margin of profit available to the importer and should not be fixed arbitrarily without evidence. In the absence of any deliberate misdeclaration or intent to evade duty, and given the nature of trade in used clothing which is highly heterogeneous and involves limited and uncertain profit margins, fixation of redemption fine at a higher percentage is not justified. The socially sensitive end-use of goods, coupled with the absence of any reliable market study or evidence of higher realizable value, is relevant while determining quantum of fine. Redemption fine must be reasonable and proportionate to the circumstances of the case and should bear nexus to the margin of profit without assuming a punitive character. Accordingly, redemption fine at 10 per cent of the declared invoice value is held to be fair, reasonable and proportionate to the facts and circumstances of the case. [Read less]

Customs - Limitation in appeals under Customs Act – Rejection of appeals as time-barred without determining date of communication – HELD - The rejection of appeals as time-barred cannot be sustained because the impugned orders lack any discussion or evidence regarding the crucial date of communication, rendering the conclusion regarding delay speculative and unsustainable in law. Further, there is no methodology or working provided for arriving at the alleged delay, and the uniform application of a ninety-one-day delay across all cases reflects a mechanical and non-reasoned approach that violates principles of natural ... [Read more]

Customs - Limitation in appeals under Customs Act – Rejection of appeals as time-barred without determining date of communication – HELD - The rejection of appeals as time-barred cannot be sustained because the impugned orders lack any discussion or evidence regarding the crucial date of communication, rendering the conclusion regarding delay speculative and unsustainable in law. Further, there is no methodology or working provided for arriving at the alleged delay, and the uniform application of a ninety-one-day delay across all cases reflects a mechanical and non-reasoned approach that violates principles of natural justice. The appellant's contention regarding computation of limitation was not examined by the lower appellate authority, resulting in non-speaking orders contrary to principles of natural justice. Accordingly, the impugned Orders-in-Appeal are set aside and the matter is remanded to the Commissioner (Appeals) to ascertain the actual date of communication, recompute the limitation period in accordance with law, and consider the applicability of the condonable period, following which the appeals shall be admitted and decided on merits if delay is found within condonable limits – The appeals are allowed by remand [Read less]

GST - Departmental Appeals to Appellate Tribunal - Delegation of Authority – Appeal filed by Assistant Commissioner before the Appellate Tribunal without proper authorization from the Commissioner as mandated under Section 112 of the CGST act, 2017, and subsequently delegates the matter to his Superintendent – HELD - The officer-in-charge of filing has not been authorized by the Commissioner as mandated under Sub-Section (3) of Section 112 of the CGST Act, 2017. Further, a delegated power cannot be further delegated - Registry, GSTAT is directed that let the issue be communicated to the Pr. Commissioner, Delhi South in... [Read more]

GST - Departmental Appeals to Appellate Tribunal - Delegation of Authority – Appeal filed by Assistant Commissioner before the Appellate Tribunal without proper authorization from the Commissioner as mandated under Section 112 of the CGST act, 2017, and subsequently delegates the matter to his Superintendent – HELD - The officer-in-charge of filing has not been authorized by the Commissioner as mandated under Sub-Section (3) of Section 112 of the CGST Act, 2017. Further, a delegated power cannot be further delegated - Registry, GSTAT is directed that let the issue be communicated to the Pr. Commissioner, Delhi South intimating that a delegated power cannot be further delegated - The appeal is transferred to the appropriate bench of the Tribunal [Read less]

Service Tax – Taxability of Corporate Guarantee without consideration - Levy of service tax on Corporate Guarantee at an arbitrary rate of 3.5 percent on the amount of guarantee, without any consideration being charged by the appellant - Whether the provision of Corporate guarantee by a company to its associated enterprises, without charging any commission, interest, or fees, constitutes a taxable service under the Finance Act, 1994 and leviable to service tax – HELD - The provision of corporate guarantee without consideration does not constitute a taxable service. The definition of service under Section 65B(44) of the... [Read more]

Service Tax – Taxability of Corporate Guarantee without consideration - Levy of service tax on Corporate Guarantee at an arbitrary rate of 3.5 percent on the amount of guarantee, without any consideration being charged by the appellant - Whether the provision of Corporate guarantee by a company to its associated enterprises, without charging any commission, interest, or fees, constitutes a taxable service under the Finance Act, 1994 and leviable to service tax – HELD - The provision of corporate guarantee without consideration does not constitute a taxable service. The definition of service under Section 65B(44) of the Finance Act, 1994 mandates that an activity must be carried out by a person for another for consideration to qualify as a taxable service - In the present case, the SCN itself acknowledges that no commission, interest, or fees were charged by the appellant for providing the corporate guarantee. The appellant is neither a banking company nor a financial institution, and the activity of providing guarantee without any consideration does not fall within the definition of banking and other financial services - The reliance on non-monetary benefits cannot extend to ascertainment of service as such benefits are relevant only for determining assessable value, not for determining whether a service exists. Since no consideration flows from the beneficiary to the guarantor, the essential element required to constitute a taxable service is absent - The demand for service tax on corporate guarantee is quashed and the appeal is allowed [Read less]

Service Tax - Invocation of extended period of limitation based on suppression of facts when a similar show cause notice has already been issued for an earlier period on identical grounds - Whether the extended period of limitation can be invoked to issue a second show cause notice based on suppression of facts when an earlier show cause notice on the same issue and grounds has already been issued to the assessee for a preceding period, with both notices containing identical or similar factual foundations – HELD - The extended period of limitation cannot be invoked to issue the second show cause notice. When the relevant... [Read more]

Service Tax - Invocation of extended period of limitation based on suppression of facts when a similar show cause notice has already been issued for an earlier period on identical grounds - Whether the extended period of limitation can be invoked to issue a second show cause notice based on suppression of facts when an earlier show cause notice on the same issue and grounds has already been issued to the assessee for a preceding period, with both notices containing identical or similar factual foundations – HELD - The extended period of limitation cannot be invoked to issue the second show cause notice. When the relevant facts came into the knowledge of the Department at the time of issuing the first SCN, the Department could not subsequently issue another SCN invoking the extended period of limitation on the same or similar facts, as this would amount to treating the facts as suppressed by the assessee when they were already in the knowledge of the authorities - The comparison of the computation tables in both notices revealed that the demand was identically made on the basis of similar documents, thereby negating any element of fresh suppression. Since there was no suppression of facts, the penalty imposed under Sections 77(1)(c) and 78 of the Finance Act, 1994, could not be sustained either - The impugned order is set aside, and the show cause notice issued invoking the extended period of limitation is quashed - The appeal is allowed [Read less]

Service Tax - Liability of cable operators to pay service tax independent of Multi-System Operators MSOs - Whether a cable operator, who receives signals from a multi-system operator and re-transmits them to subscribers, is liable to pay service tax independently or whether the payment of service tax by the MSO exempts the cable operator from such liability – HELD - The definition of cable operator under Section 2(aa) of the Cable Television Networks (Regulation) Act, 1995, includes any person who provides cable service through a cable television network and controls or is responsible for its management and operation. Th... [Read more]

Service Tax - Liability of cable operators to pay service tax independent of Multi-System Operators MSOs - Whether a cable operator, who receives signals from a multi-system operator and re-transmits them to subscribers, is liable to pay service tax independently or whether the payment of service tax by the MSO exempts the cable operator from such liability – HELD - The definition of cable operator under Section 2(aa) of the Cable Television Networks (Regulation) Act, 1995, includes any person who provides cable service through a cable television network and controls or is responsible for its management and operation. The re-transmission of broadcast television signals by a cable operator to multiple subscribers through its own closed transmission paths constitutes provision of cable service, making the cable operator a taxable service provider. The service tax chain extends from the customer to the broadcaster, and both the multi-system operator and the cable operator are liable to pay service tax on their respective services - The contention that double taxation occurs is without merit as the CENVAT Credit Rules, 2004, provide mechanism for credit of service tax paid on input services against output service tax liability. The contention that service tax is paid twice on the same service is rejected as the statutory definition of "taxable service" clearly includes services provided by both MSOs and cable operators to "any person" - The appellant's liability to pay service tax on services rendered to subscribers stands confirmed - The appeal is disposed of with adjustment of excess payment of tax made during the preceding financial year against the current period's liability – The appeal is disposed ofrnrn^Branded Service Exemption - Whether a cable operator providing unbranded cable services is entitled to exemption under Notification No. 33/2012-ST dated 20.06.2012, which provides threshold exemption of ten lakh rupees for taxable services of aggregate value not exceeding that amount – HELD - A cable operator providing unbranded cable services is entitled to claim exemption under Notification No. 33/2012-ST, subject to fulfillment of the conditions specified therein. The exemption applies to services where there is no brand name relation to ultimate customers and the service provider is merely transmitting signals received from upstream service providers. However, the threshold exemption is not available to the cable operator when the aggregate value of taxable services rendered exceeds ten lakh rupees in the preceding financial year - The threshold is determined on a yearly basis with reference to the preceding financial year's turnover, and once exceeded, the exemption does not apply for that year – The appellant is not entitled to avail the threshold exemption under Notification No. 33/2012-ST for the relevant period as the turnover exceeded the prescribed limit.rnrn^CENVAT Credit Eligibility - Whether service tax paid by a multi-system operator on input services provided to a cable operator is available as CENVAT credit to the cable operator without compliance with procedural requirements of registration and filing of statutory returns – HELD - The CENVAT credit on service tax paid on input services is admissible to a service provider only upon strict compliance with the provisions of the CENVAT Credit Rules, 2004. The credit must be claimed and crystallized by filing statutory ST-3 returns within the prescribed time limit and maintaining proper CENVAT credit records. The non-filing of statutory returns within the prescribed period does not preserve the right to claim credit indefinitely - The appellant is not eligible for CENVAT credit due to non-compliance with procedural requirements of registration, timely filing of statutory returns, and maintenance of CENVAT records as mandated under the CENVAT Credit Rules, 2004. [Read less]

Service Tax on Gold Bullion Consignment - Profit Margin as Taxable Value - Appellant imports gold bullion on consignment basis pursuant to RBI Master Circular, retains the gold in its vaults, and sells it at a later date, settling with the supplier based on the difference between the sales price and import price, which constitutes the bank's profit margin - Whether the profit margin earned by the bank from the sale of imported gold bullion can be subjected to service tax on the ground that the bank acts as a consignment agent to the foreign supplier – HELD - No service is being rendered by the bank to the supplier; rathe... [Read more]

Service Tax on Gold Bullion Consignment - Profit Margin as Taxable Value - Appellant imports gold bullion on consignment basis pursuant to RBI Master Circular, retains the gold in its vaults, and sells it at a later date, settling with the supplier based on the difference between the sales price and import price, which constitutes the bank's profit margin - Whether the profit margin earned by the bank from the sale of imported gold bullion can be subjected to service tax on the ground that the bank acts as a consignment agent to the foreign supplier – HELD - No service is being rendered by the bank to the supplier; rather, the bank purchases and sells the gold bullion and after sale settles with the supplier based on the payment terms stipulated in the consignment agreement - Under the consignment arrangement, the gold remains in the possession and ownership of the supplier until the gold is purchased and paid for by the bank, and the bank merely earns a profit margin on the resale of the gold coins - Although the definition of 'Clearing and Forwarding Agency' includes consignment agent, in the instant case no such service is being rendered by the bank to the supplier and no consideration is being received from the supplier for any service. Therefore, the profit margin cannot be considered as the taxable value as there is no service being rendered by the bank as a consignment agent - The impugned order levying service tax on the profit margin is set aside and the appeal is allowed [Read less]

Service Tax - Taxability of Complimentary accommodation services provided to employees without consideration – Audit observed that the appellant provided complimentary rooms to staff members who were staying at the hotel but not paying service tax on the accommodation services provided free of cost to staff members - Whether service tax is payable on complimentary rooms provided by a hotel to its employees during their duty period – Demand for reversal of input tax credit for inputs used in providing such complimentary services – HELD - Since no consideration is received by the hotel for providing complimentary accom... [Read more]

Service Tax - Taxability of Complimentary accommodation services provided to employees without consideration – Audit observed that the appellant provided complimentary rooms to staff members who were staying at the hotel but not paying service tax on the accommodation services provided free of cost to staff members - Whether service tax is payable on complimentary rooms provided by a hotel to its employees during their duty period – Demand for reversal of input tax credit for inputs used in providing such complimentary services – HELD - Since no consideration is received by the hotel for providing complimentary accommodation services, no service tax is payable - The adjudicating authority has taken a contradictory stance by holding that no consideration has been received and therefore no service tax is payable, while simultaneously holding that the service is an exempted service and requiring reversal of input tax credit - A service must have consideration to be taxable or exempt, and since there is no consideration received for the complimentary accommodation, the service cannot be classified as either taxable or exempted. The revenue cannot place itself in two boats simultaneously by denying taxation on the ground of no consideration while demanding reversal of input tax credit on the basis of exemption. Therefore, the question of reversal of input tax credit does not arise, and the demand for recovery of input tax credit from the assessee is not sustainable - The impugned order is set aside to the extent it required reversal of input tax credit - The appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed [Read less]

Customs - Classification of gold neck chains in running length as articles of jewellery – Importer imports gold neck chains in running lengths ranging from 2.8 feet to 206 feet from Indonesia, classifying them under Customs Tariff Heading 7113 (articles of jewellery) with nil basic customs duty under Notification No. 46/2011-Cus. dated 01.06.2011 - Customs authorities reclassify the goods under Customs Tariff Heading 7108 (gold in semi-manufactured forms) proposing confiscation and penalty – Whether gold neck chains in running length, which require only cutting to customer-specified length and attachment of hooks to be... [Read more]

Customs - Classification of gold neck chains in running length as articles of jewellery – Importer imports gold neck chains in running lengths ranging from 2.8 feet to 206 feet from Indonesia, classifying them under Customs Tariff Heading 7113 (articles of jewellery) with nil basic customs duty under Notification No. 46/2011-Cus. dated 01.06.2011 - Customs authorities reclassify the goods under Customs Tariff Heading 7108 (gold in semi-manufactured forms) proposing confiscation and penalty – Whether gold neck chains in running length, which require only cutting to customer-specified length and attachment of hooks to become finished wearable articles, are classifiable as articles of jewellery under Customs Tariff Heading 7113 or as semi-manufactured gold under Customs Tariff Heading 7108 – HELD - The Chapter Note 9(a) to Chapter 71 explicitly includes necklaces as articles of jewellery, and the impugned goods are gold neck chains intended for personal adornment. The Rule 2(a) of the General Rules of Interpretation provides that incomplete or unfinished articles attaining the essential character of a complete finished article shall be classified under the heading of the finished article – From the photographs of the goods it is seen that gold neck chains in running length have substantially attained the form of finished articles requiring only minor finishing operations of cutting and hook attachment, which do not alter the essential character of the goods as neck chains. The mere cutting or slitting of a product without change in its name, character or end-use does not constitute manufacture and does not warrant reclassification to a different commodity head. Consequently, the goods are not liable for confiscation under Section 111(d) and 111(m) of the Customs Act, 1962, and the imposition of redemption fine and penalty becomes untenable – The impugned order is set aside to the extent of imposition of redemption fine and penalty, and the appeal is disposed of [Read less]

GST - Transitional input tax credit - Procedural defect – Denial of transitional input tax credit claimed under Section 140 of the CGST Act on physical stock available as on 30.06.2017 - Demand without considering the petitioner's replies submitted on multiple occasions. The order was uploaded of which the petitioner remained unaware. The respondent authority froze the petitioner's bank account through an attachment notice – HELD - The assessment order cannot be sustained in its present form as the respondent authority has not carried out the requisite exercise of substantiating the availability and liquidation of stoc... [Read more]

GST - Transitional input tax credit - Procedural defect – Denial of transitional input tax credit claimed under Section 140 of the CGST Act on physical stock available as on 30.06.2017 - Demand without considering the petitioner's replies submitted on multiple occasions. The order was uploaded of which the petitioner remained unaware. The respondent authority froze the petitioner's bank account through an attachment notice – HELD - The assessment order cannot be sustained in its present form as the respondent authority has not carried out the requisite exercise of substantiating the availability and liquidation of stock as on 30.06.2017 through proper documentary evidence and comparison with subsequent return filings. The petitioner had already availed input tax credit that was transitioned under section 140 of the GST enactments, and the blanket denial without forensic examination represents a procedural defect - A proper examination should have compared the stock position on 30.06.2017 with GSTR-2A filings for succeeding months to determine the correctness of the transitional credit claim. The authority's failure to consider the petitioner's detailed replies submitted during the proceedings further vitiates the order - The writ petition is disposed of by remitting the case back to the respondent authority for fresh consideration and de novo adjudication on merits [Read less]

GST - Jurisdiction of State Tax Authority to initiate enforcement action against Central GST registered taxpayer – Petitioner, registered under Central GST authorities was subjected to an enforcement inspection by State Tax authorities on the place of business, following which assessment orders were passed under Section 74 of the CGST Act - Whether State Tax authorities have the jurisdiction to initiate enforcement action against a taxpayer who is registered under Central GST authorities despite the taxpayer's registration being with Central authorities – HELD - The intelligence-based enforcement action can be initiate... [Read more]

GST - Jurisdiction of State Tax Authority to initiate enforcement action against Central GST registered taxpayer – Petitioner, registered under Central GST authorities was subjected to an enforcement inspection by State Tax authorities on the place of business, following which assessment orders were passed under Section 74 of the CGST Act - Whether State Tax authorities have the jurisdiction to initiate enforcement action against a taxpayer who is registered under Central GST authorities despite the taxpayer's registration being with Central authorities – HELD - The intelligence-based enforcement action can be initiated by either Central or State Tax administrations notwithstanding the taxpayer's assignment to the other administration. In view of Supreme Court judgment in Armour Security (India) Limited, there exists no error in the State authorities initiating action as they are well within their jurisdiction to do so - Where disputed questions of facts are involved, the issue of classification cannot be adjudicated under writ jurisdiction. The remedy available to an aggrieved taxpayer is to file an appeal before the appellate authority and raise all grounds, including the question of jurisdiction before the appellate authority - The writ appeals are dismissed [Read less]

GST – Imposition of Late fee and Penalty for non-filing of Annual Returns withing prescribed time limit - Imposition of General Penalty under Section 125 of the CGST Act, 2017 – Non-response to Show Cause Notice – Petitioner was assessed for non-filing of annual GST returns within the prescribed timeline – Imposition of both General Penalty under Section 125 and Late Fee under Section 47(2) of the CGST Act - Whether the Proper Officer is justified in imposing General Penalty under Section 125 of the GST Act alongside Late Fee for failure to file GSTR-9 and GSTR-9C within the prescribed period - HELD - The impositi... [Read more]

GST – Imposition of Late fee and Penalty for non-filing of Annual Returns withing prescribed time limit - Imposition of General Penalty under Section 125 of the CGST Act, 2017 – Non-response to Show Cause Notice – Petitioner was assessed for non-filing of annual GST returns within the prescribed timeline – Imposition of both General Penalty under Section 125 and Late Fee under Section 47(2) of the CGST Act - Whether the Proper Officer is justified in imposing General Penalty under Section 125 of the GST Act alongside Late Fee for failure to file GSTR-9 and GSTR-9C within the prescribed period - HELD - The imposition of General Penalty under Section 125 cannot be countenanced in view of the statutory provision that General Penalty can be imposed only in the absence of any other penalty under the GST Act - Since the assessee is liable to pay Late Fee under Section 47(2) of the Act, the conditions for imposing General Penalty cease to exist. Once a Late Fee is levied, the imposition of General Penalty becomes statutorily impermissible - The General Penalty imposed under Section 125 is set aside. The assessee is directed to pay only the Late Fee - The writ petition is partly allowed [Read less]

GST - Cancellation of Registration on the ground of violation of Rule 10A (Bank details) read with Rule 21(d) of the CGST Rules, 2017 - The show-cause notice issued with only seven working days to respond, and the petitioner was not provided with a specific date and place for appearance. Subsequently, without waiting for the response period to expire, the Proper Officer passes an order of cancellation – HELD - Where there is a contravention of Rule 10A by a registered person, the specific statutory procedure prescribed under Rule 21A(2A)(b) of the CGST Rules must be followed. This procedure mandates that the registration... [Read more]

GST - Cancellation of Registration on the ground of violation of Rule 10A (Bank details) read with Rule 21(d) of the CGST Rules, 2017 - The show-cause notice issued with only seven working days to respond, and the petitioner was not provided with a specific date and place for appearance. Subsequently, without waiting for the response period to expire, the Proper Officer passes an order of cancellation – HELD - Where there is a contravention of Rule 10A by a registered person, the specific statutory procedure prescribed under Rule 21A(2A)(b) of the CGST Rules must be followed. This procedure mandates that the registration shall first be suspended and the registered person shall be intimated in Form GST REG-31, not Form GST REG-17, electronically or on the common portal or by email, and allowing thirty days time to respond - When the manner of doing a particular act when specifically prescribed under statute, must be done in that manner only and in no other manner. The show-cause notice in the present case is in Form GST REG-17, which is the general form for cancellation under Rule 22, and provides only seven working days instead of the thirty days mandated for Rule 10A violations - Additionally, the impugned order of cancellation is passed before the expiry of thirty days from the date of the SCN. By not affording the statutorily prescribed thirty-day period in the correct form, the Proper Officer deprives the petitioner of an effective and reasonable opportunity of being heard and violates both Section 29 of the CGST Act and Rule 10A read with Rule 21A(2A)(b) of the CGST Rules, 2017 - The respondent authorities are directed to restore the GST registration of the petitioner - The writ petition stands allowed [Read less]

GST – Maharashtra AAR – Classification of supply of warehoused goods to vessels as ship stores – Applicant, a bonded warehouse operator, imports goods storing them in its bonded warehouse under Section 58A of the Customs Act, 1962 and supplies these warehoused goods to foreign-going merchant vessels on foreign run, Indian Navy ships, and Indian Coast Guard ships, against an intent to purchase or purchase order, with physical transfer occurring within Indian ports and territorial waters - Whether the outward supplies of warehoused goods made from the bonded warehouse to ocean-going merchant vessels on foreign run, Ind... [Read more]

GST – Maharashtra AAR – Classification of supply of warehoused goods to vessels as ship stores – Applicant, a bonded warehouse operator, imports goods storing them in its bonded warehouse under Section 58A of the Customs Act, 1962 and supplies these warehoused goods to foreign-going merchant vessels on foreign run, Indian Navy ships, and Indian Coast Guard ships, against an intent to purchase or purchase order, with physical transfer occurring within Indian ports and territorial waters - Whether the outward supplies of warehoused goods made from the bonded warehouse to ocean-going merchant vessels on foreign run, Indian Navy ships, and Indian Coast Guard ships qualify as "export of goods" under Section 2(5) of the IGST Act, 2017 and thereby as a zero-rated supply under Section 16 of the IGST Act – HELD - To qualify as export of goods under Section 2(5) of the IGST Act, the provision requires a destination-based test of taking goods out of India to a place outside India. Since the recipient vessels are located within the territory of India (including territorial waters and exclusive economic zone as defined in Section 2(56) of the CGST Act, 2017) at the time of supply, and the physical transfer of goods occurs within India, the statutory definition of export is not satisfied - A supply that takes place on Indian soil or in Indian waters does not amount to taking goods out of India to a place outside India. Further, such transactions are covered under paragraph 8(a) of Schedule III to the CGST Act, 2017, read with Section 7(2)(a) thereof, which provides that supply of warehoused goods to any person before clearance for home consumption shall be treated neither as a supply of goods nor as a supply of services. Consequently, these transactions are entirely out of the field of supply upon which the GST levy is founded, and the question of zero-rating does not arise as zero-rating presupposes a supply – The instant transactions do not qualify as export of goods or zero-rated supplies under Section 16 of the IGST Act, 2017, however it is treated as neither a supply of goods nor a supply of services under paragraph 8(a) of Schedule III to the CGST Act read with Section 7(2)(a) thereof – Ordered accordingly [Read less]

GST – Maharashtra AAR - Works contract service - Taxability of construction and transfer of inclusive housing flats reserved under Statutory mandate - Under a statutory resolution mandating inclusive housing, the applicant-developer is obligated to reserve twenty percent of the net plot area for economically weaker sections and lower income group beneficiaries. In exchange for this obligation undertaken at the plan approval stage, the developer receives additional FSI from the local authority. The occupancy certificate for the project is obtained, following which the housing authority identifies allottees through a lotte... [Read more]

GST – Maharashtra AAR - Works contract service - Taxability of construction and transfer of inclusive housing flats reserved under Statutory mandate - Under a statutory resolution mandating inclusive housing, the applicant-developer is obligated to reserve twenty percent of the net plot area for economically weaker sections and lower income group beneficiaries. In exchange for this obligation undertaken at the plan approval stage, the developer receives additional FSI from the local authority. The occupancy certificate for the project is obtained, following which the housing authority identifies allottees through a lottery system and sale agreements are executed at the prescribed rates post-occupancy certificate - Whether the supply of inclusive housing flats to housing authority-identified customers after issuance of the OC constitutes an exempt sale of immovable property or a taxable supply of Works Contract service – HELD - The consideration for the supply comprises two inter-linked limbs: the non-monetary consideration in the form of additional FSI received at the commencement certificate stage and the monetary consideration receivable from allottees post-occupancy certificate - The statutory exception to the classification of construction as a supply of service operates only where entire consideration is received after issuance of the OC. Since a component of consideration, namely the additional FSI, is received at the inception stage and not after the occupancy certificate, the exception is not satisfied – The obligation to construct the inclusive housing flats originates at the plan sanction stage as a statutory pre-condition for project approval and represents a bilateral exchange or quid pro quo arrangement. The execution of sale agreements post-occupancy certificate is merely the final documentation of a transaction whose legal character was fixed at inception. The substance of the transaction must prevail over its form, and a construction obligation undertaken at inception cannot shed its character merely because final documentation occurs later - The additional FSI constitutes valuable development rights flowing from the local authority in respect of and for inducement of the developer's undertaking to construct and transfer the designated flats. The identification of individual allottees through administrative lottery mechanisms does not affect the character of the supply as Works Contract service - The supply of inclusive housing flats to housing authority-identified allottees is a taxable supply of works contract service under Section 2(119) read with schedule II paragraph 5(b) of the CGST Act, 2017, and is not excluded by Schedule III paragraph 5 or by the exception to Schedule II paragraph 5(b) – Ordered accordinglyrnrn rnrnValuation of inclusive Housing Flats - Open market value versus administered price - Whether the value of supply should be determined with reference to the Government-prescribed administered price for inclusive housing flats or the open market value of comparable flats sold to non-inclusive housing customers – HELD – The Section 15(1) of the CGST Act which recognizes transaction value where price is the sole consideration, is not applicable because the consideration comprises two limbs. Consequently, valuation proceeds under Section 15(4) read with Rule 27 of the CGST Rules, 2017, which applies where consideration is not wholly in money - The subsidy exclusion under section 15(2)(e) does not apply because no disbursement or amount is paid to the developer in the nature of a subsidy, the additional FSI is granted by the local authority and not the State government as required by the statute. The floor space index constitutes consideration paid in exchange for the developer's obligation and not a subsidy - The value of supply is to be determined under Rule 27(a) as the open market value being the price at which comparable flats are sold by the developer to non-inclusive housing buyers in the same project on an arms-length basis and not the housing authority-prescribed administered price. [Read less]