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GST - Transition of TDS credit through Form GST TRAN-1 - Demand on grounds beyond the SCN - Section 73 and Section 75(7) of CGST Act, 2017 - Respondent, a works contractor, claimed in Form GST TRAN-1 transitional credit consisting of a small purchase-credit component and a large component of tax deducted at source from its works-contract receipts under the UPVAT Act. SCN under Section 73 alleged a mismatch between the TRAN-1 claim and the credit shown in the VAT return, and non-furnishing of particulars of Forms C - Whether a ruling on the eligibility of VAT TDS for transition can be given in the absence of a properly fram... [Read more]

GST - Transition of TDS credit through Form GST TRAN-1 - Demand on grounds beyond the SCN - Section 73 and Section 75(7) of CGST Act, 2017 - Respondent, a works contractor, claimed in Form GST TRAN-1 transitional credit consisting of a small purchase-credit component and a large component of tax deducted at source from its works-contract receipts under the UPVAT Act. SCN under Section 73 alleged a mismatch between the TRAN-1 claim and the credit shown in the VAT return, and non-furnishing of particulars of Forms C - Whether a ruling on the eligibility of VAT TDS for transition can be given in the absence of a properly framed allegation and component-wise determination - HELD - The SCN is the foundation of the Revenue's case. The SCN identified only the return mismatch and the Form C objection. It did not separately identify an amount as TDS or allege that such an amount was incapable of transition because it arose from deductions from outward receipts. The Form C ground was dropped in the adjudication order. The rejection on the ground that TDS is not input tax was a distinct charge introduced for the first time in the order. Mere reference to Section 140 and Rule 117 does not meet the requirement of natural justice in the absence of a specific allegation - Section 75(7) confines confirmation of demand to the grounds specified in the notice, and the adjudicating order cannot repair a missing substantive charge. The order also did not reconcile the TDS component with the purchase-credit component, which is contrary to Section 75(6) requiring the order to state the relevant facts and its basis. The Revenue produced no completed VAT assessment or refund-disposal order to show that the legacy balance was rejected or exhausted, and such an order cannot be presumed. Remand merely to construct a fresh charge beyond the SCN would not cure the defects. As the appeal is decided on the validity of the notice and the proof of the demand, the question whether TDS can in principle be included in TRAN-1 is left open - The demand cannot be restored and the Revenue appeal is dismissed - Interest and penalty - Section 50 and Section 73(9) of CGST Act, 2017 - Interest and penalty were confirmed along with the tax demand on the transitional credit. The Respondent contended that the credit had been used before the notice and that there was no fraud, wilful misstatement or suppression - Whether the interest and penalty confirmed can be sustained - HELD - Interest must have a statutory basis and a verifiable computation. Interest on credit wrongly availed and utilised under Section 50(3) is computed under Rule 88B, while interest on unpaid output tax under Section 50(1) requires identification of the liability and the period of default. These distinct bases cannot be interchanged without reasons. The material did not supply the dates, rate, ledger-based utilisation and period supporting the interest, and the statement of the Respondent that credit was used before the notice is no substitute for that working - Section 75(9) does not dispense with proof of the facts required to establish and compute interest. Absence of fraud alone does not exclude liability or penalty arising under Section 73, but the penalty rests on the tax determination, which has not been sustained. The statutory conditions for a penalty provision must first exist before it can be imposed - The determination of interest and the penalty are unsustainable and cannot be restored. [Read less]

GST - Demand confirmed on grounds not stated in the SCN - Section 75(4) and Section 75(7) of CGST Act, 2017 - SCN under Section 73(1) alleged that the Appellant had not issued any credit notes against the sales returns claimed, resulting in escapement of turnover and short payment of tax. The Appellant furnished sample credit notes and offered to produce the complete set on requisition. The order in original did not call for the remaining credit notes, held that the credit notes were issued on the same day as the sales invoices and examined their values against the invoices, and confirmed the demand with interest and penal... [Read more]

GST - Demand confirmed on grounds not stated in the SCN - Section 75(4) and Section 75(7) of CGST Act, 2017 - SCN under Section 73(1) alleged that the Appellant had not issued any credit notes against the sales returns claimed, resulting in escapement of turnover and short payment of tax. The Appellant furnished sample credit notes and offered to produce the complete set on requisition. The order in original did not call for the remaining credit notes, held that the credit notes were issued on the same day as the sales invoices and examined their values against the invoices, and confirmed the demand with interest and penalty. No personal hearing was recorded - Whether the order in original confirming the demand on grounds not contained in the SCN and without personal hearing is sustainable - HELD - The foundational premise of the SCN that no credit notes were issued was contradicted by the order in original itself, which dealt with credit notes issued on the same day as the sales invoices. The order then tested the credit notes against Section 34, which was not invoked in the SCN, and examined their dates and values, which were never put to the Appellant. The Revenue itself appeared unsure of the basis of the SCN. Section 75(7) provides that no demand shall be confirmed on grounds other than the grounds specified in the notice. Section 75(4) requires an opportunity of hearing where an adverse decision is contemplated, and a personal hearing also allows the adjudicating authority to clarify its doubts. Where the Appellant offered to produce all credit notes and the officer never called for them, the Revenue cannot contend that the Appellant filed samples and withheld the rest. The plea of absence of prejudice cannot be accepted when the fresh grounds became known only after the order was issued - The order in original violates the principles of natural justice and Section 75(4) and Section 75(7) and is null and void - Findings of FAA on grounds beyond the SCN - Section 107(11) and Section 75(7) of CGST Act, 2017 - FAA dismissed the appeal on the grounds of non-disclosure of credit notes within the time limit under Section 34, non-reflection in annual returns, simultaneous generation of credit notes and invoices, and improbability of exchanges within a few days. None of these grounds was raised in the SCN. The Revenue contended that FAA could make further inquiry under Section 107(11), that the core finding of unproved sales returns was common to all orders, and that the Appellant had full opportunity before the Tribunal - Whether the order of FAA based on grounds beyond the SCN can be sustained - HELD - The order in appeal is founded on theories of the economics of the jewellery trade and the behaviour of consumers, and these cannot supplant evidence and legal principles. Further inquiry under Section 107(11) must also be conducted within the framework of natural justice. The appellate authority cannot enter a finding without first putting it to the Appellant, recording the contentions and passing a speaking order. There was no evidence that such an inquiry was conducted. A finding in the order in original on a ground not contained in the SCN does not attain any sanctity, and it was the duty of the appellate authority to rectify such errors, which it instead compounded by adding further grounds. The remarks on reporting time limits are not harmless, as they were used to discredit the credit notes. The plea that the Appellant has full opportunity before the Tribunal cannot compensate for the lack of opportunity before the lower authorities, since the Appellant has a vested right to a full opportunity at every stage. As the orders are quashed on these grounds, examination of the merits is unnecessary - The order in appeal is set aside and the appeal is allowed. [Read less]

GST - Refund of unutilised Input Tax Credit lying in Electronic Credit Ledger - Section 54 of CGST Act, 2017 - Respondent, an SEZ unit, filed refund application under the category of "any other" for unutilised ITC lying in its Electronic Credit Ledger. SCN issued and the refund claim was rejected under Rule 92(3) of CGST Rules, 2017. FAA allowed the appeals filed by the Respondent - The Revenue filed appeals before the Tribunal. Respondent took an additional stand that the refund claimed is of excess tax paid by it and not of unutilised ITC under Section 54(3) - Whether the refund claim falls under the category of refund o... [Read more]

GST - Refund of unutilised Input Tax Credit lying in Electronic Credit Ledger - Section 54 of CGST Act, 2017 - Respondent, an SEZ unit, filed refund application under the category of "any other" for unutilised ITC lying in its Electronic Credit Ledger. SCN issued and the refund claim was rejected under Rule 92(3) of CGST Rules, 2017. FAA allowed the appeals filed by the Respondent - The Revenue filed appeals before the Tribunal. Respondent took an additional stand that the refund claimed is of excess tax paid by it and not of unutilised ITC under Section 54(3) - Whether the refund claim falls under the category of refund of unutilised ITC lying in the Electronic Credit Ledger or refund of excess tax paid by the supplier - HELD - The SCN itself records that the refund application was filed under the category of "any other" for ITC remaining unutilised in the Electronic Credit Ledger. The order of the FAA records that the claim relates to unutilised ITC in respect of credit distributed by the Input Service Distributor and in some cases tax paid on inward supplies by suppliers. This was never questioned or controverted by the Respondent at any stage - The additional stand that the refund is of excess tax paid is not backed by any documentary evidence or law. The supplier paid the tax voluntarily for a long time and it cannot be assumed that the tax was paid by mistake or under duress or coercion. Both the Revenue and the Respondent are on the same page that the refund claims pertain to unutilised ITC availed on the basis of credit distributed by the Input Service Distributor - The claim is held to be a refund of unutilised ITC distributed by the Input Service Distributor and the additional plea of refund of excess tax paid is not accepted - Refund of ITC distributed by Input Service Distributor to SEZ unit - Section 54 of CGST Act, 2017 read with Rule 89 of CGST Rules, 2017 – Respondent-SEZ claimed refund of unutilised ITC lying in its Electronic Credit Ledger, being credit distributed by the Input Service Distributor - Revenue contended that under the proviso to Rule 89(1) the application for refund in respect of supplies to an SEZ unit is to be filed by the supplier. It was further contended that the SEZ unit is not liable to pay tax on such supplies, and that credit distributed by the ISD cannot be equated with tax paid on supplies made to the SEZ unit - Whether the refund of unutilised ITC distributed by the Input Service Distributor can be claimed by an SEZ unit as the recipient of the services - HELD - The Input Service Distributor, as defined in Section 2(61) of the CGST Act, is an office of the supplier which receives tax invoices towards input services and issues a prescribed document for distributing the credit. In such a case it is not possible for the supplier of goods and services to file a refund application for the input tax credit distributed by the Input Service Distributor. As there is no specific supplier who can claim the refund, the stand of the Revenue that the SEZ unit is not entitled to seek refund of the ITC paid in connection with goods or services supplied to it is not tenable - The proviso to Rule 89 does not use the word "only", and no word can be inserted into a Rule by interpretation. The restriction read into the proviso by the Revenue is therefore misplaced. An SEZ unit cannot be denied refund of ITC solely on the ground that it is not the supplier. No decision contrary to this position was cited by the Revenue - The contention of the Revenue is rejected and the SEZ unit is held entitled to claim refund of the unutilised ITC distributed by the Input Service Distributor - Relevance of Board circulars on manual filing of refund claims - Circular No. 17/17/2017-GST and Circular No. 24/24/2017-GST - Revenue submitted that the refund claim could not be processed under any of the categories of refund specified in the circulars prescribing manual filing and processing of refund claims, and therefore the claim was rightly rejected - Whether the Board circulars restrict the right of the SEZ unit to claim refund - HELD - The Circulars were issued due to non-availability of the refund module on the common portal and prescribe the procedure for manual filing and processing of refund claims. They did not bring any substantial change in the law relating to the right of refund to SEZ units and do not in any manner circumscribe the right of the SEZ unit to claim refund - The reliance of the Revenue on the Circulars is rejected, no fault is found with the orders of the FAA, the orders are affirmed – The appeals filed by the Revenue are dismissed [Read less]

GST - Validity of cancellation of registration under Rule 21(e) where SCN rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of ITC in contravention of Section 16 of the CGST Act, 2017, on the basis of invoices issued by supplier firms whose registrations had been cancelled, and the FAA confirmed the cancellation - The SCN alleged that the Appellant was violating Section 16(2) by claiming ITC - Whether the cancellation is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars o... [Read more]

GST - Validity of cancellation of registration under Rule 21(e) where SCN rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of ITC in contravention of Section 16 of the CGST Act, 2017, on the basis of invoices issued by supplier firms whose registrations had been cancelled, and the FAA confirmed the cancellation - The SCN alleged that the Appellant was violating Section 16(2) by claiming ITC - Whether the cancellation is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars of inadmissible ITC, and does not refer to Section 29 - HELD - The SCN issued by the adjudicating authority must contain all details necessary under law. An SCN which does not specify the grounds or sufficient factual particulars violates natural justice. The requirements necessary to sustain the validity of a notice or order must be contained therein, and any deficiency in the SCN cannot subsequently be cured - The SCN did not disclose who the supplier was, what the GSTIN was or in which period inadmissible ITC was claimed. The recommendation for cancellation was based merely on an oral intimation, and no other formal communication was made to the Proper Officer for initiating cancellation proceedings. A mere reference to an oral intimation allegedly given by an officer cannot by itself constitute a valid and sufficient ground for cancellation in the absence of specific allegations supported by the relevant statutory provisions - Proceedings under Rule 21(e) and proceedings under Section 74A are distinct and materially different in nature, scope and legal consequences, and the cancellation had to be examined strictly within its own scope, without any finding on the Section 74A proceedings. Section 29 read with Rule 22 provides the framework for cancellation, but neither the SCN nor the cancellation order referred to it, and its invocation by the FAA cannot cure the fundamental defects as the taxpayer must be afforded a fair and effective opportunity to meet the allegations - The cancellation order and the Order-in-Appeal suffer from legal infirmities the cancellation is revoked and the registration stands restored - The appeal is allowed - Powers of FAA to rely on material not mentioned in the SCN while confirming cancellation of registration - The FAA confirmed the cancellation of registration on the basis of an enquiry report and details of the Form DRC-01A, which were not mentioned in the SCN issued for cancellation, after seeking clarification from the Proper Registering Authority - Whether the FAA can confirm the cancellation on the basis of evidence not produced at the time of passing the cancellation order and without giving the Appellant an opportunity of rebuttal - HELD - The FAA went beyond the SCN and acted as if collecting evidence at the appellate stage. Additional evidence can be produced only in rare circumstances, and where the authority wants additional evidence, a proper opportunity of rebuttal must be given to the Appellant. The order of the FAA did not mention any effective and reasonable opportunity of rebuttal and hearing. Under Rule 112, additional evidence is admissible only in the circumstances specified therein. The Appellate Authority must record specific reasons for admitting or rejecting such evidence, and a personal hearing must be provided in case of rejection. Before admitting such evidence, reasonable opportunity must be given to the adjudicating authority to examine and rebut it. Appellate proceedings should not, as a matter of ordinary practice, be converted into a fresh investigation merely to remedy deficiencies in the original adjudication - The Order-in-Appeal confirming the cancellation on the basis of an enquiry report not mentioned in the SCN is not sustainable in law. The appeal is allowed [Read less]

GST - Validity of cancellation of registration where Show Cause Notice rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of Input Tax Credit (ITC) in violation of Section 16(2) of the CGST Act, 2017 and the First Appellate Authority (FAA) confirmed the cancellation by invoking Section 29 of the Act - SCN alleged that the Appellant was claiming ITC in violation of Section 16(2), referred to an intimation notice under Section 74A and to an oral communication by an officer, and directed the Appellant to explain why regis... [Read more]

GST - Validity of cancellation of registration where Show Cause Notice rests on oral intimation and does not disclose supplier details or grounds - Appellant's registration was cancelled on the allegation of wrongful availment of Input Tax Credit (ITC) in violation of Section 16(2) of the CGST Act, 2017 and the First Appellate Authority (FAA) confirmed the cancellation by invoking Section 29 of the Act - SCN alleged that the Appellant was claiming ITC in violation of Section 16(2), referred to an intimation notice under Section 74A and to an oral communication by an officer, and directed the Appellant to explain why registration should not be cancelled - Whether the cancellation of registration is sustainable when the SCN does not specify the suppliers, the GSTIN, the period or the particulars of inadmissible ITC, and does not refer to Section 29 - HELD - The SCN issued by the adjudicating authority must contain all details necessary under law, and an SCN which does not specify the grounds or sufficient factual particulars violates natural justice - The requirements necessary to sustain the validity of a notice or order must be contained therein, and any deficiency in the SCN cannot subsequently be cured. The SCN did not disclose who the supplier was, what the GSTIN was or in which period inadmissible ITC was claimed. The recommendation for cancellation was based merely on an oral intimation, and no other formal communication was made to the Proper Officer for initiating cancellation proceedings - A mere reference to an oral intimation allegedly given by an officer cannot by itself constitute a valid and sufficient ground for cancellation in the absence of specific allegations supported by the relevant statutory provisions. Proceedings for cancellation of registration and proceedings under Section 74A are distinct and materially different in nature, scope and legal consequences, and the cancellation had to be examined strictly within its own scope, without any finding on the Section 74A proceedings - Section 29 read with Rule 22 provides the framework for cancellation, but neither the SCN nor the cancellation order referred to it, and its invocation by the FAA cannot cure the fundamental defects as the taxpayer must be afforded a fair and effective opportunity to meet the allegations - The cancellation order and the Order-in-Appeal suffer from legal infirmities. The cancellation is revoked and the registration stands restored - The appeal is allowed - GST - Powers of FAA to rely on material not mentioned in the SCN while confirming cancellation of registration - The FAA confirmed the cancellation of registration on the basis of an enquiry report and details of the Form DRC-01A, which were not mentioned in the SCN issued for cancellation, after seeking clarification from the Proper Registering Authority - Whether the FAA can confirm the cancellation on the basis of evidence not produced at the time of passing the cancellation order and without giving the Appellant an opportunity of rebuttal - HELD - The FAA went beyond the SCN and acted as if collecting evidence at the appellate stage. Additional evidence can be produced only in rare circumstances, and where the authority wants additional evidence, a proper opportunity of rebuttal must be given to the Appellant. The order of the FAA did not mention any effective and reasonable opportunity of rebuttal and hearing. Under Rule 112, additional evidence is admissible only in the circumstances specified therein. The Appellate Authority must record specific reasons for admitting or rejecting such evidence, and a personal hearing must be provided in case of rejection. Before admitting such evidence, reasonable opportunity must be given to the adjudicating authority to examine and rebut it. Appellate proceedings should not, as a matter of ordinary practice, be converted into a fresh investigation merely to remedy deficiencies in the original adjudication - The Order-in-Appeal confirming the cancellation on the basis of an enquiry report not mentioned in the SCN is not sustainable in law. The appeal is allowed [Read less]

GST – Classification of Supply, erection, testing and commissioning of fire protection system - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant supplied fire protection systems comprising pumps, pipes, valves, fittings, hydrant components and compressors to private industries and Government institutions, along with installation, testing and commissioning. Under the sample work order, the Applicant was required to supply the items, clear the site, build RCC pedestals and platforms, and erect, test and commission the system - Whether the supply, erection, testing and commissioning of the fire protect... [Read more]

GST – Classification of Supply, erection, testing and commissioning of fire protection system - Composite supply under Section 2(30) of the CGST Act, 2017 - Applicant supplied fire protection systems comprising pumps, pipes, valves, fittings, hydrant components and compressors to private industries and Government institutions, along with installation, testing and commissioning. Under the sample work order, the Applicant was required to supply the items, clear the site, build RCC pedestals and platforms, and erect, test and commission the system - Whether the supply, erection, testing and commissioning of the fire protection system constitutes a composite supply under Section 2(30) - HELD - A composite supply means two or more taxable supplies of goods or services which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. In the contract for the fire protection system, the supply of goods and the erection, testing and commissioning services are naturally bundled and supplied in conjunction with each other. The supply is a composite supply - Ordered accordingly - Fire protection system - Movable or immovable property for levy of GST - Applicant contended that the system is not permanently attached to the earth, that it can be dismantled and assembled as per the needs of the recipient, and that installation involves no earth work - Whether the fire protection system is movable or immovable property for the purpose of levy of GST - HELD - The Applicant is required to get the designated spot ready by clearing bushes and trees, build the necessary RCC pedestals and platforms, do the electric wiring, install the pipes, valves and gauges, connect the whole system, and carry out testing and commissioning. The components installed at the building or premises are intended to provide a permanent fire-protection infrastructure for the facility. They are not meant to be removed and relocated without substantial dismantling. The completed system therefore assumes the character of immovable property for the purpose of levy of GST - The fire protection system is regarded as immovable property - Works contract under Section 2(119) of the CGST Act, 2017 - Classification under SAC 9954 and applicable rate - Applicant sought to know whether the contract is a works contract covered under SAC 9954 and chargeable at 12%. The Applicant also supplied the system to Government institutions - Whether the contract for supply, erection, testing and commissioning of the fire protection system is a works contract covered under SAC 9954 and chargeable at the rate of 12% - HELD - A works contract means a contract for erection, installation, fitting out or commissioning of any immovable property wherein transfer of property in goods is involved in the execution of such contract. The fire protection system involves transfer of property in goods and erection, testing and commissioning of an immovable property. The contract is therefore a composite supply of works contract, which is treated as a supply of services under para 6 of Schedule II - Heading 9954 covers construction services. The electrical installation work, including fire alarm installation, is covered under SAC 995461. The firefighting water piping, sprinkler and hydrant network installation is covered under SAC 995462 - As regards the rate, the entry for composite supply of works contract provided to Government involves predominantly earth work. The sample work order requires excavation and backfilling, which are part of earth work. However, the charges for the same are minuscule in relation to the total contract amount. The works contract services therefore do not get covered under that entry, and the rate of 6% sought by the Applicant is not applicable - The contract is a works contract covered under SAC 9954. It is not chargeable at 12% and is not covered under Serial No. 3(vii) of Notification No. 11/2017-Central Tax (Rate). [Read less]