pri Gist of Updates – Indirect Taxes – October 2018 Gist of Updates – Indirect Taxes – October 2018

Indirect Taxes Updates- GST, Customs, Excise, Service Tax & VAT- Month – October 2018

A. Amendment in Goods & Services Tax (GST) for the Month of October 2018

1. Time Limit for furnishing the declaration in FORM ITC 04 extended till 31st 2018

CBIC has extended the time limit for furnishing the declaration in FORM GST ITC-04, in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another, during the period from July, 2017 to September, 2018 till the 31st December, 2018. (Refer Notification No. 59/2018-Central Tax dated 26-10-2018).

2. Recovery of dues under ‘existing’ laws-

Procedure for recovery of tax, interest, penalty, fee or any other dues which becomes recoverable consequent to proceedings initiated under the ‘existing’ laws (Central Excise, Service Tax, VAT) have been notified. Following forms have also been notified:

   –GST DRC-07A – Summary of the order creating demand under ‘existing’ laws

   -GST DRC-08A -Amendment/Modification of summary of order creating demand under ‘existing’ laws

3. Appeal to Appellate Authority

  • Appeal can be filed before an officer not below the rank of Joint Commissioner (Appeals) [earlier Additional Commissioner (Appeals)] against any decision or order passed under CGST/SGST/UTGST Act by the Deputy/Assistant Commissioner or the Superintendent.
  • Department can also file appeal in the said situation before such authority as mentioned above.

4. Amendments in GST Form

CBIC has notified certain amendments in the following forms:

GST REG-16 Application for Cancellation of Registration

-GSTR-4 Quarterly return for registered person opting for composition levy

-GST PMT-01 Electronic Liability Register of Taxable person

-GST APL-04 Summary of demand after issue of order by Appellate Authority, Tribunal or Court

5. GST Practitioners (GSTP) Examination

The rules, pattern and syllabus of GSTP Examination has been notified for those whose were enrolled as a sales tax practitioner or tax return preparer under the ‘existing’ law (earlier law) for a period of not less than five years. (Refer Notification No. 60/2018- Central Tax, dated 30-10-2018)

  • Clarification Reg: Last date to avail Input Tax Credit in respect of Invoices or Debit Notes relating to such invoices pertaining to period from July, 2017 to March, 2018.

Furnishing of outward details in FORM GSTR-1 by corresponding supplier(s) and facility to view same in FORM GSTR-2A by the recipient is in nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of Sec16 of Act. The apprehension that ITC can be availed only on basis of reconciliation between FORM GSTR-2A and FORM GSTR-3B conducted before the due date for filing of return in FORM GSTR-3B for month of Sept.18 is unfounded as same exercise can be done thereafter also.

It may, however, be noted that Government has extended the last date for furnishing of return in FORM GSTR-3B for the month of September, 2018 for certain taxpayers who have been recently migrated from erstwhile tax regime to GST  regime vide Notification No. 47/2018- Central Tax dated 10th September, 2018. For such taxpayers, the extended date i.e. 31st December, 2018 or the date of filing of Annual Return whichever is earlier will be the last date for availing ITC in relation to the said invoices issued by the corresponding suppliers during the period from July, 2017 to March, 2018. (Refer Press Release dated 18.10.2018 MOF).

6. Refund to exporters –CGST Rule 96(10) amended prospectively and retrospectively:

Rule 96(10) of Central GST Rules, 2017, relating to refund of IGST to exporters amended again on 9-10-18. First amendment is retrospective and is applicable with effect from 23-10-17. It restores position as it was before said sub-rule was amended by Not No. 39/2018-Central Tax, dated 4-9-18, also with effect from 23-10-17. Broadly, it withdraws provision which denied refund of IGST to exporters who are availing exemption from IGST under Customs notifications issued for Advance Authorisation/ EPCG schemes. (Refer Not. No. 53/2018-Central Tax dt. 09-10-2018)

The second amendment restores position as present till 8-10-2018 (though with slight change). It again prohibits refund of IGST to persons who are availing exemption from IGST under two specified Customs notifications amending few notifications issued for Advance authorisation or EPCG schemes. However, additionally, according to latest amendments which are applicable prospectively, IGST refund would be available even if capital goods are procured domestically under EPCG scheme (deemed export). Rule 89(4B) has also been aligned with Rule 96(10) by this notification. (Refer Not. No. 54/2018-Central Tax dt. 09-10-2018)

 7. Refund of Compensation Cess to diplomatic missions and UN organisations –CGST notification to be adhered:

UN and specified international organizations, foreign diplomatic missions or consular posts in India, or diplomatic agents or career consular officers posted therein are entitled to refund of Compensation Cess payable on intra-state and inter-state supply of goods and services received by them. The circular states that Notification No. 16/2017-Central Tax (Rate) issued under CGST Act, 2017 would be applicable for purpose of such refund of Compensation Cess. Provisions of Section 9(2) and 11 of Goods & Services Tax (Compensation to States) Act, 2017 have been relied on for this purpose. (Refer Circular No. 68/42/2018-GST, dated 5-10-2018). 

8. GST on trusts for advancement of religion, spirituality or yoga clarified:

Services provided by an entity registered under Section 12AA of Income Tax Act by way of advancement of religion, spirituality or yoga are exempt from GST. Residential programmes or camps where the fee charged includes cost of lodging and boarding are also exempt if primary and predominant activity, objective and purpose is advancement of religion, spirituality or yoga. Circular also say that if such trust merely or primarily provides accommodation or serves food against consideration, same will be taxable. (Ref Circular No. 66/40/18-Cent.Tax, dated 26-9-18)

9. Detention and seizure–CGST Section 129 not to be invoked in all circumstances:

Proceedings under Section 129 of the Central GST Act may not be initiated in all cases if goods are accompanied by an e-way bill. Circular states that a simple penalty of Rs. 500 each under CGST and SGST be imposed if there is spelling mistake in name, error in pin-code not increasing validity of bill, error in address of consignee if locality and other details are correct, error in 1-2 digits of document number, error in 4 or 6 digit level of HSN if fist 2 digits are correct with right tax rate, and error in 1-2 digits/ characters of vehicle number. (Ref Circ No.64/38/18-GST dated 14.09.18)

10. Budgetary support scheme claims for specified States to be filed online:

Budgetary support claims by units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim, are to be mandatorily filed online from quarter ending September 2018. Units registered manually till now would also be required to file fresh application for registration online on ACES-GST portal till 15-10-2018. These will be approved without any verification and additional documents. Circular No.1067/6/2018-CX, dated 5-10-2018 in this regard also lays down steps involved in registration for the scheme.

11. Haryana government has decided to constitute State Bench of Goods and Services Tax Appellate Tribunal in Hisar for speedy settlement of matters related to GST, Finance, Excise and Taxation. (Reference news in Business World dated 18th October 2018 PTI).

12. The National Anti-profiteering Authority (NAA) has dismissed complaints of profiteering against KFC and Amway India. Both the complaints were dismissed for lack of evidence.

The firms were facing allegation that they were not passing on the benefit of duty reduction and thus made additional profit. The DG-AP reported that in the absence of specific or clear-cut evidence, an investigation cannot be launched. Accordingly, due to lack of evidences, NAA dismissed the case against both these parties.

(Reference news in The HINDU Business Line New Delhi dated 30th October 2018).

13. GST (Compensation to States) Act, 2017 is constitutionally valid:

GST (Compensation to States) Act, 2017 and Rules framed there under are constitutionally valid. The Act has been held as not beyond legislative competence of Parliament, as not transgressing Constitution (101st Amendment) Act and not a colourable legislation. Constitution provision empowers Parliament to provide for compensation to States for loss of revenue by law, expression “law” used therein is of wide import which includes levy of any cess for above purpose. Levy of Compensation Cess on same taxable event is permissible. Rejecting the plea of double taxation, it said that if taxes are separate and distinct imposts and levied on different aspects, then there is no overlapping in law. Since State Compensation Cess is “with respect to” goods and services tax, and is a tax, power to make law regarding goods and services tax, shall include power to levy cess on goods and services tax. Further observing that Clean Energy Cess and Compensation Cess are entirely different from each other, it disallowed the set-off of former paid till 30-6-2017. [UOI v. Mohit Mineral Pvt. Ltd.-Civil Appeal No. 10177/2018 and Ors., dated 3-10-2018, Supreme Court].

14. GST transitional credit –CGST Section 140(3)(iv) is unconstitutional:

Provisions of Section 140(3)(iv) of the CGST Act, 2017, restricting transition of Cenvat credit relating to Central Excise duty paid by dealer, based on invoice issued more than 12 months before GST regime, are unconstitutional. Differing with the view taken by the Bombay High Court in JCB India, Gujarat High Court observed that the said condition without any basis retrospectively limited the scope of a dealer to enjoy existing tax credits which are his vested right. It also observed that had the statutory provision given a time limit from the appointed day for utilization of such credit, the issue would have stood on an entirely different footing. The judgement was however stayed till 31-10-2018. [Filco Trade Centre Pvt. Ltd. v. Union of India –Judgement dated 5-9-2018 in R/Special Civil Application No. 18433 of 2017 and Ors., Gujarat High Court].

15.  CGST Section 67 authorises search and not sealing of premises:

Delhi High Court has allowed a writ petition against complete sealing of premises in a case where assessee could not produce books of accounts and other documents and asked 24 hours for the same. It observed that Section 67(4) of the Central GST Act, 2017 merely authorises officials to search premises and if resistance is offered, to break open the locks. While observing that complete sealing was illegal, the Court directed that the premise, which was in possession of the department for more than a month, be handed over to petitioner within 12 hours. [Napin Impex v. Commissioner -W.P.(C) 10287/2018, decided on 28-9-2018, Delhi High Court].

16. Anti-profiteering –GST rate benefit not to be passed through another product:

National Anti-profiteering Authority has held that benefit accrued due to rate reduction on one product cannot be passed on to the customers through another product. The respondent had reduced price of other packs in lieu of benefit on a particular pack of noodles. It was submitted that price reduction would have been around 21 paise to the retailer and around 25 paise to the ultimate consumer which would have been inconvenient to both the retailer and the consumer, and hence the price was reduced on the bigger pack taking into consideration the price reduction on the smaller pack as well. The Authority in this regard observed that the respondent could not deny benefit of reduction of tax due to problem of legal tender and had no liberty to choose products for passing of benefit. It was held that the benefit accruing to one customer cannot be given to another nor can be arbitrarily enhanced and set off against another. [Ankur Jain v. Kunj Lub Marketing –Case No. 10/2018, decided on 8-10-2018, National Anti-Profiteering Authority].

17. Charging enhanced base price to nullify rate reduction is profiteering:

In a case involving alleged profiteering by keeping price including taxes unchanged after GST rate reduction on Vaseline, from 28% to 18%, National Anti-Profiteering Authority held that re-stickering of stock was mandatory and such benefit of tax reduction was to be passed on each and every product. It observed that there was no commercial impossibility in doing so and by charging an enhanced base price to exactly nullify the impact of GST rate reduction, the respondent was guilty of profiteering. The NAA also held that being a registered person, the respondent-distributor cannot escape his liability under Section 171. Further, observing that determination of quantum of tax benefit to be passed on and MRP reduction only require mathematical calculation of the quantum of tax reduction, it rejected the argument that there was no methodology to determine quantum of benefit to be passed on. The respondent was ordered to reduce prices and return benefits to consumers (if identifiable) or deposit the alleged benefit to consumer welfare fund along with interest. Penalty was held as imposable. [Sharma Trading Company-2018-VIL-05-NAA]

18. Anti-profiteering–Benefit to be passed to each customer –Law of average not applicable:

Rejecting contention that discounts were offered to pass on benefit, National Anti-Profiteering Authority held that any discount offered could not be in lieu of reduction of GST rate as such discounts are offered in regular trade practice. Benefit of rate reduction has to be passed on to every customer in respect of each and every product, and accordingly, every transaction has to be independently seen and law of averages cannot be applied. While applicant argued that NAA could have legally limited its investigation only to extent of the complaint filed, Authority rejected same stating that all violations of Section 171, anywhere in country can be investigated by DGAP. NAA held that by charging an enhanced base price which was legally not chargeable, respondent issued incorrect tax invoice, for which a penalty prescribed under CGST Act and accordingly, there was no case of creating substantive liability under rules. NAA also held that relief from penalty was not grantable, as every breach of law has to be penalised, even if quantum of alleged profiteering was miniscule. [Lifestyle International Private Limited-2018-VIL-07-NAA].

19. Anti-profiteering –Base price increase in lieu of denial of ITC is not profiteering:

In a case involving restaurant services where the GST rate was reduced from 18% to 5% without ITC, National Anti-profiteering Authority has held increase in base price by the assessee-restaurant, post GST rate reduction, to nullify the impact of loss of ITC does not amount to profiteering. The Authority in this regard observed that the average base price was increased by 12.14% to neutralize the denial of ITC of 11.80% and such increase was commensurate with the increase in the cost of the product on account of denial of ITC. It was held that therefore, the allegation of not passing on the benefit of rate reduction was not established. The Authority was also of the view that there was no profiteering when an enhanced base price was charged on 14-11-2017 while the rates were reduced only from 15-11-2017. [NP FOODS-2018-VIL-08-NAA]

20. Profiteering when ITC benefit not passed-on:

National Anti-profiteering Authority rejected argument of respondent that no benefit could be passed on by him (construction service provider) as there was increase in tax rate. As rate of GST on construction was effectively increased from 5.25% under erstwhile regime (service tax) to 12%/8% under GST, respondent had become entitled to claim ITC. Price quoted by asssessee was maximum permissible price as per policy and there was no restriction on him to reduce this price.

The argument of respondent that sub-contractors who were earlier exempt are now charging GST and hence, costs of respondent have gone up was rejected considering that both respondent and sub-contractor have become eligible for ITC under GST, which was earlier not available. The respondent was found guilty of profiteering and was ordered to reduce price to be realized from buyers of flats in commensurate with benefit of ITC received by him and to return excess along with interest. [Pyramid Infratech Pvt. Ltd.-2018-VIL-06-NAA]

21. No ITC on transport of petrol from refinery to export warehouse:

AAR West Bengal has held that input tax credit on railway freight for transportation of HSD, petrol and ATF from refinery to export warehouse is not available. The applicant had pleaded that such supply being for export was zero rated within IGST Section 16(1)(a), and that ITC was admissible under Section 16(2). The submission that re-warehousing at depot was sufficient evidence of export was rejected by the Authority to hold that removal from refinery to warehouse was not export and that warehouse was not a mere transit point, but point of storing and final clearance, as movement of goods to depot was not occasioned by an export order. [In RE: Indian Oil Corporation Ltd.–Order No. 17/WBAAR/2018-19, dated 18-9-2018, AAR West Bengal]

22. Restaurant cannot choose to pay GST@ 18% with ITC:

GST AAR Karnataka has held that the applicant-restaurant was not entitled to pay GST @ 18% with input tax credit as services offered are classified under a heading attracting GST @ 5%, without ITC. The AAR rejected the plea that Notification No. 46/2017-Central Tax (Rate) did not prevent a restaurant from paying tax at 18% under Sl.No.35 of Notification No.11/2017-Central Tax (Rate) and avail ITC. The service was held classifiable under Heading 9963 and liable to GST @ 5%. The applicant is running restaurants, serving non-alcoholic beverages and food items. [In RE: Coffee Day Global Ltd. -Advance Ruling No. KAR ADRG 21/ 2018, dated 21-8-2018, AAR Karnataka]

23. GST payable on Supply of Food Items to Employees for Consideration in Canteen run by Company: AAAR

The Appellate Authority for Advance Rulings (AAAR) has upheld the ruling of the AAR that the recovery of food expenses from the employees for the canteen services provided by company would come under the definition of ‘outward supply’ as defined in Section 2 (83) of the Goods and Services Tax Act, 2017 and hence are taxable under the Goods and Services Tax (GST) laws. The authority ruled that such activity of providing food would amount to ‘supply’ for imposing the tax.

(Order No. CT/7726/2018-C3 dated 25.09.2018)

24. Marketing service is ‘intermediary’ and not naturally bundled with after sales:

Observing that agreement between applicant and foreign principal for facilitation of supply to Indian customers, call applicant an agent for soliciting customers in India, negotiating prices, terms, etc., AAR Karnataka has held that predominant nature of transaction was ‘intermediary’ for purpose of place of supply. Further, since incidence of after-sale services was contingent upon successful supply of materials and not upon marketing intermediary services, it was held that it cannot be called as naturally bundled services. [In RE: Toshniwal Brothers -Advance Ruling No. KAR ADRG 23 / 2018, dated 19-9-2018, AAR Karnataka]

25. Co-owners of rented property individually eligible for threshold exemption:

In a case where one of the co-owners, for administrative purposes, was to collect rent and distribute among all co-owners of immovable property let out, AAR Kerala has held that each individual co-owner would be eligible for the threshold limit. The AAR relied on Section 26 of the Income Tax Act to observe that merely by joining hands of2 or more persons, a different and distinct legal entity does not come into existence, unless there is an intention to do so. CESTAT Order on jointly owned rented property was also relied upon. [In RE: Elambrancheri Khaldoon–Advance Ruling No. KER/12/2018, dated 19-9-2018, AAR Kerala].

26. Demo cars being capital goods are eligible for ITC to car dealer:

AAR Kerala has held that input tax paid a vehicle dealer on purchase of motor car used for demonstration purposes can be availed as input tax credit as capital goods and set off against output tax payable under GST. AAR in this regard observed that demo cares are indispensable tools for promotion of sales, purchase being made for furtherance of business, and that applicant capitalises them in books of accounts. It was also held that activity did not come under negative clause under Section 17(5), as after the limited period the vehicles are sold at written down book value. [In RE: A.M. Motors -Advance Ruling No. KER/10/2018, dated 26-9-2018, AAR Kerala]

27. Providing complimentary tickets is covered as ‘supply’:

GST Authority for Advance Rulings Punjab has held that free tickets given as complimentary tickets fall within definition of supply under CGST Act, 2017 and that ITC is available on inputs and input services used in respect of such tickets. By giving free tickets, applicant is displaying an act of forbearance by tolerating persons who are receiving services provided by applicant without paying any money, which other persons not receiving such complimentary tickets would have to pay for. It was held that such act of forbearance would qualify as ‘consideration’ under Section 2(31)(b) of CGST Act, monetary value of which would be the amount of money charged from other persons not receiving the ‘complementary tickets’ for availing same services. Schedule II of CGST Act deems ‘agreeing to the obligation to refrain from an act or to tolerate an act or situation, or to do an act’ as supply of service, and that when Section 7(1)(d)of CGST Act makes reference to Schedule II, it does not contain any requirement of presence of consideration. Further, applicant was held as eligible to avail credit of input & input services going into provision of supply of complimentary tickets.[In RE: KPH Dream Cricket Pvt. Ltd.-2018–VIL–209–AAR].

28. Lease for mining taxable at rate as applicable on supply of goods:

The applicant was granted lease for mining of red boulder, soft boulder and GSB by Govt. of Haryana. Advance ruling was sought on issue of classification of service provided by Haryana Government against receipt of royalty from applicant along with rate of GST applicable on said service. Annexure to Not .no. 11/2017-Central Tax (Rate) covers ‘Licensing services for right to use minerals including its exploration and valuation’ under heading 9973 and group 99733. It was held that royalty paid by applicant to Haryana Govt. is a consideration for transfer of right to use minerals as per lease granted by Govt. to applicant. It was also held that subject service is covered at residual Entry No. 17(viii) of referred notification and shall attract same rate of tax as is applicable on supply of subject goods viz. 5%. Further, in respect of service provided by Haryana Govt., applicant shall be required to discharge tax liability under reverse charge mechanism. [In RE: Pioneer Partners-2018-VIL-176-AAR].

29. Shampoo towel classifiable under Heading 3305 while bed and bath towel classifiable under 3307:

AAR Uttarakhand has held that shampoo towel meant for application on hair only is classifiable under Heading 3305 as distinguished from Wet Wipes, and Bed and Bath Towels which are covered under Heading 3307 of GST Tariff. Latter products were found to be similar as basic nature and working of these products was same. The department had contended that bed and bath towels were classifiable under Heading 3305. The Authority also rejected classification under Chapters 34, 48 and 56 for these. All the products were held liable to GST @ 18% from 15thNovember 2017. [In RE: Gini Filament Limited –Ruling No. 5 of 2018, AAR Uttarakhand] 

B. Customs Updates for the Month of  October 2018

30. SEIS benefits to firms providing educational services to NRI students:

Benefits under Services Export from India Scheme (SEIS) of Foreign Trade Policy 2015-20 are available to Indian institutes providing educational services to NRI students. Benefits are available under Serial No. 4-A/B/C or D of Appendix 3D of FTP-Handbook of Procedures Vol. 1. According to DGFT Policy Circular No. 13/2015-20, dated 5-10-2018, services given to Indian students sponsored by NRIs would not be eligible for such benefit, since such category of students cannot be considered as foreign consumers.

31. Cruise tourism –CBIC clarifies on applicability of Customs provisions:

CBIC has clarified that cruise vessel calling on an Indian port would be liable to pay duty on liquor and other consumed stores during its transit through territorial waters or its period of stay at port in India. Instruction No. 15/2018-Cus., dated 4-10-2018 in this regard also reiterates that Chief Commissioner may ask a customs officer to escort cruise ships on domestic legs and that domestic passengers will be liable to Customs duty on on-board purchases of duty free goods, while international passengers can avail baggage allowance.

32. Customs duty increased on 19 products to narrow CAD:

India has increased basic customs duty on import of 19 products with effect from 27-9-2018. This increase, according to the Finance Ministry Press Release, aims at narrowing the current account deficit. Products covered include air conditioners, household refrigerators, washing machines less than 10 Kg, compressor for air conditioners and refrigerators, speakers, footwears, radial car tyres, certain plastic articles, travel bags, ATF and certain diamonds and articles of jewellery. Notification Nos. 67 to 70/2018-Cus., were issued on 26-9-2018 for this purpose.

33. EOU, Advance authorisation and EPCG imports -IGST and Cess exemption extended:

Exemption from Integrated GST and Compensation Cess in respect of imports under Advance Authorisations, Special Advance Authorisations and EPCG authorisations has been extended again. Exemption would now be eligible till 31.03.19 instead of 1st October 2018. Such exemption has also been provided in case of imports by Export Oriented Units (EOUs). Notification Nos. 65/2018 and 66/2018-Cus. have been issued for this purpose, making amendments in Notification Nos. 52/2003-Cus., 16, 18, 20 and 22/2015-Cus., and 45/2016-Cus. It may be noted that DGFT has also amended Foreign Trade Policy for this purpose.

34. India postpones again retaliatory measures against USA:

India has again postponed implementation of its retaliatory tariff measures against the USA which are aimed to counter USA’s certain measures on import of steel and aluminium from India. The higher basic customs duty (BCD) in respect of imports of commodities such as almonds, apples fresh and other diagnostic reagents, etc., will now be effective from 2ndof November 2018. It may be noted that the higher duty was initially scheduled for 4-8-2018 but was postponed to 18-9-2018. Notification No. 62/2018-Customs, dated 17-9-2018 has been issued for this purpose.

35. DGFT Notification No. 9/2015-20, issued without jurisdiction, quashed:

Not. No. 9/2015-20, dated 3-6-16 issued by DGFT, requiring actual user of newsprint to comply with certain conditions at time of import and not at time of clearance of goods has been quashed by Calcutta High Court. Not issued under Section 3 of Foreign Trade (Development & Regulation) Act, 1992 while Section 6 of said Act states that Central Govt. cannot empower DG to exercise powers under Sections 3, 5, 15, 16 and 19. Order dated 24-3-1994, giving sanction for DG to authenticate notification, was also held as not issued under Sec 6(3). [Sanmarg P. Ltd. v.UOI–W.P. No. 11957(W) of 16 decided on 5-10-18, Calcutta High Court]

36. No redemption fine when goods re-exported:

Observing that the goods were re-exported, CESTAT Allahabad has set aside confiscation and thus imposition of redemption fine. It observed that order of the lower authority that goods should be redeemed and be re-exported was contradictory. The case involved mis-declaration of description of goods. The Tribunal was of the opinion that the original authority had option of either ordering re-export without confiscation or option of confiscating the goods and giving an option to redeem the same on payment of redemption fine. [Eminence Technologies v. Commissioner -Final Order No. 72160/2018, dated 11-9-2018, CESTAT Allahabad]

37. EOU –Destruction of goods outside EOU –Prior permission when not required:

In a case where rejected inputs and expired manufactured goods were sent outside EOU to premises of MP Waste Management Project, CESTAT Delhi has allowed refund of duty paid mistakenly. The assessee had sent an intimation to department but permission was not received from department. The Tribunal termed the absence of permission as procedural lapse. It allowed refund observing that EOU was otherwise not liable to pay duty and that prior permission or presence of the Customs Officer was not relevant. [Teva API India Ltd. v. Commissioner -Final Order No. 52953/2018, dated 14-9-2018, CESTAT Delhi]

38. CKD kits for cars –Customs exemption clarified:

CESTAT Chennai has held that the sentence ‘engine, gearbox and transmission mechanism not in a preassembled condition’ should be read as ‘engine or gearbox or transmission mechanism not in a preassembled condition’ in Sl. No. 344(i) of Notification 21/2011-Cus. & Sl. No. 437(1)(a) of Notification 12/2012-Cus, during period from 1-3-2011 to 11-4-2013. The Tribunal held that word ‘AND’ between gearbox and transmission must necessarily be read as ‘OR’, since, any other interpretation would lead to absurdity and defeat the intention of legislature. It was held that Entry 344 (1) (b) will not include automobile kit imported with engine or gearbox or transmission in preassembled form and mounted on a chassis/body assembly & will also not include such sub-assembly engine and/or gearbox and/or transmission mechanism if they are imported mated to each other. [BMW India v. Comm. -Final Order No. 42430/2018, dated 17-9-18, CESTAT Chennai]

39. Anti-dumping duty –DA’s termination order appealable before CESTAT:

Appeal can be filed before CESTAT under Section 9C of the Customs Tariff Act, 1975 in a case where Designated Authority proposes non-imposition of anti-dumping duty. Delhi High Court in this regard noted that negative final finding order or termination order is determinative, and not a mere recommendation as in case of positive finding. It was held that such order is ‘order of determination’ under Section 9C. Disposing writ petition as not entertained due to availability of alternative remedy, High Court rejected plea of violation of procedural provisions. [Jindal Poly Film v. Designated Authority-Writ Petition (Civil) No. 8202/2017, decided on 20-9-18, Delhi High Court]

C. Central Excise and Service Tax Updates for the Month of October 2018

40. Refund of Cenvat credit not deniable even when credit not reflected in ST-3 return:

Refund of Cenvat credit on exports was held as not deniable by Mumbai Bench of CESTAT if credit particulars were not reflected in ST-3 returns fora particular period though provided in the accounting records. The Tribunal while remanding for verification of accounting records, directed the authority not to insist on nexus between input services and output service. It observed that the appellant was an EOU and no services were provided domestically, and thus, it could not be said that input services were not used for exports. [3DPLM Software Solutions v. Commissioner -Final Order No. A/87226/2018, dated 28-8-2018, CESTAT Mumbai]  

41. Cenvat credit on hotel accommodation service when available:

CESTAT Mumbai has observed that Cenvat credit can be availed on hotel accommodation service availed by employee of company providing Event Management Service. Rejecting the plea that hotel accommodation was taken for personal use of employees, it observed that event management service can never remain confined to place, and if the said place was situated at an outside location, then hotel accommodation could be considered as a basic requirement. The Tribunal however remanded the matter for scrutiny of documents. [Procam International v. Commissioner – Order No. A/87454/2018, dated 28-9-2018, CESTAT Mumbai]

42. Excise Valuation –Proprietorship and limited concerns are not related:

CESTAT Ahmedabad has rejected department’s contention of classifying assessee (a proprietorship company) and a private limited company as related, just because whole capital of the limited concern was contributed by the family members of the proprietor of assessee-manufacturer. The Tribunal was of the view that Section 6 of Companies Act, 1956 did not cover such situation. Demand was set aside observing that the price adopted by department did not relate to similar class of buyer buying substantial quantity of the total sale. [K.R. Metals v. Commissioner -Final Order No. A/12096/2018, dated 8-10-2018, CESTAT Ahmedabad]

43. Valuation of prototypes –Excise Valuation Rule 8 not applicable:

In a case where prototypes were cleared to assessee’s own another unit on returnable basis for extensive testing to determine their road worthiness, CESTAT Chennai has held that Excise Valuation Rule 8 (for captive consumption), was not applicable. Rejecting department’s plea, the Tribunal was of the view that prototypes were not consumed in further manufacture of motor vehicles and that similar model vehicles which were commercially manufactured can be said to be copies of prototypes. Valuation under Rule 4 was upheld. [Commissioner v. Mahindra & Mahindra -Final Order No. 42408/2018, dated 12-9-2018, CESTAT Chennai]

D. VAT Updates for the Month of  October 2018

44. TNVAT – ITC available when inter-State sale made to State government:

Supreme Court has upheld the Madras High Court Order which had in-turn upheld the constitutional validity of Section 19(5)(c) of the TNVAT Act and Rule 10(9)(a) of the TN VAT Rules, prescribing Form C in respect of inter-State sales, for the purpose of claiming ITC. The Apex Court however observed that in cases where a dealer makes sales exclusively to the other State Government(s), benefit of ITC would be allowed without insisting on furnishing of Form C. It was held that States would be deemed as registered dealers for this purpose. [TVS Motor Co. Ltd. v. State of Tamil Nadu -Civil Appeal Nos. 10560-10564/18 and Ors., decided on 12-10-18, SC]

45. Premix coffee is not coffee, and frozen dessert when not dessert:

Premix coffee, containing coffee powder, milk powder and sugar and used for preparation of beverage, was held as classifiable under residual Entry 141 of 1st Schedule to Kerala General Sales Tax Act. The High Court of Kerala rejected classification under Entry 42 covering coffee including coffee beans, seeds and powder, except branded powder. The Court also held that ‘Kwality Walls Feast Chocolate’ was a chocolate covered under Entry 45. Mere nomenclature as frozen dessert did not make the product a dessert, to be served after food. [State of Kerala v. Hindustan Lever Ltd. -2018-VIL-381-KER]  

With Warm Regards & Jai Hind

 Author CMA Rakesh Bhalla is Past chairman NIRC of ICAI (CMA) and Member ZAC & RAC Chandigarh – Central Excise & Service Tax (now GST) & Customs, Govt. of India, Member of Indirect Tax committee SIAM , Member, ASSOCHAM National Indirect Taxes Committee, Chief General Manager Finance- SML Isuzu Ltd., Winner Achiever Award 2015 by ICAI (CMA). 

Author can be reached at, 9779010685

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July 2021