Indirect Taxes Updates- GST, Customs, Excise, Service Tax & VAT- Month – August 2019

A. GST Updates for the Month of August 2019

I. Recent GST Notifications and Circulars on GST

  • Due date for filing GST annual return for 2017-18 postponed to 30-11-2019: Due date for filing GST annual return for the period from 1-7-2017 to 31-3-2018 has been extended to 30th November, 2019 instead of the earlier extended date of 31st August, 2019. (Order No. 7/2019-Central Tax, dated 26-8-2019).
  • Requirement to furnish declaration in FORM ITC-04 for the period July, 2017-March 2018 and FY 2018-19 waived off. (Refer Notification No. 38/2019-CT dated 31.08.2019).
  • State and Area Benches of Goods and Services Tax Appellate Tribunal in specified States and Union Territories notified: Central Government has, on 21st August 2019, notified the creation of State & Area Benches of the Goods and Services Tax Appellate Tribunal (GSTAT). The notification also provides for GSTAT Benches for Union Territories of Andaman & Nicobar, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep, and Chandigarh.
  • GST rate reduced on electrically operated vehicles from 1-8-2019: Electrically operated vehicles, including two and three wheeled electric vehicles and charger or charging station for such vehicles are liable to GST @ 5% from 1-8-19. Further, exemption provided for hiring electric operated vehicle meant to carry more than twelve passengers by local authorities. (Not Nos. 1/2017-CT (Rate) & 12/2017-CT (Rate) amended by not issued on 31-7-19).
  • Composition scheme – Due date for Form CMP-08 extended till 31-8-2019: Due date for furnishing the statement containing details of payment of self-assessed tax in Form GST CMP-08, for the quarter April, 2019 to June, 2019, has been extended till 31-8-2019. (Notification No. 35/2019-Central Tax, dated 29-7-2019).
  • Blocking of e-way bill generation for non-filers of returns, postponed: Rule 138E of CGST Rules relating to restriction on furnishing of information in Part A of Form GST EWB-01 will now be effective from 21-11-2019 instead of 21-8-2019. Hence, no person (including a consignor, consignee and transporter) will be allowed to furnish information in Part A of Form GST EWB-01 and generate e-way bill if he has not furnished the returns for two consecutive tax periods. (Not. No. 22/2019-Central Tax, 23-4-2019 amended by Not. No. 36/2019-CT, 20-8-2019.
  • GST on monthly subscription charged by RWAs, clarified: Ceiling of Rs. 7500 per month per member for GST exemption is to be applied per residential apartment and not per person. If such ceiling is crossed and RWA’s annual aggregate turnover exceeds Rs. 20 lakh, GST is payable on full amount and not on amount exceeding Rs. 7500. (Circular No. 109/28/2019-GST, dated 22-7-2019).

II. Important Cases decided on GST

  • Classification of printing service by the assesse – The applicant was engaged in providing printing services and used to print photographs in various sizes as per requirements of photographers or retail customers who shoot images using digital cameras and provide contents to applicant in Pen Drive, CD, memory card, or in any other storage media. The editing or processing is done by professionals or retail customers themselves. Issue involved was – whether activity of merely printing or reproducing content given by photographers/retail customers on pen drive, CD, memory card or any other storage media would be classifiable under Service Code 998912 or 998386? It is held that the activity of merely printing or reproducing the content given by the photographers / retail customers on pen drive, CD, memory card or any other storage media will be classifiable under Service Code 998386 and liable to tax @18%. (Case Reference – Colo Color [2019] 107 com 383 (AAR – MAHARASHTRA).
  • GST applicability on membership fees of co-operative housing society – Applicant is a co-operative housing society who is providing services to their members in form of facilities or benefits to members (for which they receive consideration). Applicant provides both, taxable as well as exempted services. Issue involved – Individuals who own flat/s in society but have opted not to become a member of the society, whether such members of society will be at par with the other individual flat owners who are not members? Observation/Ruling – AAR held that above issue does not fall within purview of Sec 97 of the CGST Act and therefore application for advance ruling rejected. (Refer case of Kabra Galaxy Star 3 Co-op Housing Society [2019] 107 com336 (AAR – MAHARASHTRA).
  • ITC availability on motor vehicles used for demonstration purpose: The applicant is a an authorised dealer for Maruti Suzuki India limited for sale of motor vehicles and  spares and for servicing as also for some other commercial vehicle manufacturers. Applicant show purchased vehicles as capital assets in his books and vehicles are used as demo cars for providing trial run to customers to understand features of vehicle and applicant held those vehicles for 2 years or 40000 km whichever is earlier then sold. Issue involve was – whether ITC available on the motor vehicle purchased for demonstration purpose? It has been observed that Section 16(1) of the GST Act provides that every person shall be entitled to take input tax credit on every supply of goods or services or both which are used for intended to be used in course or furtherance of business. Section 17(5) of the Act states that no Input tax credit would be available in respect of motor vehicle except when they are used for making the taxable supply including the further supply of such vehicle. GST law does not prescribe any time frame within which such further supply shall be effected hence AAR held that ITC on the motor vehicle purchased for demonstration purpose can be availed as ITC on capital goods as per section 16(1) of the GST Act. [Chowgule Industries (P.) Ltd.[2019] com 293 (AAR – GOA)].
  • Lapsing of ITC accumulated due to inverted rate structure on fabrics – Proviso in notification and circular quashed: Gujarat High Court has quashed the relevant proviso (ii) in Notification No. 5/2017-Central Tax (Rate) as inserted by Not. No. 20/2018-Central Tax (Rate) and Cir. No. 56/30/2018-GST by which ITC accumulated due to inverted tax structure as on 31-7-2018 was to be lapsed for manufacturers of fabrics. It observed that Section 54(3)(ii) of Central GST Act, 2017 does not empower the department to frame rules for lapsing of ITC. [Shabnam Petrofils v. UoI – R/Special Civil Application No. 16213 of 2018, decided on 17-7-2019, Gujarat High Court]
  • Show cause notice is sine qua non to proceed with recovery under GST: Karnataka High Court has reiterated that issuance of show cause notice is sine qua non to proceed with the recovery of interest payable under Section 50 of Central GST Act, 2017 and penalty imposable under CGST Act or the Rules. It observed that notion of the authority that Section 75(12) of CGST Act empowers them to proceed with recovery without issuing SCN is misconceived, as said section is only applicable to self-assessment and not to quantification or determination made by the authorities. [LC Infra Projects Pvt. Ltd. Vs Union of India (Karnataka High Court)]
  • Summons – High Court rejects plea that summons can only be issued after decision under CGST Section 73: Madhya Pradesh High Court has rejected the plea that proceedings under Section 70 of the CGST Act, 2017, relating to summons, can only be taken recourse to after decision under Section 73, relating to demand of tax. The High Court in this regard declined to quash the notice for personal hearing. [Om Shiv Associates v. UoI – Order dated 26-6-2019 in WP-11822-2019, Madhya Pradesh High Court]
  • Power of arrest to be exercised with lot of care and circumspection: Gujarat High Court has reiterated that the power to arrest under Section 69 of the Central GST Act is to be exercised with lot of care and circumspection and that prosecution should normally be launched only after completion of adjudication. The Court directed that no coercive steps of arrest against the writ petitioner should be taken. [Vimal Yashwantgiri Goswami Vs State of Gujarat (Gujarat High Court)]
  • ITC on vehicle for carrying cash – AAAR Order declining ITC set aside: Bombay High Court has set aside AAAR Maharashtra Order holding that ITC is not available on purchase of motor vehicles to carry cash by assessee engaged in cash management service. The Court was of the view that GST Council recommending ITC on vehicles used for transportation of money, would not by itself conclude that prior thereto, money was not included within definition of goods. The Court restored the question before the AAAR for fresh disposal. [C.M.S. Info Systems Ltd. Vs Commissioner, CGST (Bombay High Court)]
  • ITC – Mere reflection of transitional credit in ledger is not an act of availment: Patna High Court has held that mere reflection of transitional credit in the electronic credit ledger cannot be treated as an act of availment or utilisation, for drawing a proceeding under Section 73(1) of the Bihar GST Act. The Court noted that legislative intent reflected from reading of Section 140 alongside Section 73 and Rules 117 and 121 is that even a wrongly reflected transitional credit in the electronic ledger on its own is not sufficient to draw penal proceedings until the same is put to use. Supreme Court’s judgement in Ind. Swift Laboratories was distinguished. [Commercial Steel Engineering Corporation v. State of Bihar – 2019 VIL 348 PAT]
  • Interest on delayed payment of GST & filing of returns – Larger Bench to consider scope of CGST Section 50: Madras High Court has referred to Larger Bench the dispute as to whether interest under Section 50 of the CGST Act, for delayed filing of returns, arises automatically or on assessment and after considering the explanation offered by the assessee. The Court also put the question, as to whether at all the explanation by the assessee must be considered by the assessing officer and then pass further orders. While one Judge dismissed the departmental appeal, other Judge was of the view that the point requires deeper consideration of the scope of Section 50. [Asstt. Commissioner v. Daejung Moparts – 2019 VIL 387 MAD]
  • Seizure – Unaccounted goods at disclosed place of business are ‘secreted’: Allahabad High Court held that once it was admitted that assessee had not recorded goods found stored at his disclosed place of business, in his books of account, a presumption of goods having been ‘secreted’ as per CGST Section 67 did arise. Upholding seizure of undisclosed goods found at disclosed place, it is observed that there was nothing to restrict meaning of words ‘in any place’ in Section 67 to only undisclosed place of business. Assessee had contended that goods found at disclosed place of business were not ‘secreted’. [Rajeev Traders Vs State Of U. P. And 3 Others (Allahabad High Court)]
  • Anti-profiteering – Stay on suo motu notice seeking information on all products: Delhi High Court has stayed the suo motu notice issued by the Director General of Anti-Profiteering (DGAP), seeking information on all products of the petitioner. The petitioner had pleaded that without a report of DGAP on the complained product followed by an order of National Anti-Profiteering Authority (NAPA) under CGST Rule 133(5)(a), DGAP cannot suo motuissue a notice requiring submission of information on all its products which were approximately 3500 in number. The Court held that the petitioner had made out a prima facie case for grant of limited interim relief. [Reckitt Benckiser India Pvt. Ltd. v. UoI – Order dated 19-7-2019 in W.P.(C) 7743/2019, Delhi High Court]
  • ITC need not be reversed in case of post purchase discount: Appellate AAR of Tamil Nadu has held that ITC of full GST charged on undiscounted supply invoice is available to buyer and that proportionate reversal is not required to be done in case of post purchase discount given by supplier. Case involved issuance of commercial credit note subsequently through automated arrangement using software. Overruling the AAR ruling, Appellate AAR observed that the discount was not recorded in invoice or agreement, and hence value would continue to be the value as determined under CGST Section 15(1). It held that if GST charged and paid is not reversed, ITC need not be reversed. CGST Section 16(2) was held as not applicable. [In re M/s. MRF Limited (GST AAR Tamilnadu)]
  • Valuation – Supply to distinct person – Applying 2nd proviso to Rule 28 directly not sustainable: Tamil Nadu AAR has referred to Rule 28 of CGST Rules, 2017 and held that in case where ‘open market value’ as per Rule 28(a) was available in respect of supplies made to distinct person (branches), there is no necessity to go further down to Rule 28(b) or (c). Further, it was held that if the applicant does not use option provided under 1st proviso to Rule 28, he has to supply at ‘open market value’ as per Rule 28(a). The AAR held that both provisos were to be read together and not independently, and that the applicant cannot choose whichever proviso was favorable to it. [In RE: Specsmakers Opticians Private Limited – 2019 VIL 233 AAR]
  • Hotel accommodation booking service – GST payable @ 5% without ITC: Observing that applicant is covered under the definition of agent, supplier and taxable person, AAR Delhi has held that the applicant, booking hotel accommodation in foreign countries for its Indian clients, is required to pay GST on value of hotel accommodation service. Option to pay GST @ 18% (with ITC) was held as not available. The AAR held that value of ‘hotel accommodation’ paid by client to them, which is remitted to foreign hotel / hotel aggregator, cannot be included in taxable value, provided conditions of pure agent are satisfied. [In RE: Tui India (P) Ltd. – 2019 VIL 230 AAR]
  • No composite supply if all ingredients are equally important: Maharashtra AAAR has held that supply of electro ink along with other consumables is not a composite supply. It observed that printing cannot take place with ink (contended to be principal supply) alone and products like developer or plate are equally important. The Appellate Authority in this regard observed that products may be supplied together initially but not subsequently and that providing customer an option of a tier programme is not an industry practice. It also noted that supply involved compulsion which should not be there in a composite supply. [In RE: HP India Sales – 2019 VIL 53 AAAR]
  • Supply of food at occasional events taxable @ 18% GST: West Bengal Appellate AAR held that supply of food at events which are occasional in nature like social get-togethers in the premises of club is taxable under Serial No. 7(v) of Notification No. 11/2017-Cental Tax (Rate) @ 18% GST. Upholding AAR ruling, AAAR observed that social get-togethers & parties are occasional in nature & that services provided by the club at such get-togethers are not regular restaurant services. AAAR observed that provisions of Sl. No.7(v) are not restricted to exhibition or marriage halls and include all indoor and outdoor functions. [In Re Bengal Rowing Club – 2019 TIOL 59 AAAR GST]
  • No ban on separate GST registration to multiple firms in a co-working space: Kerala AAR has held that separate GST registration can be allowed to multiple companies providing services only and operating from a ‘co-working space’. It noted that there is no prohibition for registration to a shared office space or virtual office and that since GST registration is PAN based, identification of taxpayer is not difficult. The Authority observed that such companies need to upload rental agreement or sub-lease as proof of address of principal place of business showing respective suite or desk number. It also stated that in addition, the applicants can upload a copy of ‘monthly utility bill’ in connection with payment towards electricity charges, water charges or other common services availed by the respective suite or desk number. [In RE: Spacelance Office Solutions – 2019 TIOL 255 AAR GST]
  • GST liability on residential flats constructed partially before and partially after introduction of GST – Time of supply: Karnataka AAR while referring to time of supply of service under Section 13 of CGST Act, 2017 on applicability of GST on works contract service pertaining to partially completed flats, has held that GST is not applicable if customers are identified post completion of flats and post issuance of completion certificate. AAR observed that in case customers were identified prior to implementation of GST, applicant would be liable to pay service tax proportionate to services provided prior to GST regime and GST proportionate to services provided under GST regime. In case customers are identified after introduction of GST regime, the applicant was held liable to GST. AAR, for this situation, also rejected the plea that the value of supply under GST shall be only the value of the work carried out after the appointed date. [In RE: Durga Projects & Infrastructure Pvt. Ltd. – 2019 VIL 236 AAR]
  • Valuation – Amortization cost not includable in transaction cost if tools on FOC supplied under contract: On the question of applicability of GST on tools amortization cost where tools were received for free on returnable basis from the customer under contract, Karnataka AAR referring to Circular No. 47/21/2018-GST, has held that tools amortization cost need not be included in the value of supply of parts. It noted that as per contract/purchase order, the applicant was not under any obligation to use its own tools/moulds for manufacture of components supplied. The applicant was engaged in manufacture, sale and design of plastic moulds as per customers. The AAR also held that the ruling will apply to other contracts if the terms and conditions contained therein are the same. [In RE: Toolcomp Systems Private Limited – 2019 VIL 235 AAR]

III. GST Compliance Calendar – Returns for the Month of August 2019 to be filed in September 2019

Return Last Date
GSTR-1 Outward supply for the month of August 2019 11th September 2019
GSTR-5 Non-resident foreign taxpayers return for the month of August 2019 20th September 2019
GSTR-6  Input service distributor for the month of August 2019 13th September 2019
GSTR-7 Tax Deducted at Source for August 2019 10th September 2019
GSTR-8 Tax Collected at Source by e-commerce operator for August 2019 10th September 2019
GSTR-3B Summary return tax payment for the month of August 2019 20th September 2019

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B. Customs Updates for the Month of August 2019

I. Recent Notifications and Circulars on Custom

  • Re-import of goods earlier sent out for exhibition – IGST when not payable: Relying on recent GST Circular holding that sending/taking goods out of India for exhibition, in the absence of consideration, is neither supply nor zero rated supply, CBIC has clarified that Sl. No. 1(d) of Notification No. 45/2017-Cus., requiring payment of IGST on re-import, is not applicable. According to the circular, Sl. No. 5 instead is relevant. Circular No. 21/2019-Cus., dated 24-7-2019 also observes that Sl. No. 5 will apply even in cases where exports are made to related/distinct persons or to principals/agents, for participation in exhibition or on consignment basis.
  • Re-imports – Recovery of export benefits taken under reward schemes: Importers are required to provide a no incentive certificate from RA of DGFT at the time of re-import of exported goods on which benefit under Chapter 3 of FTP was availed at the time of export. CBIC Instruction No. 3/2019-Cus., dated 13-8-2019 clarifying so, reiterates that before allowing clearance in cases of such re-imports, a no-incentive certificate is to be ensured by Customs field formations. Instruction notes that Para 3.24 of Handbook of Procedures Vol.1 prescribes the procedure for obtaining such certificate.
  • IGST refund to exporters – Mismatch between GSTR-1 and 3B during FY 2018-19 – Verification procedure extended: CBIC has clarified that the solution provided in Circular No. 12/2018-Cus., in case of payment mismatch between GSTR-1 and GSTR-3B during the period from July 2017 till March 2018, would also be applicable for the period from April 2018 till March 2019. According to Circular No. 25/2019-Cus., dated 27-8-2019, corresponding CA certificate evidencing no discrepancy between the amount refunded and actual amount paid, must be furnished by 30th of October 2019. Circular No. 12/2018-Cus. had provided for mechanism to verify IGST payments in such cases.
  • IGST refund in invoice mismatch issue – Officer interface facility extended: Alternative mechanism with an officer interface to resolve invoice mismatches errors for IGST refund to exporters, has been extended for shipping bills filed till 31-7-2019. The mechanism was earlier available for shipping bills filed till 15-11-2018 only. Circular No. 26/2019-Cus., dated 27-8-2019, issued for this purpose, notes that despite wide publicity and outreach programmes to make exporters aware about the need to have identical details in invoices given in shipping bills and GST returns, few exporters continue to commit such errors.
  • Fees for excess utilization of duty saved amount can be paid within 2 years: Regional Authorities have been granted power to condone delay in payment of fee for excess utilisation of duty saved amount. As per the new provisions inserted in Para 5.16(a) of the Handbook of Procedures Vol.1, RA may accept additional fee to cover the excess imports, if the same is furnished beyond one month but within two years of the excess imports. This will however be subject to payment of composition fee of Rs. 5000/- per authorization. DGFT Public Notice No. 22/2015-20, dated 31-7-2019 has been issued for this purpose.
  • CBIC directs gradual relaxation in percentage of physical examination of exports: CBIC has asked its field formations to gradually taper down the percentage of physical examination in cases wherever the earlier examination has validated the declaration made in the shipping bill. RMCC shall for this purpose consider the feedback received from field formations. Circular No. 22/2019-Cus., dated 24-7-2019 notes that CBIC has received representations wherein exporters have raised the issue of repeated opening of export containers for 100% examination related to risky exporters under the new procedure laid down in Circular 16/2019-Cus.
  • AIR drawback when not applicable for calculation of Brand Rate: Observing that since central excise duty on inputs and service tax on input services used in the manufacture of export goods have been subsumed in GST for which input tax credit/refund is available, CBIC has clarified that contents of para 3(a) and 3(b) of Circular Nos. 83/2003-Cus. and 97/2003-Cus. are not applicable for exports made in post GST era. Para 3(a) and 3(b) of earlier circulars pertain to brand rate fixation for leather articles, complete bicycles and complete buses. Circular No. 24/2019-Cus, dated 8-8-2019 has been issued for this purpose.
  • Refund of IGST paid on imports by specialized agencies clarified: Customs field formations will provide refund of IGST paid on import of goods by the specialized agencies notified by Central Government under Section 55 of CGST Act, 2017. Circular No. 23/2019-Cus., dated 1-8-2019 while clarifying so, observes that Section 3(7) of Customs Tariff Act, 1975 provides for a parity between the integrated tax rate attracted on imported goods and the integrated tax applicable on the domestic supplies of goods. It notes that in case of UN and specialised agencies, GST notifications envisage payment and then refund of taxes paid, and therefore, on this principle of parity, specialised agencies ought to get the refund of IGST paid on imported goods.
  • Global Authorization for Intra-Company Transfer (GAICT) of SCOMET Items/Software/Technology – Procedure specified: Para 2.79F has been inserted in the Handbook of Procedures Vol.1, 2015-20 for laying down the procedure for issuance of Global Authorization for Intra-Company Transfer (GAICT) for SCOMET Items/ Software / Technology. Pursuant to the introduction of the said para, no pre-export authorization will be required for re-export of imported SCOMET items, software and technology (excluding SCOMET Categories 0, 1B, 1C2, 3A401, 5 and 6) subject to the conditions laid down therein. DGFT Public Notice No. 20/2015-20, dated 24-7-2019 has been issued for this purpose.

II. Important Cases decided on Custom

  • Customs not to recover from legal heirs of deceased noticees/assessees: Customs Department cannot proceed against legal heirs of a deceased noticee/assessee against whom there may be proceedings for recovery of customs duty. The Delhi High Court while holding so, observed that there is no machinery provision in the Customs Act, 1962 whereby the dues owed by a proprietary concern or a partnership firm can be sought to be recovered from legal heirs of proprietor/partner of such concern/firm. The Court in this regard relied upon a Supreme Court judgement in the case of Shabina Abraham v. Collector which was related to Central Excise. [Amandeep Singh Sehgal Vs Commissioner of Customs (Preventive) (Delhi High Court)]
  • Seizure, absence of SCN – Right to unconditional release when not available: Delhi High Court has observed that second proviso to Customs Section 110(2), stating that in case of provisional release, period of 6 months for SCN would not apply, is to make sure that at least seized goods are provisionally released quickly. The Court held that 2nd proviso, inserted by Finance Act, 2018, did not take away what was already available to assessee and hence the proviso was not applied retrospectively. It also held that right for release of goods might have accrued if no provisional release order was passed before 6 months from seizure. [Wide Impex Vs Principal Commissioner of Customs (Import) (Delhi High Court)]
  • Classification of goods – Similarity of contents when not a criterion: CESTAT New Delhi has observed that assorted birthday candles with Chlorate, Potassium, Aluminium, etc., (material for fireworks) only in material contents of the central wig, are not classifiable as fireworks. The Tribunal for this purpose, relied upon Rule 3(a) of Interpretative Rules and the essential use criteria. It observed that if similarity of contents is the criteria, even matchstick is a firework. The Tribunal also held that although CHA is obligated with CBLR Regulations but not every breach leads to revocation of license. [Jaiswal Import Cargo Services Limited Vs Commissioner of Customs (CESTAT Delhi)]
  • Classification of goods – No estoppel to raise dispute in subsequent import: Mumbai Bench of CESTAT has held that there is no estoppel in raising classification dispute in subsequent import of a product and that in the absence of appropriate classification there was nothing binding to treat previous classification as the sole option. The Tribunal observed that Granola bar comprised of various products including oats and its character is altered post baking and mixing, and therefore it would not be appropriate to fit it in category of cereals or prepared food in the absence of coverage by residuary entry under Heading 1904. [General Mills India Ltd. Vs Commissioner (CESTAT Mumbai)]
  • Valuation – Declared value cannot be revised just because it is lower than in NIDB database: CESTAT Chennai has held that the difference in the declared value and the value in the NIDB database does not constitute in itself a “reasonable doubt” needed to reject the transaction value under Rule 12 of Customs Valuation (Determination of Value of Imported Goods), 2007. It was held that simply because the value declared by the appellant is lower than the value found in the NIDB database, the value cannot be revised by the department. [Sai Exports Vs Commissioner of Customs (CESTAT Chennai)]
  • Effective date of STP approval cannot be amended to an earlier point of time, once imports made: The petitioner was granted permission for setting up a ‘Software Technology Park’ and a communication dated 29-11-2005 was sent by the Ministry. Since their imports had already arrived during October-November 2005, an amendment of the effective date of approval to 4-4-2005 was sought, to avail the benefit under Notification No.153/93-Cus. Observing that the petitioner had jumped the gun and made imports even before approval, the Madras High Court held that having imported without any document with regard to approval of application for STP, the effective date of approval cannot be advanced to an earlier point of time. [Khivraj Tech Park Pvt. Ltd. v. Union of India – 2019 TIOL 1812 HC MAD CUS]
  • Demand of duty and interest when delay on part of authorities processing necessary redemption certificate: The assessee was exempted from payment of customs duty by Notification No. 96/2009-Cus. subject to condition that evidence of discharge of export obligation was produced within sixty days of expiry of the period allowed for fulfilment of EO. However, the redemption certificates in proof of fulfilment of such export obligations were issued to the assessee belatedly. Allowing the writ petition, the High Court of Telangana and Andhra Pradesh held that the authorities should put in place a proper mechanism to see that certificates are issued promptly. [(Hetero Labs Limited Vs Assistant Commissioner (Telangana High Court)]
  • Denial of cross examination of Directors not violative of principles of natural justice in all cases: Delhi High Court has held that statement of directors of company who were co-noticees cannot be in every case need to be cross examined under Section 9D of the Central Excise Act, 1944 or Section 138 of Customs Act, 1962. It was held that statement of directors cannot be called as statement simplicitor but a statement as that of the company. The Court also held that as these statements are made to the Customs officer, these are out of the ambit of Section 24 of Indian Evidence Act and are readily admissible as evidence. The High Court also held that the co-noticee, if his statement amounts to confession, cannot be compelled to be cross-examined and there would be no violation of principles of natural justice. [Silicone Concepts International Pvt. Ltd. Vs Principal Commissioner of Customs (CESTAT Delhi)]
  • EPCG scheme – No interest payable on composition fee as same not duty under Customs Section 28: CESTAT Bangalore has held that composition fee paid for extension in export obligation beyond two-years period is not duty under Section 28 of the Customs Act, 1962. It was held that the final duty under EPCG scheme was yet to be assessed and hence, the interest was not liable to be paid on it. The assessee, importing under EPCG scheme, could not fulfil export obligation within the stipulated time and requested for extension. JDGFT directed the assessee to pay 50% duty for unfulfilled export obligation as pre-condition to consider request for extension. The assessee paid the amount with interest on it but subsequently submitted application of refund which was denied holding it as applicable on delayed payment of duty. [Lulu International Convention Centre Pvt Ltd Vs Commissioner of Customs Cochin-cus (CESTAT Bangalore)]
  • Cabling of various parts of agriculture machine is not ‘manufacture’ – Benefit available as full machine and not as parts: CESTAT Delhi has held that mere cabling of various parts of agricultural machine (laser level transmitter, laser receivers, control boxes connecting cables and rechargeable battery packs) so as to let them function as a complete machine does not amount to manufacture and hence benefit of Sl. No. 399(A) of Not No. 12/2012-Cus. cannot be denied. Department’s plea of putting the goods under Sl. No. 399(B) as parts was rejected.[SPL Technologies Pvt. Ltd. Vs Principal Commissioner of Customs (Import) (CESTAT Delhi)]

C. Central Excise, Service Tax & VAT for the Month of August 2019

I. Recent Notifications and Circulars on Central Excise, Service Tax & VAT for the Month of August 2019

  • Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 effective from 1-9-2019 – CBIC clarifies on coverage of the scheme: Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 will come into effect from 1st of September 2019. As per Scheme Rules a declaration under the scheme can be made on or before 31st of December 2019, electronically at Various forms to be filed electronically prescribed, constitution of designated committee and procedure for verification of the declaration by committee provided.(Notification Nos. 4 and 5/2019-C.E. (N.T.), both dated 21st of August 2019). Clarifying on various issues pertaining to the scheme, the Circular also lists type of cases which are excluded from the coverage of the scheme. The exclusions provided are : Cases in respect of goods still liable to Central Excise duty, Cases for which the taxpayer has already been convicted in Court of law, Cases under litigation where the final hearing has taken place before 30-6-2019, Cases of erroneous refund and Cases which are pending before Settlement Commission.
  • Central Excise and Service Tax – Monetary limit for departmental appeals before CESTAT, High Court and Supreme Court raised: Monetary limits for the department to file appeals to the CESTAT, High Court and Supreme Court in cases relating to Central Excise and Service Tax has been revised. Rs. 50 lakh for CESTAT, Rs. 1 crore for the High Court and Rs. 2 crore for the Supreme Court and will apply to all pending cases as well. (Instruction issued on 22-8-2019)

II. Important Cases decided on Central Excise, Service Tax & VAT for the Month of August 2019

  • Excise valuation – No basis for adopting cost inflation index of Income Tax: CESTAT Delhi held that there was no legal basis for adopting cost inflation index of Income Tax dept for determination of assessable value under Section 4 of CE Act read with the CE Valuation Rules, 2000, for valuation of captively consumed goods. The Tribunal also noted that cost of manufacture as certified by Cost Accountant in CAS-4 cannot be rejected based on vague reasons and that Commissioner (Appeals) should have provided tenable grounds for rejecting assessable value. [Shri Krsna Urja Project Pvt Ltd. Vs CCE (CESTAT Delhi)]
  • Commercial training or coaching service – Only institute issuing certificate for course recognized by law not liable to Service Tax: CESTAT Larger Bench has held that merely because Principal of Junior College also signed the certificate with college stamp, it did not mean that the certificate was issued by the college. The Tribunal observed that the certificate was issued by the Board of Intermediate Education and not by the junior college of the assessee. It observed that emphasis on imparting education for obtaining recognized certificates was misconceived. [Sri Chaitanya Educational Committee v. Commissioner – Misc. Order No. 30344/2019, dated 23-7-2019, CESTAT Larger Bench]
  • Cenvat credit available on product liability insurance: CESTAT Chennai has allowed Cenvat credit on product liability insurance availed by the manufacturer for covering the risk of manufacturing defect arising in finished products. The Tribunal for this purpose observed that the insurance was directly connected with manufacturing activity and was also an input service used in relation to manufacture of finished products. [Wheels India Ltd. Vs Commissioner of GST & Central Tax (CESTAT Chennai)]
  • Rebate on exports – No condition for export goods to be manufactured inside country: Allahabad High Court has held that there is no specification under Excise Rule 18 that for the purpose of rebate, goods need to be manufactured inside country. The Court held that the rule talks about any goods, which includes both manufactured inside the country and received from outside. The High Court observed that LCD panels and parts were specified in schedule to Central Excise Tariff and had suffered countervailing duty. [Samsung India Electronics Pvt. Ltd. Vs Union of India And 3 Others (Allahabad High Court)]
  • Refund of Cenvat credit – EOU unit is in DTA in respect of SEZ unit: Observing that the definition of DTA under SEZ Act includes everything located outside SEZs, CESTAT Hyderabad has held that 100% EOU located outside SEZ, constitutes DTA as far as SEZ Act is concerned. It also observed that Section 51 of the SEZ Act makes it clear that this Act prevails over any other law. The Tribunal held that the appellant (EOU) is entitled to refund of Cenvat Credit under Cenvat Rule 5 in respect of the goods which they had sold to SEZ units. CESTAT Chennai Order in case of Orbis India (P) Ltd. was relied on. [ Mylan Laboratories Limited Vs Commissioner of Central Tax (CESTAT Hyderabad)]
  • Leasing of work-wear – Maintenance does not mean effective control retained: In a case where the assessee undertook to deliver, wash and service work-wear to his clients, CESTAT Chandigarh has rejected the department’s contention that since goods always remained in the control of assessee, there was no transfer of effective control and hence the transaction is out of the purview of deemed sale and liable to service tax. It held that exclusive possession remained with the clients as use of goods was not controlled by assessee. [Lindstrom Service India Private Limited Vs Commissioner of Central Excise & Serive Tax (CESTAT Chandigarh)]
  • GTA exemption for transport of fruit – Any produce of a tree as a result of ripened ovary is ‘fruit’: CESTAT Hyderabad has allowed exemption under Notification No. 33/2004-S.T. to assessee taking service of GTA for transport of palm oil fruit. Contention of the department that anything which is not edible cannot be classified as fruit, was hence rejected. The Tribunal, relying on Stroud’s Judicial dictionary of words, held that any produce of a tree which is a result of ripened ovary, is a ‘fruit’, irrespective of nature of it being edible or not. [Nava Bharat Agro Products Ltd. v.Commissioner – 2019 TIOL 2111 CESTAT HYD]
  • Subsequent curtailment of an incentive scheme – Promissory estoppel: Bombay High Court has allowed petition filed against curtailment of validity period of incentive scheme (New Package Scheme of Incentives, 1993). The scheme incentivised setting up of industrial unit in remote areas of Maharashtra. The Court observed that only liberty available with the State was to modify the Incentive Scheme in such a way that it is consistent with the new tax structure while not reducing or restricting the benefits under the scheme. [K. M. Refineries and Infraspace v. State of Maharashtra – 2019 VIL 377 BOM].

*Past chairman NIRC of ICAI (CMA), Ex-Member of ZAC & RAC – Central Excise, Service Tax & Customs Govt. of India, Chandigarh (now GST), Member of Indirect Tax committee SIAM, Member-ASSOCHAM National Indirect Taxes Committee & Special Task Force on GST, Chief General Manager Finance- SML Isuzu Ltd., Member-Chandigarh Branch of Indian Institute of Material Management, Winner Achiever Award 2015 by ICAI (CMA) In addition to above, also a member of 9 council committees of CMA institute. 

Information source- M/s LKS, Nitya Tax Associates, Probability GST updates, PwC India Indirect Tax News Flash, and other sources-many thanks to all.

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  1. srinivas.D says:

    we are having excise duty closing balance as on 30.06.2017 we didnot availed credit in TRAN-1 we submitted our in ability to the central excise department they have taken data of reasons but no decission is given regarding this can any body help us how to take the same into gst credit

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October 2021