GST, Excise, Service Tax, Customs & VAT updates for August 2018

Indirect Taxes Updates- GST, Customs, Excise & Service Tax- Month – August 2018 (updated upto 5^th Sept. 2018) 

A. Amendment in Goods & Services Tax for the Month of August 2018 (updated upto 5^th Sept. 2018)

1. Government notifies CGST GST Amendment Acts 2018

In order to give effect to decisions taken in 28th GST Council meeting Government has taken one more step i.e. notification of GST amendment Act 2018. The GST bill got affirmation from President on 29th August 2018 and GST amendment Act was notified with effect from 30th August 2018.

In many cases, though government has inserted amendments in relevant provisions but silent about effective dates which will be notified separately by government.   

a. Amendment of section 7:  (with effect from the 1st day of July, 2017)

All forms of Supply of goods or services or both will be for consideration AND Furtherance of Business

‘(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II” has been Inserted as to include all forms of supply is given in subsection (1) before the supplies were excluded

b. Amendment of section 9:

‘(4) The Government may, on the recommendations of the Council, by notification provide the class of registered persons who shall in pay reverse charge for the specified category of goods or services from an unregistered dealer

c. Amendment of section 10:

Limit of composition levy has been increased to 1.50 cr by Notification

and Proviso added that Person who pays tax under Composition levy may supply services of Value not exceeding 10% of Turnover in State or UT in Preceding FY or 5 Lakhs whichever is Higher

d. Amendment of section 17:

Subsection (5) motor vehicles for transportation of persons having the seating capacity of not more than thirteen people here ITC is blocked except

(A) Further supply of such motor vehicles; or B) transportation of passengers; or (C) imparting training on driving such motor vehicles

(aa) vessels and aircraft except when they are used –

(i) for making the following taxable supplies, namely: (A) the further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft;

 (ii) for transportation of goods;

(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

Provided that the input tax credit in respect of such services shall be available –

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

e. Amendment of section 34:

A single Credit and Debit notes can be made for more than one tax invoices

f. Amendment of section 39:

Changes in returns as may be prescribed Insertion of new section 43A.

Procedure for furnishing return and availing input tax credit.

g. Amendment of section 48:

Increased Powers for GST practitioners

h.  Amendment of section 49:

The Setoff of GST has been changed now the IGST Credit Should be Claimed Fully and then the credit of CGST and SGST can be used For CGST and SGST Payable Respectively

49A. Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment. 

2. Notification No. 39/2018-Central Tax dated 04^th September 2018:

Amendments in the CGST Rules, such as the following:

a. Form GSTR-9 i.e. Annual Return notified.

b. If the tax invoice does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person.

c. Retrospective amendment in Rule 96(10) of CGST Rules to provide that the refund will not be available to the exporters availing the exemption from IGST under advance authorisation/EPCG.

d. Amendment in the format of Form ITC-04.

e. Amendment in the definition of “Adjusted Total Turnover” in Rule 89(4)(E) of CGST Rules.

3. Notification No. 40/2018-Central Tax dated 04^th September 2018:

Extends the time limit for making the declaration in FORM GST ITC-04 (Job work) for the period July, 2017 to June, 2018 till 30.09.2018. 

4. Notification No. 41/2018-Central Tax dated 04^th September 2018:

Waives the late fee payable in respect of certain class of registered persons. 

5. Circular No. 57/31/2018-GST dated 04^th September 2018:

Clarifying the scope and ambit of principal-agent relationship in the context of Schedule I of the CGST Act (i.e. supply of goods without consideration), as under:

a. The key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not.

b. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall under Clause 3(a) of Schedule I.

c. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered under Clause 3(b) of Schedule I.

6. Circular No. 58/32/2018-GST dated 04^th September 2018:

Clarifying that the taxpayers may reverse the wrongly availed CENVAT credit under the existing law and inadmissible transitional credit through Table 4(B)(2) of FORM GSTR-3B. The applicable interest and penalty shall apply on all such reversals which shall be paid through entry in column 9 of Table 6.1 of FORM GSTR-3B. 

7. Circular No. 59/33/2018-GST dated 04^th September 2018:

Clarification in respect of several refund related issues under GST such as the following:

a. No requirement of submission of invoices (original or duplicate) for processing of claims of refund, the details of which are present in FORM GSTR-2A.

b. Re-credit of electronic credit ledger in case of rejection of refund claim on receipt of an undertaking.

c. Neither the State nor the Central tax authorities shall refuse to disburse the amount sanctioned by the counterpart tax authority on any grounds whatsoever

8. Circular No. 61/35/2018-GST dated 04^th September 2018:

Clarifying the e-way bill compliances in case of storing of goods in the godown of the transporter. The circular clarifies the following:

a. Recipient to declare the godown as an additional place of business.

b. Once declared, the transportation under the original e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown.

c. Hence, e-way bill validity in such cases is not required to be extended.

d. Whenever the goods move from the transporter’s godown to the recipient taxpayer’s any other place of business, a valid e-way bill shall be required.

9. Reverse charge liability on supplies from non-registered supplier deferred till 30-9-2019:

Notification No. 8/2018-Central Tax (Rate) has been again amended to extend the date for implementation of GST liability under reverse charge mechanism in case of supplies from a non-registered supplier. According to amendment by Notification No. 22/2018-Central Tax (Rate), dated 6-8-2018 issued for this purpose, the new date would be 30-9-2019. (Refer Notification No. 22/2018-Central Tax (rate) dated 06/08/2018)

10. GST Returns–Due dates for months of July 2018 till March 2019 notified:

Form GSTR-1 containing details of outward supplies can now be filed till 11thday (instead of 10th) of the next month by suppliers having aggregate turnover of more than Rs. 1.5 crores. Smaller suppliers (aggregate turnover up to Rs. 1.5 crore) would be required to file the same return quarterly by the last day of the month following the quarter. GSTR-3B will continue to be filed by 20thof next month for this period, i.e. for months of July 2018 till March 2019. Notification Nos. 32, 33 and 34/2018-Central Tax have been issued on 10-8-2018 for this purpose.

(Refer Notification No. 32/33/34/2018-Central Tax dated 10/08/2018)

11. Due dates for filing GSTR-3B and GSTR-1 (in specified cases), extended:

Last date for filing of return GSTR-3B for July, 2018 has been extended till 24-8-2018 for all class of taxpayers. Notification No. 35/2018-Central Tax, dated 21-8-2018 has been issued for the purpose. As per reports, this is being done in order to facilitate filing of easy GST returns. It may be noted that, as per reports, in view of the disruption caused due to severe floods in Kerala, Mahe (Puducherry) and Kodagu (Karnataka), the due dates for filing GSTR-1 and GSTR-3B by taxpayers in Kerala, Mahe and Kodagu have also been extended.

(Refer Notification No. 35, 36 & 37/2018-Central Tax dated 21/08/2018)

12. GST return by Input Service Distributor –Date extended again:

Form GSTR-6 for the months of July, 2017 to August, 2018 can now be filed by Input Service Distributor till 30th of September, 2018. Notification No. 30/2018-Central Tax, dated 30-7-2018 has been issued in this regard in supersession to Notification No. 25/2018-Central Tax which prescribed the last date as 31stof July 2018 for this return for the months of July, 2017 to June, 2018.

(Refer Notification No. 30/2018-Central Tax dated 31/07/2018)

13. Fertilizers supplied for manufacturing complex fertilizer attract GST @ 5%:

Fertilizers supplied for direct use as fertilizers or supplied for use in manufacturing of other complex fertilizers for agricultural use (soil or crop fertilizer) will attract 5% GST. Phrase “other than clearly to be used as fertilizers” in Notification No. 1/2017-Central Tax Rate) would not cover such fertilizers that are used for making complex fertilizers for use as soil or crop fertilizers. Tax structure on fertilizers in the GST regime has been prescribed on the lines of pre-GST tax incidence.

(Refer Circular No. 54/28/2018-Central Tax dated 09/08/2018)

14. GST on vocational training provided by private ITIs:

Services provided by a private Industrial Training Institute (ITI) in respect of designated trades notified under Apprenticeship Act, 1961 are exempt from GST under Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate). Circular No. 55/29/2018-GST, dated 10-8-2018 issued for the purpose also clarifies that services provided in respect of other than designated trades would however be liable to GST. Further, it has also been clarified that GST is exempt in respect of designated trades for the services provided by private ITIs for conduct of examination and service relating to admission.

(Refer Circular No. 55/29/2018-Central Tax dated 10/08/2018).

15. Rate of tax on various products and services:

CBIC has issued an elaborate circular to clarify on rate of GST on various products, namely, fortified toned milk, refined beet and cane sugar, tamarind kernel powder (modified & un-modified form), drinking water, plasma products, wipes using spun lace non-woven fabric, real zari kasab (thread), marine engine, quilt and comforter, and disc brake pad. According to Circular No. 52/26/2018-GST, dated 9-8-2018, fortified toned milk and drinking water for public purposes (if not supplied in a sealed container) would not be liable to GST. However, same would be payable @ 5% on refined beet and cane sugar, and tamarind kernel powder (both plain and treated). The circular also states that a quilt filled with cotton constitutes a cotton quilt, irrespective of the material of the cover of the quilt, and that Disc Brake pad for automobiles, are appropriately classifiable under heading 8708 of the Customs Tariff Act, 1975 thus attracting 28% GST. Further, it has also been clarified that in case of fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and GST would be payable at 18%.

(Refer Circular No. 52/26/2018-Central Tax dated 09/08/2018).

16. Special procedure for completing GST migration:

CBIC has laid down a special procedure for completing migration of taxpayers, who could not complete the migration process till 31st December, 2017. As per CGST Notification No. 31/2018-Central Tax, dated 6-8-2018, persons who did not file the complete FORM GST REG 26 of the Central Goods and Services Tax Rules, 2017 but received only a Provisional Identification Number may now apply for Goods and Services Tax Identification Number. Upon completion of the process, the taxpayers will be deemed to have been registered with effect from 1-7-2017.

(Refer Notification No. 31/2018-Central Tax dated 06/08/2018).

17. Services by employees of corporate office, to other units in other States, is supply’:

Activities by employees at corporate office in course of or in relation to employment such as accounting, administrative and IT system maintenance, for units located in other states, i.e. distinct persons as per Section 25(4) of CGST Act, is ‘supply’ of service in terms of Entry 2 of Schedule I to the said Act. The applicant had contended that activities by employees to other units are covered by Entry I of Schedule III to the said Act (Services by an employee to the employer in the course of or in relation to his employment) and hence not liable to GST. The AAR however held that employees in corporate office have no employer-employee relationship with other offices at least as per the Goods and Service Tax Acts, even if they are belonging to the same legal entity. [Columbia Asia Hospitals-AR No. KAR ADRG 15/2018, dated 27-7-2018, AAR Karnataka].

18. E-Commerce Operator liable to GST on amount charged by cab operators for transportation:

Karnataka AAR (GST) has held that the electronic commerce operator (ECO) is liable to tax on amounts billed by them on behalf of taxi operators for service of transportation of passengers in accordance with Section 9(5) of Central GST Act, 2017 read with Notification No. 17/2017-Central Tax (Rate). AAR held that the money paid by the customer to driver of the cab for services of the trip is liable to GST. It was held that applicant is liable, being deemed supplier of such service by taxi operator as service of transportation was supplied to customers through them. [Opta Cabs-advance Ruling No. KAR ADRG 14/2018, dated 27-7-18, AAR Karnataka].

19. Generic terms indicating quality when to be construed ‘brand name’:

Appellate Authority for Advance Rulings, Maharashtra (GST) has upheld the findings of Authority for Advance Rulings that the applicant is not eligible for exemption under Notification No. 2/2017-CT (Rate) even after removal of registered brand name / logos in a case when the surrounding environment is kept intact. It was held that such removal of logos would not render the products unbranded as the appellant would continue to enjoy the advantage attached to the brand names. Further, the Appellate Authority was also of the view that use of words ‘Value’, ‘Choice’ or ‘Superior’ on the proposed packing, without altering the surrounding environment to take advantage of brand ‘MORE’, would be construed as ‘brand name’ for the purpose of exemption notification. [Aditya Birla Retail–Order No. MAH/AAAR/SS-RJ/05/2018-19, dated 7-8-2019, AAAR Maharashtra].

20. Conversion of EVR (diamond in vault) to securities and vice-versa attract GST:

Karnataka AAR (GST) has held that conversion of Electronic Vault Receipts representing diamonds held in vaults to e-units (securities) and similar conversion of e-units into diamonds will constitute ‘supply’ of diamonds, which is taxable under GST. The Authority however also ruled that derivative contracts in e-units and settlement thereof are transactions in securities asit involves only e-units with no physical diamonds, and hence would remain out of scope of GST. Mere deposit of diamond with safe vaults acknowledged by EVR was also held as not liable. [Rajarathnams’ Jewels-Advance Ruling No. KAR ADRG 16/2018, dated 27-7-2018, AAR Karnataka].

21. Supply of beverages by coffee vending machines to SEZ units is not covered under ‘zero rated supply’:

Observing that the applicant failed to establish that activity undertaken by them is certified as an ‘authorized operation’ by proper officer of SEZ, Karnataka AAR (GST) has held that supply of non-alcoholic beverages/ingredients to such beverages to SEZ units using coffee vending machines do not qualify as zero rated supply, as defined under Section 16 of IGST Act. CGST Rule 89 relating to refund stipulates that supply should necessarily be for authorized operations, & that according to SEZ Act any special benefit accruing to the units located in the SEZ is strictly to be in respect of the authorized operations only. It was observed that the same is implicit under Section 16(1)(b) of the IGST Act. [Coffee Day Global-Advance Ruling No. KAR ADRG 13/2018, dated 26-7-2018, AAR Karnataka].

22. Supply of diesel engines and repair services to units located in SEZs are zero rated:

Observing that supplies are for units and developers of Special Economic Zones, AAR West Bengal (GST) has held that provisions of Section 16 of IGST Act will be applicable and tax liability will be zero rated. It noted that applicant can supply without paying tax under Section 16(3)(a) or can supply on payment of tax and claim refund subsequently under Section. 16(3)(b) of IGST Act. The applicant intended to supply diesel engines and their spare parts along with services either on AMC basis or on as required basis to units and entities located in Kolkata SEZ. [Garuda Power–Order No. 14/WBAAR/2018-19, dated 1-8-2018, AAR West Bengal].

23. Exam support services are composite supplies attracting GST @ 18%:

Services of sourcing and managing test centre venues, maintaining supply of test materials, providing back office support relating to financial controls, etc. for conducting IELTS exams are so bundled with each other that these cannot have an independent existence, hence, are composite supplies. The AAR Haryana in this regard held that such services as classifiable under Service Code 999299 as education support services, with principal supply being conducting exams. The applicant provides such services to its holding company British Council. [BC Examinations and English Services India –Advance Ruling No. HAR/HAAR/R/2017-18/11, dated 1-6-2018, AAR Haryana].

B. Customs Updated for the Month of August 2018 (updated upto 5^th Sept. 2018)

1. Petroleum coke import policy revised–Import for fuel prohibited:

Ministry of Commerce and Industry amended import policy related to petroleum coke by allowing its import only to cement, lime kiln, calcium carbide and gasification industries for use as feed stock or in manufacturing process on actual user condition. Import of pet coke for fuel prohibited. Ministry of Environment, Forest and Climate Change in consultation with Customs and DGFT will bring out detailed guidelines on regulating & monitoring imports. Policy Condition No.6 inserted in Chapter 27 of ITC (HS) 2017 by DGFT Notification 25/2015-2020 dated 17-8-2018.

2. Solar cells imports to be provisionally assessed –Safeguard duty stayed:

In compliance with the interim directions of the Orissa High Court, Ministry of Finance decided not to insist on safeguard duty on imports of solar cells whether or not assembled in modules or panels. According to CBIC Instruction No. 12/2018-Cus., dated 13-8-2018, said goods will be assessed provisionally on furnishing of simple letter of undertaking/bond, in respect of safeguard duty. It may be noted that safeguard duty was imposed by a notification dated 30-7-2018, at specified rates, for a period of two years.

3. Textile products -Customs duties increased on various textile products:

India has increased customs duty on number of textile products from 7^th of August. This time list of products include carpets & textile floorings, and various articles of apparel and clothing accessories, covered by Chapters 57, 61 and 62 of Customs Tariff. It may be noted that India recently increased import duties on mobile phones and ink cartridges, and Japan has, according to some reports, registered a formal protest with the Indian government.

4. Indian retaliatory measures against USA to cover trade loss, postponed:

Ministry of Finance had by Notifications dated 20-6-2018 amended First Schedule to Customs Tariff and revised the jumbo exemption notification, to increase import duty on goods under Chapter7, 8, 28, 38, 72 and 73 from USA, with effect from 4-8-2018. This additional duty on commodities such as almonds, apples fresh and other diagnostic reagents, etc., will now be effective from 18-9-2018.The increase of import tariffs is in connection with certain measures by the United States of America on import of certain aluminum and steel articles from India.

5. MEIS benefit extended to specified goods -List in Appendix 3A deleted:

List of items deleted which were till now not allowed to be imported under Export from India Schemes under Chapter3 of Foreign Trade Policy, unless otherwise specified. Notice No. 24/2015-20, dated 26-7-2018 issued for this purpose, deletes Serial Nos. 1 to 7 in list specified under Appendix 3A to FTP Handbook of Procedures Vol. I. Accordingly, duty credit scrips are now allowed to be debited for import of items, including certain capital goods which were earlier not permitted.

6. Courier and postal exports –Value limit for MEIS benefit enhanced:

Ministry of Commerce has placed a value limit of Rs. 500,000/consignment for exports through courier or post. On similar lines, value limit of such exports for benefit of Merchandise Exports from India Scheme (MEIS) has also been revised to Rs. 500,000 per consignment from the hitherto applicable limit of Rs. 25,000. Further, limitation of port of export for such benefit has been removed. Paras 2.47 and 3.05 of FTP amended by DGFT Notification No. 22/2015-20, dated 26-7-2018 for this purpose.

7. TED refund on supplies to projects funded by JICA till 31-3-2015:

DGFT has issued Policy Circular No. 11/2015-20, dated 23-7-2018 to allow refund of Terminal Excise Duty in cases where exemption from payment of TED under relevant Central Excise notifications was not available, in respect of supplies made to the projects funded by JICA, etc., (other than IBRB, IDA and ADB). This benefit would however be available only for supplies made up to 31-3-2015. Circular also advises regional authorities to dispose TED refund claims in respect of supplies made under Para 8.2(d) of FTP 2009-14.

8. Refund to exporters –CBIC extends facility of officer interface:

For refund of IGST to exporters, CBIC extended rectification facility to Shipping Bills filed up to 30-6-2018. This alternative mechanism with an officer interface to resolve invoice mismatches was earlier available only for shipping bills filed till 30-4-2018. CBIC Circular No. 22/2018-Cus., dated 18-7-2018 also extends this facility to SBs filed till 30-6-2018, where exporter has wrongly declared that shipment is not under IGST payment, though had paid tax. Issue where exporter has mentioned PAN instead of GSTIN in SB has also been clarified.

9. No fees for amendment in Export Manifest for specified period-Levy of Fees (Customs Documents) Regulations amended:

CBIC has amended the Levy of Fees (Customs Documents) Regulation, 1970 by inserting Regulation 5. According to the new regulation, no fees shall be levied in respect of export manifest when it is amended or supplemented with the entries relating to the Shipping bills filed from 1stJuly, 2017 to 30^th June, 2018 in Inland Container Depots. Notification No. 64/2018-Cus. (N.T.) 27-7-2018 has been issued for this purpose.

10. SCOMET -Amendments in Appendix 3, procedural relaxations and export authorizations:

The Central Government has made a total of 139 amendments in Appendix 3 to Schedule-2 of ITC (HS) Classifications of Export and Import Items, 2018. These amendments have been made to align India’s SCOMET list with the amendments made to Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies in December 2017 o which India is a signatory. Not. No.17/2015-2020, dated 3-7-2018 has been issued for purpose.

11. Procedural relaxation for issue of authorizations for repeat orders:

By Public Notice 20/2015-20, dated 12-7-2018, DGFT has relaxed procedure for issue of authorizations for repeat orders of SCOMET items. Now applications for grant of authorization for repeat orders to applicant exporter for export of same SCOMET items to same country/entities shall be approved by Chairman IMWG, without any consultation with members. However, in cases of repeat orders for export of same SCOMET items to different country/entities, approval shall be granted only after verification of the credentials of foreign buyer/consignee/end user.

12. Issuance of export authorization/license by DGFT (Hqrs):

DGFT has decided that export authorizations for SCOMET items would be issued by the SCOMET Cell, DGFT (Hqrs). Issues relating to revalidation of SCOMET authorizations after expiry, penal action in terms of FTDR Act, grant of MEIS and other benefit, etc. would continue to be handled by the concerned jurisdictional Regional Authority, in terms of the existing provision in FTP/HBP. The Trade Notice also clarifies that where the permission has been granted by DGFT (Hqrs) before issuance of this Trade Notice, jurisdictional RAs would immediately issue export authorizations in respect of such SCOMET cases. (Ref Trade Notice 20/2018-19, dated 6-7-2018)

13. Tax exemption notifications to be interpreted strictly favouring Revenue:

Exemption notification should be interpreted strictly and when there is any ambiguity in such notification, the benefit cannot be claimed by assessee rather it must be interpreted favouring Revenue department. Overruling its decision in Sun Export, the Apex Court also overruled all decisions in which similar views were taken. In case of ambiguity in a charging provision, benefit must go in favour of assessee, but that the same is not true for an exemption notification. Every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. [Commissioner v. Dilip Kumar and Co. –Judgement dated 30-7-2018 in Civil Appeal No. 3327 of 2007, Supreme Court].

14. Redemption of goods on payment of fine –Additional condition of re-export not correct:

In a case where importer did not want to re-export, CESTAT Hyderabad has set aside the order imposing additional condition of re-export along with imposition of redemption fine. Imported goods were earlier confiscated as they did not meet mandatory BIS requirements. The Tribunal in this regard held that the authority may allow redemption of prohibited goods on payment of fine, but cannot ask for a conditional redemption. It was held that Section 125 of the Customs Act, 1962 does not confer upon the authority the power to impose any conditions while allowing redemption of goods. [HBL Power System Ltd. v. Commissioner-Final Order No. A/30684/2018, dated 5-7-2018, CESTAT Hyderabad].

15. SEZ Act does not override FT (D&R) Act if it remains consistent with former:

Delhi High Court has held that Development Commissioner appointed under SEZ Act has jurisdiction to adjudicate and impose penalty under Section 11(2) of Foreign Trade (Development & Regulation) Act. The Court in this regard observed that there is no conflict between the Foreign Trade (D&R) Act and the SEZ Act as violations under former are designated as notified offences under latter, and also Section 58 of the SEZ Act shields and insulates sections and notifications under the Foreign Trade (D&R) Act to the extent they are consistent with the SEZ Act. It was noted that Proceedings under Section 11 of the F.T. Act is not a civil suit and adjudication by the designated authority under Section 13 of F.T. Act is not adjudication by a civil court. [Xtraa Clean cities v. UOI-Writ Petition (Civil) No. 3909/2013, decided on 30-7-18, Delhi High Court].

16. Amendment of Bill of Entry on change in importer, after Customs duty rates increased:

Gujarat High Court has granted permission for amendment of existing Bill of Entries (BoE) instead of filing fresh BoE while also permitting provisional clearance on basis of pre-revised rate of duty, subject to furnishing of bank guarantee considering the current duty rates. Another company had imported yellow peas which were Nil rated at relevant time but failed to clear goods due to financial difficulties. The present importer negotiated with the exporter and the original importer, but by then Customs duty rate was increased. [Agricore Commodities v. UOI-R/Special Civil Application No. 4510 of 2018, decided on 26-7-2018, Gujarat High Court].

C. Central Excise and Service Tax Updated for the Month of August 2018 (updated upto 5^th Sept. 2018)

1. Vocational training -Exemption to commercial training services in aviation, hospitality, etc.:

Supreme Court has dismissed the Civil Appeals filed by department on the issue of service tax liability on providing vocational training in the fields of aviation, hospitality and travel management. The Tribunal in its impugned order had agreed that assessee was eligible for exemption as Notification No. 24/2004-ST covered both, ability to seek employment and to undertake self-employment. Revenue’s contention that benefit was not available as courses offered did not impart skills to engage participants in self-employment, was thus rejected. The Supreme Court in this regard stated that hey did not find any merit in the appeals. [Comm. v. Frankfinn Aviation Services -Diary No. 21341/2018, decided on 23-7-2018, Supreme Court]

2. No Cenvat credit of service attributable to trading even prior to 2011:

Assessee has to segregate quantum of input service attributable to trading activity and exclude it from records maintained for availing credit on proportionate basis. Activity of trading was not service or manufacture (period involved prior to 2011) and it went beyond the purview of Central Excise Act and Finance Act, 1994. The assessee was involved in sale of automobiles and also in providing Business Support Services. Assessee’s argument of absence of mechanism for reversal of credit was also rejected. [Lally Automobiles v. Commissioner-SERTA 7/2018, decided on 25-7-2018, Delhi High Court]

3. Agreement for supply of water on agreed tariff not covered under BSS:

Supreme Court has dismissed Civil Appeal filed by department in respect of supply of water by assessee to Chhattisgarh State Industrial Development Corporation (CSIDC). The assessee had entered into an agreement with CSIDC to maintain water supply as per agreed tariff. Department’s contention that such activity fell under Support Services of Business was earlier rejected by the CESTAT as outsourcing activity was absent. The Apex Court in this regard upheld order which concluded that such activities fell under scope of agreement for consideration on sale of water. Civil Appeal was dismissed observing absence of any legal & valid ground for interference. [Comm. v. Radius Waters –Civil App. No. 19415 of 2017, decided on 13-7-18, Supreme Court]

4. Cenvat credit available on courier service used for sending free samples:

CESTAT Chennai has allowed Cenvat credit on courier service used for ending free samples to prospective buyers in foreign countries. Revenue department’s plea that the service was akin to outward transportation of finished goods and hence not eligible for credit, was thus rejected. The Tribunal in this regard found force in the argument that samples were sent to prospective foreign buyers as sales promotion/ marketing/advertisement for trading, and that the same was not removal of finished goods involving sale. [Raj Petro specialties v. Commissioner–Final Order Nos. 42032-42034/2018, dated 18-7-2018, CESTAT Chennai]

5. Reimbursements towards senior counsel fee not liable to service tax:

Delhi High Court has held that payments received as reimbursements towards senior counsel fee, were not includible in the value of services rendered by a law firm. Apex Court’s decision in UOI v. Intercontinental Consultants was relied on for this purpose. The Court in this regard observed that the department wrongly relied on Rule 5 of Service Tax (Determination of Value) Rules, 2006 for subjecting to service tax payment made by the law firm to the senior counsel for services rendered to third party inthe form of representation in Courts, etc. [Duttmenon Dunmorrsettv. UOI-W.P. (C) 4740/2017, decided on 16-7-2018, Delhi High Court].

6. Cenvat Credit on CVD not deniable even if document for other inputs not enough:

Delhi High Court has allowed benefit of Cenvat Credit of CVD paid by assessee which was denied by authorities on basis of lack of documents pertaining to payment of duty on other inputs, clandestine removal and due to absence of registration under Central Excise Act. The Court in this regard noted that assessee was given benefit of SSI status and its consequential entitlement cannot be denied when record establishes the same. The Court also observed that assessee imported PVC resin for which CVD was paid which can be legitimately claimed as input credit. [Icon Industries v. Comm-CEAC 30/2017, decided on 17-7-18, Delhi High Court].

7. Construction of residential complex for personal use, via sub-contractor:

Karnataka High Court has held that principal contractor was not liable to pay service tax on construction of residential complex undertaken through sub-contractor. It noted that sub-contractor had paid tax for construction activity and tax cannot be demanded from the one not undertaking construction. The High Court for this purpose observed that activity of assessee was covered by CBEC Circular dated 24-5-2010, as after construction, it will be handed over to the ultimate owner for personal use. [Comm v. Nitesh Estates–CEA No. 5/2016, decided on 4-7-2018, Karnataka High Court]

8. Credit card services –Bank issuing credit card when not liable:

Bank issuing credit card and receiving certain commission from acquiring bank (bank paying to the merchant and charging certain amount from them) was not liable to pay service tax on that amount under category of ‘Credit Cards Services’ under Section 65(33A) read with Section 65 (105)(zzzuu) of Finance Act, 1994. Issuing bank was not engaged in any activity of settlement of the amount, and hence would not be covered under Credit Cards services. Relying on Allahabad High Court’s decision in the case of Chotey Lal Radhey Shyam, it was also held that assesse-issuing bank was not liable since acquiring bank was discharging their service tax liability on the amount in question. [ABN Amro Bank NV v. Comm.-Final Order No. 71601/2018, dated 23-7-2018, CESTAT Delhi]

9. Food supplied to airlines and not served to passengers on board is not outdoor catering service:

In a case where the assessee was simply supplying the food and not serving the same to passengers on board airlines, CESTAT Delhi has set aside the demand of service tax on the value of food. The Tribunal in this regard observed that invoice showed sale of food separately from the charges of other services rendered in addition to supply food, and that the property in food got transferred the moment it was loaded on the aircraft trolley. Discharge of VAT liability on food was also considered by the Tribunal while allowing assessee’s appeal. The department had relied upon Supreme Court’s decision in the case of Tamil Nadu Kalyana Mandapam Association. [EIHA (Unit of Oberoi Flight Services) v. Commissioner-Final Order No. 52308/2018, dated 26-6-2018, CESTAT Delhi].

10. Manufacture –Cutting and embossing of jumbo paper rolls when amount to manufacture:

Applying the fourth test as stated by the Supreme Court in its decision in the case of Servo-Med Industries Pvt. Ltd., CESTAT Delhi has held that activity wherein the jumbo roll of paper was attached to the paper napkin machine, set in the required size and then embossing of design, cutting, slitting, and folding were undertaken using the machine, would amount to ‘manufacture’ under provisions of Central Excise Act, 1944. Even though both the jumbo rolls and final products such as napkins were made of the same tissue paper, the transformation of jumbo rolls into either toilet rolls or kitchen rolls or in the form of paper napkins brought out a distinctive and different use in the article and the products were perceived differently in the market. [S R Protus Hygiene Pvt Ltd.v. Commissioner–2018 TIOL 2486 CESTAT DEL]

11. Cenvat credit on rail and rail sleeper for transporting material:

CESTAT Kolkata has allowed Cenvat credit on rails & railway sleepers for laying railway track from railway siding to the unloading point inside the factory for inward transportation of raw materials and also for outward transportation of finished goods. Reliance in this regard was placed on the Rajasthan High Court’s decision in the case of Aditya Cement [2008 (221) ELT 362 (Raj.)] and CESTAT Order in the case of Tata Steel Ltd. [2016 TIOL 881 CESTAT KOL]which in turn had relied on Supreme Court decision in the case of Jayaswal Neco Ltd. [2006 (199) ELT 145 (SC)].It was held that the impugned goods had nexus with the manufacture of final goods and were covered under definition of inputs as per Cenvat Credit Rules, 2004. [Adhunik Alloys and Power Ltd.v. Commissioner–2018 TIOL 2476 CESTAT KOL]

*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). 

With Warm Regards & Jai Hind 

CMA Rakesh Bhalla –nancybhalla@yahoo.com