CMA Rakesh Bhalla
Past chairman NIRC of ICAI (CMA)*

CMA Rakesh Bhalla

GOODS AND SERVICES TAX (GST)

♠ Outcome of GST Council Meeting held on 04th March, 2017-

-The GST council cleared C-GST and I-GST bills.

-Draft SGST law will be circulated among states in the next few days.

-1st July, 2017 appeared to be the likely roll out date for GST- Union Finance Minister

Further, February, 2017 updates below:

♠  The Goods and Services Tax (GST) will be implemented by July 1 and not later as feared earlier on – says Economic Affairs Secretary. – After the last GST meet, however, it was told that GST cannot be implemented by July 1. Many state governments earlier opposed various proposals under GST due to both economic and political reasons.

♠  GST Council met on 18thFebruary, 2017 for finalizing the draft GST law. Summary of the discussion in the tenth GST Council meeting is as under:

1. Council has cleared draft GST compensation bill. The same will be brought in next session of Parliament.

2. Certain provisions of CGST, SGST, IGST bill has been cleared. Pending provisions will be discussed and cleared in the next council meeting.

3. The Council also cleared the final drafting of the anti-profiteering clause to ensure benefit of lower taxes gets shared with consumers. The anti-profiteering clause allows for the constitution of an authority that examines whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any reduction in the tax rate, actually result in a commensurate reduction in the price of the said goods and/or services supplied by the person.

4. Government plans to introduce the Model GST law in Parliament in this Budget Session beginning next month. The government is keen to roll out the new regime from July 1 but for that, it will have to get two laws – the Central GST (CGST) Act and Integrated GST (IGST) Act — approved by Parliament and each of the state legislative have to pass the State GST (SGST) Act.

5. The next meeting will be held on 4th& 5th March, 2017.

♠ GST laws, rules to be finalised by march end, rates may be decided in May /June – Revenue Secretary

♠ SAP launches ‘GST in a Box’ to help Indian Firms – German software company SAP SE on Wednesday launched ‘GST in a Box’ — an all-inclusive solution portfolio to help the Indian firms become GST compliant. The ‘GST in a Box’ solution enables organisations to effectively manage suppliers, customer engagement and supply chain in the new tax regime.

Central Excise Duty

Time limits for grant of permission for transfer of Cenvat credit and for remission:

  • Rule 10(4) has been introduced in Cenvat Credit Rules, 2004 to specify a time limit of 3 months from the date of receipt of application for allowing transfer of credit by the Deputy Commissioner or Assistant Commissioner of Central Excise.
  • Similarly, Rule 21(2) has been added in Central Excise Rules, 2002 to provide that the authority referred in Rule 21(1) shall decide remission of duty within a period of 3 months from the date of receipt of application.
  • These time periods can be further extended by 6 months by higher authorities.
  • Notification Nos. 4&5/2017-C.E.(N.T.), both dated 2-2-2017 have been issued in this regard, as part of Budget 2017 proposals.

EOU – Benefit of exemption notifications issued under Excise Section 5A:

  • CBEC has clarified the non-applicability of exemptions under notifications issued Section 5A of the Central Excise Act, 1944 is only in respect of excisable goods produced or manufactured by an EOU and cleared to DTA.
  • This clarification contained in the communication DOF No. 334/7/2017/-TRU, dated 1-2-2017 issued to explain Budget 2017 proposals states that notifications providing exemption on inputs/raw materials will be applicable on procurement by EOUs.

Manufacture – Filling gases in cylinders from tanker and mixing of gases does not amount to manufacture:

  • Taking note of the CESTAT decision in the case of Ammonia Supply Company which has attained finality, and department’s Circular dated 8-10-1997, the Supreme Court has upheld Tribunal’s decision that activity of filling gases in cylinders from tanker would not amount to manufacture in terms of first limb Note 10 of Chapter 28 of the Central Excise Tariff. [Commissioner v. Vadilal Gases Ltd. – 2017-TIOL-34-SC-CX]

Cenvat credit of CVD not to be reversed on re-export of defective goods:

  • CESTAT Delhi has held that Cenvat credit of the CVD paid by the importer – manufacturer is not required to be reversed when certain capital goods on being found to be defective, were re-exported as such under bond. [Commissioner v. Universal Cables Ltd. – 2017 (345) ELT 308 (Tri. – Del.)]

Export of goods procured under CT-1, not in original packing, when not fatal:

  • The assessee had procured excisable goods without payment of duty under CT-1 certificate in their capacity as merchant exporter under Notification No. 42/2001-C.E. (N.T.), but contravened the condition mentioned in the said notification by not exporting the goods in their original packed condition, and using the same as raw materials in goods which were ultimately exported.
  • Distinguishing the facts of the present case from the decision of Eagle Flask Industries [2004 (171) ELT 296 (SC)], CESTAT Chandigarh has held that when there was no allegation relating to the non-filing of undertaking/declaration or about the fact as to export of goods, demand of duty was not sustainable. [Modern Insecticides Ltd. v. Commissioner – 2017 (345) ELT 233 (Tri. – Chan.)]

Denial of exemption based on unsubstantiated definition available on internet or any other sources not justified:

  • CESTAT Delhi, in a case wherein the assessee manufactured security paper used for printing of currency and other security instruments and availed exemption under Notification No. 4/2006-C.E., has held that the exemption cannot be denied on the ground that these papers did not bear water mark, security thread, etc. [Security Paper Mills v. Commissioner – 2017 (345) ELT 661 (Tri. – Del.)]

Remission of duty – “Year” includes part of year:

  • Considering the fact that the loss of molasses was less than 2%, Allahabad High Court has allowed assessee’s appeal against rejection of remission of duty.
  • Revenue department’s contention that the loss was a sudden loss in a short period of time, and hence the duty should not be waived, was rejected by the Court observing that Rule 8(4) of U.P. Sheera Niyantran Niyamwali, 1974 does not require that “year” would mean the entire period of 12 months, and not a smaller part thereof. [Balrampur Chini Mills Ltd. v. Commissioner–2017-TIOL-211-HC-ALL-CX]

Refund – Re-credit of duty earlier paid through Cenvat account – Letter to department for re-credit can be considered as refund claim:

  • Observing that the duty was paid twice, once through Cenvat account and second time by cash, CESTAT Mumbai has rejected the contention of the department demanding amount re-credited in the Cenvat account by the assessee after informing the department.
  • It was noted that re-credit was not taken suo motu but number of letters were written to the department. [Dew-Pond Engineers Pvt. Ltd. v. Commissioner–2017–TIOL-295-CESTAT-MUM]

Climbers and thrillers used by children in playgrounds classifiable as sports goods:

  • CESTAT Mumbai has rejected Revenue department’s contention that only sports played nationally and internationally are sports, and that play of children in garden and playground, are not sports. [Airhant Industrial Corpn. Ltd. v. Commissioner – Order dated 14-12-2016 in Appeal No. E/1868/06-Mum, CESTAT Mumbai]

Kulfi classifiable as milk product and not as ice cream – CESTAT Mumbai has held that “kulfi” would be classifiable under Heading 0404 of the Central Excise Tariff. [Parsi Dairy Farm v. Commissioner – Order dated 1-9-2016 in Appeal No. E/3206/05, CESTAT Mumbai]

Duty when not payable on capital goods cleared after long use – CESTAT Delhi has held that in a case where the assessee clears capital goods after use for a long time (not as waste and scrap) and reverses the Cenvat credit on the same, no extra duty can be demanded under Rule 3(5) of the Cenvat Credit Rules, 2004. It was held that Rule 3(5) cannot be considered as charging section to collect more revenue from the manufacturer. It may be noted that the period involved was February-March 2007. [Jaypee Bela Plant v. Commissioner – 2017 (345) ELT 542 Tri.-Del.]

SERVICE TAX

Works Contract service – Service Tax Valuation Rules proposed to be amended retrospectively:

  • Finance Bill, 2017 has proposed to amend Service Tax Rules, 2006, retrospectively from 1-7-2010.
  • The amendment seeks to provide for exclusion of value of land.
  • Clause 128 of the Finance Bill read with Sixth Schedule thereto make it clear that in works contract where the amount charged includes the value of goods as well as land or undivided share of land, service tax shall be payable on 25% of the total amount charged for the said contract.
  • It may be noted that tax would be payable on 30% of the amount charged, in respect of the rule prevalent from 1-4-2016 onwards.

Research and Development Cess Act, 1986 proposed to be repealed:

  • At present, R&D Cess @ 5% is leviable on taxable services involving import of technology by an industrial concern on all payments made under a foreign collaboration, and Notification No. 14/2012-S.T. grants exemption from service tax to the extent of R&D Cess paid.
  • The provisions relating to repeal of the said Act will come into force with effect from 1-4-2017, and hence from such date, full service tax will be applicable on such taxable services.

BAS – Liability on expenses incurred for joint operation of centre – CESTAT Delhi has rejected the contention of liability under Business Auxiliary Services. [Old World Hospitality Limited v. Commissioner – 2017-VIL-97-CESTAT-DEL-ST]

Supply of Water – Coverage under BSS – CESTAT Delhi has rejected the contention of the Revenue department that assessee engaged in supply of water to M/s. Chhattisgarh State Industrial Development Corporation (CSIDC) in terms of the agreement, would be liable to service tax under Support Services of Business or Commerce. [Radius Water Ltd. v. Commissioner – 2017-VIL-107-CESTAT-DEL-ST]

Construction of commercial portion of ISBT not liable to Service tax – CESTAT Delhi has rejected the contention of the Revenue Department that exclusion for transport terminals is not available for commercial portion of Inter-State Bus Terminal (ISBT). [Commissioner v. Amar Construction Co.-Final Order No. 55260/2016, dated 22-11-2016, CESTAT DEL]

Deploying police personnel on payment basis, statutory – Not liable to tax:

  • CESTAT Delhi has held that activity of deploying police personnel on payment basis is to be considered as part of statutory function of the State Government and that the fees recovered is to be considered as statutory. [Deputy Commissioner of Police v. Commissioner – Final Order Nos. 55321-55348, dated 25-11-2016, CESTAT Delhi]

Refund – Locus standi to file refund claim and limitation in case of provisional prices:

  • CESTAT Delhi has reiterated that service recipient is entitled to claim refund of service tax paid by him to the service provider and that such recipient can file refund application before the authorities having jurisdiction over the service recipient or before the jurisdictional authorities of the service provider. [Chambal Fertilisers and Chemicals Ltd. v. Commissioner – 2017-TIOL-407-CESTAT-DEL]

Legal Consultancy services – Scope encompasses advisory services:

  • Terming the finding of the lower authority that since the legal firm did not represent the appellant-assessee in any court or legal proceeding, the service is not legal consultancy service, as fallacious, CESTAT Delhi has held that scope of legal services encompasses advisory services also. [Petronet LNG Ltd. v. Commissioner – 2017-TIOL-351-CESTAT-DEL]

Cenvat credit – Effect when goods capitalised including service portion and depreciation claimed:

  • CESTAT Delhi has held that the restriction contained Rule 4(4) of the Cenvat Credit Rules, 2004, on availing credit if the depreciation is availed, was only in respect of capital goods and not on services.
  • Department’s contention of double benefit was hence rejected by the tribunal. [Shree Pandurang SSK Ltd. v. Commissioner -2017-TIOL-366-CESTAT-MUM]

Refund – Proof of protest payment:

  • Noting the payment can be made under protest in several ways, Punjab & Haryana High Court has held that for the act to be under protest, it is not necessary that it should be accompanied by the very words “under protest”.
  • The court in this regard was of the view that whether an act is performed under protest or not must be determined on the basis on which it is performed. [Commissioner v. Ind. Swift Lands Ltd. – 2017-VIL-64-P&H-ST]

CUSTOM DUTY

Time limit for filing bill of entry and duty payment proposed to be reversed:

  • Section 46(3) of the Customs Act, 1962 is being proposed to be amended to make it mandatory for the importer to present bill of entry before the end of the next day following the date of arrival of vessel at customs station. If not presented within such time, the importer would be liable to pay charges for late filling, unless sufficient cause is shown for the delay.
  • Similarly, Section 47(2) is proposed to be amended to state that the importer would be liable to pay the import duty on date of presentation of the bill of entry in case of self-assessment.
  • Present duty has to be paid within 2 days. Clauses 99 and 100 of the Finance Bill, 2017 refer to the above.

Seizure – Appropriate orders to be passed for seizure under Customs Section 110:

  • The CBEC has directed all its field formations to pass appropriate orders, stating reasons for which they believe that goods are liable for confiscation.
  • It has also been clarified that show cause notices are to be issued within the stipulated time period irrespective of the fact that the goods remain seized or are provisionally released. Customs Instruction No. 1 of 2017, dated 8-2-2017 has been issued in this regard.

Valuation – Enhancement of value based on market enquiry when not justifiable:

  • CESTAT Delhi has held that there is no legal justification to conduct a market enquiry in the presence of comparable data authenticated in NIDB for identical goods for material period. [Balaji International v. Commissioner – 2017-TIOL-358-CESTAT-DEL]

Confiscation – No mis-declaration when two views equally possible in classification – with intent to evade payment of duty cannot be alleged. The assessee in SEZ had compacted the brass scrap before clearing same in DTA. [Sterling Ornaments Pvt. Ltd. v. Commissioner – 2017-TIOL-134-CESTAT-DEL]

Bringing a rig into India for repairs is not import for home consumption:

  • Department’s plea of taxable import, considering the fact that there was release of foreign exchange and grant of various approval and import licence, was rejected by the Court holding that for deciding the question whether the rig was imported into India, the requirements of home consumption has to be satisfied. [Commissioner v. Aban Loyd Chiles Offshore Ltd. – 2017-VIL-08-SC-CU]

Refund of SAD to EOU on DTA clearances:

  • CESTAT Mumbai has rejected the contention of the Revenue department that refund of additional duty under Notification No. 102/07-Cus. cannot be granted as the duty was not paid at the time of the import but at the time of domestic clearance by EOU.
  • The Tribunal noted that the assessee was an EOU and hence there was no occasion for payment of duty at the time of import. [Metaplast Exim India Pvt. Ltd. v. Commissioner – 2017-VIL-130-CESTAT-MUM-CE]

External Hard Disk Drivers classifiable under TI 8471 70 20 – not under the Tariff Item 8471 70 30 according to CESTAT Delhi. It was held that the same are also covered by exemption Notification No. 12/2012-C.E. [Commissioner v. Superton Electronics Pvt. Ltd. -2017-TIOL-125-CESTAT-DEL]

Inland Air Travel Tax (IATT)-Monies deposited by the third parties not to be adjusted against tax dues:

  • Delhi High Court has held that the amount deposited by the lessor of the aircraft for release of distrained aircraft cannot be appropriated towards the outstanding dues of tax on the part of the carrier.
  • Observing that the deposit by lessor would represent only the aircraft and not such amounts as were to be recovered from the carrier, it was held that the responsibility of the carrier to pay IATT dues subsisted and the recovery is to be made from the carrier itself till the tax, interest and penalty so determined are paid. [Spicejet Ltd. v. Union of India -2017-TIOL-274-HC-DEL-CUS]

Omnical Calcium Nitrate Solution Grade Fertilizer Classifiable under TI 2834 29 90 of the Customs Tariff Act, 1975 – The Tribunal observed that the impugned goods were primarily composed of calcium nitrate with small amount of ammonium nitrate and hence shall subscribe neither to TI 3105 90 90 nor 3102 60 00. [Advanced Agri Solutions (India) Pvt. Ltd. v. Commissioner – 2017-VIL-135-CESTAT-CHE-CU]

Chappals or sandals – Classification:

  • High Court of Delhi has rejected the contention of the department that since the impugned goods did not contain a strap at the back, they were classifiable as chappals and not sandals. [Wishall International v. Union of India – 2017-TIOL-181-HC-DEL-CUS]

VALUE ADDED TAX (VAT)

Rajasthan VAT – Clarification regarding declaration in VAT-47:

  • Commissioner of Commercial Taxes has issued a clarification bearing No. 16 (1150)/VAT-47A required to be carried with the goods for import in the State of Rajasthan.

Himachal Pradesh Entry Tax and VAT – Amendments for e-commerce transactions:

  • By Notification No. EXN-F(10)-21/2016 dated 31-1-2017 amendments have been made to the Himachal Pradesh Tax on Entry of Goods into Local Area Rules,2012 and the Himachal Pradesh Value Added Tax Rules, 2005, with effect from 1-2-2017.
  • Rule 4A has been inserted in the HP Entry Tax Rules providing for procedure for registration and payment of tax.

No declaration required under Section 51(2) of Punjab VAT for goods brought by railway train:

  • The Punjab and Haryana High Court has held that the obligation to submit the declaration in terms of the first proviso to Section 51(2) is on the ‘owner or person in charge of the goods vehicle’ and not on any other person.
  • the Court in this regard noted that ‘goods vehicle’ specifically excludes ‘vehicle running upon fixed rails’ (as held in the case of State of Punjab v. Indo Arya Central Transport Ltd. – 2016-VIL-705-P&H) and therefore, Section 51(2) will not be attracted. [Unique Chains v. State of Punjab -2017-VIL-47-P&H].

Works Contracts – Revision of assessment invoking extended period – Several petitions challenging notice for revision of assessment under the Haryana Value Added Tax Act, 2003 were disposed of by the High Court of Punjab & Haryana.

Interest on refund of pre-deposit under Gujarat Sales Tax – Gujarat High Court has allowed appeal of the assessee in a dispute involving interest on refund of pre-deposit made while preferring appeal before the Tribunal. [Crompton Greaves Limited v. State of Gujarat-2017-VIL-52-GUJ]

*Member ZAC Chandigarh, Service Tax, Govt. of India, Member RAC Chandigarh, Central Excise & Customs, Member Indirect Tax committee SIAM , Member, ASSOCHAM Indirect Taxes Committee, Chief General Manager Finance- SML Isuzu Ltd. Winner Achiever Award 2015 By ICAI (CMA)

Information source- M/s LKS, M/s Nitya tax Associates, Economic Times, Financial express, GST.com and other sources including various Govt websites-many thanks to all.

(Author can be reached at nancybhalla@yahoo.com)

*Member ZAC Chandigarh, Service Tax, Govt. of India, Member RAC Chandigarh, Central Excise & Customs, Member Indirect Tax committee SIAM , Member, ASSOCHAM Indirect Taxes Committee, Chief General Manager Finance- SML Isuzu Ltd. Winner Achiever  Award 2015 By ICAI (CMA)

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