Article contains Indirect Taxes Updates on GST, Customs, Excise, Service Tax & VAT for the Month of May 2019. Article Analyses Important Notifications / Circulars issued in the Month of May 2019 and also analyses Important Case Laws / Advance Ruling etc. decided by Various Courts and Authorities from time to time on GST, Customs, Excise, Service Tax & VAT.

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A. GST Notifications/ Circulars for May 2019

1. Time provided to apply for revocation of cancellation of registration – A one-time opportunity to apply for revocation of cancellation of registration has been provided to persons whose registrations were cancelled till 31-3-2019 due to non-furnishing of returns in Form GSTR-3B or GSTR-4. Such persons can apply for revocation of cancellation on or before 22-7-2019 As per new proviso in CGST Rule 23(1), if registration is cancelled with retrospective effect, returns, for the period from effective date of cancellation till date of order of revocation of cancellation, shall be filed within 30 days from date of order of revocation (Removal of Difficulty Order (RoD) No. 05/2019-Central Tax).

2. Ongoing project and liability on cancellation of bookings clarified: In cases where more than one completion certificate is issued for one real estate project, it will be considered as an ongoing project unless all completion certificates, for every part (block) of the project, are received for the entire proj Clarifying so, FAQ released by CBIC with reference F. No. 354/32/2019-TRU, dated 7-5-2019 also states that where commencement certificate is issued prior to 1-4-2019.

3. GST applicability on Seed Certification Tags- clarified – Seed testing and certification is a multi-stage process, the charges for which are collected from the seed producers at different stages. Supply of seed tags to the seed producer is nothing but an element of the one integrated supply of seed testing and certification. All the above charges, including those for issue of seed certificates/tags by the Seed Certification Agency of Tamil Nadu and Uttarakhand to the seed producing organization/ companies are collected for the composite supply of seed testing and certification, which is exempt under Notification No. 12/2017-Central Tax (Rate) Sl. No. 47 (services by Central/State Governments by way of testing/certification relating to safety of consumers and public at large, required under any law). This clarification would apply to supply of seed tags by seed testing and certification agencies of other states also following similar seed testing and certification procedure (F. No. 354/27/2019-TRU   Dated the 30th April, 2019)

4. Seeks to extend the due date for furnishing FORM GSTR-3B for the month of for the month of April, 2019 for registered persons in specified districts of Odisha till 20.06.2019– Following amendment in notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 13/2019 – Central Tax, dated the 07th March, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.195(E), dated the 07th March, 2019, namely:– In the said notification, in the first paragraph, the following proviso shall be inserted, namely:

“Provided that the return in FORM GSTR-3B of the said rules for the month of April, 2019 for registered persons whose principal place of business is in the districts of Angul, Balasore, Bhadrak , Cuttack , Dhenkanal , Ganjam, Jagatsinghpur, Jajpur, Kendrapara, Keonjhar, Khordha, Mayurbhanj, Nayagarh and Puri in the State of Odisha shall be furnished electronically through the common portal, on or before the 20th June, 2019.” (Notification No. 24/2019 – Central Tax)

5. Seeks to extend the due date for furnishing FORM GSTR-1 for taxpayers having aggregate turnover more than Rs. 1.5 crores for the month of April, 2019 for registered persons in specified districts of Odisha till 10.06.2019 – Following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2019- Central Tax, dated the 07th March, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide number G.S.R. 194(E), dated the 07th March, 2019, namely:– In the said notification, in the first paragraph, the following proviso shall be inserted, namely

“Provided that the details of outward supply of goods or services or both in FORM GSTR-1 of the Central Goods and Services Tax Rules, 2017 for the month of April, 2019 for registered persons whose principal place of business is in the districts of Angul, Balasore, Bhadrak , Cuttack , Dhenkanal , Ganjam, Jagatsinghpur, Jajpur, Kendrapara, Keonjhar, Khordha, Mayurbhanj, Nayagarh and Puri in the State of Odisha shall be furnished electronically through the common portal, on or before the 10th June, 2019.” (Notification No. 23/2019 – Central Tax)

B. Important Cases decided in GST

1. Re-credit of amount of rejected refund claim to the electronic credit ledger in the absence of mechanism on GST portal

The GST law provide for re-credit of ITC on rejection of refund claim. However, GST portal did not have functionality regarding the same. The Court held that the revenue cannot deny re-credit of the amount on account of lack of mechanism on GST portal. Accordingly, the taxpayer was given option to take credit of the said amount manually in its return in case such amount is not credited electronically. M/s Garden Silk Mills Ltd Vs Union of India (Gujarat High Court)

2. Nature of business: Manufacturer – Complaint:

There was a reduction in rate of tax in November 2017. The taxpayer neither reduced the price of the goods nor passed on the benefit of rate reduction to the consumer. Held Profiteering: No Reasoning: The taxpayer did not resort to profiteering as the taxpayer maintained base price of the goods post rate reduction. The NAA has consistently held that there is no profiteering where base price of goods has remained same after introduction of GST or rate changes in GST regime. Kerala State Screening Committee on Anti-Profiteering Vs Ms. Rosata Vitrified Pvt. Ltd. (National Anti-Profiteering Authority)

3. Interest payable on total tax liability including portion of ITC available for set off

Telangana High Court has held that liability to pay interest under Section 50 of the CGST Act, 2017 is confined not only to the net tax liability. The High Court held that interest is payable on total tax liability including the portion liable to be set-off against Input Tax Cred The High Court in this regard observed that until a return is filed as self-assessed, there is no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. M/s. Megha Engineering & Infrastructures Ltd. Vs The Commissioner of Central Tax (Telangana High Court)

4. Detention of conveyance – Carrying LR issued by transporter is not mandatory

Gujarat High Court has directed to release the truck carrying goods which was detained by authorities under Section 129(1) of the CGST Act. The truck was detained on the ground that the lorry receipt issued by the transporter was a photocopy without the computerized serial number and contact number details. The Court observed that carrying lorry receipt issued by the transporter is not mandatory under Rule 138A (1) of CGST Rules, 2017 and that the detention was without the authority of law. F S Enterprise Vs State of Gujarat (Gujarat High Court)

5. Seizure of goods from premises of job-worker, when not valid:

Observing that allegations regarding evasion of tax, against person engaged in the business of hallmarking, can only be with reference to its business activity, Kerala High Court has held that seizure of the gold jewellery, belonging to petitioners but seized from the premises of the hallmarker, was not justified. The Court also observed that goods entrusted by principal, with hallmarker, and covered by delivery challan, cannot be subject matter of confiscation order under Section 130 of the CGST Act, passed in relation to the hallmarker. M/s. Josco Bullion Traders Pvt Ltd Vs Commissioner State Goods and Services Tax Department (Kerala High Court)

6. Imprisonment Power invokable only post determination of demand:

Madras High Court has held that power to punish under Section 132 of the CGST Act, relating to imprisonment, is invocable only when it is established post determination of demand that assessee has committed offence. The High Court held that when recovery is made subject to assessment, The High Court in this regard was of the view that exceptions to this rule are only where assessee is a habitual offender Judgement in Make My Trip was relied o It was, however, observed that revenue interest can be protected by provisional attachment. (Jayachandran Alloys v. Superintendent – Writ Petition No.5501 of 2019, decided on 4-4-2019, Madras High Court)

7. Anti-profiteering – Comparison with pre-GST rate – Delhi HC stays NAA order:

Delhi High Court has stayed the order passed by the National Anti-profiteering Authority wherein NAA had rejected the plea that CGST Section 171 was not applicable to reduction in rate of tax as compared with pre-GST indirect tax regime, and that only reduction of tax rate in GST regime can be considere NAA had ruled that assessee had indulged in profiteering as tax incidence was reduced from 30.06% during pre-GST to 28% and later 18% under GST regime. The petitioner, however, undertook to pay certain sum along with interest in the Consumer Welfare Fund. (Abbott Healthcare Private Limited & Anr Vs Union of India & Ors. (Delhi High Court)

8. Anti-profiteering ITC benefit to be passed on periodically:

In a case alleging non-passing of ITC benefit, where the real estate developer had pleaded that benefit be calculated at time of completion of project after considering the unsold flats, NAA has held that assessee had profiteered by not reducing basic p It was held that benefit needs to be passed on periodically. The NAA also held that there was no provision to withdraw the complaint and the DGAP had rightly pursued the investigation. Further, objections against method for calculating profiteered amount, was also rejected noting that there is no straight jacket formula and no set prescription The contention that the respondent made purchases from traders who did not pass the benefit of ITC to him, was also rejected (Pallavi Gulati v. Puri Constructions Pvt. Ltd. Case No. 30/2019 decided on 8-5-2019, National Anti-profiteering Authority)

9. Valuation – Cost of diesel provided by service recipient includible for charging GST:

AAR Chhattisgarh has ruled that cost of diesel provided by the service recipient has to be included by the transporter in the freight amount for charging GS The Authority in an advance ruling observed that diesel provided by service recipient for vehicles of applicant formed an integral component of business process, without which supply of cement could not materialize. It noted that any amount supplier is liable to pay and which has been incurred by the recipient and not included in the price actually paid is includible in the taxable value. [In RE: Shri Nawodit Agarwal (GST AAR Chhattisgarh)]

10. Sale of ice cream in retail pack and in scoop is supply of goods

In a case involving sale of ice creams both in retail packs and as scoops, AAR Maharashtra has held that since retail packs were sold at MRP the same constitutes sale of goods with no service being involved. With respect to the ice cream scoops, the Authority was of the view that the transaction of receiving ice cream in bulk and selling them in scoops is akin to sales made by grocery shops in the case of sale of edible oil wherein the grocer sells such oil in various lesser quantities after receiving the same in bulk quantity. Accordingly, it was held that since the predominant element of the transaction is that of sale of goods, the said transaction was held to be a “supply of goods”. (In Arihant Enterprises (GST AAR Maharashtra))

11. Work Books which test child’s knowledge classifiable as ‘Printed books’:

Delhi High Court has held that work books (Sulekh Sarita) which test child’s knowledge and facilitate evaluation of his understanding are classifiable under HSN 49.01, ‘printed books including braille books’ that are exempt from GST (Sonka Publication (India) Pvt. Lt v. Union of India – W.P.(C) 10022/2018, decided on 7-5- 2019, Delhi High Court)

C. GST Compliance Calendar – June 2019

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

D. Customs Updates for May 2019

1. Exports New Shipping Bill Regulations – introduced: CBIC has introduced Shipping Bill (Electronic Integrated Declaration and Paperless Processing) Regulations, 2019. The new Regulations issued in supersession of Shipping Bill (Electronic Integration Declaration) Regulations, 2011 requires authorised person to retain assessed copy of shipping bill and all supporting documents in original, for a period of 5 years. Provision has also been made for generation of authenticated copy of shipping bill As per the Regulations issued on 25-4-2019 penalty upto Rs. 50,000 is imposable in case of any contravention

2. SEZ Management and Business Consultant services is authorized service: SEZ Approval in its 85th meeting has decided that “Management and Business Consultant Services may be included in the list of default authorized services. As per SEZ Instruction No. 94, dated 8-5-2019, such services would be limited to the extent of such value of services availed of/consumed by the SEZ entity only. Further, the unit will have to produce evidence that the said service was consumed in relation to their authorized operations only. It may be noted that 66 services are already permitted as default authorized services..

3. Exports 250 shipping bills can now be filed online in single ANF 3D: The number of entries of shipping bills/ airway bills which can be filed in a single online ANF 3D application has been increased from 50 to 250 for claiming Merchandise Exports from India Scheme (MEIS) benef ANF 3D which itself was notified recently has been amended for this purpose by DGFT Public Notice No. 7/2015-2020 issued on 7-5-2019. MEIS is a duty credit scrip issued under Chapter 3 of the Foreign Trade Policy with an objective to provide rewards to exporters to offset infrastructural inefficiencies and associated costs

4. FTP No requirement to submit physical copy of RCMC for incentives: The requirement to submit physical copies of RCMC for the purpose of availing incentives under the Foreign Trade Policy 2015-20 will be discontinued from 1-7-201 According to DGFT Trade Notice No. 12/2019 dated 13-5-2019, validity of RCMCs will be checked directly from the DGFT’s database which has the uploaded data of RCMCs from EPCs. The Trade Notice while noting that as on 31stApril, 32,060 valid RCMCs are available on DGFT’s data base, also advises all exporters to ensure that their valid RCMCs are duly uploaded by their respective EPC in the DGFT server

5. Belated payment of redemption fine – not to return excess amount from auction:

Larger Bench of Delhi High Court has held that Government can retain excess auction proceeds after adjusting customs duty, redemption fine, etc., where order under Section 125 of the Customs Act, 1962 has attained finality and the payment is made belatedly but prior to the auction date. The High Court noted that Sections 125 and 126 are not to be read disjunctively. It observed that once there is failure to pay redemption fine in time, whether goods are prohibited goods or other goods, transient nature of confiscation ends and vesting of goods with the govt. becomes absolute. (Gillette India Ltd. v. Commissioner – Judgement dated 23-4-2019 in W.P. (C) No. 1735/2016, Delhi High Court Larger Bench)

6. FTP – Clubbing of Advance authorisations when not possible:

In a case involving clubbing of Advance Authorisations issued in 2004 and 2010, Delhi High Court has held that clubbing can be provided only if export obligation period of authorization issued at a prior point of time allowed under Paragraph 4.22 of the HoPv1 has not expired. The High Court rejected clubbing as petitioner had made no application for extension of export obligation period under license dated 22-8-2004 and maximum period for extension had also expir It also held that amendment in HoP on 13-10-2011 was not applicable. (Jindal Poly Films Ltd. v. DGFT – Judgement dated 22-4-2019 in W.P.(C) 7806/2014, Delhi High Court )

7. IGST refund not deniable even if shipping bill is shut in computer system:

Madras High Court, in the light of alternate mechanism under CBIC Circular 8/2018-GST, has held that IGST amount on exported goods must be refunded to petitioner who mistakenly availed higher drawback by selecting Drawback code 680203A instead of 680203B in the shipping bill. The High Court held that the petitioner cannot be made helpless just because computer system did not enable refunding the IGST amount as Export General Manifest for the shipping bills was closed. [Vsg Exports Pvt Ltd Vs. Commissioner of Customs (Madras High Court)]

8. No confiscation under Customs Section 113(d) when attempt to export absent: In a case where goods were not presented to proper officer for export and thus formalities as per Regulation 6 of the Courier Imports & Exports (Clearance) Regulations were not completed, CESTAT Mumbai has set aside confiscation of goods seized from the courier agency. The Tribunal observed that language of Sections 113(d) and 2(19) of Customs Act, 1962 convey that only goods which are attempted to be exported are liable to confiscati It also observed that the appellant had filed FIR for missing goods and that goods were booked for export by somebody else. (Dalumi Hongkong Ltd. v. Commissioner – Order No. A/85757/2019, dated 18-4-2019, CESTAT Mumbai)

E. Central Excise & Service Tax updated for May 2019

1. Interest payable on differential duty payable due to retrospective price escalation:

Larger Bench of Supreme Court has held that interest for delayed payment of Central Excise duty is liable to be paid on the differential excise duty payable due to retrospective price escala Earlier, doubting the correctness of the Supreme Court decision in the cases of CCE v. SKF India Ltd. [2009 (13) SCC 461] and International Auto [2010 (2) SCC 672], the matter was referred to the Larger Bench in Steel Authority of India case [2015 (16) SCC 107]. The Referring Bench was of the view that excise duty paid on the date of clearance of goods was not treatable as ‘short-paid’ as it was not possible to pay duty based on price escalation which took place later. Rule 7 of the Central Excise Rules relating to provisional assessment, according to which interest is to be paid, was relied on. The Apex Court observed that assessee had not opted for provisional assessment, and that the law will have to be interpreted in a manner that it is fair and equal to similarly situated group of assessees. (Steel Authority of India Ltd. v. Commissioner – Civil Appeal No. 2150/2012 and Ors, decided on 8-5-2019, Supreme Court Larger Bench)

2. Bagasse not a manufactured product – Allahabad High Court quashes CBIC Circular:

Allahabad High Court has held that Cenvat credit need not be reversed in respect of bagasse which is an agricultural waste and not a manufactured final produ The High Court quashed CBIC Circular No.1027/15/2016-CX, dated 25-4-2016 which treated bagasse as exempted product. It also observed that amendment in 2015 in the Cenvat Credit Rules may have the effect of treating bagasse as exempted good but cannot result in it being manufactured goods. Judgement in UoI v. DSCL Sugar Ltd. was relied on. (M/s. Balrampur Chini Mills Ltd Vs Union of India (Allahabad High Court)

3. Valuation of goods self-used but not in production Excise Valuation Rule 8 not applicable: CESTAT Chennai has held that goods cleared to sister units and also used internally in construction activity, in various expansion projects, are not covered under Excise Valuation Rule 8. It was held that such goods cannot come under the fold of “self-consumption”. Department’s view that for Rule 8, goods are required to be consumed in manufacture of other articles and not merely utilised in expansion, was uph The Tribunal upheld adjudication orders requiring adoption of Rule 4 read with Rule 11 for valuation in such case. (JSW Steels Ltd. v. Commissioner – 2019-VIL-262-CESTAT-CHE-CE)

4. Cenvat credit on input/capital goods not confined to registered site: CESTAT New Delhi has allowed Cenvat credit on capital goods, input services and inputs received in one SSA (Secondary Switching Area) and distributed to anothe The assessee had, for convenience, taken registration in different areas but undertook maintenance through its wing which catered to different SSAs. The Tribunal noted that Cenvat credit of inputs or capital goods, was not confined to registered premises, but can be availed even if capital goods were received beyond registered premises for providing output services. (Bharat Sanchar Nigam Limited v. Commissioner – Final Order No. 50553/2019, dated16-4-2019, CESTAT Delhi)

5. Cenvat credit available on photography, repair of MD car and debris removal: CESTAT Bangalore has held that Cenvat credit of service tax can be availed in respect of repair of MD’s car and on service of car used to ferry employees inside manufacturing unit and also to transport work-in-progress. It held that both are indirectly related to manufactur The Tribunal also held that photography for ground breaking function, hiring charges as well as cleaning and debris removal also fell within the definition of input service, being directly or indirectly related to manufacture. (Plansee India High Performance Materials Pvt. Ltd. v. Commissioner – 2019-VIL-240-CESTAT-BLR-ST)

6. Excise No appeal before High Court if matter involves valuation also: In a case involving clandestine removal along with under-valuation, Bombay High Court has held that even if the order of the Tribunal has dealt with other issues besides valuation, the appeal against such order must be brought before the Supreme Cou Denying own jurisdiction, the High Court observed that order of the Tribunal cannot be bifurcated and must be challenged as a whole before one forum. It relied on Central Excise Section 35L and directed the return of Memorandum of Appeal to enable the department to file appropriate proceedings before Supreme Court. (Commissioner v. Durian Industries – 2019-TIOL-847-HC-MUM-CX)

F. Value added Tax (VAT) update for May 2019

1. No power with State gov./Municipal to legislate on advertisement tax: Allahabad High Court has set aside demand of advertisement tax from the petitioners for the period after 1-7-2017. The High Court in this regard observed that provision of Section 172(2)(h) of the Municipal Corporation Act was omitted by Section 173 of the U.P. GST Act with effect from 1-7-2017 and even the power of the State legislature to legislate with regard to advertisement tax stood deleted with effect from 12-9-2016 by the Constitution (101) Amendment Act. It held that there is no power left with the State Government or the Municipal Corporation to legislate tax on advertisement. (Selvel Media Services Private Limited v. State of U.P. – 2019-VIL-215-ALH)

2. Delivery of possession, not custody of goods, sine qua non for VAT: Allahabad High Court has reiterated that unless possession and control of the vehicle are transferred there cannot be transfer of right to use the goods under Section 3F of the P. VAT Act. The High Court set aside the order of Assessing Officer and the Tribunal on demand of tax under Section 3F on contractor operating tank trucks for haulage and delivery of petroleum products belonging to Hindustan Petroleum. Relying on Rashtriya Ispat Nigam Ltd., High Court reiterated that delivery of possession of thing must be distinguished from its custody. (Gopal oil Company v. Commissioner – 2019-TIOL-1009-HC-ALL-VAT)

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