A businessman in Bengaluru was arrested for Rs 42 Crore GST fraud by issuing invoices to the tune of Rs 245 Crore     : Pyramid Infratech moves court against the order of the GST National Anti-profiteering Athority     : Finance ministry denies that GST refund claims worth Rs 23,000 crore are pending     : National Anti-Profiteering Authority declares that GST rate cut must be passed on for every stock keeping unit.     : Ex- Prez Mukherjee says "Impasse over GST can't be resolved politically, will require judicial pronouncement'     : CA, two businessmen arrested for GST fraud     : Central Government is planning to cut GST slabs to just two from the current five     :

Fraudulent GST invoices to the tune of Rs 245 Crores and evasion of Rs 42 Crore detected by Bengaluru State GST Authorities

18th October

A businessman name Mangilal was arrested and later remanded to judicial custody on Tuesday 16th October.

The State GST authorities after preliminary investigations alleged that Mangilal issued fake invoices to the tune of Rs 245 Crore. They also alleged that he evaded GST of Rs. 42 crore.

His modus operandi included obtaining a GST registration in  the name of a deceased person and  issuing invoices in that name or of fictitious persons.

 

Goods in the factory can't be offending goods. When physical control operates, goods outside the factory must be presumed duty paid

17th October, 2018

Goods "lying within the factory premises were not contravening goods and had not violated any provision of Central Excise Act and, therefore, their confiscation is set aside."

"...goods which were confiscated such as at the transporter premises of Baba Roadlines.... the redemption fine cannot be directed to be paid by the appellants because said goods were proceed to have been manufactured by the appellant.

"...2,88,000 sticks of Captan brand cigarettes stated to have been found in excess at the residential premises of Shri Roop Singh .....cannot be contravening goods because the manufacturers factory was under physical control and it was not possible to remove manufactured goods without payment of duty...."  Musk Tobacco & Ors Vs CCE, Lucknow 

When transporter has already discharged Service Tax liability, appellant is under no obligation to pay tax a second time.

17th October, 2018

 

 

Service tax is payable on reverse charge basis on GTA services. An exemption under “Not No.36/2004-ST is available, but it is a conditional one.  Its subject to the fact that the truck owners or transporters has not availed any benefit of Cenvat credit.The onus lies on the assessee to establish this.  

In this case, it was claimed that most of the transporters themselves had discharged the service tax liability. When the transporter has already discharged the Service Tax liability, the appellant is under no obligation to pay the tax amount a second time.

A.S.P. Sealing Pdts Vs CCE, Meerut-II

Another "disaster cess"​ in the offing to manage natural calamities?

16th October, 2018

A panel of State Finance Ministers headed by Mr Sushil Modi, Deputy CM, Bihar, has examined the possibility of imposing "disaster cess" as an additional indirect tax and will be seeking the views of the Attorney General on such a levy.

It will be recalled that post the recent floods in Kerala, and losses caused by it to the State, the aspect of relief to affected areas/States has come into sharp focus.

There can be no dispute about the  purpose or intention of providing such relief. It’s legitimate, of course. However, the method of raising revenue is questionable. Whether an over-riding cess like the erstwhile “Education cess” (EC), “Secondary and higher education cess” (SHE), “Swach Bharat cess” and “Krishi kalyan cess” should be re-introduced into the indirect tax system?  Is that the best option we have?

Read the full article

Punjab Authority for Advance Ruling :  K.P.H. Dream Cricket Pvt. Ltd.

15th October, 2018

The questions before the Authority for advance ruling were :

a. Whether free tickets given as "Complimentary Tickets" falls within the definition of supply under CGST Act, 2017 and thus, whether the applicant is required to pay GST on such free tickets?

b. Whether the applicant is eligible to claim Input Tax credit (for short "ITC") in respect of complimentary tickets?

The relevant extracts of the ruling reads :

"the applicant is also agreeing to the obligation of doing the act of allowing entry to the complementary ticket holder to enjoy services .... is covered under each limb of para 5(e) of Schedule II of the CGST Act, 2017.....
The activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service .....

.....Since all tickets supplied by the applicant including complementary tickets would be taxable, the applicant would clearly be eligible for claim of Input Tax Credit....".

Read the AA Ruling

Pyramid Infratech files writ petition in Delhi High Court against the recent NAA order.

14th October, 2018

Pyramid Infratech Pvt Ltd  has filed a writ petition on Friday 12th October, 2018 in Delhi High Court against the order passed by NAA directing them to pay back the amount determined and profiteered by them.

Pyramid Infratech has challenged the constitutional validity of the provisions in the GST law relating to antiprofiteering mechanism .

The anti-profiteering provision requires the suppliers of goods and services to pass on the benefits of  the reduction in tax rates and also the benefit of input tax credit under GST.

Supreme Court of India : ALD Automotive Pvt. Ltd.  Vs  CTO etc: 12th October, 2018 :

Input tax credit (ITC) for Rs. 4.2 million was denied when the appellants claimed the credit through revised returns instead of during the respective months itself.

Section 19(2) of TN VAT Act, 2006 mandates ITC must be claimed before the end of the financial year or before 90 days from the date of purchase, whichever is later. The ITC denial and the law surrounding this was challenged as violative of the Constitution by the appellants.

Held by the Apex Court: “a valid piece of legislation, cannot be struck down as being either unreasonable or discriminatory and violative of Article 265 and 360A of the Constitution of India….

The taxing statute has to be strictly construed....

The statute having not given any indication for extension of time which is a condition for claiming Input Tax Credit, the submission that period could have been extended by assessing authority is unfounded and cannot be accepted. Issue number 5 is answered accordingly.”

Read the article/judgement

The benefit of lower tax notified has to be passed on for every product/pack (SKU).

11th October,2018

 The NAA concluded that the dealer of Maggi Noodles profiteered by increasing the base price of the product from Rs.3.96/- per pack to Rs 4.17 after the GST rate was reduced from 18% to 12%. The NAA rejected the claim that the benefit was passed on certain other bigger packs. Relevant portion of the order which records this claim, reads :
“12. It is further apparent from the record that the Respondent has contended that he had passed on the benefit in respect of the product by way of reducing the MRP of the 70 Gms. products. The Respondent has no such liberty to arbitrarily decide in respect of which products he would pass on the benefit and in respect of which products he would not pass such benefit.”

 

Judgements/Decisions

11th Oct : CESTAT Mum:  CCE Thane-I Vs Shree New India etc. : Four departmental appeals filed in the Tribunal against a  single order-in-appeal (OIA) arising out of 4 original orders. Though the aggregate amount in the OIA exceeded Rs 20 Lakhs, the demanded amount in the  notices and original orders do not exceed the monetary limit of Rs 20 lakhs in F.No.390/Misc./163/2010-JC dated 17th December 2015 of CBEC. Appeals dismissed.

11th Oct : CESTAT Ahd :  D Jewel etc Vs C.C.E. & S.T.- Surat-I : D Jewel is a SEZ unit manufacturing Gold jewellery studded with diamonds etc.  The DRI intercepted 66 gold bars valued at Rs 2.34 Crores being transported. The gold was seized. It was explained that due to urgency in meeting the delivery schedules to UAE buyers the gold was sent to for producing ornaments outside the SEZ.

The Tribunal held : "The appellant knowingly removed the gold bars of SEZ without proper procedure. The excuse given by the appellant is that there is an urgency to execute the export order, however, the law does not provide any relaxation ...." Penalty on individual partner and employees set aside. Dept appeal for absolute confiscation rejected.

NAA determines that Pyramid Infratech Pvt Ltd. had profiteered from  the buyers and directs them to pass on the benefit to 2476 buyers

10th October,2018

 The National Anti-profiteering Authority (NAA) has determined that Pyramid Infratech Pvt Ltd. had profiteered from the 2476 buyers of of residential apartments by not passing on the benefit of input tax credit available under GST. This NAA order was passed covering 102 applications.

The NAA directed that Pyramid Infratech Pvt Ltd as under :"shall reduce the price to be realized from the buyers of the flats in commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 28.02.2018 any benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. He shall not only pass on the benefit as has been mentioned above to the 109 Applicants who are before us but to all the 2476 buyers as they are identifiable." Full text of the order.

Are "industrial effluents" goods? Whether transportation of such effluents is a taxable activity under service tax?

9th October, 2018

The Ahmedabad Bench of CESTAT in Effluent Channel Project Ltd Vs CCEST re-confirmed an earlier (2014) in GSFC Vs CCE  saying such industrial effluents are not goods. Accordingly the appeal was decided against the Revenue and demand set aside.

This question arose when service tax was demanded on transportation of the industrial effluents by the Revenue under the head of “Transportation of goods other than water through pipeline or other conduit” service.

However, in the context of Goods & Services Tax, this decision may not have any impact. It is irrelevant in the context of GST whether "industrial effluents" are "goods" or not, the service provided per se is taxable. In other words, taxability is not determined by any specific taxable entry which limits the scope of the tax. 

 

Recent Court / Tribunal Judgements

 National Anti-profiteering Authority

Decisions for the National Anti-Profiteering Authority :

  1. 1. Shri Ankur Jain & DG Anti-Profiteering, CBIC Vs M/s Kunj Lub Marketing Pvt. Ltd. : Case No. : 10/2018 : 8th October, 2018
  2. 2. Sh. Jijrushu N. Bhattacharya & DG Anti-Profiteering, CBIC  Vs M/s NP Foods (Franchisee M/s Subway India) : Case No. 9/2018 : 27th September, 2018
  3. 3. Miss Neeru Varshney & DG Anti-Profiteering, CBIC Vs M/s Lifestyle International Pvt. Ltd. : Case No. 8/2018 : 25th September, 2018
  4. 4. Shri Sukhbir Rohilla along & 108 other Applicants & DG Anti-Profiteering, CBIC Vs M/s Pyramid Infratech Pvt. Ltd. : Case No. 7/2018 : 18th September, 2018  
  5. 5. Shri Pawan Sharma & DGAP, CBIC Vs M/s Sharma Trading Company, Jaipur: Case No. 6/2018 : 7th September, 2018
  6. 6. Dinesh Mohan Bhardwaj Vs M/s Vrandavaneshwree, Automotive Private Limited : Case No. 1/2018 : 27th March 2018

 CESTAT Decisions

 

12th Oct : CESTAT Mum : Tahnee Heights CHS Ltd. Vs Commissioner of CGST, Mumbai South : Held : "The appellant also do not provide any service to its members, who pay the amount towards their share of contribution, for occupation of the units ....the explanation furnished under clause 3(a) in Section 65B of the Act will not designate the appellant as an entity, separate from its members....the case of the appellant is not confirming to the requirement of 'service', as per the definition contained in Section 65B(44) of the Act."

11th Oct : CESTAT Chennai : M/s. Pepsico India HPL Vs Commr of GST & CE, Chennai Outer : The appellants had paid excess central excise duty for which they utilised the CENVAT credit. On realizing this they suo moto took re-credit of the excess amount debited from the Cenvat account.

Held:  Following the said decisions of the High Courts, The impugned order and demand was set aside.

10th Oct : CESTAT Ahd :  L & T Ltd. etc Vs C.C.E. Ahd Appellants argued the law and IS specifications had changed for their product "concrete mix" made at site. It was eligible for the exemption making the earlier Supreme Court judgement in their own case irrelevant.

Tribunal ruled that there is no change in the  C.Ex Tariff Heading description as far as ready mix concrete is concerned. There is no mention of any IS Specification anywhere in the SC judgement. So changes in IS Specifications cannot be used to distinguish the decision of Hon’ble Apex Court. Demand beyond the period of limitation set aside. Personal penalty quashed as this is a case of interretation.

3rd October, 2018: CESTAT Ahd C.C., Kandla Vs Reliance Port & Terminals Ltd.: Revenue argued thatEPCG benefit was not available for “consumables” which was deleted from Not 97/2004 Cus on 21.5.2007. “Consumables” are not “capital goods”.  Respondents submitted the imported items were “used for installation of Crude. Product pipelines, therefore, all the goods used during the initial installation of pipeline shall be categorized as capital goods only.” The Tribunal dismissed the appeal on limitation without entering the merits of the case as the Revenue had abandoned the argument of limitation.

3rd October, 2018 : Mayur Printers & Ors Vs C.C.E.& S.T. Surat-I :
Two points were raised in the Rectification of Mistake Application. First, credit denied on defective gate passes and second, there was no findings in respect of cenvat credit lying in their account which should have been adjusted against the demand. Tribunal held - credit admissible if established through evidence. Matter remanded.

26th July, 2018 : CESTAT Bangalore : Sree Rama Coffee Works Vs Commr of Customs : Whether coffee roasting machine is classifiable under 85167990 and exempted under Not No. 21/2002 or under CTH 84198190 without exemption.  Tribunal has held 85167990 applies only to domestic appliances.  This machince an industrial appliances would fall under 84198190.

20th July 2018 : CESTAT Delhi : Sukan Power Systems Ltd & Ors Vs CCE Delhi III: The Tribunal quashes Commissioner (Appeals) order as statement recorded during investigation cannot be admitted without observing the procedure in Sec 9D(1) (b) of CEA. The Tribunal relies on the judgement of Punjab & Haryana High Court in the case of M/s Ambika International & ors. Vs. UOI.

17th July, 2018 : CESTAT Delhi : Sir Ganga Ram Hospital Vs C.S.T. Delhi-IDuring audit it was observed the appellants outsourced 4 diagnostic services to 3 diagnostic centres. The Tribunal held "the arrangement vis a vis appellant and diagnostic centre is clearly an arrangement of Business Support System." The Tribunal set aisde the demands under Management Maintenance & Repair Services. Appeal was partly allowed.

13th July, 2018 : CESTAT Mumbai : Mahindra Engg. Vs CCE, Pune-I : The appellant refund claim was allowed but amount credited to Consumer Welfare Fund. The appellant had intimated on enquiry that the said amount was treated as expenditure in their P&L account accordingly the amount was credited to the Consumer Welfare Fund. The Tribunal held “The only possible way to pass the bar of Unjust Enrichment is that the disputed tax /duty is not expensed off in the accounts, but booked as ‘Receivables’.” Appeal dismissed.

9th July, 2018 : CESTAT Bangalore : Bhagwan Mahaveer Jain College Vs CC, Bangalore: It was alleged 200 PCs imported under Not. 51/96-Cus for reasearch in the field of agriculture, computers etc. were only used for their courses in microbiology, botany, biochemistry. The Tribunal held "Essentiality Certificate has been issued and Bangalore University is registered with the DSIR. Therefore, the importer is eligible ..as the conditions of the Notification have been satisfied..".  Appeal is allowed.

3rd July, 2018 : CESTAT Delhi : Udaipur Treasure  Vs C.C.E. & S.T.-Indore  : Appellant availed Cenvat Credit but provided no output service or paid service tax. The Tribunal rejected the appeal held "Credit... allowed to be taken contingent upon ...rendering output service which is chargeable to Service Tax..."

3rd July, 2018 : Elinjikal Foods & Beverages  & Ors  Vs CCE (Adj) etc.  : The appeal involves valuation where the buyer, Concept Sales was alleged to sell the goods at twice the purchase price. Investigation revealed interconnectedness, interdependence & inexplicable financial transactions. The Tribunal held "..under these circumstances, it has to be held that leave about mutuality of interest, all the companies were one and the same managed by Shri George Varghese; corporate entities are created as a façade."

2nd July, 2018 :  CESTAT Allahabad : Piem Hotels Ltd. Vs CCEST, Lucknow : The main dispute was over credit availed on invoices of Indian Hotels as "Management Consultancy". The dept disputed this saying it was "Franchisee Service" and hence truncated credit only to the extent of 20% should have been availed, not  100%. The issue since then is settled at Indian Hotels end in their favour. Accordingly, the appellant is entitled to full 100% credit.

2nd July, 2018 : CESTAT Allahabad : Alert Protection And Security Vs CCEST, Meerut-i : Details as per the bank statements and bills received from the customers did not match with the service tax returns. The appellant argued the balance sheet figures were lower. The Tribunal accepted the revenue’s argument and held that the balance sheet does not carry any weight.  Appeal is rejected.

2nd July, 2018 : CESTAT Ahmedabad : Radha Trading  & Ors Vs CC-Kandla : DRI seized the goods on charges of under valuation alleging the goods were routed through SEZ units to actual importers. They relied on evidences and statements of persons indicating that the DTA buyers/ importers were negotiating directly with overseas suppliers etc. The appeal was against the harsh conditions of provisional release. Appeals were partly allowed. 

2nd July, 2018 : CESTAT Delhi : Pee Cee Cosma Sope Ltd. Vs CE, C & CGST – CCE & ST, Jodhpur :  Cenvat Credit on outward freight inadmissible. On time bar appeal rejected on grounds of suppression.

High Court Judgements

 

2nd July, 2018  : Allahabad High Court : Hamdard (Wakf) Labs Vs Commr Of Commercial Taxes : The High Court upholds the Tribunal order and holds that "Sharbat "Rooh Afza" is not unclassifiable under Schedule-V of the Act and liable to tax @ 12.5%. It is neither fruit juice nor fruit drink nor processed fruit.

2nd July, 2018 :  Delhi High Court : JOYCE KAROUNG Vs NARCOTICS CONTROL BUREAU : Relying on the SC judgment in Babua v. State of Orissa, (2001) 2 SCC 566 the High Court concluded the petitioner is not prima facie not guilty. Also, liberty of a citizen must be balanced with the interest of the society especially where narcotic drugs and psychotropic substances are involved. It is alleged that this is not the first offence.

22nd June, 2018 : MP High Court : Star Automobile Vs Commr : Appellant was issued a notice for Rs. 26.61 lakhs and later confirmed in adjudication and both appeal stages. The appellant raised the time-bar issue before the Tribunal. The Hon'ble Court dismissed the appeal u/s 35G as "the appeal does not involve any substantial questions of law for adjudication by this Court and the proposed questions ....are purely factual.." 21st June, 2018 : Bombay High Court : Lloyds Steel Industries Vs CESTAT & Ors : The issue involved eligibility of cenvat credit on appliances/instruments used for maintenance. Tools or instruments must be demonstrated to be used during manufacturing process. The Court held the items do not qualify as capital goods and upheld CESTAT order denying credit.
21st June, 2018 : Calcutta High Court : ARCL Organics Ltd Vs CCE, Kol V : The substantial question of law was: “Whether an appeal can be dismissed for non-compliance of pre-deposit without considering merits? Though clandestine removal was raised, Tribunal did not go into the merits but dismissed merely on the ground that pre-deposit was not made.  If appellant makes the pre-deposit of 10% of the duty within 30 days, appeals will stand restored. 20th June, 2018 : Karnataka High Court : Principal Commr CE Vs  AZKO NOBEL : The Dept appeal was filed seeking an answer to a question of law already answered by the Tribunal in favour of the assessee that the Amendment of Rule 6(6)(i) of Cenvat Credit Rules, 2004, was clarificatory and hence restrospective in nature. The Court uphold the decision of the cognate bench & dismissed appeal.
18th June, 2018 : Chattisgarh HC : Shrikishan & Co Vs Addl Commr Commrcl Tax : Whether bitumen emulsion should be assed under under residual category at % or 4% as per Entry-23 of Schedule-II of Part II of the Chhattisgarh VAT Act. Based on a detailed analysis, Hon'ble High Court sets aside revisional authority order and rules bitumen emulsion is covered by Entry-23 of Part II of Schedule-II of the VAT Act and rate of VAT would be 4% or applicable. 18th June, 2018 : Himachal Pradesh HC : The State of HP Vs Tritronics India :  The Court rejects Revenue plea to condone delay in Revision saying HP VAT Act, 2005 "is a complete code in itself....and as there is no provision contained in the Act, making the provisions of Limitation Act applicable.....this Court has no inherent power to condone the delay in entertaining a Revision Petition which stands filed beyond the period of limitation prescribed in the Act."

Click for earlier Judgements in 2018

Tax Risk Management Part 1

An Introduction

 

Risk comes from not knowing what you’re doing. 
- Warren Buffet

Read the Article

 

Tax Risk Management Part 2

Tax Risks as Black Swan Events!

If you were asked "What 'tax risks' you perceive in your business?" What would be your answer?

Read the Article

 

 

Indirect Tax Risk Management

Indirect Risk Tax Management
 

 

 

 

Economic Survey of India 2017-18