CBIC confirms tax evasion and acknowledges concerns on GST AAR orders

13th December

The Central Board of Indirect Taxes & Customs (CBIC) confirms that despite anti-evasion measures adopted when implementing GST, the tax evasion in GST during Apr-Nov 2018 amounted to Rs 12K Crores.

The CBIC also acknowledged concerns of the industry and trade that orders from GST AAR State Benches are sometimes conflicting. The solution to this was a National AAR which would reflect reflect a uniform approach for the whole of India. However this idea for a national AAR bench appears to have hit a road block as it requires around 40 members with every state being represented.

 

The next indirect tax reform is aimed at customs procedures to boost trade and improve ease of doing business

4th December

The Chairman of CBIC, Mr S Ramesh elaborated that current customs procedures will be replaced by processes in line with best practices of the World Customs Organisation (WCO). This will entail eliminating face-to-face contact with tax officials, automated clearance of goods, linking ports to enable flexibility to assess goods landed in other ports, e-traceability of shipments etc. These will speed up clearances and substantially reduce corruption.

Mr Ramesh said “We want to go in for something which will be radically different from what we have been doing. We are going to venture into a new territory called faceless assessment... We could start a pilot in a month’s time,”

These steps are likely to enable India to boost its ranking getting into the top 50 rank (currently 80) of the World Bank’s Ease of Doing Business.

Supreme Court dislodges Rajasthan HC judgement and denies IT exemption to Urban Improvement Trust

22nd October

 

SC has dislodged a Rajasthan HC judgement saying the Urban Improvement Trust set up under the State law is neither a  "municipality" nor a "municipal board". The SC inter alia holds:

"The word “Municipal Committee” occurring in Clause (iii) Explanation, thus, has a definite purpose and object.

Purpose and object was to cover those bodies, which are discharging municipal functions but are not covered by the definition of municipalities as was required to be constituted by Article 243Q of the Constitution of India. Urban Improvement Trust constituted under the Rajasthan Urban Improvement Act, 1959, thus, cannot be held to be covered by the definition of Municipal Committee as contained in Clause (iii) of Explanation to Section 10(20) of the I.T. Act......"

Read the full text of the judgement.

Ministry of Statictics seeks GST data to improve Accounts

19th October

It has been reported that the Ministry of Statistics & Programme Implementation (MSPI) has sought quarterly GST data (output, input and revenue) on tax paying units from the Ministry of Finance.

This data is expected to improve the quality, timeliness and credibility  of both National Accounts Statistics and state-level accounts. Also this step is expected to reduce data collection cost. Apparently, the Finance Ministry will share this data one the GST system stabilises.

 

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

 

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

 

18th October, 2018 : CESTAT Mum : UPS Jetair Express Private Limited   Vs Commissioner of CGST, Mumbai East 

Revenue denied CENVAT credit only on the ground invoices didn't mention the registration number of the service provider. No other allegations were made regarding receipt of input services, eligibility etc.

Held : This is merely a procedural lapse. It is settled that CENVAT credit can't be denied on mere technicalities or procedural lapses.

CENVAT credit allowed, extended period of limitation not applicable.

Ed's comment : Isnt it surprising that a Senior Officer like Prin. ADG, DGPM, WRU, still needs to catch up with decades old case law regarding Modvat and Cenvat? It's repeatedly held procedural lapses aren't reason enough to deny credit. How will the dept reduce litigation? Should Tribunal for fairness?

18th October, 2018 : CESTAT Ahd : M/s Auto Care Lubricant Vs C.C.E. & S.T.-Vapi
The Tribunal relying on an earlier decision in Castrol India Ltd, held :
“The authorities under the Standards of Weights and Measures Act are the best judge to decide as to whether a product is required to be affixed with a MRP under the said Act or not. If said authority has clarified that 210 ltr. barrel are not required to be affixed with MRP, it was obligatory on the part of the Excise authority to accept such decision of Controller of Legal Metrology authority….., it was not open to the Excise authority to doubt the decision of the authority under Standards of Weights and Measures Act and to proceed independently ….”

18th October 2018 : CESTAT Ahd : M/s Javiya Finance Services, Javiya Marketing Vs C.C.E.& S.T.- Surat-I
The appellant were providing service of identifying customers for car loans and receiving commission from ICICI Bank. This was to be taxed under Business Auxiliary Services (BAS).  

The appellants admitted taxability but argued they were under bonafide belief the services are not taxable and so extended period of limitation should not be invoked.
Held : "The definition of Business  Auxiliary  Services  is  very  clear  and  there  is  no  scope  of interpretation. The definition specifically includes the service of promotion or marketing of any service of the client within its ambit." Appeals dismissed.

 

 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."

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.

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.

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.

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.

 

 

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.

Click for earlier Judgements in 2018

Whether A Judicial Member is a must for Advance Ruling Authority

Whether A Judicial Member is a must for Advance Ruling Authority

20th February, 2018

The Gujarat High Court recently admitted a Special Civil Application NO. 18030 of 2017 filed by Nipun Praveen Singhvi relating to the Authority of Advance Ruling (AAR) and the Appellate Authority of Advance Ruling (AAAR) under the Central GST. The matter will be next heard on 13th April, 2018.

The application seeks that the High Court declare the relevant CGST provisions as ultra vires the Constitution as the Benches do not include a judicial member.

Traditionally, the Authority for Advance Rulings in the legacy taxes like central excise,  customs and service tax have always included a Judicial member.  So, this is a departure from the established practice. Also almost every tax tribunal (except single Benches) includes both a Technical Member and Judicial Member.

The Gujarat High Court has issued notices to the Central Government, the GST Council and the Gujarat Government.

In terms of Section 96 of the CGST Act, the Advance Ruling Authority set up under the State GST Act or UT GST Act will be deemed to be the AAR under CGST for that State or UT. The said section reads :

“96. Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.”

The corresponding provisions in the State GST Act (extract from AP GST Act) which set-out the modalities of constituting the AAR and the AAAR are contained in Section 96 and 99 respectively. The said sections prescribe constituting the AAR and AAAR by appointing officers from Central Tax and State Tax. 

Section 96 reads :

"96. (1) The Government shall, by notification, constitute an Authority to be known as the Andhra Pradesh Authority for Advance Ruling:

Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State.

(2) The Authority shall consist of,-

(i) one member from amongst the officers of Central tax; and
(ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively.

(3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed."

Section 99 reads :

"99. The Government shall, by notification, constitute an Authority to be known as the Andhra Pradesh Appellate Authority for Advance Ruling for Goods and Services Tax for hearing appeals against the advance ruling pronounced by the Advance Ruling Authority consisting of,-

(i) the Chief Commissioner of Central tax as designated by the Board; and
(ii) the Chief Commissioner of State tax:

Provided that the Government may, on the recommendations of the Council, notify any Appellate Authority located in another State or Union territory to act as the Appellate Authority for the State."

It should be noted that the AAR and the AAAR under section 105 of the CGST Act will like the AARs in the legacy tax laws will also be a deemed Civil Court and will exercise powers under the Civil Procedure Code regarding discovery & inspection, enforcing attendance, issuing commissions and compelling production of records, accounts etc. Section 105 reads :

"105. (1) The Authority or the Appellate Authority shall, for the purpose of exercising its powers regarding—

(a) discovery and inspection;
(b) enforcing the attendance of any person and examining him on oath;
(c) issuing commissions and compelling production of books of account and other records, have all the powers of a civil court under the Code of Civil Procedure, 1908.

(2) The Authority or the Appellate Authority shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial proceedings within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code."

Apart from the Constitutionality, Advance Ruling is an important mechanism in taxation which reduces tax uncertainties.  It creates a conducive transparent environment, encouraging investment.  Creating tax certainty is especially important in the context of a new introduced GST which became effective from 1st July 2017. The quality of the orders from AAR will be considerably enhanced if expertise in Technical and Judicial aspects are drawn upon.

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