Gujarat HC strikes down 1 year limit on Cenvat invoices under sec 140 of the GST Act for "first stage dealers"

18th September, 2018

The question before the Hon'ble Court in Filco Trade Vs UOI -was whether the Petitioner a first stage dealer could claim credit on invoices which were dated more than 12 months prior to the implementation of GST. 

Seemingly, clause(iv) of sub-section(3) of section 140 imposes this condition. This condition therefore distinguished "a first stage dealer" from a "manufacturer".  While a manufacturer could avail CENVAT credit of tax paid on purchases and utilize this credit towards discharging duty liability of goods manufactured by him, a dealer neither takes credit nor utilizes  but only passes on the credit of tax already paid to customers.  

The Court ruled : "....the benefit of credit of eligible duties on the purchases made by the first stage dealer as per the then existing CENVAT credit rules was a vested right. By virtue of clause (iv) of sub-section (3) of section 140A such right has been taken away with retrospective effect in relation to goods which were purchased prior to one year from the appointed day........

32. For all these reasons we find that clause (iv) of subsection (3) of section 140 is unconstitutional. We therefore strike down the same. Petitions are allowed and disposed of. " Read the judgement


Evasion by banks alleged by GST authorities

14th September, 2018

The Mumbai GST Commissionerate appears to have raised objections on an alleged a tax evasion by some banks in their money transfer services. This is  being called as a “cut and pay” model adopted by the banks and their operatives i.e. banking correspondents (BC) and their agents.

The total amount of service fees payable for the transaction to the BCs and their agents ranges between 1-1.5%. Out of this, 0.2% to 0.6 % is BC agent/retailer commission which is retained by the BC.

Apparently, RBI guidelines DBOD no. BL.BC.43/22.01.009 dated Sept 28, 2010 permits only the bank to charge the customer and prohibits the BC or its agents from charging any fee directly to the customers for the services rendered on behalf of the bank.

The Department’s objection is, GST is being evaded by the bank on the amount that is retained by the BC agents/ retailers in cash. Reportedly, Yes Bank and AXIS Bank have denied these allegations saying their approach was cleared by tax experts and they are following the industry's practice.

Time to wake up! Last chance to claim the unclaimed GST credits and make reversals of for the year FY 2017-18 -before 30th September, 2018 – Steps to be taken.

12th September, 2018

1.    Unclaimed GST for FY 2017-18 for goods or services received but credit deferred due to doubts on eligibility. Eligibility must now be determined and credit availed and included in the Sept 2018 return.
2.    Correct and reconcile mis-matches between the liability declared by vendor (GSTR2A) and credit claimed by recipient in the books of accounts.
3.    Issue adjustment notes i.e. credit or debit notes. This must reflect in books of accounts and this must in the return of  30th Sept 2018.
4.    Compute and reverse tax credits (rule 42) on exempted outward supplies. This must be done provisionally every month and finalized at after the financial year end.
5.      Credit reversal Section 16(2) of the CGST Act when vendors are not paid the consideration within 180 days. Delay will trigger an interest liability.



Consumer anti profiteering complaints to be investigated

12th September, 2018

GST aims to amalgamate and eliminate cascading of Central and State taxes. So input tax credits and overall lower tax rates mean lower tax outflow for tax payers. The lower tax must benefit consumers who really bear the burden of the indirect tax.

The GST law also creates anti-profiteering provisions to penalise vendors who do not pass on the benefit to consumers.  Several complaints have been most notably by consumers of white goods that tax benefits are not being passed on.  For instance tax rate was reduced by 10% on refridgerators, washing machines and water heaters  (from 28% to 18%). The antiprofiteering officials will be now looking into complaints.

The Companies concerned are reported to have denied these accusations claiming they have passed on the entire GST benefit.

Supreme Court imposes penalty on CIT for trying to mislead.

29th August, 2018

The Supreme Court bench headed by Justice Madan B Lokur said it was "shocked" that the Commissioner of Income Tax, Ghaziabad presented "false and misleading" facts trying to mislead it and slapped a penalty of Rs 10 lakhs. 

The department claimed a similar case was pending in the Supreme Court since 2012 and that this case be tagged with it.  However the registrar's office pointed out that the old case was already decided way back in Sept 2012. The Apex Court stated that "the Commissioner of Income Tax has taken the matter so casually," and came down hard on the departmental lawyers trying to hoodwink the top court
The petition was dismissed with costs of Rs 10 lakh to be paid to the Supreme Court Legal Services Committee within four weeks.  Read the Judgement

Niti Aayog recommends slash in import duty and GST on gold

It is reported that Niti Aayog has recommended to the government to slash import duty on gold from the current 10% and similarly slash GST on gold from the current 3%. The reason advanced for the recommendation is that this will lead to greater compliance and will also reduce the smuggling of gold.

The committee has also suggested other exemptions on exports and scrapping of commodity transaction tax on gold derivatives and provision for capital gains tax exemption for gold related financial instruments.

Labour leader James Corbyn takes on the media and fake news.

He says “ But we must  also break the stranglehold of elite power and billionaire domination over large parts of our media. Just 3 companies control 71% of national newspaper circulation and five companies control 81% of local newspaper circulation. This unhealthy sway of a few corporates and billionaires shapes and skews the priorities and world view of powerful sections of the media….”

Notifications issued consequent to 28th GST Council Meeting revising rates and introducing changes

27th July, 2018

The new notifications can be found chronologically listed in the following lists:

1. CGST Rate Notifications of 2018

2. IGST Rate Notifications of 2018

3. UTGST Rate Notifications of 2018

4. Compensation Cess Rate Notification 2018

5. Press Release dated 21st July 2018 after 28th GST Council Meet

GST Council exempts sanitary napkins, reduces rates on several items, simplifies the return etc.

21st July, 2018

Fresh reports on the recommendations consequent to the 28th GST Council Meeting held today are :
1.    Tax rates over 30 items have been reduced to 18% and 12%.
2.    Sanitary napkins will now be totally exempt from GST.
3.    Annual ceiling for tax payers to qualify under the composition tax raised to Rs 1.5 Crores. As a result of this new tax payers will get included.
4.    Many changes mooted to correct typographical errors  and similar corrections
5.    GST on bamboo flooring reduced to 12%
6.    No decision taken by the Council on sugar cess.

These changes will come into effect on notifications being issued by the Govts.

Read the article 

Read 5 Govt Press releases dated 21st July

To simply GST first step is "remove 28% tax slab", says outgoing CEA Arvind Subramanian

28th June, 2018

Outgoing CEA says first step to simplify GST is to do away with 28 per cent tax slab. 

Mr Arvind Subramanian said “I am saying that in an ideal system the 28 per cent rate has to go. The cesses may have to be there because we are going to have higher rates for some products but there shouldn’t be multiple rates even here. In my report, we had called for one 18 per cent rate and then 40 per cent rate. Cesses are a different way of implementing the 40 per cent rate.”

Currently, there are seven slabs in GST 0, 0.25%, 3%, 5%, 12%, 18% and 28%. In addition there is compensation cess applicable to "sin" or "luxury" goods. All this makes the GST structure both complex and high.


Read 5 Govt Press releases dated 21st July

To simply GST first step is "remove 28% tax slab", says outgoing CEA Arvind Subramanian

28th June, 2018

Outgoing CEA says first step to simplify GST is to do away with 28 per cent tax slab. 

Mr Arvind Subramanian said “I am saying that in an ideal system the 28 per cent rate has to go. The cesses may have to be there because we are going to have higher rates for some products but there shouldn’t be multiple rates even here. In my report, we had called for one 18 per cent rate and then 40 per cent rate. Cesses are a different way of implementing the 40 per cent rate.”

Currently, there are seven slabs in GST 0, 0.25%, 3%, 5%, 12%, 18% and 28%. In addition there is compensation cess applicable to "sin" or "luxury" goods. All this makes the GST structure both complex and high.


HSBC report says GST has not increased formalisation of Indian Economy

24th June, 2018


A British brokerage firm HSBC seems to contradict what Mr Arun Jaitley recently said a few days ago. He said that GST and Noteban are reforms that are leading to the gradual increase in formalisation of the Indian economy.

The HSBC report on the contrary, says, the demand for cash in India has gone up - "Cash in circulation is rising above trend, but not because rural India is faring better, rather it is due to a revival in the 'informal' sectors, thanks to the continued remonetisation".
 Click for News Archives  


Recent Court / Tribunal Judgements

 CESTAT Decisions

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 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

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