24th February, 2018
Universal Cylinders Ltd (UCL) the assessee manufactured and sold LPG cylinders to IOC, BPCL & HPCL. The sale price was initially provisional and fixed at Rs. 682 from 01.07.99. On 31.10.2000, IOC revised the provisional price downward to Rs.645 applicable from 01.07.1999. Consequently, the oil companies deducted by adjustment the excess amount paid of Rs.37 per cylinder and the proportionate sales tax thereon from subsequent payments to UCL.
Based final price and the recovery of the price and corresponding sales tax, the assessee approached the assessing authority for refund excess sales tax on Rs.37/.
This refund claim was rejected by the Assessing Officer (AO) saying "there is no provision under the Act for reducing or refunding the amount of tax once the amount of tax has been paid. The AO also observed that the arrangement between the assessee and oil companies was a private one and sales tax department had nothing to do with this.
The assessee's appeals was partly allowed by the Deputy Commissioner of Appeals. However, on appeal by the Revenue, the Tax Board, allowed the Revenue appeal. The High Court dismissed the revision applications filed by the assessee.
The Law :
There are two expressions defined in Rajasthan Sales Tax Act, 1944 (the Act) which are relevant in this context. They are "sale price" and "turnover" defined in Section 2(39) and Section 2(44) respectively in the Act.
Section 2(39) of the Rajasthan Sales Tax Act, 1994, reads :
“2(39) “sale price” means the amount paid or payable to a dealer as consideration for the sale less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof.”
Section 2(44) reads :
“2(44) “turnover” means the aggregate amount received or receivable by a dealer for sales as referred to in clause (38) including the purchase price of the goods which are subject to purchase tax under section 11 of the Act;
Explanation : Tax charged or collected and shown separately in the sale bill/cash memorandum or in the accounts shall not form part of turnover.”
Ruling by the High Court :
The High Court held that the words ‘paid’, ‘payable’, ‘amount received’ and ‘or receivable’ have been used. The cylinders were delivered at Rs 682 and also collected. So the High Court held that the assessee thereafter cannot claim that the cylinder was priced at Rs.645. The High Court after referring to the SC judgment in IFB Industries Ltd. ((2012) 4 SCC 618), held that both the provisional price and the final price are controlled by the PPAC.
TQ Comments : The High Court seems to missed the point that the Rs 682 was a provisional price to be finalised later. Also the High Court has appearently stopped the clock at the point of time when cylinders were delivered. Thereby rendering the subsequent revision of price, recovery of price difference and sales tax thereof by oil companies as irrelevant to assess i.e. determining taxable value and tax.
Citations relied upon by the Assessee
1. Hon'ble SC judgement in IFB Industries Limited v. State of Kerala1 - (2012) 4 SCC 618
2. Hon'ble Gujarat High Court judgement in ONGC v. State of Gujarat - 2 2014 SCC Online Guj 15385 (Tax Appeal No. 50 of 2014)
3. Madhya Pradesh High Court judgement in Gail India Ltd. v. State of M.P.3. -(2014) 72, VST 161
Ruling by the Hon'ble Supreme Court :
Definition of "sale price" allows deduction of discounts allowed in the normal trade
The Hon'ble Supreme observed that the definition of “sale price” clearly indicates that any discount or rebate in accordance with the normal practice prevailing in the trade shall be deducted and shall not be included in the sale price.
Price at the time of delivery was not final. Assessee was to only receive price finalised by MoP & NG
The Apex Court also observed that when the orders were placed the price was not final. It was clear that the price of Rs.682 was only provisional and the final final price will be the price as approved by the Ministry of Petroleum & Natural Gas (MoP & NG). Therefore the assessee was under a legal obligation only to receive that price which was finally fixed by MoP & NG.
Price could have been higher. In which case the assessee would have to collect and pay the additional amount as sales tax
This final price determined by MoP & NG could also have been higher than Rs.682. In which case the assessee would have had to collect and deposit the sales tax on the excess amount. Smilarly, if the price is reduced, the assessee couldn't charge the higher price and is therefore bound to refund the excess amount collected and is therefore legally entitled to get refund of the tax paid on the excess amount.
The excess amount has been refunded to the oil companies.
The assessee had to refund the amount of Rs.37/per cylinder to the oil companies. Therefore, what it has actually received is only Rs.645/per cylinder. The assessee supplied LPG to the oil companies on the basis of provisional price and final bill invoice was issued after the price was settled by the PPAC and credit note or debit note
The Supreme Court judgement in MRF Ltd. v. Collector of Central Excise, Madras is not relevant as it relates to a central excise case
The Supreme Court rejected the respondent contention that the judgment in the case of MRF Ltd. v. Collector of Central Excise, Madras - 4 (1997) 5 SCC 104 had no relevance to as it was a central excise case where the excise duty gets attracted at the time of removal from the factory.
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.
CESTAT rejects appeal, holds - sample testing a must as importer didn't produce any certificate
On 7th April, 2017 in Maa Bhagwati Coke Vs CC,Jamnagar, CESTAT Ahmedabad rejected the appeal for exemption on imported coal claiming the ash content was <12% and distinguished a SC judgment relied upon by the appellant. The Tribunal held that on testing the coal samples, the report confirmed ash content at 13.1% also the test was necessary saying:
"....it is seen that the appellant have relied on the decision of Honble Apex Court to assure that there was no reason to get the coal tested. However, in the said case, the importer had produced a certificate of CASCOs regarding the ash content of the imported coal. In the instant case, the record shows that no such certificate was produced. In absence of the certificate, it was necessary to get the sample tested in view of the claim of notification by the appellant."
19th February, 2018
Judgement dated 1st Febrary, 2018 : Commissioner of Central Excise & Service Tax Vs Ultra Tech Cement : Ciivil Appeal No . 11261 OF 2016
The Hon'ble Supreme Court allows the Dept appeal denying Cenvat credit of service tax paid on outward transportation of goods from the factory to the Customer’s premises saying it is not "input service" within the definition in Rule 2(l)(ii) of the Rules, 2004.
The adjudicating authority had allowed the credit on the ground the above definition of "input service" covers services used in or in relation to clearance of the final products "from the place of removal".
The appellate authority i.e. the Commissioner (Appeals) reversed this on the ground that the definition of ‘place of removal’ and that services utilised for outward transportation beyond the "place of removal" was not covered by "input service". It was stated that outward transportation as a service eligible for credit was imited to only "outward transportation upto the place of removal".
The Apex Court held :
"The phrase ‘place of removal’ is defined under section 4 of the Central Excise Act, 1944. It states that,-
“place of removal” means-
(i) a factory or any other place or premises of production or manufacture of the excisable goods ;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty ;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;
from where such goods are removed.”
It is, therefore, clear that for a manufacturer /consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the ‘place of removal’ does not pose much problem. However, there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract /agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.
"...Therefore extending the credit beyond the point of removal of the final product on payment of duty would be contrary to the scheme of Cenvat Credit Rules.....
"However, the important aspect of the matter is that Cenvat Credit is permissible in respect of ‘input service’ and the Circular relates to the unamended regime. Therefore, it cannot be applied after amendment in the definition of ‘input service’ which brought about a total change. Now, the definition of ‘place of removal’ and the conditions which are to be satisfied have to be in the context of ‘upto’ the place of removal. It is this amendment which has made the entire difference. That aspect is not dealt with in the said Board’s circular, nor it could be."
Gujarat High Court Allows Petition to Release Machinery Seized by DGCEI
16th January, 2017.
The Gujarat High Court in the case of Devraj Tobacco Co Vs UOI & 3 Ors on 16th January, 2017.
The DGCEI on 29th June, 2016 sealed two machineries and seized raw materials and other materials at the premises of the petitioner under panchnama. Thereafter, a criminal complaint was also filed with the Gorva Police Station under section 9 (1),(b), (bb) and 9(1) (c) of the Central Excise Act, 1994. Consequently, the proprietor was also arrested and later on 17.10.2016 granted bail.
Subsequently, notices were issued for the confiscation of raw materials and packing materials. However the confiscation of the machinery which were sealed by the authorities was not contemplated in the notices.
The petitioner also seeks a direction to the respondent authorities to immediately release the raw materials and other materials seized by them, as reflected in the panchnama dated 29.06.2016 (Annexure “A” to the petition), on the petitioner executing necessary bond for this purpose.
Under section 110 (2) of the Customs Act, if no notice is issued under clause (a) of section 124 within six months of the seizure of goods, the goods shall be returned to the person from whose possession they were seized. The Court allowed the petition and held as under :
“5. From the facts as emerging from the record, it is an admitted position that a period of more than six months has passed since the goods in question have been seized and the two machines in question have been sealed. Therefore, in the light of the provisions of sub-section (2) of section 110 of the Customs Act, since no notice under sub-section (1) thereof has been given in respect of the sealed machines, and no order extending the period of six months has been passed, continuation of the sealing of the machines in question, is clearly without any authority of law. Therefore, the respondents are not justified in not de-sealing the two machines in question despite the fact that the DGCEI has given no objection certificate in that regard. Insofar as imposition of conditions for de-sealing the machines is concerned, when the respondents have no authority to continue with the sealing, the question of imposition of any condition for de-sealing the same would not arise.” (emphasis supplied)
As regards the raw materials the court held :
“6. Insofar as the release of raw materials is concerned, by virtue of the provisions of section 110A of the Customs Act, the respondent authorities are duly empowered to release the goods pending adjudication on taking a bond from the owner in proper form with such security and conditions as the adjudicating authority may require. The deponent has submitted that he is willing to execute such bond as may be required for release of the raw materials. Under the circumstances, there should be no impediment in releasing the raw materials subject to the petitioner executing the requisite bond.
7. In the above view of the matter, the petition succeeds and is, accordingly, allowed. The respondents are directed to forthwith de-seal the two machines of the petitioner sealed by them, as reflected in the panchnama dated 29.06.2016. The respondents are further directed to forthwith release the raw materials seized by them under the panchnama dated 29.06.2016 on the petitioner executing necessary bond for this purpose. Rule is made absolute accordingly with no order as to costs.”