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GST - Case Laws
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2024 (3) TMI 738 - AUTHORITY FOR ADVANCE RULING, TAMILNADU
Levy of GST - Composite supply or not - recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises - recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment - facility of Car extended to the employees of the Applicant-Company in the course of employment - ITC on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - ITC on on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business - ITC on GST charged for gardening expenses of the Applicant-Company.
Whether GST is applicable on recovery of nominal amount by the Applicant from employees for availing the facility of Canteen at the factory premises? - HELD THAT:- The canteen service provided by the applicant company on its own account to its employees, is a composite supply which gets treated as a supply of service in terms of Entry No. 6 of Schedule II to the CGST Act, 2017 - the amount charged on the employees by the applicant, whether nominal or otherwise, is to be treated as the consideration for such supply of canteen service on its own account to its employees on which taxes under GST is liable to be discharged by the applicant/employer.
Whether Input Tax Credit is available on facility of canteen service provided to employees by applicant as statutory obligation under Factories Act - HELD THAT:- GST charged on the inward supplies received, if any, in relation to the provision of food to the employees by the applicant is admissible as ITC to them, provided the number of direct employees in the establishment is more than 250. Further, it is also held that while availing such ITC, the proportionate credit to the extent of cost recovered from such employees is required to be reversed by the applicant/employer.
Whether GST is applicable on the recovery of premium of Medical Insurance Policy from the employees for them and their dependents at actuals under the HR Policy - HELD THAT:- The applicant is just a facilitator in the transaction relating to insurance, and practically no supply of service is made in the course or furtherance of business by the applicant in the instant case. Since the provision of this insurance cover to the employees and their dependents is reportedly provided in terms of the HR policy of the Applicant-Company, the same is to be treated as a contractual agreement entered into between the employer and the employee in accordance with clause 1 of Schedule III of the CGST Act, 2017, which is neither a supply of goods nor a supply of service. As per Section 7(2) of the Act, ibid, Schedule III supersedes Schedules I and II, which means that even if it is considered as a supply under Section 7(1), no tax will be payable in view of the provisions contained in clause 1 of Schedule III - no supply of service by the applicant is present in the instant case involving the collection and remitting of insurance premium to the insurance companies, and therefore GST is not liable to be discharged on such cases.
Whether GST is applicable on recovery of nominal amount from employees for using of transportation facility to and from the factory and office premises provided to the employees in the course of employment? - HELD THAT:- In the instant case, the cab operators are the actual services providers, and that the applicant is not involved in any supply of transportation service to the employees, Further, in the instant case the applicant themselves pay up the actual cost of transportation to the service providers, i.e., the cab operators, but recovers only a nominal portion of the transportation cost from the employees, whereby the remaining portion of the transportation cost is borne as expenditure by the applicant. Further, since the nominal amount recovered from the employees forms part of the total cost reimbursed to the transportation service providers, no consideration actually accrues to the applicant in the instant case as well - no supply of service by the applicant is present in the instant case involving the transportation facility extended to the employees through a third party, and therefore GST is not liable to be discharged on such cases.
Whether GST is applicable on facility of Car extended to the employees of the Applicant-Company in the course of employment? - HELD THAT:- In the instant case, the Applicant-Company reportedly pays the lease premium directly to car leasing company, and the overall salary cost of the related employees will get reduced to the extent of cost incurred by Applicant-Company to extend the expense incurred in relation car facility provided to employees for office purpose. However, wo notice that the circumstances relating to the car lease premium differs basically from the other cases discussed above in view of the fact that these types of car facility are normally provided to a few specific employees of the organisation, and that they are not general in nature like the canteen facility, insurance facility or the mass transportation facility - the cars are normally booked under the name of the company/organization, and it remains with them for a specific period, or until the lease period is over. Therefore, when the applicant provides the said service to their employees on their own account, and when the clement of ‘perquisite’ is absent in the instant case, it is held that under the circumstances of the case, GST is applicable on the facility of Car extended to the employees of the Applicant-Company, even if it is in the course of employment.
Whether Input Tax Credit can be availed on expense incurred for the well-being of employees such as vaccination and other benefits to avoid any disruption in Business? - HELD THAT:- As per Section 17(5)(b) of the CGST Act, 2017, the supply of goods or services or both in relation to health services cannot be availed as ITC, unless it is obligatory for an employer to provide the same its employees under any law for the time being in force. We notice that inspite of their claim that providing medical facility is part of service contract, the applicant has not adduced any details or documentary evidence in support of the same, and as a result no further discussions could be made in this regard. Moreover, even in the event of considering the same as an obligation or responsibility on the part of the employer, the same should be mandated under any law for the time being in force, and this aspect has not been substantiated by the applicant - the only respite available to the applicant in the form second proviso to Section 17(5)(b) of the CGST Act, 2017, also stands exhausted as discussed above, and therefore it is held that Input Tax Credit cannot be availed on the expense incurred for the wellbeing of employees such as vaccination and other health benefits extended to them.
Whether Input Tax Credit is available on GST charged for gardening expenses of the Applicant-Company? - HELD THAT:- The definition of ‘input service’ provided under Rule 2(1) of the erstwhile CENVAT Credit Rules, 2004 was already wide enough to encompass the availability of credit on such gardening services, as it contained the words, "whether directly or indirectly, in or in relation to the manufacture". Whereas the definition of ‘input service’ provided under Section 2(60) of the CGST Act, 2017, is much wider as it contains the words "in the course or furtherance of business - Having been mandated by the Tamil Nadu Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987 (Centred Act 14 of 1981), and the rules and orders made thereunder, as discussed in detail above, it is observed that gardening and maintenance of green belt in and around the unit’s premises is an activity in the course or furtherance of business that is mandatorily required to be carried out by the applicant - ITC is available on the input services received by the applicant in the instant case, in relation to gardening activities carried out within the factory premises.
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2024 (3) TMI 684 - SC ORDER
Condonation of delay of 167 days in filing the Special Leave Petition - sufficient reasons for delay or not - HELD THAT:- There is a delay of 167 days in filing the Special Leave Petition. The explanation for the delay is not sufficient. Consequently, the Special Leave Petition is dismissed on the ground of delay.
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2024 (3) TMI 683 - MADRAS HIGH COURT
Cancellation of GST registration of petitioner - non-filing of returns for a continuous period of seven months - petitioner assails an appellate order rejecting the appeal against cancellation of the petitioner's GST registration and also such order of cancellation - petitioner suffered from kidney and heart related issues - HELD THAT:- The appellate authority cannot be faulted for rejecting the appeal in view of the language of Section 107 of the Central Goods and Services Tax Act, 2017. At the same time, the petitioner should not be left without remedy. The reasons set out in the order of cancellation is non filing of returns for a continuous period of more than six months.
In Suguna Cutpiece v. The Appellate Deputy Commissioner (ST)(GST) and others, [2022 (2) TMI 933 - MADRAS HIGH COURT], this Court directed restoration of registration subject to certain conditions. In the over all facts and circumstances, the petitioner is entitled to an order on similar lines.
The petitioner is directed to file returns for the period prior to the cancellation of registration, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order - restoration of the GST registration is allowed subject to and conditional upon fulfilling the conditions imposed - petition disposed off.
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2024 (3) TMI 682 - MADRAS HIGH COURT
Validity of assessment order - petitioner was provided sufficient opportunities to contest the tax demand and penalty or not - violation of principles of natural justice - HELD THAT:- The reply dated 280.08.2023 of the petitioner is on record. By such reply, the petitioner asserted that a sum of Rs. 1,79,806/- each was paid towards CGST and SGST along with interest of Rs. 77,903/- each towards CGST and SGST. When the impugned assessment order is examined against this backdrop, it is unclear as to how the liability of Rs. 1,43,048/- each towards SGST and CGST was arrived at. The assessment order also refers to the payment of Rs. 2,57,709/- by the petitioner, whereas documents on record indicate that the sum paid was Rs. 1,79,806/- each towards CGST and SGST. In addition, as contended by learned counsel for the petitioner, penalty was imposed without providing the petitioner an opportunity to issue show cause in respect thereof. For all these reasons, the impugned assessment order warrants interference.
Hence, the assessment order dated 29.09.2023 is quashed and the matter is remanded for reconsideration. The respondents are directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within two months from the date of receipt of a copy of this order.
Petition disposed off.
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2024 (3) TMI 681 - ALLAHABAD HIGH COURT
Validity of the Notification No. 09/2023 dated 31.3.2023 and Notification No. 515/SI-2-23-9(47)/17-T.C215-U.P. Act- 1-2017-Order-(273/2023) dated 24.4.2023 - no valid reason existed to grant second extension of time to issue show cause notice under Section 73(10) of the U.P. GST Act, 2020 - HELD THAT:- In the present case, it has further been submitted that the further impugned Notification No.56 of 2023 dated 28th December, 2023, has been issued only under the Central GST Act, 2017, that too, without prior approval of the GST Council. In any case, no parallel notification may have been issued under the UP GST Act, 2017.
The matter requires consideration - Connect with Writ Tax No.1256 of 2023.
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2024 (3) TMI 680 - CALCUTTA HIGH COURT
Search and seizure - Challenge to order of prohibition dated 25th March, 2023 issued under Section 67(2) of the CGST/WBGST Act, 2017 - HELD THAT:- Admittedly in this case it is noticed that a prohibitory order has been passed by invoking the first proviso to Section 67(2) of the GST Act. Admittedly, the assessee has not approached the respondent no. 1 for release of goods under Section 67(6) of the GST Act and the Hon’ble Supreme Court in the case of THE STATE OF UTTAR PRADESH & ORS. VERSUS M/S KAY PAN FRAGRANCE PVT. LTD. [2019 (12) TMI 95 - SUPREME COURT] has clearly highlighted that the assessee in order to seek release of the goods must invoke the provisions of the GST Act to seek release of the goods.
Insofar as the judgment delivered in the case of BEST CROP SCIENCE PVT. LTD. VERSUS SUPERINTENDENT, CGST, DELHI WEST AND ORS. [2023 (9) TMI 996 - DELHI HIGH COURT], it is found that the Hon’ble Delhi High Court taking note of the provisions of Section 67(7) of the GST Act has observed that the prohibitory order cannot be permitted to continue indefinitely. In this case it may be relevant to consider that the assessee has not approached the respondents under Section 67(6) of the GST Act and as such, there is no reason for this Court to interfere at this stage save and except, if any application is made by the assessee with the respondent no. 1 in terms of Section 67(6) of the GST Act, the same shall be considered in accordance with law.
The writ petition is disposed off.
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2024 (3) TMI 679 - ALLAHABAD HIGH COURT
Rejection of petitioner's application for grant of registration by a non-speaking order - violation of principles of natural justice - The petitioner, a successful Resolution Applicant under the Insolvency Resolution Process (CIRP under IBC) - HELD THAT:- In absence of any consequence shown to have been provided by any law and in face of any other undoubted position that registration granted may apply prospectively and further since the petitioner is not claiming the registration retrospectively, it is found constrained to observe that the order rejecting the grant of registration is practically an order infringing on the petitioner's fundamental right to carry on business.
Since facts are not in dispute and the issue is wholly with respect to registration which only enables the business to abide by the regulatory laws and further since there is no objection on part of the revenue authorities that the petitioner is seeking registration for business purpose, no useful purpose would be served in keeping the petition pending or calling for a counter affidavit.
The impugned order dated 27.02.2024 is quashed - petition allowed.
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2024 (3) TMI 678 - GUJARAT HIGH COURT
Seeking grant of Regular Bail - allegedly issued GST invoices without any supply of the goods to the buyers on commission basis - HELD THAT:- There is no dispute that the applicant is involved in an economic offence of considerable magnitude and gravity. The department has already filed complaint against the applicant, wherein list of documentary evidences has also been furnished. The proprietors of other firms have also been made witnesses in the complaint, who were also the beneficiary of the allegedly illegal conduct of the applicant. The evidence collected against the applicant has been described in the complaint. The offences with which the applicant-accused has been indicted, are all exclusively triable by the Court of Magistrate. The applicant is in jail since 07.11.2023 and there is no allegation that he is having any past criminal history of any economic offence against him.
The Hon’ble Supreme Court in case of SANJAY CHANDRA VERSUS CBI [2011 (11) TMI 537 - SUPREME COURT] has referred the case of STATE OF KERALA VERSUS RANEEF [2011 (1) TMI 1396 - SUPREME COURT] to observe that in deciding the bail applications an important factor which should certainly be taken into consideration by the court is the delay in concluding the trial. Here, taking into consideration the course of investigation adopted by the Department and the evidences so collected, the trial may take considerable time and thus it may happen, if nixed the bail, that the judicial custody of the applicant would be prolonged beyond the statutory period of punishment of five years as provided under the Act.
Section 132(1)(i) provides for punishment in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine; and section 132(2) provides that, where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine - Taking into consideration the aforesaid provisions of law and the fact that the Commissioner is empowered to recover the due amount and propose for abating the proceedings and as the trial will take its own time to conclude, this Court deems it proper to exercise discretion in favour of the applicant-accused.
The applicant is ordered to be released on regular bail subject to the fulfilment of conditions imposed - bail application allowed.
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2024 (3) TMI 677 - ORISSA HIGH COURT
Maintainability of petition - availability of alternative remedy - appealable order under Section 112 of the CGST/OGST Act, 2017 - non-constitution of the Appellate Tribunal - HELD THAT:- The petitioner is desirous of availing the statutory remedy of Appeal under the said provisions. Apparently, acknowledging the absence of constitution of Appellate Tribunal, in exercise of the power conferred under section 172 of the CGST Act, 2017, the Government of India based on the recommendation made by the G.S.T. Council, has issued Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 on 03.12.2019 - In tune with the said Removal of Difficulties Order dated 03.12.2019, the Central Board of Indirect Taxes and Customs, GST Policy Wing vide Circular No. 132/2/2020-GST Dated 18th March, 2020 has come out with the clarification in respect of appeal having regard to non-constitution of the Appellate Tribunal.
Subject to verification of the fact of deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, or deposit of the same, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the CGST/OGST Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the CGST/OGST Act, for the petitioner cannot be deprived of the benefit, due to non-constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed - statutory relief of stay on deposit of the statutory amount, in the opinion of this Court, cannot be open ended.
Petition disposed off.
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2024 (3) TMI 676 - CALCUTTA HIGH COURT
Lack of mention regarding tax demand in the show cause notice - Apparent discrepancy in treatment of refund claim and tax demand. - Scope for granting interim order on the writ petition - HELD THAT:- When the order was tested before the Appellate Authority, namely, the Joint Commissioner (Appeals), CGST & CX, Appeal-II Committee, Kolkata, it is found that the order only deals with the correctness of the rejection of the refund claim and there is no mention about anything with regard to the demand of tax to the tune of Rs.29,63,488/-. That apart, till date no demand notice was issued.
The appeal along with the connected application stand disposed of granting liberty to the appellant to file a fresh stay application before the learned Single Bench as and when demand notice is issued by the respondent Department and if such an application is filed the learned Single Bench is requested to consider the same on merit.
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2024 (3) TMI 675 - APPELLATE AUTHORITY FOR ADVANCE RULING, TAMILNADU
Classification of goods - Bike and Scooter seat cover - to be classified under CTH 87089900 or not - rate of tax of 28% is correct or not - HELD THAT:- In the said manufacturing process the "U" Foam which is purchased from other dealers are cut to the shape of Two-Wheeler Seats and along with Rexine sheets are stitched and the said Seat Covers are fitted into the Two Wheelers like Bike and Scooter. Then they supply the same to the two-wheeler dealers and also to local market. As per the Appellant, these seat covers are meant for the protection of the seats and there is no comfort or convenience to the rider or the pillion rider.
The main contention of the Appellant is that seat covers manufactured by them for two wheelers are ‘parts’ of seat and thereby, the goods are to be classified under 94019900. They contend that the finding of AAR that it is an ‘accessory’ to Two-wheeler falling under 87141090 is factually incorrect and as per the Rules of interpretation, seat cover is ‘part’ of the seat, which has a specific entry 94019900.
From the definition of part, it is clear that ‘part’ per se means a portion of an equipment or a machinery which is essential to the functioning of that particular equipment or machinery. In other words, ‘part’ is an integral element of machinery or equipment without which the specific product cannot function. The ‘part’ in question should be so inextricably linked to the product that the product cannot be brought into use without the ‘part’ in question. As against this, an ‘accessory’ is an addition to the main product, which merely adds to its beauty or convenience or effectiveness.
The seat covers are generally not manufactured or cleared by the O.E. manufacturer of motorcycle seats when the supply is made by them to the motorcycle manufacturer. Instead it is the dealers of motorcycles that sell the seat covers separately, on optional basis, to the purchasers of motorcycles - Hence seat covers are not integral element of seats and thus not by any means, part of the seat. ‘Seat covers’ are only accessories to the seat.
The ‘two-wheeler seat covers’ are specifically covered under CTH 8714 10 90 and are taxable @ 14% CGST + 14% SGST - the lower authority (AAR) had ruled that two-wheeler seat covers merit classification under 8714 99 90, whereas the product is rightly classifiable under 8714 10 90, at applicable rates. Therefore, the ruling of the lower authority (AAR) is modified to the extent of CTH, whereas the rate of tax remains the same.
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2024 (3) TMI 674 - AUTHORITY FOR ADVANCE RULING, TAMILNADU
Classification of goods - car seat Cushion Suspension wires - Steel hooks - to be classified under HSN 87089900 thereby attracting CGST of 14 % plus SGST of 14% or will fall under HSN 94019900 thereby attracting CGST of 9% plus SGST of 9%? - HELD THAT:- Chapter Heading 8708.00 covers 'parts and accessories' of motor vehicles and this chapter heading is wide enough in its scope so as to cover all accessories of motor vehicles as well whereas Chapter heading 9401.00 covers all type of seats and 'parts' thereof.
For any product to classify under chapter 9401 9000(classification given in para 3.2 above), the same has to be in the nature of 'part of seats'. The term 'part' per se means a portion of an equipment or a machinery which is essentially linked to the functioning of that particular equipment or machinery. In other words, 'part' is an integral element of machinery or equipment without which the specific product cannot function. The 'part' in question should be so inextricably be linked to the product that the same cannot be brought into any form without the 'part' in question.
From the write-up, it is found that these cushion suspension wire is now-a-days used instead of coil springs and these are used both in front and back seats of a car. Also these are forming part of the basic skeleton steel structure of the seats. During personal hearing, the Applicant displayed the entire steel structure and explained how the cushion suspension wire is used in the steel structure. We observed that, without the said item, the basic structure of the seat cannot be achieved and basic function of cushion effect in the car seats cannot be achieved. Hence, the said item is a part of the seat, as it is one of the building blocks of the steel structure and an integral part of the seat.
The steel hooks are used to keep the steel wires in place and in taut position, so the structure is achieved and also the functional usage, i.e. to give cushion effect, is also achieved. During personal hearing, the Applicant displayed the entire steel structure and how the steel hooks are used in the steel structure. Hence, the said item is a part of the seat, as it is one of the building blocks of the steel structure and an integral part of the seat.
The goods viz. 'Car seat Cushion Suspension wires' and 'Steel hooks' manufactured by the Applicant will fall under HSN 94019900 thereby attracting CGST of 9% plus SGST of 9%.
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2024 (3) TMI 673 - AUTHORITY FOR ADVANCE RULING, TAMILNADU
Input Tax Credit - availability of inputs to the Assesses when the Godowns constructed by him is entirely meant for renting it out for Commercial purposes to registered dealers - HELD THAT:- The Applicant is proposing to rent out to large companies for storing their stock for future sale i.e. for furtherance of his business. Therefore, as per section 17(5) (d), no ITC is available on any goods or services received by them for such construction and the same cannot be claimed by them.
The Legislative Scheme is amply clear. The input tax paid on the goods/services received for construction of an immovable property ‘on one’s own account’ is unavailable. The restriction is provided in the Act which is passed by the Legislature. The power to restrict flow of credit exists under Section 16(1) of the GST Act, which shows a Legislative intent that Input Tax credit may not always be allowed partially or fully. As the suitability and requirement of taxpayer varies from person to person, rule/Act, cannot be changed/amended accordingly and it is mandatory for the taxpayers to adhere the restrictions prescribed in Act and Rule.
No Input Tax Credit is available on Inputs to the Applicant when the Godowns constructed by him is meant for renting it out for Commercial purposes to registered dealers.
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2024 (3) TMI 672 - AUTHORITY FOR ADVANCE RULING, TAMILNADU
Levy of GST - various charges collected along with network/wheeling charges, cross subsidy surcharge and additional charges - these are charges for distribution of electricity and collected in connection with supply of electricity - HELD THAT:- TANGEDCO, the Applicant, is a distribution licensee in terms of section 14 read with section 131 of the Electricity Act, 2003 and they are authorized to operate and maintain distribution system for supplying electricity to the consumers. Thus they are undoubtedly 'Electricity transmission or distribution utility' and the transmission or distribution of electricity services provided by them is exempt from GST as per the Notification No. 12/2017-CT(Rate) dated 28.06.2017.
The service provided by the Applicant to the users as 'wheeling/network charges' are only for providing the service of transmission of electricity and hence charges collected form the part of consideration for the same single service. Further it is seen that the charges are on the basis of the energy input to the system. Hence the wheeling/network charges collected is for the service of transmission of electricity and hence covered under the exemption stated in the notification - there are force in the Applicant's contention regarding charges collected for dishonoured cheque and belated payment. Based on the Board's Circular No. 178/10/2022-GST dated 03.08.2022, the charges collected for dishonoured cheque are not taxable and charges collected for belated payments are naturally bundled with the main supply, i.e. transmission of electricity, which is exempted and thereby these charges are also exempted.
The following charges collected for the services rendered by the Applicant are directly or closely related to transmission or distribution of electricity and therefore we hold that these charges will be completely exempted as per Notification No. 12/2017-CT(Rate) dated 28.06.2017: Belated payment surcharge (BPSC), Dishonoured cheque service charge and Network/wheeling charges - the Applicant is bringing the entire gamut of services under composite supply. As per GST law, whether a supply consisting of two or more goods or services or both, is composite supply or not is given under Section 8 of CGST Act, 2017.
For a supply to be considered as a composite supply, it constituent supplies should be so integrated with each other that one is not supplied in ordinary course of business without or independent of other. In other words, they are naturally bundled, and if supply of one service is removed, then the nature of service will be affected. It is found that not all services rendered by the Applicant for which they charge, are naturally bundled with the main service i.e. transmission or distribution of electricity.
The services are not naturally bundled with the principal supply i.e. transmission/distribution of electricity. The main supply may take place without above ancillary charges. The provision of service such as consumer meter card replacement charge, excess contracted load charges, Temporary disconnection charges at the request of the consumer etc. are infrequent, need based and provided upon specific request of the consumer at a cost which is independent of the cost for service of the main supply. The main supply, i.e. supply of electricity is not affected even if any of the services above are not rendered - the services are not composite supply and thereby charges for the services will be taxed at the appropriate prevailing rate, i.e. 18% GST (CGST 9% & SGST 9%) as per Notification 11/2017-CT(Rate) dated 28.06.2017.
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2024 (3) TMI 671 - AUTHORITY FOR ADVANCE RULING, TAMILNADU
Nature of activity - replacing the old scrap received from the customers with the already processed Winding wire, then and there, at a fixed differential price - sale of goods or service? - composite supply or not - rate of tax - HSN code / SAC code - If RCM is applicable on the purchase old Copper Scraps from the Motor Mechanics, then what is the Tax rate? - If RCM is applicable, can they take Input Tax Credit on the RCM paid? - Tax Structure and the related procedures and documents to be followed for the movement of goods from Hub to Factory to Hub.
HELD THAT:- The instant transaction of the applicant involving replacement of copper scrap, with the enameled copper winding wire cannot be considered as a supply of ‘service’, whatsoever, and that the same amounts to supply of goods. That is to say, the supply of enameled copper wire by the applicant to the customer is to be considered as an outward supply of goods by the applicant, and that the receipt of copper scrap from the customers is to be considered as an inward supply of goods to the applicant. Overall, it is clear that both the legs of this transaction (inward and outward) are independent of each other, and we hold that both relates to supply of ‘goods’.
Having held that the supply of enameled copper wire by the applicant to the customer is an outward supply of goods by the applicant, the HSN code relating to the same is now required to be determined. From the submissions made by the applicant, it is observed that it is not just the winding wire of copper which is being supplied to the customers, but enameled copper winding wire. While plain copper wire of different specifications merit classification under 7408, we observe that an enameled winding wire of copper serves a specific purpose of insulation, as the enamel coating forms an electrical insulation film in order to provide thermal and chemical resistant properties. Therefore, enameled winding wire of copper which operates as an insulated electric conductor merits classification under chapter sub-heading 8544 11 10 of the GST Tariff which attracts IGST at 18%, or CGST at 9% plus SGST at 9%, as the rate of tax.
Composite supply or not - HELD THAT:- Composite supply, as the name denotes, involves two or more taxable supplies which are naturally bundled and supplied in conjunction with each other - the supply of the fully finished manufactured product, viz., enameled copper winding wire to the customers is the one and only outward supply of goods made by the applicant. It can also be seen that the illustration attached to the definition of ‘composite supply’ explains the case in point. Therefore, as only one outward supply of goods is made by the applicant in the instant case, it does not get covered under the category of ‘composite supply’.
Liability under reverse charge mechanism (RCM) applicable on the purchase old Copper Scraps from the motor mechanics (customers), the tax rate to be adopted and whether input tax credit (ITC) can be availed on the same by the applicant - HELD THAT:- RCM provisions on purchases from unregistered persons was applicable only on the class of registered persons to be notified in future, and hence the temporary blanket exemption from RCM provisions on such purchases was made permanent through the said amendment. It is observed that only one notification since then have been notified to specify Promoters and Builders, as the category of registered persons liable to pay taxes under RCM under this section, vide Notification No. 07/2019-Central Tax (Rate) dated 29.03.2019. As on date, except ‘Promoters’, no other registered person is liable to pay taxes under RCM in respect of the receipt of goods or services from an unregistered supplier, and therefore, the applicant is not liable to pay taxes under RCM on the purchase of copper scraps from Motor mechanics.
Once the issue relating to discharge of liability under RCM by the applicant stands settled, i.e., answered in negative, the other related queries as to the tax rate to be adopted for such RCM payments, and whether ITC can be availed on the taxes under RCM paid by the applicant are rendered redundant and does not merit consideration.
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2024 (3) TMI 632 - ALLAHABAD HIGH COURT
Dismissal of an appeal due to the non-submission of a certified copy of the impugned order within the prescribed time frame. - Direction to appellate authority to de novo hear the appeal filed by the petitioner and pass a reasoned order on merits within a period of three months - HELD THAT:- Upon reconsideration of the order passed, this Court, suo motu, is of the view that paragraph 4 of the judgment and order dated February 12, 2024 [2024 (2) TMI 718 - ALLAHABAD HIGH COURT] is required to be substituted.
Accordingly, paragraphs 4, 4(i) and 4(ii) of this order be read in place of paragraph 4 of the judgment and order dated February 12, 2024 and this order be treated as part and partial of the said judgment and order.
The Registrar Compliance of this Court is directed to communicate this order to the parties.
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2024 (3) TMI 631 - ALLAHABAD HIGH COURT
Scope of SCN - Refund claim - Unutilised Input Tax Credit (ITC) - applicability of principle of res judicata - whether principle of res judicata does not apply in matters of taxation and merely because refund claims have been sanctioned previously, does not mean that the refund claims for subsequent period will also be sanctioned? - adherence to the Accounting Standards or not - Specific goods have not been capitalised by the Petitioner in accordance with Accounting Standard 10.
HELD THAT:- The inconsistency and irrationality displayed by the Department in withholding refund claims for July-September 2019 and October-December 2019, despite having sanctioned similar claims in the past and in the future are indefensible. - The Supreme Court in Bharat Sanchar Nigam Ltd. And Anr. v. Union of India [2006 (3) TMI 1 - SUPREME COURT] and others and other decisions has consistently emphasized that Revenue cannot take a different stand when facts are almost identical. These judgments underscore the significance of consistency in tax administration and the need for tax authorities to adhere to established principles and precedents. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity.
It is evident in the instant case that the Department has deviated from the show cause notice, and as such any order passed by it running contrary to the grounds taken in the show cause notice, cannot be sustained. Issuance of the show cause notice represents a pivotal juncture in legal or administrative proceedings, demarcating the boundaries within which any authority can exercise its powers. Adhering to the confines of the show cause notice upholds principles of fairness, accountability, procedural regularly, and legal certainty essential for the legitimacy and effectiveness of the governance systems. Any attempt to transcend these limits not only violates the rights of the individuals or entities involved but also undermines the rule of law and public trust in the institutions tasked with upholding it. Therefore, adherence to the show cause notice is not merely a procedural formality but a mandatory requirement, beyond the scope of which, no action can be taken.
While the principle of res judicata does not apply to taxation matters, it is incumbent upon authorities to take a consistent approach when dealing with similar factual and legal circumstances. The principle of consistency states that when faced with analogous factual and legal circumstances, the treatment should remain uniform. Taxpayers have a legitimate expectation that similar factual and legal circumstances will be met with uniform treatment, and any deviations from this principle undermine the credibility and legitimacy of the actions taken by tax authorities.
When facts and circumstances in a subsequent assessment year are the same, no authority, whether quasi-judicial or judicial can generally be allowed to take a contrary view. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity.
Capital goods, are intended for long-term use and are typically subject to capitalization. However, inputs, are goods used in the day-to-day operations of the business and are not subject to capitalization.
While issuing a Show Cause Notice, it is incumbent upon the Department to clearly outline the specific allegations or concerns against the recipient. In no case, the Department can be allowed to traverse beyond the confines of the Show Cause Notice, since the same will trample upon the recipient’s right to defend itself. Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice. Such actions would not only undermine the recipient’s right to a fair hearing but also erode trust in the integrity and impartiality of the adjudicatory process. Any action taken beyond the confines of the Show Cause Notice, is void ab initio and cannot be sustained.
It is evident that the impugned orders dated October 25, 2021 and February 24, 2023 are palpably erroneous, and cannot be sustained. Accordingly, let there be a writ of certiorari issued against the orders dated October 25, 2021 and February 24, 2023 passed by the Respondent No. 2. The said orders are hereby quashed and set aside.
Petition allowed.
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2024 (3) TMI 630 - DELHI HIGH COURT
Validity of Demand order including penalty - Show Cause Notice issued u/s 61 of the Act, with regard to discrepancies - mismatch of Input Tax Credit [ITC] - HELD THAT:- Perusal of the Show Cause Notice shows that the Department has given separate heading of excess claim Input Tax Credit [ITC]. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving full disclosures under the said head. The observation in the impugned order dated 29.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper officer had to at least consider the reply on merits and then form an opinion whether the reply was not satisfactory. He merely held that the reply is not satisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
Further, if the Proper Officer was of the view that reply was not satisfactory and further details were required, the same could have been specifically sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details.
Thus, the order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Petition is disposed of in the above terms.
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2024 (3) TMI 629 - DELHI HIGH COURT
GST registration cancelled retrospectively - Show Cause Notice issued without specify any cogent reason for cancellation - HELD THAT:- In terms of Section 29(2) of the Act, Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
We may also note that the Show Cause Notice did not put the noticee to notice that registration was liable to be cancelled retrospectively. It may be further noted that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason.
Thus, Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 31.07.2019 is modified to the limited extent that registration shall now be treated as cancelled with effect from 14.03.2018 i.e., the date when Sh. Krishan Mohan passed away. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
Petition is accordingly disposed of.
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2024 (3) TMI 628 - DELHI HIGH COURT
Cancellation of GST registration with retrospective effect - Application seeking cancellation of GST registration rejected - taxpayer found non-existent at the principal place of business - thereafter, defective Show Cause Notice issued - HELD THAT:- Clearly, the order for cancellation on the ground that petitioner was found non-existent on 30.05.2023 ex-facie is not sustainable for the reason that on 12.04.2023, petitioner had himself applied for cancellation of registration on the ground of closure of business. It is but obvious that on 30.05.2023, when an inspection was carried out, petitioner was not found available at the subject premises.
The Show Cause Notice dated 06.06.2023 does not bear the name and designation of the officer issuing the Show Cause Notice, though it required the petitioner to appear before the issuer of the notice. Further, the order of cancellation dated 15.06.2023 also does not give any reasons. It merely states “reference to the Show Cause Notice issued dated 06.06.2023” and then states that “the effective date of cancellation of registration is 26.10.2023” i.e., a retrospective date.
In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
Thus, the impugned order dated 15.06.2023 and the Show Cause Notice dated 06.06.2023 are modified to the extent that the registration of the petitioner shall now be deemed cancelled with effect from 12.04.2023 i.e., when the petitioner applied for cancellation of registration. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
Petition is accordingly disposed of in the above terms.
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