TMI Tax Updates - e-Newsletter
January 27, 2023
Case Laws in this Newsletter:
Service Tax
Articles
By: Sunil Keswani
Summary: The article discusses the contentious issue of Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime, particularly the legislative requirement for recipients to pay suppliers within 180 days to retain ITC. It highlights the debate over whether ITC is a vested right or a statutory benefit, referencing key legal cases. The article critiques the 180-day payment rule, arguing it undermines contractual freedom and could violate constitutional rights. It suggests legislative amendments to alleviate taxpayer burdens, especially in light of COVID-19, and warns that judicial intervention may become necessary if the legislature does not act.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Tamil Nadu Goods and Services Tax Act, 2017, allows authorized officers to conduct test purchases to ensure compliance with tax invoice issuance and prevent tax evasion. The Joint Commissioners (Intelligence) are empowered to oversee these operations, targeting businesses suspected of non-compliance or tax evasion. Test purchases are conducted discreetly, and if proper invoices are not issued, penal actions are initiated. Reports are submitted to monitor outcomes, and penalties are enforced through the DRC-07 system. In Trichy District, test purchases led to protests from traders, alleging unjust penalties and prompting state intervention to defer such operations.
By: Bimal jain
Summary: The Authority for Advance Ruling (AAR) in Chhattisgarh determined that Interactive Flat Panel Screens used solely for data processing are subject to an 18% GST. If these screens perform additional functions beyond data processing, they will incur a 28% GST. The ruling involved a case with a company that purchased such screens, classified under tariff heading 8471 41 90 of the Customs Tariff Act, 1975. The AAR noted that BIS certification alone does not confirm this classification. The decision emphasized that any modifications affecting functionality could alter the applicable GST rate.
By: Bimal jain
Summary: The Authority for Advance Ruling (AAR) in Chhattisgarh ruled that the activity of supplying, installing, testing, and commissioning oxygen pipeline systems in government hospitals is subject to an 18% Goods and Services Tax (GST). The applicant, a company engaged in these activities, argued for exemption under a notification for COVID-19 relief supplies. However, the AAR determined that the services provided are a composite supply of goods and services, naturally bundled, and not covered by the exemption, as it applies only to COVID-related items, not work contract services. The activity is classified under SAC 995464.
By: Bimal jain
Summary: The Calcutta High Court directed the appellant, who challenged a detention order of teak sawn timber under the CGST Act, to first approach the State Tax Authority to address alleged discrepancies in documentation and goods transport. The court emphasized that the appellant must exhaust initial remedies before seeking judicial intervention. The court noted that the goods had not been confiscated, allowing the appellant to present documentation to counter the allegations. Additionally, the court permitted protective measures for the goods due to potential weather exposure. The appellant was instructed to file an application within a week to resolve the matter with the State Tax Authority.
News
Summary: A new feature on the GST Portal allows for the automated dropping of proceedings for GST Identification Numbers (GSTINs) suspended due to non-filing of returns. This applies to taxpayers who have submitted their pending returns, either six monthly or two quarterly. Once all pending returns are filed, the system will automatically revoke the suspension. If the GSTIN status does not update to active, taxpayers can manually initiate the drop proceeding through the portal. If issues persist, they should contact their Jurisdictional Officer. This functionality is for GSTINs suspended after December 1, 2022.
Summary: The G20 Startup20 Engagement Group will hold its first meeting in Hyderabad, with delegates from G20 nations and observer countries. Under India's presidency, the group aims to develop policy recommendations on entrepreneurship and innovation for G20 countries. The initiative seeks to create a global narrative supporting startups and fostering synergies among startups, corporates, investors, and innovation agencies. The group will focus on harmonizing global startup ecosystems, increasing access to capital, and promoting inclusion and sustainability. Activities will span five events, culminating in a summit in Gurugram, with expected outcomes including policy communiques and a Startup Handbook.
Summary: On the eve of Republic Day 2023, 29 officers and staff from the Central Board of Indirect Taxes & Customs (CBIC), Department of Revenue, are set to receive Presidential Awards for their exceptionally meritorious service and distinguished records. These awards recognize their exemplary performance and dedication in various roles, including Principal Chief Commissioner, Commissioner, and other key positions. The honorees have consistently demonstrated excellence in their duties, contributing significantly to the department's objectives. The awards are a testament to their commitment and service in maintaining high standards in the discharge of their responsibilities.
Notifications
Companies Law
1.
G.S.R. 41(E) - dated
19-1-2023
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Co. Law
Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2023
Summary: The Ministry of Corporate Affairs issued a notification amending the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Effective from January 23, 2023, the amendment involves replacing Form No. MR.1 and Form No. MR.2 in the Annexure of the original rules. These changes are authorized under various sections of the Companies Act, 2013. The principal rules were initially published in the Gazette of India on March 31, 2014, and last amended on September 12, 2018.
Customs
2.
02/2023 - dated
25-1-2023
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ADD
Levy Anti dumping duty on imports of Phthalic Anhydride (PAN) originating in or exported from China PR, Indonesia, Korea RP and Thailand for a period of five years - Seeks to amend Notification No. 43/2021-Customs (ADD), dated 9th August, 2021
Summary: The Indian government has amended its anti-dumping duty notification regarding Phthalic Anhydride (PAN) imports from China, Indonesia, Korea, and Thailand. Initially imposed in August 2021, the duty aims to counteract dumping practices harming domestic industries. The amendment involves a name change for a cooperating producer from "Aekyung Petrochemical Co., Ltd." to "Aekyung Chemical Co., Ltd." This change, confirmed by the designated authority, does not affect the company's ownership or business nature. The amendment is made under the Customs Tariff Act to ensure accurate representation in official records.
3.
06/2023 - dated
25-1-2023
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Cus (NT)
Presidential Award of Appreciation Certificates and Medals announced on the occasion of Republic Day, 2023
Summary: The Government of India, through the Central Board of Indirect Taxes and Customs (CBIC), has announced the Presidential Award of Appreciation Certificates and Medals for a "Specially Distinguished Record of Service" on Republic Day, 2023. These awards recognize the exemplary service of various officers and staff members within the CBIC, Department of Revenue. The recipients include high-ranking officials such as Principal Chief Commissioners, Commissioners, and Senior Intelligence Officers, among others, from various zones and directorates across the country. The awards are granted under the scheme outlined in the Gazette of India Extraordinary, as per the amended notification from November 1962.
GST - States
4.
154- FIN-CT1-TAX-0002/2022 - dated
3-1-2023
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Orissa SGST
Odisha Goods and Services Tax (Amendment) Rules, 2023
Summary: The Odisha Goods and Services Tax (Amendment) Rules, 2023, effective from its publication in the Odisha Gazette, modifies Rule 109A of the Odisha Goods and Services Tax Rules, 2017. It outlines the appellate authorities for decisions or orders under the Odisha GST Act and the Central GST Act. Appeals can be made to the Special Commissioner, Additional Commissioner, or Joint Commissioner (Appeals) depending on the rank of the officer who issued the decision. The timeframe for filing an appeal is three months for aggrieved persons and six months for officers directed to appeal.
5.
No.33764- FIN-CTI -TAX-0002/2022 - dated
31-12-2022
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Orissa SGST
Odisha Goods and Services Tax (Fifth Amendment) Rules, 2022
Summary: The Odisha Goods and Services Tax (Fifth Amendment) Rules, 2022, were issued under notification number 33764 on December 31, 2022. These amendments pertain to the State Goods and Services Tax (SGST) regulations in Odisha. The notification outlines specific changes or updates to the existing GST rules applicable within the state, aiming to streamline tax processes and ensure compliance with the broader GST framework.
6.
33739-FIN-CT1-TAX-0001/2022 - dated
31-12-2022
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Orissa SGST
Notification to amend F.D. notification No. 19841 dated 29.06.2017 bearing SRO No. 289/2017
Summary: The Government of Odisha has issued a notification amending the previous notification No. 19841 dated 29th June 2017, under the Odisha Goods and Services Tax Act, 2017. Effective from January 1, 2023, the amendment revises entries in the notification's table related to essential oils other than those of citrus fruit. Specifically, it addresses oils such as peppermint, spearmint, water mint, horsemint, bergamot, and mentha arvensis. The amendment applies to transactions involving any unregistered or registered person. This change follows recommendations from the Goods and Services Tax Council.
7.
33735-FIN-CT1-TAX-0001/2022 - dated
31-12-2022
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Orissa SGST
Notification to amend F.D. Notification No. 19833 dated 29.06.2017 bearing SRO No. 296/2017
Summary: The Government of Odisha has amended a previous notification under the Odisha Goods and Services Tax Act, 2017. Effective January 1, 2023, the amendment revises the entry against S. No. 102 in the Schedule to include aquatic feed, poultry feed, cattle feed, and other specified items. Additionally, a new entry, S. No. 102C, is added to include husk of pulses, concentrates, and related items. This amendment follows recommendations from the Goods and Services Tax Council and is issued in the public interest.
8.
33729 FIN-CT1-TAX-0001/2022 - dated
31-12-2022
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Orissa SGST
Notification to amend F.D. Notification No. 19873 dated 29.06.2017 bearing S.R.O. No. 306/2017
Summary: The Government of Odisha has issued an amendment to the previous notification dated June 29, 2017, under the Odisha Goods and Services Tax Act, 2017. Effective January 1, 2023, this amendment clarifies that the exemption for services related to renting residential dwellings applies when a registered person, as a proprietor, rents a dwelling for personal residential use, not for business purposes. Additionally, entry S. No. 23A and its related entries are omitted. This amendment follows recommendations from the Goods and Services Tax Council and aims to serve public interest.
9.
33725 FIN-CT1-TAX-0001/2022 - dated
31-12-2022
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Orissa SGST
Notification to amend notification No. 19829 dated 29.06.2017 bearing S.R.O. No. 295/2017
Summary: The Government of Odisha has issued amendments to its notification from June 29, 2017, under the Odisha Goods and Services Tax Act, 2017. Effective January 1, 2023, changes include revisions in tax schedules: Schedule I (2.5%) now includes ethyl alcohol for blending with petrol and bran residues; Schedule II (6%) covers fruit pulp drinks and educational boxes; Schedule III (9%) specifies denatured ethyl alcohol, excluding that for oil marketing companies. These amendments follow recommendations from the Goods and Services Tax Council and are published in the Odisha Gazette.
Highlights / Catch Notes
GST
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High Court Rules Coercive Cash Seizure Unlawful Under GST Act; Emphasizes Strict Adherence to Search and Seizure Protocols.
Case-Laws - HC : Seeking return of money recovered - Clearly, the petitioners had not handed over the cash to the concerned officers voluntarily. Undisputedly, the action taken by the officers was a coercive action. There are no provision in the GST Act that could support an action of forcibly taking over possession of currency from the premises of any person, without effecting the same. The powers of search and seizure are draconian powers and must be exercised strictly in terms of the statute and only if the necessary conditions are satisfied - HC
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Court Allows Petition After E-Way Bill Expired in Transit; No Ill-Intent Found from Howrah to Jamnagar.
Case-Laws - HC : E-way Bill - Period of limitation for expiry of E-way Bill - it can be gathered that there does not appear to be any ill-intent on the part of the petitioner to use the expired e-Way bill. The company is situated at Howrah, West Bengal and the place of delivery was Jamnagar, Gujarat and in transit, this e-Way bill has expired. - The petition deserves to be allowed and is allowed. - HC
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Petitioner's GSTR 2A Data Verification Ordered; Potential System Error in GST Refund with Interest Case.
Case-Laws - HC : Refund along with interest - The respondents are directed to examine whether the form GSTR 2A, as visible at the petitioner’s end, reflects all relevant details. If it does, it would be apparent that there is a technical error is in the respondents’ system. - HC
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Court Upholds TDS Credit Migration from VAT to GST; Petitioners Entitled to 9% Interest Refund Under JVAT Act.
Case-Laws - HC : Migration of TDS Credit from VAT to GST - Transitional provisions - the stand of the Respondents is self-destructive, as if the Petitioners are not allowed to migrate the unadjusted TDS amount under the GST Regime, they would have become entitled for refund of the same with effect from 1st July, 2017 and would have certainly been entitled to statutory interest @ 9% on the said amount in terms of Section 52/53 of the JVAT Act. - - It is declared that the Petitioners are entitled for migration of the TDS amount in terms of Section 140(1) of the JGST Act - HC
Income Tax
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Supreme Court: Assessing Officer Misses Deadline u/s 142(2C), Loses Right to Make Tax Assessment.
Case-Laws - AT : Special audit U/s. 142(2C) - time limit for submission of Special Audit Report - once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore in our considered opinion, the ratio laid down by the Hon’ble Supreme Court squarely applies to the instant case also. In the instant case on hand, the Ld. AO ought to have passed an order U/s. 142(2C) of the Act on or before 25/5/2019 ie., expiry of the first extension. - AT
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Company Excluded as Comparable in Transfer Pricing Case Due to High Software Revenue and Lack of Segmental Data.
Case-Laws - AT : TP adjustment - Design Engineering Services - Selection of comparable - Since the assessee is not providing any Software services and the software services of this company constitute around 78% of its revenue and further that no segmental information is available, we hold that this company cannot be treated as comparable. We, therefore, order to exclude it from the list of comparables. - AT
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Indexation benefit on capital gains applies from property allotment date in FY 1998-99 for assessee's acquisition rights.
Case-Laws - AT : Capital gain computation - date of acquisition of the right over the property by the assessee - benefit of indexation on the cost - date of acquisition of the property was to be reckoned from the date of the allotment i.e in the F.Y. 1998-99. - AT
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Section 263: Erroneous Order by Assessing Officer Deemed Prejudicial to Revenue Interests, Beyond Tax Loss.
Case-Laws - AT : Revision u/s 263 - The expression prejudicial to the interest of the revenue is of wide import and is not confined to merely loss of tax. - The term erroneous means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. Therefore, we hold that order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue - AT
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Pr. CIT Revises AO's Erroneous Order Allowing Unapproved Exemption, Invokes Section 263 for Correction.
Case-Laws - AT : Revision u/s 263 - Interestingly, it is a case where the order u/s.143(3) dated 15.11.2019 had been held by the Pr. CIT as erroneous on the ground that he had wrongly allowed a claim of exemption which, in fact, had never been so allowed by the A.O. - AT
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Understanding Section 54/54F Income Tax Benefits for Long Term Capital Gains on Residential Properties.
Case-Laws - AT : LTCG - benefits of Section 54/54F - the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. - AT
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Currency Swap Deals Not Speculative Under Sec 43(5); Hedging Costs, ECB Interest Deductible Per Sec 36(1)(iii.
Case-Laws - AT : Premium paid in respect of hedging contracts - interest cost on ECBs - speculative transaction - the transactions relating to currency swap contracts entered by the assessee with BTMU cannot be considered to be in the nature of speculative transaction covered under Section 43(5) of the Act. In that view of the matter, the deduction claimed by the assessee is allowable under Section 36(1)(iii) of the Act. - AT
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Penalty Upheld for Non-Compliance with Tax Notices u/s 271(1)(b); Highlights Importance of Responding to AO Notices.
Case-Laws - AT : Penalty levied u/s 271(1)(b) - undisclosed investment u/s 69A - ex parte assessment order - We have no hesitation in confirming the penalty levied under section 271(1)(b) for non-compliance of notices before the AO. - AT
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Hawala Transactions: No Merit in Differential Tax Treatment for Unexplained Transactions, All Found at Par with Explained Ones.
Case-Laws - AT : Unexplained Hawala Transactions - the various reasons cited in the beginning of this paragraph clearly reveal that all transactions were at par. Being so, we do not find any merit in the claim of revenue that the so-called “unexplained transactions” should be accorded a different treatment than the “explained transactions”. - AT
Customs
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Court Urges DRI to Conclude Investigation on RFID E-Seals Tampering Involving Company Managing Director.
Case-Laws - HC : Seeking quashment of proceedings against Managing Director of the Company, one of the vendors of RFID e-seals - Tampered e-seals - passing customs clearances even when it was not in a locked condition - The issue in the lis is shrouded with admissions and certain seriously disputed questions of fact, which will have to be thrashed out only in a full blown proceeding. It is rather surprising as to why the DRI has not proceeded further and filed its final report is a serious matter of the kind. It is for the DRI to conclude the investigation, if not already concluded and take the proceeding to its logical end. - HC
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Natural Brassinolide Fertilizer Classified Under CTH 3808 Due to Preparation Form, Not Excluded by Chapter Note 1(a)(2.
Case-Laws - AT : Classification of goods - 0.1 percent natural brassinolide fertiliser - The Chapter Note excludes specially defined chemicals from Chapter 38, except when they are put up in forms described in 3808 viz., as retail packings, as preparations and as articles. Of these, there is no dispute that the imported brassinolide were not articles which leaves with retail packings and preparations. - Since the brassinolide is in the form indicated in CTH 3808 by being preparation, it is not excluded by Chapter Note 1 (a) (2). Therefore, it falls under CTH 3808. - AT
IBC
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Tribunal Confirms Resolution Plan Validity Under Insolvency Code; No Discrimination Among Operational Creditors per Section 30(2)(b.
Case-Laws - AT : Validity, Viability and Feasibility of Resolution Plan - keeping in mind the payment to all the Operational Creditors, is Nil, there is no aspect of discrimination between the Operational Creditors, in the considered opinion of this Tribunal. Further, when the ingredients of Section 30 (2) (b) of the I & B Code, 2016, are satisfied, the distribution is to be treated as Fair and Equitable one. After all, the Plea of the Fair and Equitable treatment is not between the different classes of Creditors, and the same is between the Operational Creditors, as a Class, as opined by this ‘Tribunal’. - AT
Service Tax
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Rule 6(4A) Clarifies Excess Service Tax Adjustment: No Refund Required, But Timely Adjustments Needed. Evidence Essential for Claims. (4A.
Case-Laws - AT : Adjustment of excess service tax paid - ‘succeeding month or quarter’ used in Rule 6(4A) - There is no ambiguity in the wording of Rule 6(4A) ibid. - the filing of refund claim is not mandatory but then the adjustment under Rule 6(4A) ibid has to be done within a reasonable period if not in the immediate succeeding month or quarter - since no documentary evidence has been placed on record except the arithmetical calculation, therefore it cannot be concluded that any extra payment of tax has been made by the Appellant. - AT
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Appellant wrongly denied tax abatement under Notification No. 12/03-ST, overpaid service tax; demand deemed unsustainable. /03ST.
Case-Laws - AT : Denial of benefit of Notification No. 12/03-ST - it can be seen that as against the abatement of 67% available under Notification No. 15/04-ST and 01/06-ST - the appellant have taken the abatement ranging from 30% to 48%. Thus, despite the availability of abatement as per the above notification, the appellant have paid the service tax on much higher value, for this reason also the demand is absolutely unsustainable. - AT
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Court Grants Service Tax Exemption for Vocational Training Programs in Finance, IT, Arts, and More.
Case-Laws - AT : Levy of Service tax - Commercial Training or Coaching service - vocational training - imparting educational programmes in the areas of finance, banking, insurance, accounting, law, management, information technology, arts, commerce, education, science and technology, at bachelor's and master's level on full time campus and distance learning modes - Benefit of exemption allowed - AT
VAT
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High Court Rules ITC Applies When Import License is Used for Goods, Not Just License Sale.
Case-Laws - HC : Reversal of Input tax Credit - on purchase of R.E.P. license - the assessee-dealer had purchased import license from another person after paying the taxes as was applicable and the licence, which was in a intangible form was converted into a tangible form by the assessee importing chemical from outside the country. - The findings recorded by the Tribunal to the extent that I.T.C. can only be availed in case the assessee-dealer selling the licence itself and not importing the goods using the said import license and reselling the same in the market is not correct - HC
Case Laws:
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Service Tax
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2023 (1) TMI 1458
Levy of Service tax - supply of Work-wear on rent/ lease basis as per the requirement of each customer - supply of tangible goods service or not - declared service or not - HELD THAT:- From the decision in M/S LINDSTROM SERVICE INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX [ 2019 (8) TMI 427 - CESTAT CHANDIGARH ], it is observed that the CESTAT s two benches have taken a consistent view that the service in question is not taxable under supply of tangible goods for use or under the declared service. Therefore, following the aforesaid decision in the present case also, the issue deserve to be decided in the favour of the assessee. As regard, the submission of learned Authorized Representative that against the aforesaid two Chennai Tribunal s order, the Revenue has filed appeal bearing No. Civil Appeal No. 6459 of 2021, we find that as of now either side could not produce any stay order staying the operation of the Chennai Tribunal s Order, therefore, mere filing of appeal before the Hon ble Supreme Court will not of any help to the Revenue. Appeal of assessee allowed.
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