TMI Tax Updates - e-Newsletter
February 28, 2022

Case Laws in this Newsletter:

Income Tax

Articles

1. GST AAR on Supply of online educational journals or periodicals

   By: Ganeshan Kalyani

2. GST PROPOSALS IN BUDGET 2022 (PART-III)

   By: Dr. Sanjiv Agarwal

News

1. SFIO arrests Satish Kumar Pawa, Saurav Aggarwal, Suhas S. Paranjpe in connection with investigation into affairs of Jagat Agro Commodities Pvt. Ltd.

2. Revised Calendar for Auction of Government of India Treasury Bills

3. Sovereign Gold Bond Scheme 2021-22– Issue price Series-X

Notifications

GST - States

1. S.O. 72 - dated 21-2-2022 - Bihar SGST

Bihar Goods and Services Tax (Tenth Amendment) Rules, 2021.

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 36/2021-2022 - dated 25-2-2022

DGFT Helpdesk for Russia-Ukraine related International Trade Issues

Highlights / Catch Notes

GST

• Court Orders Release of Vehicle, Citing Section 130(2); Goods Confiscated Due to Owner's Alleged Fraud.

  Case-Laws - HC : Seeking release of conveyance alongwith the goods - to force the owner of the conveyance to pay the tax, penalty and fine on the goods would mean that the owner of the conveyance is also foisted with the vicarious liability of any mis-declaration/fraud by the owner of the goods despite the proviso engrafted on to Sub Section 2 of Section 130 of the Act. - The argument of the learned State counsel is rejected and it is directed that the conveyance be released forthwith. The goods obviously would be confiscated and disposed of by the respondents in accordance with law - HC
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• High Court Quashes Show Cause Notice u/s 73 for Lack of Specific Allegations, Emphasizes Detailed Requirements.

  Case-Laws - HC : Validity of SCN - fulfillment of very ingredient of a proper show cause notice as required u/s 73 of the Act - The show cause notice is completely silent on the violation or contravention alleged to have been done by the petitioner regarding which he has to defend himself. The summary of show cause notice at annexure-2 though cannot be a substitute to a show cause notice, also fails to describe the necessary facts which could give an inkling as to the contravention done by the petitioner - It needs no reiteration that a summary of show cause notice in Form DRC-01 could not substitute the requirement of a proper show cause notice. - SCN quashed - HC
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• GST Rate Classification for Cereal and Legume Mixes: Dosai, Idly, Vada, Tiffin, Health, and Porridge Mixes.

  Case-Laws - AAAR : Classification of goods - rate of GST - products are mixture of flours of cereals and dried leguminous or not - the above explanatory note and entry in serial number 59 of Schedule I of Notification No. 1/2017- Central Tax Rate, dated 28-6-2017speaks about the flours of cereals and dried leguminous vegetables. Whereas the products of the appellants do contain the flour and the same is not meant for supply as flour but meant as dosai mix, idly mix, vada mix, tiffin mix, health mix and porridge mix which are the products for human consumption by way of cooking as directed in the container label. Hence these products are not mere mixture of dried leguminous vegetable or cereals and hence not classifiable under HSN 1106. - AAAR
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• GST Exemption for Consulting on Chennai Stormwater Project as 'Urban Planning' under Twelfth Schedule, Article 243W.

  Case-Laws - AAR : Exemption from GST - Pure Services - rendering Consulting Services for Programme Management and Accompanying Measures for implementation of Integrated Strom Water Drain - it is established that the project is undertaken to improve the 'urban Infrastructure of the Chennai City'. 'Urban Planning' is one of the activities stipulated under the 'Twelfth Schedule' of the Constitution. Therefore, the activities of the applicant are 'in relation to' the activity of 'Urban Planning', an activity under Article 243W of the Constitution. - in this case the applicants are providing “Pure Services”, by way of rendering Consulting Services. - AAR
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• GST Now Applies to Club Services for Members; Club and Members Treated as Separate Entities Under New Explanation.

  Case-Laws - AAR : Levy of service tax - services provided by clubs to its members - an explanation is added to say that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgements of any Court, Tribunal or any other authority. - GST is payable on the services provided by clubs to its members - AAR
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Income Tax

• Tribunal Approves LIFO Method for Stock Valuation for 2009-10, Upholds Consistent Practice with Revenue Acceptance.

  Case-Laws - HC : Difference in stock valuation - valuation of the closing stock - LIFO or FIFO method - It is an admitted case that the assessee has been continuously adopting the LIFO method which has been accepted by the revenue for all the earlier assessment years and in respect of the assessment year 2009-10, the matter travelled upto the tribunal and the manner of valuation of the closing stock done adopting LIFO method was approved. Therefore, in our considered view, the tribunal was right in affirming the order passed by the CIT(A). - HC
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• Faceless Tax Assessment Deadline Dispute: Section 144B Deadline Expired; Notification No.74/2021 Exclusion of Section 144C(13) Questioned.

  Case-Laws - HC : Faceless assessment u/s 144B - time-limit to complete the assessment - Even if for a moment we hold that Relaxation Act is applicable to petitioner’s case, the time-limit provided by Notification No.38/2021 expired on 30th June 2021. Notification No.74/2021, on which respondents have relied upon to submit that time has been extended upto 30th September 2021, specifically excludes Section 144C(13) of the Act. If that also was to be included, Notification No.74/2021 would have expressly provided for it as it has provided in Notifications No.20/2021 and 38/2021. - HC
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• Revenue Authorities Justify Case Transfer from Dimapur to Kollam u/s 127; Court Upholds Decision.

  Case-Laws - HC : Transfer of case u/s 127 - The Revenue authorities are the best judge in this matter and they have assigned clear and cogent reasons as to why the transfer is being made. The only requirement of the law is that while passing an order of transfer, the reasons must be assigned. We have absolutely no doubt in our mind that cogent reasons have been assigned by the Revenue for transferring the case from Dimapur to Kollam and therefore, it does not call for our interference. - HC
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• Court Examines Land Classification for Sale to Kerala Industrial Corp: Agricultural or Non-Agricultural?

  Case-Laws - HC : Capital gains - nature of land sold - land converted into a barren land to establish an industrial estate - land sold by the assessee through sale deed in favour of Kerala State Industrial Development Corporation Limited (for short ‘KSIDC’) - In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non-agriculture. The assessee has demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. Though it is a peripheral, it is an important matter in appreciating the character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out in plots, then the stamp duty payable on registration would be on the nature of land sold at the relevant point of time. - HC
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• Reopening of assessment u/s 147 invalid due to mechanical sanction u/s 151; procedural failures noted.

  Case-Laws - AT : Validity of Reopening of assessment u/s 147 - we are of a strong conviction that the sanctioning authority, i.e, the Pr. Commissioner of Income-tax-II, Amritsar had granted his sanction u/s 151 of the Act, in a mechanical manner, i.e, without application of mind to the facts of the case and the material available on record. - AT
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• Invalid Service of Notice u/s 148: Efforts to Locate Assessee Required, Affixing Notice on Door Insufficient.

  Case-Laws - AT : Service of notice u/s 148 - The service of Notice u/s 148 by ordering a substituted service, as contemplated in Order V-Rule 20 of the Code of Civil Procedure, 1908 (5 of 1908), in the absence of using of all reasonable and due diligence for locating the whereabouts of the assessee, not being as per the mandate of law cannot be subscribed on our part. Our aforesaid view that service of notice in case of an assessee residing abroad, by affixing the same on the main door of his local residence in India is not a valid service, is supported by the judgment of the Hon’ble High Court of Allahabad - AT
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• Reopening of assessment u/s 147 invalid due to insufficient reasons u/s 148; minimal evidence provided.

  Case-Laws - AT : Validity of reopening of assessment u/s 147 - The reasons, in the instant case recorded by the AO do not satisfy the requirements of Section 148 - reasons and the information referred is extremely scanty and sudden jump to the conclusions. There is no reference to any specific document except the Annexure which cannot be regarded as material or prima facie evidence to establish the link to point out escapement of income - AT
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• Assessee's Gross Margins Exceed Comparables; No ALP Adjustment Needed for Finished Goods Imports per TPO Selection.

  Case-Laws - AT : TP Adjustment - Arm's Length Price (ALP) adjustment - The gross margins of assessee are much more than the gross margins of comparable companies chosen by the ld. TPO. Hence no adjustment to ALP is to be made in respect of import of finished goods even if the comparable companies chosen by the ld. TPO are upheld. - AT
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Customs

• Show Cause Notice u/s 124 Challenged for Delay Beyond Six-Month Limit Without Extension or Provisional Release.

  Case-Laws - HC : Time Limitation - validity of SCN - whether the SCN given under Section 124 of the Act after six months of seizure can be sustained under the law? - In the instant case, admittedly there has been no provisional release of the seized goods. Further extension of six months with the reasoned order by the Principal Commissioner of Customs or Commissioner of Customs also is completely missing. - It is quite unfathomable as to why the time limit is not adhered to and issuance of the show cause notice has been delayed beyond the statutory time period and hence, intervention will be necessary at the end of this Court - HC
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• Sajji Khar Import Not Restricted: Conditions Imposed After Import Cannot Lead to Confiscation, Consistent with Historical Practice.

  Case-Laws - AT : Confiscation of goods - prohibited/restricted goods or not - import of consignment of Sajji Khar - It is a settled law that any condition is imposed on the import shall not apply to the import already originated from the port of shipping - In the present case also the instruction dated 21.05.2020 was issued much after not only the import of goods but also after filing of warehousing Bill of entry. It is also undisputed fact that the same product i.e. Sajji Khar has been allowed to be imported without the condition as imposed by the department in the present case on the earlier occasions by various importers. - The goods are not liable for confiscation - AT
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Service Tax

• Adjudicating authority wrongly included security deposit interest in Business Auxiliary Service taxable value without proper basis.

  Case-Laws - AT : Valuation - inclusion of interest in the gross value - The adjudicating authority has wrongly considered the interest received on security deposit as part of consideration received by appellant for providing the Business Auxiliary Service without establishing as to how the said security deposit is includable in the amount of consideration charged for the taxable value provided by the appellant - AT
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• Software Maintenance Tax Lapse: Appellants Liable for Penalty u/s 76, Despite Credit Entitlement Post-April 1, 2008.

  Case-Laws - AT : Levy of service tax - software maintenance services - The appellants are well established service tax registrants and therefore, we are of the considered opinion that the lapse of non-payment of service tax during the relevant period cannot be taken lightly - the appellants are entitled to utilise the balance credit after 1.4.2008, they will be liable to pay penalty under Section 76 of the Finance Act, 1994, as applicable during the relevant period. - AT
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• Cenvat Credit Reversal on Ocean Freight: Demand Set Aside as Appellant Rightly Claimed Input Credit Under Reverse Charge.

  Case-Laws - AT : Reversal of Cenvat Credit - ocean freight - point of taxation - the payment of service tax for six of the invoices under question was made on 30th June, 2017. The admitted figures in the table at admitted fact No.3, are sufficient to show that, in the given circumstances, the appellant has rightly availed the input credit of service tax paid by him though under Reverse charge mechanism. - The confirmation of demand by Commissioner (Appeals) is hereby set aside - AT
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Central Excise

• Goods Near Ports Not Considered In Stock by Tribunal; Already Moved from Factory with Buyer Invoices.

  Case-Laws - HC : CENVAT Credit - goods stored in the godown/depot near the ports - goods in stock or not - in the present case, the Adjudicating Authority as well as learned Tribunal rightly came to the conclusion that the goods in question could not be said to be lying with the assessee in stock as they had already been removed to the port area from the factory on the basis of issuance of invoices disclosing buyers name. - HC
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• Sugar Cess Refund Approved: Cenvat Credit Eligibility Confirmed, Previous Demand Notices Deemed Irrelevant and Unsustainable.

  Case-Laws - AT : Refund of duty (sugar cess) paid - The issue in the said demand notice also relates to eligibility of Cenvat credit on sugar cess and when the same has already been decided in favour of the Appellant assessee, then the earlier demand notices become infructuous and cannot be sustained in the eyes of law. - Thus in the instant case, the refund claim of the Appellant needs to be allowed - AT
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Case Laws:

• Income Tax

• 2022 (2) TMI 1492
  Addition u/s 40A(3) - payments in question made by the assessee to Government undertakings - payment of legal tender - Whether the cash payments made by the assessee towards purchase of wine to the aforementioned undertakings of the Government, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., which as per him were to be considered as an arm of the State Government that had received the payment in legal tender, i.e., in Indian currency, would by virtue of the exception carved out in Rule 6DD(b) of the Income Tax Rules, 1962 be saved from the disallowance contemplated in Sec. 40A(3)? - HELD THAT:- Referring to tests laid down by the Hon ble Apex Court in the case of Som Prakash Rekhi [ 1980 (11) TMI 113 - SUPREME COURT ] we are of the considered view, that as both of the aforesaid undertakings, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., are State Government Companies wherein 100% share holding is held by the State Government; there is an existence of deep and pervasive control of the State Government on the said undertakings, and the full control of their working, policy and framework is vested with the State Government, therefore, they can safely be brought within the meaning of State . As regards the requirements contemplated in Rule 6DD(b) that the payment is required to be made in legal tender, we find that the term legal tender has not been defined in the Income-Tax Act. The dictionary meaning of legal tender as mentioned in Aiyer s Law Terms and Phrases , is the coinage of a country in which debts may be paid and which the creditor is bound to accept . The dictionary meaning of the coin is; metal used for the time being as money and stamped and issued by the authorities of the state in order to be used. Therefore, it can be said that legal tender means the currency of a state which is to be used as money. Backed up our aforesaid observations, we are of the considered view, that as in the case of the assessee before us the payments in question to the aforementioned State Government undertakings have been made by the assessee in Indian currency, therefore, it can safely, or in fact inescapably be concluded that the same have been made in legal tender. Thus the payments made by the assessee to the aforementioned Government undertakings , which could safely be held as a part of the Government would fall within the realm of the exception carved out in Clause (b) of Rule 6DD of the Income- Tax Rues, 1962, qua, the applicability of the provisions of Sec. 40A(3) of the Act - Payments in question made by the assessee to the State Government entities in legal tender were covered by the exception contemplated in Rule 6DD(b) of the Income Tax Rules, 1962, therefore, the same could not have been disallowed u/s 40A(3) of the Act, uphold his order. - Decided in favour of assessee.

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