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The Petitioner had sought to avail the benefit of Sabka Vishwas Legacy Dispute Resolution Scheme (‘SVLDRS’) and accordingly, filed Form SVLDRS-1.While submitting the said form, the Petitioner inadvertently stated the duty payable by them under clause 9.1 instead of the prescribed clause 9.4. Consequently, the Respondent rejected the claim of the Petitioner under SVLDRS on the ground that no Show Cause Notice / demand was issued to the Petitioner.
The Guwahati HC observed that a mistake made can be of two different types:
It was further observed by the HC that while a deliberate mistake to claim an undue benefit would be construed to be an incurable mistake, an inadvertent error caused by oversight, not resulting into accrual of a benefit which he otherwise would not have been entitled to, can be accepted to be a curable mistake.
It was held that in the instant case, the inadvertent mistake made by the Petitioner cannot be construed to have an undue benefit which the Petitioner was not otherwise entitled to. Accordingly, the HC directed the Petitioner to submit an application before the Respondent authorities for correction within 15 days. Further, the HC directed the Respondent authorities to pass a reasoned order within 2 months from the date of receipt of application.
Urban Systems vs. Union of India and Ors. [WP(C) 2264/2020]
The Petitioner, inter alia engaged in the business of manufacture of soya products, had imported certain edible oil. The Petitioner filed Bills of Entry on 01 March 2018 seeking clearance of the imported goods for home consumption by paying 30% BCD along with the applicable IGST.
In the meanwhile, the Customs Department issued Notification No. 29/2018 – Customs dated 01 March 2018 (‘NN.29/2018’) u/s. 25(1) of the Customs Act increasing the BCD on the imported goods from 30% to 44%. Accordingly, the Customs Department insisted the Petitioner to pay the enhanced duty.
Aggrieved, the Petitioner had filed a Writ before the Gujarat HC inter alia for declaring Section 25(4) of the Customs Act, as unconstitutional.
Section 25(1) r/w. 25(2A) of the Customs Act inter alia provides that the Central Government, in the public interest may, by notification in the official gazette, exempt goods from the custom duties. Further, the Central Government is empowered to insert explanation in such notification.
Further, Section 25(4) of the Customs Act inter alia provides that notifications shall come into force on the date of its issue by the Central Government for publication in the Official Gazette.
The Petitioner submitted that as NN.29/2018 was published electronically on 06 March 2018, the same would not be applicable for the clearance of the imported goods for which the BOE were filed on 01 March 2018. It had been further submitted that the Respondent authorities could not have reassessed the bills of entry demanding enhanced duty and differential IGST relying upon the provisions of Section 25(4) of the Customs Act as amended in the year 2016, which provides that every notification issued u/s. 25(1) or 25(2A) shall unless and otherwise provided, would come into force on the date of its issue by the Central Government for publication in the official gazette.
The Respondent submitted that a operation of a notification under the Customs Act comes into force on the date of its issue by the Central Government for publication in the Official Gazette so the relevant date in for coming into force is the date of issue of notification by the Central Government for publication in the official gazette, and not the date on which it is published in the official gazette.
It was further submitted by the Respondent that the time of coming into operation would be the moment of expiration of the day preceding commencement of the notification. In this regard, the Respondent relied upon the judgement of the Punjab and Haryana HC in the case of Commissioner of Income Tax vs. RB Jodha Mal Kuthiala [Income-tax Reference No. 16 of 1960].
The Gujarat HC relied upon the judgement of the Andhra Pradesh HC in the case of Ruchi Soya Industries Limited vs. Union of India [MANU/AP/0325/2019], wherein Section 25(4) of the Customs Act had been struck down declaring the same as arbitrary and contrary to the provisions of Section 25(1)(2A) of the Customs Act.
It had been observed that according to Section 25(1) of the Customs Act, whenever, a notification is to be issued in the public interest, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions to be fulfilled before or after clearance as may be specified in the notification. As NN.29/2018 enhanced the rate of duty from 30% to 44% by Amendment Act 28 of 2018 to be notified in the Gazette, it must be only in the public interest in general. However, according to subsection (4) of Section 25, introduced by Amendment Act 28 of 2018, substituted subsection says that every notification issued under subsections (1) & (2A) of Section 25 of the Act shall be, unless otherwise provided came into force by the date of issue by the Central Government for publication in the Gazette. Accordingly, it was held by the AP HC that the purport of subsections (1), (2A) and (4) of Section 25 are inconsistent with one another and therefore, liable to struck down.
Relying upon the judgement of AP HC in the case of Ruchi Soya (supra) and various other judgements, the Gujarat HC held that the provisions of Section 25(4) of the Customs Act, is arbitrary and contrary to Section 25(1) & (2A) of the Customs Act. The HC further directed the Respondent to refund the excess amount of custom duty and differential amount of IGST collected from the Petitioner for clearance of imported goods for home consumption as per the Notification published subsequent to the date of filing of the bills of entry with simple interest @ 6% p.a. from the date of deposit till the date of payment.
Ruchi Soya Industries Limited vs. Union of India and Ors. [R/Special Civil Application No. 11063 Of 2018]
The CBIC vide Circular No. 41/2020 – Customs dated 07 September 2020 has announced that the facility of Auto Let Export Order (‘LEO’) has been developed by Directorate General of Systems and Data Management is ready for launch.
It has been stated that in order to facilitate exports by courier and to provide a level playing field to the Indian exporters, the CBIC has allowed Auto LEO under Express Cargo Clearance System (‘ECCS’). It has been further provided that Courier Shipping Bills (‘CSBs’) filed for clearance of export goods under ECCS are subjected to Risk Management System, after the registration of the goods by the Custodian. The RMS either facilitates or interdicts a CSB as per risk parameters.
It has been further provided that the export goods which are covered under CSBs, and are fully facilitated by RMS and cleared by customs x-ray scanning shall be automatically given LEO by the ECCS. It is contemplated that this move would considerably reduce the dwell time of the clearance of export shipments through courier.
The Petitioner, engaged in the business of lubricants, faced technical difficulties in uploading Form TRAN-1 and therefore relentlessly raised grievances, however the same were not adequately addressed by the Respondent authorities. Accordingly, the Petitioner filed a Writ before the Madhya Pradesh HC seeking to file their TRAN-1.
The Petitioner relied upon the judgement of Punjab and Haryana HC in the case of Adfert Technologies Private Limited vs. Union of India [2019 TIOL-2519HC-P&H-GST], wherein the HC had allowed a batch of Petitioners to file their TRAN-1 after the appointed day. It was further submitted that an SLP was filed against the said judgement which had been dismissed.
The Petitioner further relied upon the judgement of Delhi HC in the case of Brand Equities Treaties Limited and Others Vs. Union of India [2020 TIOL-900-HC-Del], wherein, following the decisions of various HCs, the respective Petitioners were permitted to file TRAN-I after the appointed day.
Taking cognizance of the submissions made by the Petitioner, the Madhya Pradesh HC directed the Petitioner to file a fresh representation annexing all the judgments cited, within a period of seven days before the Jurisdictional Commissioner from the date of receipt of the instant order.
The HC further directed the Jurisdictional Commissioner to decide the matter in light of the various judgements, and pass a reasoned and speaking order within 4 weeks of the Representation to be filed by the Petitioner.
Gurukripa Lubricants vs. Union of India and Ors. [WP-12184-2020]
The GSTN has facilitated a PDF statement of GSTR-1 while filing GSTR-3B. The PDF statement will be prepared on the basis of the values reported by the taxpayers, in their GSTR-1, for the tax period. This facility would be available on the GSTR-3B dashboard, from tax period of August 2020 onwards, containing the information of GSTR-1 filed by them on or after 04 September 2020.
This facility is extended to all taxpayers registered as a Normal taxpayer, SEZ Developer, SEZ unit and casual taxpayer.
In other words, following tables of GSTR-3B would be auto drafted, on basis of values reported in GSTR-1, for the said period:
It has been further provided that in case any of the above values is negative as per GSTR-1, those figures would be mentioned as Zero in the auto-drafted PDF and will not be carried forward to next period. Further, the turnover and tax would be computed after taking into account credit notes, debit notes, amendments and advances, if any. Lastly, it has been provided that only filed GSTR-1 statements would be considered for auto-population of the values in Form GSTR-3B.
In the much-awaited news, the CBIC vide Circular No. 40/2020 – Customs dated 04 September 2020, has decided to roll out the Faceless Assessment at pan India level in all ports for imports and for all imported goods by 31 October 2020. Following are the key highlights of the Circular:
Constitution of National Assessment Centres
The CBIC has decided to constitute 11 National Assessment Centres (‘NACs’), which would be organized commodity-wise according to the First Schedule to the Customs Tariff Act, 1975. The rationale for the selection of a Zone in the NAC would be the share of volume of the import of the particular commodity group(s) in its Zone vis-à-vis All India imports and / or share of contributed by the said commodity group(s) or the share of import of the particular commodity group(s) in their own Zones.
Responsibilities of National Assessment Centres
The NACs would be required to examine the assessment practices of imported goods across the Customs stations to bring about uniformity and enhanced quality of assessments. Following are the key responsibilities of the NACs:
Pre-launch preparation for Faceless Assessment
As a precautionary measure to ensure smooth assessment and clearance of goods, the CBIC has further required the Nodal Commissioners in the NAC to undertake the following before the launch of Faceless Assessment:
It has been further provided that Directorate General of Taxpayer Services in coordination with Customs Policy Wing shall organize extensive outreaches via online webinars / promotional videos etc. to ensure smooth implementation of Faceless Assessment for both Department and the trade.
Further, the CBIC vide Notification No. 85/2020 – Customs (N.T.) dated 04 September 2020 has empowered the Commissioner of Customs (Appeals) to take up appeals filed in respect of Faceless Assessments pertaining to imports made in their jurisdictions even though the Faceless Assessment officer may be located at any other Customs station.
The Petitioner, situated in a Special Economic Zone (‘SEZ’), filed an application for refund with regards to credit of IGST distributed by Input Service Distributor (‘ISD’) for the services pertaining to the SEZ unit for the year 2018-2019. The refund application was rejected by the Revenue authorities on the ground that the supply of goods and / or services to SEZ unit is zero-rated hence, not eligible for refund u/s. 54 of the CGST Act.
Aggrieved, the Petitioner filed a Writ before the Gujarat HC stating that refund of the unutilized ITC distributed by ISD is available as section 16 of the CGST Act provides for ITC charged on any supply of goods or services or both by the supplier which are used or intended to be used in the course or furtherance of the business.
It was further submitted by the Petitioner that the entire scheme of the GST does not restrict any distribution of common credit by an ISD to an SEZ unit and on a conjoint reading of section 16 of the IGST Act and section 54 of the CGST Act, the Petitioner is entitled to get the refund of unutilized ITC lying in the Electronic Credit Ledger.
The Gujarat HC observed that Rule 89 of the CGST Rules provides for procedure for application for refund of tax, interest, penalty, fees and prescribes that in respect of supplies to a SEZ unit, the application for refund has to be filed by the supplier of goods or services. It was further observed that it is not possible for a supplier of goods and services to file a refund application to claim the refund of the ITC distributed by ISD. Therefore, the stance of the department that the petitioner is not entitled to seek the refund of the ITC paid in connection with goods or services supplied to SEZ unit is not tenable.
The HC further referred to Notification No. 28/2012 dated 20 June 2012 which was in connection with service tax attributable to the services used in more than one unit to be distributed pro-rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units and similarly, in facts of the present case also, credit of service tax is distributed to all the units by the ISD and therefore, the claim of refund made by the SEZ unit of the petitioner is required to be granted.
Lastly, the HC relied upon the judgement in the case of Amit Cotton Industries vs. Principal Commissioner of Customs [2019 (29) GSTL 200], wherein the Court had allowed the claim made by the petitioner for refund of the IGST in case of an export unit. Therefore, the HC in the instant case held that the Petitioner is entitled to claim refund of IGST lying in the Electronic Credit Ledger as there is no specific supplier who can claim the refund under the provisions of the CGST Act and the CGST Rules as ITC is distributed by the input service distributor.
Consequently, the HC set aside the IGST refund rejection order and directed the Revenue authorities to process the claim of refund made by the petitioner for unutilized IGST credit lying in Electronic Credit Ledger u/s. 54 of the CGST Act.
Britannia Industries Limited vs. Union of India [R/Special Civil Application No. 15473 Of 2019]
The Applicant, a joint venture between Volvo Group and Eicher Motors, engaged in the business of selling trucks and thereafter providing after sale services, provided a warranty on its products, the cost of which was included in the cost of product. Upon acceptance of the warranty claims of the customers and after providing replacements / repair services to the customers, the Applicant used to raise invoice upon Volvo Sweden, for claiming the amount on discharging such warranty obligations. Accordingly, Volvo Sweden issued credit notes to the Applicant and thereby reimbursed such expenses in convertible foreign exchange.
In view of the above-mentioned background, the Applicant had preferred an application to the Karnataka AAR to ascertain whether the supplies made by the Applicant to Volvo Sweden is a supply of service and whether such supply would amount to export of service and hence zero rated under GST?
The AAR had observed that even if it is considered that approval of the warranty claim is done by Volvo Sweden for replacement / repair work, then the Applicant is providing services to the customer only in the capacity of agent of Volvo Sweden. Such transactions would be supply by the Applicant to the customer for consideration being paid by Volvo Sweden (being third party) by way of issuing credit notes. It was further observed that such transaction was within the country amounting to composite supply of goods or services to the customers by the Applicant and hence does not amount to export of services as Volvo Sweden is not the recipient of services provided by the Applicant, but only pays the consideration to the provider for such services.
Basis the above observations, the AAR ruled that the services provided by the Applicant to Volvo Sweden would amount to composite supply and such supply is not an export of service and accordingly cannot be termed as zero-rated supply under IGST Act. Aggrieved, the Applicant challenged the AAR ruling before the Karnataka AAAR.
The AAAR observed that in terms of Volvo International Warranty guidelines, the warranty is subject to the condition that the vehicle has been serviced and maintained in accordance with Volvo recommendations. It was further observed that as an established trade practice, the manufacturer is obliged to provide repair, services, replacement of a product for a certain time period subject to certain conditions. In the instant case, once it is agreed that there is a valid warranty claim by the customer, the manufacturer authorizes the Distributor to carry out the repairs / replacements and reimburses the cost to the Applicant.
The Karnataka AAR referred to Section 2(93) of the CGST Act and observed that the term ‘recipient of supply of services or goods or both’ inter alia means where a consideration is payable for the supply of goods or services or both, the person who is liable to pay the consideration shall be the recipient. The AAR further referred to Section 2(31) of the CGST Act which inter alia defines ‘consideration’ as any payment made or to be made, in respect of the supply of goods or services or both, whether by the recipient.
In line with the above definitions, the Karnataka AAAR observed that the person who is required to make a payment for getting a job done is the recipient of service. Accordingly, the recipient of services supplied by the Applicant during the warranty period would be the manufacturer, Volvo Sweden, as it is at their behest that the Applicant has undertaken the activity of repair and replacement of parts to the customers during the warranty period.
It was further observed that the reimbursement received from Volvo Sweden was in the nature of consideration paid by the manufacturer to the Applicant for carrying out the services during the warranty period, which activity was part of the obligation of Volvo Sweden.
Basis the above observations, the AAAR disagreed with the finding of the AAR that the recipient of service is the customer, however agreed that the supply by the Applicant to Volvo Sweden is a composite supply of goods and services with the principal supply being supply of service. The AAAR further refrained from answering the question as to whether the supply of services to Volvo Sweden amounts to ‘export of services’ as the same was beyond their jurisdiction.
Volvo Eicher Commercial Vehicles Limited [KAR/AAAR-14B/2019-20 dated 06 February 2020]
The Bombay HC had earlier allowed duty-free import of popcorn maize under Duty Free Import Authorisation Scheme (‘DFIA’) floated under FTP 2015-2020 by holding that that imported maize is capable of being used in the manufacturing of export goods namely maize (corn) starch powder. It was further held that as long as export goods and import item corresponds to the description given in prescribed SION entry, it cannot be held to be invalid by adding something else which is not in the policy.
Basis the above observations, the HC quashed the show cause notice insisting for payment of custom duties in respect of the authorizations granted to the assessee under the DFIA scheme.
Aggrieved, the Revenue filed a Special Leave Petition before the SC against the judgement of Bombay HC. The SC has now issued a notice in the matter and listed the same for hearing after six weeks.
CBIC vide Notification No. 65/2020 – Central Tax dated 01 September 2020 extends the due date till 30 November 2020 for completion or compliances of any action, by any authority or by any person, or as prescribed u/s. 171 of the CGST Act, which falls during the period from 20 March 2020 to 29 November 2020.
Earlier, the CBIC had extended the due date for compliances till 30 June 2020 vide Notification No. 35/2020 – Central Tax dated 03 April 2020.
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