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Taking cognizance of the difficulties faced by the taxpayers in electronic filing of Income Tax Forms 15CA/15CB on the portal, the Finance Ministry vide Press Release dated 05 July 2021 has further extended the date of manual filing of such forms till 15 July 2021. A facility will be provided on the new e-filing portal to upload the forms for the purpose of generation of the Document Identification Number.

The Petitioners, engaged in the business of manufacture of MS Billets in Ingots had been subjected to assessment orders, whereby the Revenue had sought to reverse a portion of the ITC claimed, proportionate to the loss of the input, referring to the provisions of Section 17(5)(h) of the CGST Act. Aggrieved, the Petitioner had preferred a Writ before the Madras HC challenging the assessment order.

The HC observed that Section 17(5)(h) relates to goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. The loss that is occasioned by the process of manufacture cannot be equated to any of the instances set out in clause (h) of Section 17(5). It was further observed that the situations u/s. 17(5)(h) of the CGST Act indicate loss of inputs that are quantifiable, and involve external factors or compulsions. A loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself.

In view of the above observations, the Madras HC held that the reversal of ITC involving Section 17(5)(h) by the Revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h) of the CGST Act.

ARS Steels and Alloy International Private Limited [2021-TIOL-1393-HC-MAD-GST]

Authors’ Notes:

The issue relating to availement of credit in respect of inputs lost during manufacturing process persisted even under the erstwhile VAT and excise laws. The New Delhi Tribunal in the case of Cadbury India Limited [2015-TIOL-1407-CESTAT-DEL] had held that in case of inputs lost in work in process, the assessee is entitled to take CENVAT Credit. The instant judgement of the Madras HC will be a landmark under the GST regime as it brings a huge relief to the manufacturers. 

The CBIC vide Notification No. 28/2021-Central Tax dated 30 June 2021 has waived off the penalty for non-compliance of GST Invoice QR code provisions in respect of B2C invoices for the period from 01 December 2020 to 30 September 2021.

Authors’ Note:

The QR Code provisions had come into effect from 01 October 2020. However, in view of the difficulties faced by the taxpayers in complying with such provisions, the CBIC had waived off the penalty for non-compliance of such provisions till 30 June 2021 vide Notification No. 06/2021 dated 30 March 2021. 

The Appellant had initially availed credit of Education Cess and KKC into GST. Post the amendment to Section 140 of the CGST Act, whereby the term ‘CENVAT Credit’ had been contextualized with the term eligible duties, to disallow credit of cesses, the Appellant had duly reversed the credit of cesses so availed. Thereafter, the Appellant filed a refund claim of such cesses, being credit unutilized. The said refund claim came to be rejected by the Revenue on the ground of it being time barred as the GST came into effect on 01 July 2017.

Aggrieved, the Appellant preferred an Appeal before the Chandigarh CESTAT. The Tribunal observed that the amendment to Section 140 of the CGST Act came on 30 August 2018 i.e., after one year of the switching to the GST Regime which is applicable retrospectively. Accordingly, it was held that the Appellant could not have possibly have filed the refund claim within 1 year from 01 July 2017. Accordingly, it was held that the relevant date for the refund claim shall be 30 August 2018 and therefore, the refund application being filed in September 2018, is within the due date. In view of the above, the Chandigarh Tribunal set aside the refund rejection order and allowed the Appeal.

Authors’ Notes:

Basis the instant judgement of the Chandigarh Tribunal, the taxpayers who had filed refund claims for cesses within 1 year of amendment of Section 140 of the CGST Act, can now represent to the appropriate authorities to allow their refund claims. Similarly, taxpayers can also claim the refund of CVD/SAD, wherein such duties had become payable after 01 July 2017 and credit could not be availed. 

The F.M. Smt. Niramala Sitharaman in her press conference on 28 June 2021 announced various economic reliefs for the trade and industry in wake of the pandemic. Most notably, the tenure of Production Linked Incentive (‘PLI’) Scheme for Large Scale Electronics Manufacturing has been extended by one year (i.e., till 2025-26). The FM reasoned that Companies have been unable to achieve incremental sales condition due to pandemic related lockdowns.

Following are other key reliefs announced by the F.M. in the press conference:

• Support to project exports by extending coverage of National Export Insurance Account (‘NEIA’) additionally by Rs. 33,000 crores for the next 5 years;
• Infusing equity of Rs. 88,000 crores in Export Credit Guarantee Corporation (‘ECGC’) over the next 5 years to boost export insurance cover;
• Free Tourist Visa scheme to be applicable till 31 March 2022 or till 5,00,000 visas are issued, whichever is earlier;
• Extended Atmanirbhar Bharat Rozgar Yojana from 30 June 2021 to 31 March 2022.

The Appellant had purchased melting iron scrap on High Sea Sales (‘HSS’) basis from various sellers during the period 2010-11 to 2012-13. During the course of the audit, the Revenue observed that the Appellant had availed CENVAT credit of input service on the strength of improper documentation in respect to the invoices, which were issued in the name of the high sea seller who sold the goods to the Appellant.

Basis the above observation, the Revenue alleged that the Appellant had availed CENVAT Credit in contravention of the CENVAT Credit Rules (‘CCR’). Basis the said allegation, the Revenue had proposed to recover the CENVAT Credit along with applicable interest and penalty, which had been confirmed by an order. Aggrieved, the Appellant preferred an Appeal before the Tribunal.

The Tribunal observed that goods purchased were indeed inputs for the Appellant. It was further observed that manufacturer can avail CENVAT Credit on the basis of the invoice issued during the clearance of inputs from any of its premises where the goods are sold or on behalf of the said manufacturer. Similarly, it was observed that an importer is entitled to avail CENVAT Credit on inputs if the importer is registered in terms of the provisions of Central Excise Rules.

Further, referring to the Rule 4A(1) of Service Tax Rules it was observed that the Appellant had substantially complied with the documentation requirement except the invoice not being in the name of the Appellant. Most importantly, it was observed that no specific documents had been mentioned considering the transaction of subsequent sale on high sea sale basis, in the Rules. 

Therefore, it was observed that the scheme of the Act is to be read harmoniously with the Rules. Accordingly, the Tribunal held that if something is missing the Rules, reference can be drawn through the Act and credit cannot be denied for some gap left in the statute which will defeat the scheme of CENVAT credit. In view of the above, the Tribunal held that CENVAT credit availed by the Appellant was correct and accordingly the appeal was allowed with consequential reliefs.

Mammon Concast Private Limited vs. Commissioner of CGST, Customs and C. Ex. [Service Tax Appeal No. 53625 of 2018-SM]

In order to address the difficulties faced by the taxpayers in relation to Dynamic Quick Response (‘QR’) code applicability, the CBIC has issued Circular No. 156/12/2021-GST dated 21 June 2021 inter alia clarifying the issues:

• Any person who has obtained a Unique Identity Number is not a registered person u/s. 2(94) of the CGST Act. Therefore, any invoice issued to such person having UIN, shall be considered as an invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code;
• Bank account and IFSC details shall not be required in the Dynamic QR Code, as the UPI ID is linked to specific Bank Account of the payee/ person collecting money;
• If the payment is collected by a person, authorized by the supplier, the UPI ID of such person may be provided in the Dynamic QR Code, instead of UPI ID of the supplier;
• An invoice can be issued without Dynamic QR code to a recipient located outside India for which place of supply is in India, since the QR code cannot be used by recipient located outside India for making payment to the supplier in India in foreign exchange through RBI approved mediums;
• In case of retail sales over the counter, where invoice number is not available at the time of digital display of dynamic QR code, and invoice is generated after payment, the unique order ID/sales reference number may be provided in Dynamic QR Code for digital display, as long as details of unique order ID/ sales reference linkage with invoice are available on processing system of merchant/supplier and cross-reference of such payment along with unique order ID/ sales reference number are also provided on invoice;
• When the part-payment for any supply has already been received from the customer/ recipient, in form of either advance or adjustment, then the Dynamic QR code may provide only the remaining amount payable by the customer/recipient against “invoice value”. The details of total invoice value, along with details/ cross reference of the part payment/ advance/ adjustment done, and the remaining amount to be paid, should be provided on the invoice.

The Applicant, engaged in the business of manufacturing seat components and accessories, had preferred an application before the Tamil Nadu AAR to ascertain the correct tariff classification of Track Assembly of Automotive Seating System. The said product is fitted on the floor of the car, which enables forward and backward movement of the seat. When seats are fixed on this TRACK ASSY it can slide back and forth with the operation of a lever for varying the positions of the seats.

The Applicant had been classifying the Track Assy. Under CTH 8708. However, as various manufacturers insisted the classification of the said product to be under CTH 9401, the Applicant had preferred the Advance Ruling. It was observed by the AAR that CTH 8708 covers parts and accessories of Motor Vehicles. It was further observed that in order to be classified as a part and accessory, the said item:

• Should not be excluded under Note 2 to Section XVII;
• Should be principally used with the automotive vehicle; and
• Should not be covered more specifically elsewhere in the Tariff.

The AAR observed that vehicle seats, being specifically mentioned in CTH 9401 is excluded from the purview of CTH 8708. It was however observed that CTH 9401 covers parts of seats of motor vehicles. ‘Parts’ are an amount or section which when combined with others makes up the whole of something. Hence part is an essential component of the whole without which the whole cannot be complete or cannot function. Accessories on the other hand, are not an essential component without which the whole cannot be complete or function, but it is a component which when added improves the utility, efficiency or appearance of the whole thing.

It was observed that the seat is manufactured and complete before fixing it on the said assembly. The seat is fixed on the track assembly only to facilitate the movement of seat forward and backward. Thus, it is the seat and track assembly are two individual, independent products, manufactured separately and fixed together to make the seat movable.

The AAR further observed that as seats are complete even without the said track assembly, the said assembly cannot be termed as 'Parts of seat'. Accordingly, the same would not merit classification under CTH 9401. In view of the above, it was observed that that the Track assembly is an accessory to the Motor vehicle and is covered under CTH 8708. The AAR also noted that the Track Fittings fulfill the above-mentioned conditions to merit classification under CTH 8708. In light of the above submissions, the Tamil Nadu AAR ruled that the Track Fittings manufactured by the Applicant are classifiable under CTH 8708 chargeable to 28% GST.

Daebu Automotive Seat India Private Limited [Order No. 17/AAR/2021 dated 07.05.2021]

Subsequent to notifying the decision of the 43rd GST Council Meeting, certain doubts had been raised by the Trade and Industry. Accordingly, in order to clarify the issues, the CBIC has issued a series of Circulars, which have been summarized hereunder:

In our Update dated 10 June 2021, we had apprised you of the divergent views of division bench of the Bombay HC on the constitutional validity of intermediary service provision under GST. While Justice Ujjal Bhuyan had opined that intermediary service to be unconstitutional, Justice Abhay Ahuja had a dissenting view, upholding the constitutional validity of the intermediary service provision. In his dissenting view pronounced on 16 June 2021, Justice Ahuja has inter alia made following broad observations:

Constitutional Challenge

• As a settled principle of law, there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature;
• The amendment to the Constitution for introduction of GST, has defined the term to mean inter alia any tax on supply of goods, or services, or both by including the same in sub-Clause 12A of Article 366 of the Constitution of India;
• The term ‘supply’ has been defined under the GST Law and not under the Constitution to keep the process of future amendment simple whereas the terms ‘goods and services’ are defined under both. The expression ‘goods’ was already defined under Article 366 to include all the materials, commodities and articles. Further, the term ‘services’ has been defined under Article 366 to mean anything other than goods;
• In a similar challenge to the GST Compensation Act and Rules, in the case of UOI vs. Mohit Minerals Private Limited and Anr. [Civil Appeal No. 10177 of 2018], the SC had relied upon the statement of Objects and Reasons to the Constitution 101st Amendment Act, 2016 for the introduction of GST. Thereafter, the SC quoted Art. 246A, 269A and others and sections of the Constitution (101st) Amendment Act which were relevant in respect of deciding the challenge relating to the Compensation to States for loss of revenue on account of introduction of GST to finally hold that that the Compensation Act as well as the Rules were not unconstitutional or ultra vires the Constitution of India;
• Similar to the analogy in the case of Mohit Minerals (supra), it was observed that as per the Statement of Objects and Reasons of the IGST Act, the same has been enacted for levying GST on the supply of goods or services or both which takes place in the course of inter-State trade or commerce;
• It is apparent that the IGST Act has been enacted by the Parliament for levy of IGST on inter-state supply of goods or services, inter alia, pursuant to the exclusive power contained in Art. 246A(2);
• Under Article 269A, Parliament has powers to make laws (i) with respect to GST where the supply of goods or services or both takes place in the course of inter-State trade or commerce or (ii) on the principles determining place of supply, and when a supply of goods or services takes place in the course of inter-state trade or commerce;

GST Provisions

• Under the IGST Act, the only exception is that if the intermediary has provided the service on his own account in which case, he may claim to be an exporter of the service if he otherwise falls within the definition. It would not be an export of services in as much as Intermediary Services are specifically provided in Section 13 (8)(b) under the authority of the Constitution of India provided in Article 269A read with Article 246A;
• In the instant case, the Petitioner is providing intermediary service of arranging, marketing, facilitating the export of his overseas customers to Indian importers and therefore he receives commission. It is in respect of these intermediary services that Section 13(8)(b) refers to the place of supply of such service as the location of the supplier;
• Intermediary services are specifically dealt with, where it has been specifically provided that where the supplier or the recipient is outside India, then in respect of Intermediary services, the place of supply shall be the location of the supplier. There is no quarrel with the definition of export of services contained in Section 2 (6) of the IGST Act;
• When there is a specific provision defining Intermediary u/s. 2(13) of the IGST Act and Intermediary Services are specifically dealt with in section 13(8)(b), the question of application of general provision of Section 2(6) of export of services would not arise. Accordingly, there would therefore be no question of deeming Petitioner’s supply of intermediary services to be intra-State supply;

Deeming Fiction

• Section 8 of the IGST Act deals with nature of supply and Section 13 deals with place of supply. Both the provisions have different purposes. While Section 8(2) refers to a situation to be intra-state if location of supplier and place of supply is in the same State, Section 13(8) refers to place of supply being the location of the supplier of service in case of intermediary services whereas in the instant case the service recipient is outside India;
• In Section 8(2) the reference is to the same State in India, whereas in Section 13 (1) read with Section 13(8)(b) it is location of the service recipient being outside India. Once the Parliament has in its wisdom stipulated the place of supply in case of Intermediary Services be the location of the supplier of service, no fault can be found with the provision by artificially attempting to link it with another provision to demonstrate constitutional or legislative infraction;

Article 286 of the Constitution

• Firstly, Article 286 prevents one State in India from imposing any tax on supply of goods and services within another State as that is the prerogative of individual States i.e., no authority to any State to impose tax on intra state supply within another State except that other State;
• Secondly, it does not permit any State in India to authorize imposition of tax on import into or export out of the territory of India of goods and services as that is the prerogative of the Central Government;
• Thirdly, it states that the Parliament alone and not the State Legislatures will formulate the principles for determining when supply of goods or of services or both is outside the State or import into or export out of India;
• Accordingly, the whole purpose of Article 286(2) is to empower the Parliament to formulate principles to determine the situs of supply, which is also stated in Article 269A;

Scheme of the IGST Act

• In terms of Section 5 of the IGST Act, all that on inter State supplies of goods and services, there shall be levied IGST, which shall be paid by the taxable person. There is no divergence of view that the scheme, scope and object of the IGST Act is a levy on inter-State supplies and the supply in this case is an inter-State supply;
• Parliament, can by law determine the place of supply, which pursuant to Article 269A(5) of the Constitution of India, it has done by enacting Sections 10 to 14 on place of supply. Section 13(8)(b) pertains to the case of intermediary services, where the service recipient is outside India and where the place of supply has been provided to be the location of the supplier;
• When the Constitution has empowered the Parliament to formulate principles determining the place of supply, Section 13(8)(b) cannot be said to be ultra vires the charging section as the same does not violate the levy on the supply made by the intermediary, particularly in view of Section 7, which designates such supplies to be inter-State supplies.

In light of the above observations, Justice Ahuja, agreeing with the judgement of the Gujarat HC in the case of Material Recycling Association of India vs. UOI and Ors. [R/Special Civil Application No. 13238 of 2018 with R/Special Civil Application No. 13243 of 2018] held that the legitimacy of Section 13(8)(b) or Section 8(2) of the IGST Act cannot be doubted. Accordingly, the Constitutional validity of Section 13(8)(b) or Section 8(2) of the IGST have been upheld.

Failing to attain finality on the matter at hand due to the contrary views of the Division Bench, the same has now been directed to be placed before the Chief Justice on the administrative side for his decision.