Newsletter

With the festivities all around in the last quarter of the calendar year, the spirits are high among the people! Further, with the re-opening of the TRAN-1 portal, which is currently live, the taxpayers are making the most of it by revising their earlier filed forms and claiming the missed credit. The month of September also witnessed some of the most impactful amendments in the CGST Act. Most notably, Section 16 of the CGST Act has been amended, extending the time limit for availing ITC in respect of invoices or debit note for a particular Financial Year till the 30th of November of following Financial Year. However, there have also been amendments, which are not quite welcome by the trade, namely the rule prescribing the reversal of credit, in case of non/short-payment of dues to a vendor within 180 days.

On the Regulatory front, the MCA has redefined Small Companies by enhancing the cap of paid-up capital and the turnover. Further, the MCA has amended the CSR Policy, which will have an impact on the stakeholders.

Compiling all such developments, we are glad to bring to you, the 25th Edition of our ‘Vision 360’ Newsletter in association with TIOL. We have covered the key judicial and legislative developments in Direct, Indirect Tax other regulatory areas in the month of September 2022. We hope that reading of the newsletter would bring an enriching experience to you! Your valuable feedback is always welcome at consult@gstlegal.co.in or updates@gstlegal.co.in 

The Petitioner had been subjected to a Show Cause Notice, demanding differential duty on alleged short-payment of duties during the import of goods. It was alleged that the Petitioner did not declare entire amount payable of the imported model with intent to evade payment of customs duty. The Petitioner had unsuccessfully preferred an application before the Settlement Commission, who crystalized the demand along with interest and penalty. Aggrieved, the Petitioner preferred a Writ before the Bombay HC.

The Bombay HC observed where there is no substantive provision requiring the payment of interest, the authorities cannot, for the purpose of collecting and enforcing payment of tax, charge interest thereon. It was further observed that interest on delayed payment of duty is applicable only for customs duty leviable u/s. 12 of Customs Act and the charging section for levy of additional duty is the not u/s. 12, but u/s. section 3 of the amended Act. Accordingly, there is no substantive provision requiring the payment of penalty or interest. 

In view of the above observations, the HC held that the imposition of interest and penalty on portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction.

Mahindra and Mahindra Limited (Automotive Sector) [2022-VIL-690-BOM-CU]

GLS Comments:

The Bombay HC has rightly set-aside the imposition of interest and penalty on additional duties. It would be pertinent to note that as a settled principle of law, must be a charging section to create liability. In RE: Khemka and Co. (Agencies) Private Limited [1975 (2) SCC 22], it had been held that there must be, firstly a liability created by the Act, secondly, the Act must provide for assessment and thirdly, the Act must provide for enforcement of the taxing provisions. Thus, imposing of a liability on an assessee in absence of a express provision, is unsustainable.

In RE: Modi Sugar Mills Limited [1961 (2) SCR 189], the Apex Court had held that taxing statutes cannot be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed. Thus, nothing can be implied, which is not expressly provided.

On account of technical glitches on the GSTN portal, the Appellant could not avail transitional credit in GST. Accordingly, they had filed an application for refund of such unutilized CENVAT credit u/s. 11B of the Excise Act, which could not be transferred. Simultaneously, the Appellant had also prayed the Jurisdictional Department to allow re-filing of Form TRAN-1. The refund application came to be rejected and such rejection was upheld by the Appellate authority inter alia on the ground that Section 11B does not specifically allow refund of unutilized CENVAT credit.

Aggrieved, the Appellant preferred an Appeal before the Tribunal. The Tribunal observed that as the refund rejection order had not disputed the eligibility of credit, the Appellant has rightly claimed the refund of CENVAT credit. It was further observed that mere change in taxation regime should not affect the credit availment right of the assessee. By relying on the judgement passed by the Karnataka HC in RE: Slovak India Trading Co. Private Limited [2006 (201) E.L.T. 559 (Kar.)], the Delhi CESTAT ruled that the appellant is rightly entitled for the credit and also refund. The Tribunal further stated that as the Appellant was unsuccessful to file TRAN-1 due to IT glitches, the refund of said amount in cash remains the only possibility under transitional provisions of the CGST Act.

Monochem Graphics Private Limited [Ex. Appeal No. 51140/2022 dated 04 October 2022]

GLS Comments:

While the New Delhi Tribunal has relied upon the Karnataka HC judgement to allow the cash refund of unutlized CENVAT credit u/s. 11B of the Excise Act, the Mumbai Tribunal is often hesitant to do so, as it is chained down by the binding judgement of the Bombay HC in RE: Gauri Plasticulture [2019 (30) GSTL 224]. In this case, it had held that cash refund of unutilized CENVAT credit cannot be allowed in absence of a specific provision.

However, an interesting question that arises is whether the Bombay HC can rule in take a different stand from Karnataka HC in Slovak (supra), which has been maintained by the Apex Court. Thus, the moot question is whether the the doctrine of merger would apply when the SC has maintained the Karnataka HC in Slovak (supra), basis the concession of the ASG appearing for the Revenue. The matter is far from settled.

The CBIC vide Press Release dated 04.10.2022 has issued clarification regarding time limit for certain compliances pursuant to issuance of Notification No. 18/2022 dated 28.09.2022, which came into force from 01.10.2022. The time limit for claiming ITC in respect of a particular FY has been extended and fixed as 30 November of the next FY, or furnishing of the relevant annual return, whichever is earlier. Following are the clarifications provided in the Press Release:

The CBIC has also clarified that the aforementioned FY compliances can be met in the relevant return or statement filed/ furnished upto 30 November of the subsequent FY, or the date of furnishing annual return for the said FY, whichever is earlier. It is also clarified that no extension shall be granted for filing monthly returns/statements for October (due in November) or quarterly returns/statements for the quarter ending in September.

The GSTN has issued an update on Re-opening of TRAN Forms to claim Transitional ITC on GST common portal by aggrieved taxpayer, from 01.10.2022 till 30.11.2022 (‘the impugned period’). Vide the said update, the GSTN has provided the procedure to file the TRAN Forms and noted down certain precautions which the taxpayers may bear in mind during filing of such forms. Following are the key guidelines laid down:

General

• The default filing status of TRAN Forms for all the taxpayer is visible as ‘Not filed’ which implies that TRAN Forms are not filed in the new window provided during the impugned period.

• ITC shall reflect in the credit ledger of the taxpayer post the verification 

Navigation to file TRAN 1/TRAN 2 Forms

• Access the www.gst.gov.in link

• Login to the GST Portal

• Services - Returns - Transitional Forms - TRAN-1/TRAN-2

Guidelines for filing GST TRAN-1

• The taxpayer then have to select one option from Yes or No for the question asked in respect of returns furnished for the period of six months immediately preceding the appointed date.

• If the taxpayer select the Yes option then all the tables of TRAN1 shall be open for the taxpayer to fill in. However, if the taxpayer select No option then the system would not allow the taxpayer to fill details in table 5 and table 8 of TRAN-1 and the said tables will be hidden.

• Further the taxpayer should ensure that there are no saved records in table 5 & table 8 of TRAN 1 form before selecting No option.

• In case where the details to be added in table 6(a), 6(b), 7(a) and 7(b) are substantial, the taxpayer can prepare in excel template and upload the JSON file in respective tables

• In case where the details to be added in table 5(b), 9(a), and 9(b) are substantial, the taxpayer can prepare in CSV template and upload the CSV file in respective tables

• In case where the details to be added are not substantial, the taxpayer can choose to file the form online and can add the details in the required tables and then click on save button on each table to save the details

• The details which are added in aforementioned table by using the JSON or CSV or online facility, can download the details and verify the same before submitting the form.

• The taxpayer can also download the complete TRAN-1 details added by them in excel file and verify the same before submitting the Form

• Once TRAN-1 is filed successfully, it cannot be revised.

Precautions to be taken care of during TRAN 1/TRAN 2 filing

• The taxpayer are advised to save the details periodically, download the added details and cross verify downloaded data with the added uploads before submitting the forms

• In case of revising earlier filed TRAN, the taxpayer is requested to file the form with all required details and the originally claimed credit and credit being claimed now should be same.

• The preview functionality wherein the taxpayer can download the filed TRAN form in excel format to ensure the correctness of the details is also provided.

• Further if the Forms are not filed with DSC or EVC then the submitted forms would not be filed.

GST TRAN 2 Form

• The taxpayer should file the entire claim in one consolidated FORM GST TRAN-2, instead of filing the claim tax period wise and should mention the last month of the consolidated period 

• Further the TRAN 2 Form will be made available only if the taxpayer has filed TRAN 1 and had made declaration in table 7 of TRAN 1

• The taxpayer can also download the complete TRAN 2 details same as TRAN 1 in excel file to verify the same before submitting the Form

• The taxpayer can also download the earlier file TRAN 2 form

• The taxpayer must file the TRAN 2 form after clicking the submit button by EVC or DSC, once it is submitted it cannot be revised

Supporting Documents

• The taxpayer now can also upload separately any supporting documents after filing the TRAN Forms

• Once all the documents are uploaded the taxpayer is required to submit the same, and once the files are submitted no further changes can be made.

The CBIC vide Notification No. 18/2022 - Central Tax dated 28 September 2022 has notified various provisions of the Finance Act 2022 to be effective from 01 October 2022. However, none of the provisions bear more importance than Section 16 of the CGST Act, which provides for the time-limit for availment of ITC for a particular F.Y. As per Section 16(4) of the CGST Act, as it stands today, the last date to avail ITC for a F.Y. is the due date of Form GSTR-3B for the month of September of the subsequent F.Y. With effect from 01 October 2022, the due date will be extended to 30th Day of November of the subsequent F.Y. The key amendments to come into effect from 01 October 2022 have been tabulated hereunder:

GLS Comments:

The above-mentioned amendments had been recommended in the Finance Bill in February 2022. However, the same are being notified after a period of 6 months. Nonethless, as they say... better late than never. These amendments are welcome by the Trade and Industry. Especially the amendment to Section 16(4) of the CGST Act. Further, in lines with the said amendment, various due dates such as the last day for issuane of credit notes and reporting in GSTR-1, rectifications in GSTR-1, GSTR-3B, etc.

It would further be pertinent to note that generally the Financial Statements of any Company are closed in the month of September. Thus, any missed-out credit, transactions, credit notes, etc. which are identified during the finalizing and closing of the Financials Statements in the month of September, can now be availed by virtue of the amendment in Section 16(4) of the CGST Act. 

It shall also be borne in mind that the due date for availing credit u/s. 16(4) has been extended till 30th November of the following F.Y. and not the due date of filing the return for the month of November. Thus, effectively the credit for a particular F.Y. can be availed in GSTR-3B for the month of October of the following F.Y., provided that the same is filed on or before 30th November.

The Government has further extended the Foreign Trade Policy 2015-20 by six months w.e.f. 1^st October, 2022 due to the global economic uncertainties.

The DGFT has issued Notification No.33/2015-2020 dated 16 September, 2022 permitting invoicing, payment and settlement of exports and imports in INR to sync with the RBI Circular dated 11 July 2022. This notification has been made effective immediately.

Further, the settlement of trade transactions is also permitted through Special Rupee Vostro Account in India in terms of the prescribed procedure under the relevant regulations of Foreign Exchange Management (Deposit) Regulations, 2016.

The Applicant had sought an advance ruling before the Karnataka AAR to ascertain whether ITC would be available on vouchers and subscription packages procured from third party vendors that are made available to the eligible customers, participating in the loyalty program against the loyalty points earned by such customers.

The Applicant contended that the procurement of the vouchers and the subscription packages on payment of the GST from third party vendors are exclusively for the purpose of business as an e-commerce platform leading to increase in earning commission. The Applicant had further submitted that the vouchers and subscription packages are classified as a services and not goods.

The AAR while referring the definition of voucher u/s. 2(118) of the CGST Act, observed that the subscription packages procured is also voucher as it plays an obligation on the potential supplier to accept it as consideration for supply of goods or services to the customer. It was further observed that that the vouchers are a movable property capable of being transmitted electronically or supplied physically, and thus qualify as goods.

The AAR further observed that the participation of a customer in the loyalty program will be dependent on meeting the pre-defined eligibility criteria plus by agreeing to the terms and conditions associated with the program. It was also observed that the Applicant recovers the full amount from the customer and gives the loyalty points free of cost, and the said loyalty points do not have any monetary value and are non-transferable and cannot be converted to cash. Hence, it implies that the vouchers are issued free of cost to the customers. In view of the above, the AAR held that the Applicant is not eligible to avail the ITC on the vouchers in terms of section 17(5)(h) of the CGST Act.

Myntra Designs Private Limited [KAR ADRG 33/2022 dated 14 September 2022]

CBIC vide Notification No. 79/2022-Customs (N.T.) dated 15 September 2022 has amended the Electronic Duty Credit Ledger Regulations, 2021 which specifies the manner of issuance of duty credit. Pursuant to the amendment, the validity of e-scrip has been extended to 2 years from the date of its creation in the ledger.