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The Petitioner, a 100% EOU was engaged in exporting major portion of its manufactured products and clearing minor portion for sale in the Domestic Tariff Area (DTA). The Petitioner imported capital goods and input for manufacturing its products and availed exemption of BCD and IGST paid on such imports under the relevant notifications.
Invoking the extended period of limitation, the DRI initiated investigations against the Petitioner seeking to deny refund of IGST in light of restrictions envisaged u/r. 96(10) of the CGST Rules as amended by Notification No. 54/2018 dated 09 October 2018. The DRI sought details of refund received by the Petitioner and requested the Petitioner to voluntarily pay customs duty in the form of IGST and Compensation Cess.
Aggrieved, the Petitioner preferred a Writ before the Madras HC challenging the vires of Rule 96(10). The said Rule inter alia provides that the claimant shall not have availed the benefit of IGST exemption in terms of certain customs notifications. The Petitioner contended that the said Rule violates the provisions in the parent statute because the only prescription in Section 16 of IGST Act and Section 54 of CGST Act was to the extent of outlining the form and manner for claiming refund and not for restricting refund.
It was further argued by the Petitioner that the only intent was to block IGST refund for exporters who had imported inputs under Advance Authorisation Scheme. However, in the process, amended Rule 96(10) has disentitled exporters who do not import inputs under Advance Authorisation scheme which was never the intent.
The Writ has been admitted by the Madras HC.
Comstar Automotive Technologies Private Limited vs. Union of India
Earlier the CBIC had provided waiver from recording of UIN on the invoices issued by retailers / other suppliers till March 2020. Taking cognizance of the continued issue of non-recording of UIN, the CBIC vide Circular No. 144/14/2020 - GST dated 15 December 2020 has given waiver from recording of UIN on the invoices issued by the retailers / suppliers, pertaining to the refund claims from April 2020 to March 2021, subject to the condition that the copies of such invoices are attested by the authorized representative of the UIN entity and the same is submitted to the jurisdictional officer.
The Petitioner had contemplated to sell certain copper wire rods, etc. on high sea sale basis to the Original importer. Accordingly, two Bills of entry in respect of two consignments had been filed in the name of the Original importer.
The said Importer subsequently declined to get purchase the imported goods on high seas, however agreed to co-operate in getting No Objection Certificate (NOC) and for substitution of the name of the Petitioner in the two BOE. A request was made for the amendment of the BOE, which was duly carried out. Subsequently, the DRI authorities seized the consignment of the Petitioner on the ground that certain provisions of Notification No.25/1999 – Customs 28.02.1999 had been contravened. Aggrieved, the Petitioner filed a Writ before the Bombay HC.
Referring to Section 110 of the Customs Act, the HC observed that if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. Accordingly, the proper officer must have reason to believe that the goods in question are liable to confiscation under the Customs Act. Once the proper officer forms such a belief then he may seize such goods.
It was further observed that the expression 'reason to believe' is an expression of considerable import and in the context of the Customs Act, confers jurisdiction upon the proper officer to seize goods. The HC further observed that the belief has to be of the proper officer who had made the seizure. It cannot be that seizure is made by one officer and the reasons to believe are recorded by another officer. It was further observed that the proper officer who made the seizure must have reasons to believe that the seized goods are liable to confiscation. Seizure of goods is not an end in itself.
It was further noted by the HC that the Petitioner had not sought any concession or exemption or benefit under Notification No. 25/99 – Customs dated 28.02.1999. Accordingly, there could not have been any reason to believe that the said imported goods had contravened any of the provisions of section 111 dealing with confiscation and hence liable to seizure under section 110.
It was further remarked that the cancellation of amendment was not carried out by the authority which had allowed the amendment i.e., Customs authorities, Nhava Sheva, after due application of mind. It was carried out as per the direction of DRI, Zonal Unit, Ahmedabad. Such cancellation certainly resulted in adverse civil consequences upon the Petitioner who was the beneficiary of the amendment. It was further observed that without putting the Petitioner to notice and without giving an opportunity of hearing, the amendments could not have been unilaterally cancelled. Such cancellation of amendment would, therefore, be a nullity having no legal sanctity.
Basis the above observations, the HC set-aside the order for seizure of goods and directed for the release of the goods subject to the payment of the requisite duty and completion of necessary formalities.
Nikkom Copper and Conductors Private Limited vs. Union of India and Ors. [W.P. No. 3834 of 2020]
As we approach towards the end a rather nightmarish 2020, hopes are high for better days in the ensuing year, 2021. Amid all the difficult times faced this year, one must also take note of the collective global effort taken by everyone to fight the COVID-19 pandemic, especially the health workers and the State authorities, who kept the economies running.
Speaking of the initiatives taken by the State authorities, we have analyzed the PLI Scheme of the Atmanirbhar 3.0 package, in the Sparkle Zone of our newsletter. We have also penned down articles exploring the scope of ITC restriction provisions under GST and position of the MSME Sector in India.
With other judicial and legislative developments in the fields of taxation along with our insightful analysis, we are glad to present to you the 4th edition of our Vision 360 Newsletter in association with TIOL.
The Petitioner has challenged the constitutional validity of Section 17(5)(d) of the CGST Act to the extent that it denies the benefit of ITC to the petitioner as well as it provides a time bar restriction for the availment of ITC. The Petitioner has submitted that it has not availed ITC during the pendency of the writ petition and prayed that in the event the writ Petitioner succeeds, then it may be allowed to avail the benefits.
The Calcutta HC has requested the Additional Solicitor General of India and the Additional Advocate General of State of West Bengal to file their affidavits in this matter. The HC has further listed the matter to be heard in January 2021.
Instakart Services Private Limited vs. Union of India [W.P.A. 8205 of 2020]
The Petitioner has challenged the constitutional validity of Section 16(2)(c) of the CGST Act before the Gujarat HC. The said provision inter alia denies ITC to a buyer of goods or services, if the tax charged has not been actually paid to the Government by the supplier of goods or services. The Petitioner challenged the said provision, inter alia on the following grounds:
Taking cognizance of the submissions made by the Petitioner, the Gujarat HC has issued a notice in this regard, returnable on 19 January 2021.
Surat Mercantile Association vs. Union of India [R/SPECIAL CIVIL APPLICATION NO. 15329 of 2020]
It would be pertinent to note that a similar Writ Petition has been filed before the Delhi HC in the case of Bharti Telemedia Limited vs. Union of India and Ors. [W.P.(C) 6293/2019], wherein a notice has been issued. As for the erstwhile law, the Madras HC in the case of Sri Ranganathar Valves (Private) Limited [W.P.No.38488 of 2015], had held that the buyer cannot be denied ITC on account of sellers not depositing tax.
The CBIC vide Notification No. 90/2020 – Central Tax dated 01 December 2020 has mandated the taxpayers to report 8-digit HSN codes in tax invoices for certain prescribed chemicals such as Dimethyl propylphosphonate, carbonyl dichloride, etc.
In the later months of the year 2019 and the beginning of 2020, the CBIC had issued certain trade notices in Customs, requesting the importers and exporters to refrain from classifying their goods under the ‘other category’. Similarly, on various occasions, the Government had expressed their will to align the use of correct and apt HSN codes across all fields of indirect taxation. This instant notification seems to be a step towards to goal of correct reporting of HSN codes for tradable goods.
The Appellant had imported certain raw materials and equipment, from their US based parent company. The case was forwarded to Special Valuation Branch (‘SVB’) for detailed investigation. Upon investigation, the SVB rejected the Appellant’s declared transaction value and loaded the declared value. The said order was further confirmed by the Commissioner (Appeals). Aggrieved, the Appellant preferred an Appeal before the CESTAT.
It was contended by the Appellant that the Respondent’s orders fly in the very face of Rule 4(3)(a) of the Customs Valuation (Determination of Price of Imported Goods) Rules, and settled principles of law on redetermination of value. In terms of Rule 4(3)(a) of the CVR, 1988, the Department needs to accept the transaction value even in cases where the parties are related. Before rejecting the transaction value, a duty is cast on the Department to examine the circumstances surrounding the sale and the transaction value may be rejected only if such examination indicates that the relationship between the parties influenced the price.
The CESTAT observed that no clarification whatsoever was sought by the Department from the Appellant as to the relevance of the Chemical weekly report before proceeding to rely on the report. It was further observed that no opportunity of hearing in this regard was afforded to the Appellant. The Department relied upon the international chemical report without actually assessing whether the items mentioned therein and the items imported were comparable in quality as well as quantity and that no test report had been obtained.
It was further observed by the CESTAT that the original authority had given a finding that that the onus to prove that their relationship has not affected the pricing lies on the importer in terms of the rules cited above. However, the same is not the correct proportion of law. It was observed that as per Rule 3(a) of the Customs Valuation Rules, where the buyer and the seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate the relationship did not influence the price. It was observed that neither the original authority nor the Appellate authority had given reasons to hold that the relation had indeed affected the prices.
The CESTAT further observed that no reasons were produced by both the authorities for rejecting the submissions of the appellant and that no discussion and findings were given by both the authorities. In the end there was rush to complete the proceedings.
Basis the above observations, the CESTAT allowed the appeal by way of remanding the matter back to the original authority for proper examination of all facts and submissions of the Appellant and to pass a speaking and reasoned order as per law.
It has been seen that various SVB matters have been pending at the adjudication stage despite the Revenue’s clear instruction to dispose the same on expeditious basis. It would be pertinent to note that such delays in finalization of SVB matters adversely affect the importers to a great extent.
Pending the SVB Order, the importers are required to pay the application RD / EDD for clearance of their consignments imported from related parties. Although such duties paid on imports during investigation can be refunded, it casts additional burden upon importers. In this regard, the Revenue shall ensure that all SVB matters are disposed judiciously and expeditiously.
CBIC vide Notification No. 89/2020 – CT dated 29 November 2020 has waived the penalty for non-compliance of provisions of dynamic QR code in B2C invoices between the period 01 December 2020 to 31 March 2021 subject to the condition that such person complies with provisions of dynamic QR code in B2C invoices w.e.f. 01 April 2021
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