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:
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:
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:
Circular No. |
Clarification |
Circular No. 149/05/2021 - GST dated 17 June 2021 |
|
Circular No. 150/06/2021 - GST dated 17 June 2021 |
|
Circular No. 151/07/2021 - GST dated 17 June 2021 |
|
Circular No. 152/08/2021 - GST dated 17 June 2021 |
|
Circular No. 153/09/2021 - GST dated 17 June 2021 |
|
Circular No. 154/10/2021 - GST dated 17 June 2021 |
|
Circular No. 155/11/2021 - GST dated 17 June 2021 |
|
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
GST Provisions
Deeming Fiction
Article 286 of the Constitution
Scheme of the IGST Act
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.
Considering 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 14 June 2021 has provided the facility of manual filing of such forms till 30 June 2021. At a later date, 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 44th GST Council meeting held on 12 June 2021 under the Chairmanship of Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman, recommended changes in the GST Rates to remain in force till 30 September 2021 for specified items that are being used in COVID-19 relief and management. The recommendations for GST Rate changes have been tabulated hereunder:
Sr. No. |
Description |
Present Rate |
Recommended Rate |
Medicines |
|||
1. |
Tocilizumab |
5% |
NIL |
2. |
Amphotericin B |
5% |
NIL |
3. |
Anti-Coagulants like Heparin |
12% |
5% |
4. |
Remdesivir |
12% |
5% |
5. |
Any other drug recommended by Ministry of Health and Family Welfare (MoHFW) and Dept. of Pharma (DoP) for Covid treatment |
At applicable rate |
5% |
Oxygen, Oxygen generation equipment and related medical devices |
|||
6. |
Medical Grade Oxygen |
12% |
5% |
7. |
Oxygen Concentrator/ Generator, including personal imports thereof |
12% |
5% |
8. |
Ventilators |
12% |
5% |
9. |
Ventilator masks / canula / helmet |
12% |
5% |
10. |
BiPAP Machine |
12% |
5% |
11. |
High flow nasal canula (HFNC) device |
12% |
5% |
Testing Kits and Machines |
|||
12. |
Covid Testing Kits |
12% |
5% |
13. |
Specified Inflammatory Diagnostic Kits, namely D-Dimer, IL-6, Ferritin and LDH |
12% |
5% |
Other Covid-19 related relief material |
|||
14. |
Pulse Oximeters, incl personal imports thereof |
12% |
5% |
15. |
Hand Sanitizer |
18% |
5% |
16. |
Temperature check equipment |
18% |
5% |
17. |
Gas/Electric/other furnaces for crematorium, including their installation, etc. |
18% |
5% |
18. |
Ambulances |
28% |
12% |
It has been further provided that these rate reductions/exemptions shall remain in force upto 30 September 2021.
With the slow but gradual revival of the Country, the economy seems to be taking up pace once again. This is largely on account of the various reliefs extended by the Tax authorities for the in relation to compliances and the Special Drives undertaken by the CBIC for processing of refund and drawback claims. Similarly, the judicial and quasi-judicial authorities have also been liberal in condoning technical breaches, while also relaxing limitation provisions.
Compiling all such developments, we are glad to bring you the 10th Edition of our ‘Vision 360’ Newsletter in association with TIOL. We have covered all the judicial and legislative developments in Direct, Indirect Tax other regulatory areas. 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.
A division bench of the Hon’ble Bombay HC in the case of Dharmendra Jani vs. Union of India [Writ Petition No. 2031 of 2018], heard a Writ Petition challenging the taxability vires of the intermediary service provider provision under GST. While one of the Judges has held the provision to be unconstitutional, the other has listed the matter on 16 June 2021 to provide his judgement. Justice Ujjal Bhuyan has reasoned that the intermediary service is undoubtedly an export of service. It is only by virtue of a deeming fiction that the said service is made exigible to tax. It was held that such an artificial deeming fiction runs contrary to the scheme of the CGST Act as well as the IGST Act besides being beyond the charging sections of both the Acts.
GLS Comments:
This judgement could prove to be a huge breakthrough in the industry of intermediary service as it would substantially reduce the tax burden on such mediators or marketing and promotional service providers. A long running issue in the indirect tax world could finally be put to rest, provided that Justice Abhay Ahuja concur with the view of Justice Bhuyan.
Assuming that Justice Ahuja agrees with judgement given, the judgement of the Gujarat HC in the case of Material Recycling Association of India [2020-TIOL-1274-HC-AHM-GST], would essentially be negated, wherein the constitutional validity of the intermediary service u/s. 13(8)(b) of the IGST Act had been held to be valid. With two different view of two different HCs, the jurisdiction of the assesses would play a role in deciding the taxability. However, it is contemplated if Justice Ahuja concurs with the view of Justice Bhuyan, the matter would be taken up by the Legislative for suitable amendments in the IGST Act.
The Ministry of Commerce and Industry had approved the Product Linked Incentive (PLI) Scheme for White Goods (Air Conditioners and LED Lights) vide Notification dated 16 April 2021. In respect thereto, a detailed guideline has been issued for smooth and effective operation of the PLI Scheme for domestic manufacturers of White Goods. The key guidelines have been summarised hereunder:
Application and Approval
The application window for the PLI Scheme shall be open online at the portal from 15 June 2021 to 15 September 2021. The PLI Scheme shall be implemented through a Project Management Agency (PMA) under the instruction of the Department of Promotion of Industry and Internal Trade (DPIIT). The Applicants application will be processed by a PMA and on receiving approval, a Bank Guarantee for an amount equivalent to 0.5% of the committed investment shall be submitted in the proper format. The BG will be valid for 18 months.
Criteria
The Applicants shall fulfil both the criterions of cumulative incremental investment in plant and machinery as well as incremental sales over the base year in that respective year to be eligible for PLI. Investment under the guidelines shall include investment on plant, machinery, equipment and associated utilities (as specified in the guidelines) and shall be used in the regular course of manufacturing of the eligible products under target segments. The plant machinery equipment shall be purchased or leased. Expense incurred in respect to the plant, machinery and equipment’s shall also be considered.
Investment in Research and Development (R&D) shall also be considered as investment if the investment is under capital investment on R&D and product development. The revenue expenditure shall be excluded from ambit of investment. However, it shall be noted that the investment in R&D shall not exceed 15% of the total committed investment.
Eligibility
Incentive under the PLI shall be provided to Companies making brown field or green field Investments for manufacturing in target segments in India. The Scheme is applicable to the Applicants who process the raw materials or inputs and its results emerges into a new product. Mere, value addition to the Scheme shall not be eligible for the scheme benefit.
The eligibility shall be subject to thresholds of cumulative incremental investment and incremental sales of manufactured goods (as distinct from traded goods) over the base year for the respective year. The category of investment to be considered under each target scheme will be Large as well as normal investment. The Applicants must meet all the threshold conditions to be eligible for disbursement of incentive as detailed under Appendix A to the detailed guidelines. Further, Any entity availing benefits under any other PLI Scheme will not be eligible under this scheme for same products but the entity may take benefits under other applicable schemes.
Incentive
This PLI Scheme shall extend an incentive of 4% to 6% on incremental sales (net of taxes) over the base year of goods manufactured in India and covered under target segments, to eligible companies, for a period of 5 years subsequent to the base year (i.e., F.Y. 2019-20) and one year of gestation period. The incentive calculation will be capped on the basis of the net increment sale of the products up to 5 times for Air Conditioners and 6 times LED Lights, of the cumulative threshold investment in the previous financial year. The first year of investment will be FY 2021-22 and the first year of incremental sale will be FY 2022-23.
Tenure
This Scheme shall be provided for a period of 5 years (i.e., F.Y. 2021-22 to F.Y. 2028-29) subsequent to the base year i.e., F.Y. 2019-20 and one year of gestation period for fructifying investment to be implemented over FY 2021-22 to FY 2028-29. Further, F.Y. 2019-20 shall be treated as base year for computation of cumulative incremental investment and net incremental sales of eligible products as well as financial attributes under pre-qualification criteria.
Disbursement
The Application for claiming the disbursement of the claim shall be submitted along with requisite document in the formats given in the guidelines through PMA online. Claim for disbursement shall be filed by the Applicants latest by 31 October in the following F.Y. to which the claim pertains. Actual disbursement of the claim under the PLI Scheme for a respective year will be subsequent to that year. Upon appropriate recommendations with DPIIT, the PMA will be processing the claim for the disbursement within 45 days from the date of receipt of the claim.
|
Sign up for the Newsletter