Newsletter

In the past 4 years of GST India, there have been significant changes in the economy. However, even with 44 Council meetings and the countless advance rulings, the law is yet far from settled. Nonetheless, the GST law has been developing at a considerable pace.

While other laws, such as Direct Tax and Customs Laws are as old as time, there are still various developments in this regard. In DT, the Government has now increased the fold of TDS from service sector to also include goods. As for Customs, the Government is still bringing in various goods under the umbrella of BIS.

Compiling all such developments, we are glad to bring you the 11th 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.

The DGFT vide Trade Notice No. 08/2021-22 dated 08 July 2021 has temporarily kept the issuance of benefits / scrips under MEIS, SEIS on hold due to changes in the allocation procedure. During this period, no fresh applications will be allowed to be submitted online at the IT module and applications that are already submitted and pending for issuance of benefits will also be kept on hold until further notice.

During the filing of an application under the MEIS Scheme on the EDI portal, the Petitioner had inadvertently selected the intent for claim of benefit as ‘No’ instead of ‘yes’. Accordingly, the claim of MEIS had been rejected by the Revenue. Aggrieved, the Petitioner preferred a Writ before the Madras HC seeking quashing of the order rejecting benefit under the MEIS Scheme.

The HC observed that the Petitioner had unintentionally made an error while uploading the shipping bills on the EDI system and the error is hyper-technical, inadvertent and a human error. The HC further observed that the intention of the Petitioner was clearly expressed in the shipping bills. Basis the above observations, the HC set aside the order passed by the Revenue and held that the Petitioner was entitled to the benefit under the MEIS Scheme and also directed the Respondent to grant consequential benefits.

K.I. International Limited [W.P. No. 16328 of 2020 dated 23 June 2021]

Authors’ Note:

It is now a settled principle that the Revenue shall not withhold substantial benefits to an assessee on account of hyper-technical inadvertent errors. Notably, the Bombay HC in the case of Portescap India Private Limited [Writ Petition No. 2532 of 2019] it was held that such errors are a procedural defect and curable considering the fundamental objective of the scheme. However, the Revenue authorities seldom take note of such judgements before rejecting claims. This only adds to the litigation burden on the assessees and the higher judicial authorities.

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.