Newsletter

The DGFT vide Notification No. 64/2015-2020 and Public Notice No. 53/2015-2020 both dated 31 March 2022, has extended the existing Foreign Trade Policy ('FTP') 2015-2020 and Handbook of Procedures ('HBP') 2015-2020 till 30 September 2022. 

The Applicant, inter alia engaged in business of manufacturing, marketing and distribution of cigarettes had sought advance ruling before the UP AAR to ascertain inter alia whether the extra packs of cigarettes given free of cost for purchase of certain packs, would be leviable to GST and whether the extra packs of cigarettes would be considered as exempted supplies or free samples.

The AAR observed that the additional packs were supplied for certain payment of packs. Accordingly, the Applicant was supplying two products at the price of one as ‘buy one get one free offer’. It was observed that the CBIC vide Circular No. 92/11/2019-GST dated 07 March 2019 had clarified that such additional supplies would not be liable to GST.

Golden Tobie Private Limited [TS-763-AAR(UP)-2021-GST]

The Applicant had sought an advance ruling before the UP AAR to ascertain the tariff classification of Driver Cab Air Conditioner Unit for railways. It had been submitted that such goods were not viable for use elsewhere other than the Railways.

Accordingly, the Applicant opined that the goods were appropriately classifiable under HSN 8607. The AAR observed that the goods under dispute would be manufactured by the Applicant strictly as per the specification and designs provided by the Indian Railways and meant to be solely used in railway rolling stock and nowhere else. Accordingly, it was held that Driver Cab Air Conditioner Unit for railways are correctly classifiable under HSN 8607 as parts of railways.

Prag Polymers [Advance Ruling No. UP ADRG 86/2021 dated 08 November 2021]

AUTHORS’ NOTES :

The classification of railway goods/ parts has been a bone of contention between authorities and taxpayers for donkey’s years. The issue which incepted under the Excise Regime has been very well carried forward into the GST regime. While certain judicial authorities have held that articles even though principally used for the Railways would merit classification under respective headings, certain judicial authorities have held otherwise. Recently, the Apex Court in RE: Westinghouse Saxby Farmer Limited [2021-TIOL-121-SC-CX-LB], has held that goods manufactured specifically for the Railways as per the designs and layouts provided by them, are rightly classifiable under CTH 8607. However, it shall be noted that a review application has been filed against the SC judgement in Westinghouse (supra).

The Appellant had obtained an advance authorization license, while exporting certain paints vide two shipping bills. However, the Appellant did not enter correct scheme code in the shipping bills i.e., mentioning ‘00’ instead of mentioning the scheme code as ‘01’. To correct this mistake, the Appellant had filed an application u/s. 149 of the Customs Act for conversion of free shipping bills to advance authorization shipping bills. However, the request was rejected on the basis of the time limit of 3 months prescribed in Board Circular No. 36/2010 and that goods exported were not subjected to physical examination. Aggrieved, the Appellant preferred and Appeal before the Chennai CESTAT.

As regards the limitation, the Tribunal observed that when the statute does not prescribe any time limit for filing an application for conversion of a shipping bill, the department cannot rely upon a circular to frustrate the provisions contained in the statute. When there is a conflict, the statute will definitely prevail over the Board circular.

In respect of rejection of rectification application on the ground of no physical verification, the Tribunal observed that, there is no requirement u/s. 149 that the amendment can be allowed only if the goods have been subjected to physical examination before export. In view of the above observations, the Tribunal held that the rejection of request for conversion of free shipping bills to advance authorization scheme shipping bills is not justified.

Carboline India Private Limited [2022-TIOL-168-CESTAT-MAD]

AUTHORS’ NOTES :

It is trite law that Circulars, being a subordinate law, cannot override the statutory provisions under law. The Madras HC in RE: Precot Meridian Limited [2019 ACR 813] had held that Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision. It shall be further noted that the Courts have time and again allowed rectification of Shipping Bills where the assesses have inadvertently entered the incorrect scheme code. In RE: Visoka Engineering Private Limited [TS-61-CESTAT-2022-CUST] had held that rejection of request for conversion of free shipping bills to Advance Authorization Shipping Bills are not justified.

The Applicant had sought an advance ruling before the UP AAR to ascertain whether to charge GST for availing reimbursement of expenses i.e., Basic Salary, ESIC, EPF, Bonus with service charge and further to ascertain whether the said service for deployed manpower was NIL rated supply in GST. The UP AAR observed that the Applicant was deploying manpower to MPPKVVCL and MPMKVVCL to distribute electricity in rural area, clamming them to Government entities. However, there was nothing on record to prove that said are Government entities. The invoices issued to MPPKVVCL and MPMKVVCL by the Applicant with description of supply of manpower was not a sufficient document.

It was further observed that in terms of section 15(1), as the supplier and recipient of the supply was not related then the price would be sole consideration of supply. Accordingly, it was held that GST @18% was chargeable on reimbursement of expenses.

Broadcast engineering Consultants India Ltd [TS-768-AAR(UP)-2021-GST]

In the last couple of years, we have witnessed and faced one major global threat after another. The Russia-Ukraine war is no exception. While the war is between the two countries at the moment, it has certainly affected the Global trade as well. The increase in oil prices, and the refusal of airlines to fly over the war-hit territories, has made the trade all the more difficult. Nonetheless, the last couple of years has taught us well how to deal with such international disruptions. 

Thus, despite all that is going on in the Eurasia, the Indian Legislature and Judiciary has maintained its pace to ensure economic development. Notably, the Comprehensive Economic Partnership Agreement between India and the UAE signed recently, provides zero-duty access to 90% of Indian products in the UAE. Coming to the domestic updates, the Apex Court in its recent judgement, upheld People’s priority over Government’s priority by giving precedence to Bank’s charge under SARFAESI Act over tax dues. On the Indirect Tax front, the CBIC has reduced the threshold for the E-Invoicing applicability, covering more taxpayers under its fold. Following are the key developments covered in this Newsletter:

• An analysis of the amendments in the Customs Act to overturn the judgement of the Apex Court in Canon India by designating the DRI as proper officers;
• A Deep dive into the issues relating to taxation on crypt-currencies, NFTs and other Virtual Digital Assets;
• HC’s decision to set aside SCN issued on the allegation of fraud by others in supply chain;
• The strategic India-UAE CEPA targeting to boost the merchandise trade between the two countries to US$ 100 billion over the next five years;
• Judicial and Regulatory updates in the Direct Tax, Indirect Tax and Regulatory fronts!

Compiling all such developments, we are glad to bring to you in new Avatar, the 18th 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. 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 Notification No. 58/2015-2020 dated 7 March 2022 has extended the due date for submitting applications for scrip-based schemes in the manner as tabulated hereunder:

The Petitioner had preferred a Writ before the Punjab and Haryana HC against the detention of goods in transit u/s. 130 of the CGST Act. The Petitioner submitted that the Revenue authorities had intercepted and detailed the goods in transit basis the allegation on genuineness of the transaction despite the driver of the vehicle being in possession of all the requisite documents. 

The Revenue alleged that the inward supply to suppliers of the Petitioner is from a supplier who is not having inward supply and is only engaged in outward supply without paying any tax. In this regard, the HC observed that Section 130 is a penal provision which is invocable only in certain situations, where the contravention has occurred with an intent to evade taxes. 

The HC held that a person can be attributed with intent to evade taxes only if the contravention of the provisions has some direct nexus with his action. A person cannot be held liable u/s. 130 for contravention of the provisions by other person in the supply chain. Basis the above observations, the HC set aside the SCN issued by the Revenue for alleged contravention of Section 130 of the CGST Act.

Shiv Enterprises [2022-TIOL-169-HC-P&H-GST]

AUTHORS’ NOTES :

It shall be noted that under the erstwhile VAT regime, the Apex Court had affirmed the Delhi HC’s view in RE: Arise India Limited [2018-TIOL-11-SC-VAT] tha failure to distinguish between bona fide and nonbona fide purchasing, the dealer would be hit by Article 14 of the Constitution. It shall be further noted that as long as the purchasing dealer has taken all the necessary steps to verify that the tax invoice has been issued in accordance with the law, he cannot be expected to keep track of whether the selling dealer has in fact deposited the tax so collected or has been lawfully adjusted.

The GSTN vide its Advisory dated 23 February 2022 has informed upcoming GSTR-1/IFF improvements and enhancements on GST Portal for the taxpayers. Taxpayers will now be shown a table-wise consolidated summary before actual filing of GSTR-1/IFF. Taxpayers can now view and download detailed summary of the GSTR-1/IFF in a new PDF format. The new summary format has been aligned with the notified format of Form GSTR-1. It will also contain the total outward supplies liability of the taxpayer (other than reverse charge), to be auto-populated in Form GSTR-3B.

Amidst the commotion created by the announcement of the Union Budget ’22, the developments in the tax and regulatory space in the month of January 2022 seems to have taken the back-seat. However, these developments are not to be missed out, as the Judiciary and the Legislature had a lot in store for the taxpayers! Most notably, the Apex Court, taking cognizance of the rising COVID-19 cases, had once again restored the limitation relaxation order. This will greatly help those who had missed out on filing Appeals, applications in the past 2 years. Other notable development in the month of January is that the Board has clarified the issues pertaining to relaxation on necessity of Bank Guarantee for Authorised Economic Operators.

On the Direct Tax front, the CBDT has notified the e-Advance Ruling Scheme, 2022. The Board has also provided a one-time relaxation for verification of all ITRs e-filed for AY 2020-21. Further, in a move towards achieving the ‘Digital India’ goal, the NSE has launched a new digital portal for filing compliances with the Exchange!

Compiling all such developments, we are glad to bring to you in new Avatar, the 18th 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. 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