CBIC vide Notification No. 10/2023 – Central Tax dated May 10, 2023 has lowered the E-invoicing aggregate turnover limit from 10 crore to 5 crore, effective from August 01, 2023.
The Company had availed CENVAT credit on the structural steel items like M.S. Plates, MS Sheets/Aluminium Coil, Joist//MS Channels, Angels etc. However, the Department had denied the credit on the ground that the items were not capital goods in terms of Rule 2(a) of CENVAT Credit Rules, 2004 (‘CCR 2004’). Aggrieved, the Company filed Appeal, wherein the Tribunal relied on the case of Vandana Global Limited vs. CCE, Raipur [n 2011 (274) ELT A-78 (Chhattisgarh)] and allowed the benefit of CENVAT credit on the steel items. Aggrieved, the Department filed an Appeal before the Punjab High Court.
The HC examined the term 'capital goods' defined in the CCR 2004 and based on the consistent view taken by the judiciary in similar cases, observed that the Company has a right to claim CENVAT Credit for the impugned goods. Accordingly, the HC dismissed the Department’s Appeal and allowed the benefit of CENVAT Credit for goods used as inputs for capital goods in the fabrication of structures embedded to earth.
The Principal Commissioner, CGST Ludhiana vs. IOL Chemicals and Pharmaceuticals Limited [2023-VIL-259-P&H-CE]
GLS Comments:
It would be pertinent to note that the issue of CENVAT credit on capital goods has been a hotly debated topic in tax circle, with numerous litigations over the years. While the definition of capital goods has been the subject of much interpretations, several landmark judgments by the Supreme Court and various High Courts have unequivocally upheld the entitlement of assesses to claim CENVAT credit on capital goods. There are amply of judgments like the Bhushan Steel and Strips Limited [2008 (223) ELT 517], Jai Balaji Industries Limited [Excise Appeal No. 76313 of 2016] etc. wherein the Tribunal has allowed input credit in respect of similar items used in the factory for construction work and fabrication of structures. The recent judgment by the Punjab High Court, serves as yet another affirmation of the judiciary's stance and provides much-needed clarity to such similar contentions of the Department.
In one of the most important judgements in GST, the Bombay HC has pronounced its judgement on the deeming fiction created by Section 13(8)(b) of IGST Act. The constitutional validity of section 13(8)(b) of the IGST Act was challenged by the Petitioner contending that the aforesaid provision is violative of Articles 14, 19, 245, 246, 246A, 248, 265, 269A, and 286 of the Constitution.
The matter was first listed before the division bench of the Bombay HC, wherein the One Judge observed that Section 13(8)(b) of IGST Act not only falls foul of overall scheme of CGST Act and IGST Act but also offends Articles 245, 246A, 269A and 286(1)(b) of Constitution, and the other judge has expressed his disagreement and has rendered his separate opinion.
Therefore, in view of such difference in opinion, the matter was listed before the Hon’ble Chief Justice. The Chief Justice of the Bombay HC has held that the fiction which is created by Section 13(8)(b) would be required to be confined only to the provisions of IGST and ruled that Section 13(8)(b) and Section 8(2) of the IGST Act are legal, valid, and constitutional. However, the court has also held that these provisions can only be applied to the IGST Act and can’t be used to levy tax on intermediary services under the CGST and SGST Acts.
Dharmendra M. Jani vs. Union of India [Writ Petition No.2031 Of 2018]
GLS Comments:
In a rather lengthy and elaborate decision which includes multiple views from the various courts, this landmark judgment is welcome by the trade with open arms as it will have a far reaching impact on many taxpayers engaged in a similar business of export. In another matter concerning the intermediary service provision, it would be relevant to note that the Delhi HC in RE: M/s Ernst and Young Limited [2023-VIL-190-DEL], held that Professional services provided to foreign entities of the parent company does not amount to 'intermediary services'. This judgment on the scope of intermediary services is likely to provide much-needed certainty and clarifications for taxpayers. It would now be interesting to see whether the Revenue would challenge the instant judgement of the Bombay HC, before the SC.
DGFT vide the Public Notice No. 07/2023 dated 18 April 2023, has clarified the duties on which interest is payable.
It has been clarified that the interest payable under amnesty scheme for one-time settlement of default in export obligation (EO) by Advance Authorisation (AA) and EPCG Authorization holder is capped at maximum of 100% of such duties exempted on which interest is payable.
The GST Council vide 49th GST Council meeting, had proposed one-time Amnesty Scheme for the taxpayers, whose registration has been cancelled due to non-filing of returns and application for revocation of cancellation of registration was not filed within 30 days from the date of order of cancellation u/s. 29 of the CGST Act.
In adherence to the said recommendation, the CBIC vide Notification No. 03/2023-CT dated 31 March, 2023, has notified the time limit to file revocation application under one-time amnesty scheme for the taxpayer whose registration has been cancelled up to 31 December, 2022. The Time limit to file aforesaid revocation application against such cancellation is until 30 June, 2023 only if the pre-condition of filing the pending returns along with payment of tax, interest and penalty has been fulfilled.
DGFT vide Policy Circular No. 1/2023-24 dated 17 April 2023, has prescribed the online procedure to apply for amnesty scheme for One-Time Settlement of Default in Export Obligation by Advance and EPCG authorization holder as follows:
The DGFT has directed the RAs to process the application within the 3 working days.
The Government has proposed to impose a time limit on reporting old invoices on the e-invoice IRP portals. In order to ensure timely compliance, taxpayers with AATO greater than or equal to 100 crores, will not be allowed to report invoices older than 7 days on the date of reporting. The restriction will also apply to debit/credit notes.
For example, if an invoice has a date of April 1, 2023, it cannot be reported after April 8, 2023. The validation system built into the invoice registration portal will disallow the user from reporting the invoice after the 7-day window. Hence, it is essential for taxpayers to ensure that they report the invoice within the 7-day window provided by the new time limit.
It has been further clarified that there will be no such reporting restriction on taxpayers with AATO less than 100 crores, as of now. In order to provide sufficient time for taxpayers to comply with this requirement, the Government has proposed to implement the time-limit restriction w.e.f. May 1, 2023 onwards.
Authors’ Notes:
It shall be noted that in terms of Section 122 of the CGST Act, penalty for contravention of the e-invoice provisions is as follows:
As evident, any non-compliance with the e-invoice provisions can result in heavy penalties to the taxpayers. Moreover, the instant advisory does not differentiate between taxpayers who bona fide contravened the time-limit provisions and vice versa. The non-compliance of the above advisory could also occur on account of bona fide reasons such as system limitations, changes in the taxpayer’s systems, amendments under the GST law, changes in Invoice format, etc.
To subject such taxpayers to the above penal provisions, may not be the intention of the Legislature. However, as the Department would issue notices for imposition of such penal provisions, the bona fide taxpayers will have no other option but to litigate such matters. In order to avoid such punitive actions, it is important that taxpayers gear-up and bring about necessary changes in their systems in order to comply with the provisions and ensure timely reporting of the e-invoices on the IRP Portal.
The Applicant had entered into a business transfer agreement to transfer its independent running business divisions as a whole, along with all its assets and liabilities. The Applicant sought advance ruling on whether the transfer of an independent running business division, including all its assets and liabilities, as a going concern, constituted a 'supply' u/s. 7 of the CGST Act. The Applicant contented that the agreement was considered as a slump sale and, therefore no GST was applicable.
The AAR observed that for any activity to qualify as a supply under the CGST Act, it should satisfy three limbs: (i) the activity must be a form of supply of goods or services or both, made or agreed to be made; (ii) for a consideration by a person; (iii) and in the course or furtherance of business. Accordingly, the AAR held that the transfer activity in the instant case satisfied all three limbs and hence, the business transfer agreement amounts to supply of services u/s. 7 CGST Act 2017. The AAR also held that the benefit of a notification prescribing a NIL rate would be available to the Applicant subject to the fulfilment of the conditions of a going concern.
M/s Pico2femto Semiconductor Services Private Limited [2023-VIL-47-AAR]
The CBIC vide Instruction No. 13/2023- Customs dated March 31, 2023 has issued instructions on acceptance of an Electronic Certificate of Origin (‘e-CoO’) issued under the India-Japan Comprehensive Economic Partnership Agreement (‘IJCEPA’).
It has been clarified that an e-CoO, issued electronically by the Issuing Authority of the Japan shall be a valid document for claiming the preferential benefit under the IJCEPA, provided it meets the prescribed format and fulfills all other requirements mentioned in notification No. 55/2011-Customs (N.T.) dated July 01, 2011, as amended.
The authenticity of the e-COO can be verified through the "CO Reference System" of the Ministry of Economy, Trade and Industry (METI) of Japan. The specimen seals and signatures will continue to be used to verify the genuineness and authenticity of e-CoO. To receive preferential treatment, the importer/customs broker must upload the e-CoO to e-Sanchit, and the e-CoO particulars, such as unique reference number and date, originating criteria, and so on, must be carefully entered while filing the bill of entry. A printed copy of the e-CoO shall be presented to the Customs officer for defacement purpose.
Instruction No. 13/2023- Customs dated March 31, 2023
With a slew of Notifications issued on 31 March 2023, the CBIC has notified various decision in relation to GST taken at the 49th GST Council Meeting. Following are the key highlights of the Notification:
Sr. No |
Notification No |
Summary |
1 |
Notification No. 02/2023 – Central Tax dated 31.03.2023. |
Late fees in case of FORM GSTR-4 for the periods from July-2017 till F.Y. 2021-22 has been waived completely in case of NIL returns and reduced to Rs 500/- in other cases, provided the said returns are filed between 01.04.2023 to 30.06.2023. |
2 |
Notification No. 03/2023 – Central Tax dated 31.03.2023. |
Amnesty scheme has been provided for registered persons whose registrations have been cancelled on or before 31.12.2022 due to non-filing of returns. The registered persons may apply for revocation of cancellation of their registrations up to 30.06.2023 only after furnishing the returns due and after payment of any amount due as tax, along with any amount payable towards interest, penalty and late fee in respect of the such returns. |
3 |
Notification No. 04/2023– Central Tax dated 31.03.2023 |
Changes have been made in Rule 8(4A) & Rule 8(4B) of the CGST Rules, 2017 pertaining to procedure regarding Aadhaar authentication and biometric verification of applicants. The said changes shall be deemed to have come into force from 26.12.2022. |
4 |
Notification No. 05/2023– Central Tax Dated: 31.03.2023 |
Changes have been made in Rule 8(4B) of the CGST Rules, 2017 giving effect to Sub-rule (4A) proviso, thereby making the said proviso only applicable to the state of Gujarat. |
5 |
Notification No. 06/2023 – Central Tax dated 31.03.2023. |
Amnesty scheme has been provided for registered persons in whose cases assessment u/s 62 of the CGST Act has been done on or before 28.02.2023 and who have failed to furnish a valid return within a period of 30 days from date of service of assessment order. Such persons should furnish the said return on or before 30.06.2023 with payment of interest and late fees. |
6 |
Notification No. 07/2023 – Central Tax dated 31.03.2023 |
Late fees u/s 47 of the CGST Act has been rationalised for Annual Returns u/s 44 of the CGST Act for the F.Y. 2022-23 onwards based on turnover of the registered persons as below: Aggregate Annual T/O upto Rs. 5 Cr. – Late fee of Rs. 50 per day subject to maximum of 0.04% of T/O. Aggregate Annual T/O above Rs. 5 Cr. And upto Rs. 20 Cr– Late fee of Rs. 100 per day subject to maximum of 0.04% of T/O. Aggregate Annual T/O above Rs. 20 Cr. – Late fee of Rs. 200 per day subject to maximum of 0.5 % of T/O. |
7 |
Notification No. 08/2023 – Central Tax dated 31.03.2023 |
Amnesty scheme for Final Return in FORM GSTR-10 has been provided if the said return is furnished from 01.04.2023 to 30.06.2023 with a maximum payment of late fees of Rs. 1,000/- only. |
8 |
Notification No. 09/2023 – Central Tax dated 31.03.2023. |
Section 168A of the CGST Act has again been invoked by the Government to extend the time limit for issuance of order u/s 73 of the CGST Act for recovery of tax not paid or short paid or of ITC wrongly availed or utilised. F.Y. 2017-18 – Upto 31.12.2023 F.Y. 2018-19 – Upto 31.03.2024 F.Y. 2019-20 – Upto 30.06.2024 |
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