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The World Customs Organization had formulated the Harmonized System for coding of goods in 1988 for easement of global trade and bringing about uniformity in classification of goods. While this objective has been substantially met and what has been achieved so far in harmonizing the tariff codes has been nothing short of a phenomenon, there is a long way to go in achieving complete harmonization!
To ensure the harmony in classification, the DGFT had issued notices urging the importers/exporters to use specific classification and avoid residual categories. The DGFT had also proposed to bring about a licensing regime for classifying the goods under such residual category. However, an immediate switch from classifying goods under residual category to specific tariff headings may not be as simple as it seems as there are various hurdles in doing so. Delving into the intricacies of tariff classification and the consequences of changes, the authors have penned down an article titled ‘Classification of Goods Under ‘Others’ Category - A Catch – 22 Situation!!’
The article as published on the Taxsutra portal has been attached herewith. We hope that reading of the Article would bring an enriching experience to you!!
The DGFT vide Notification No. 48/2015-2020 dated 31 December 2021 has amended Para 3.13A of the FTP to extend the due date of submitting applications for scrip-based schemes under MEIS, SEIS, ROSCTL, ROSL and 2% additional ad hoc incentive, to 31 January 2022
The much-awaited extension for furnishing of Annual Return in Form GSTR-9 and Reconciliation Statement in Form GSTR-9C for the F.Y. 2020-21 has been extended to 28 February 2022 vide Notification No. 40/2021 – Central Tax dated 29 December 2021. The key highlights of the Notification No. 40/2021, notifying the 10th amendment to CGST Rules, have been summarised hereunder:
Conditions for availing ITC – Rule 36(4)
Rule 36(4) of the CGST Rules has been amended to provide that the recipient would not be able to take any ITC if the same is not appearing in his GSTR-2B.
Due Date for filing of Annual Return for F.Y. 2020-21
The due date for furnishing of Annual Return in Form GSTR-9 and Reconciliation Statement in Form GSTR-9C for the F.Y. 2020-21 has been extended to 28 February 2022
Refund of Tax without UIN on invoice
Rule 95 of the CGST Rules has been so amended to provide that refund in cases where Unique Identification No. (‘UIN’) is not mentioned in the invoice in respect of which refund is claimed, shall be available only if the same is duly attested by the authorised representative and submitted along with the refund application. The said amendment has come into effect from 01 April 2021
Detention / Seizure of Vehicles
The time limit to pay the tax and penalty determined u/s. 129 of the CGST Act for detention / release of vehicles, post the issuance of Show Cause Notice has been reduced from 14 days to 7 days
Recovery of penalty by sale of goods or conveyance detained or seized in transit
Rule 144A has been inserted into the CGST Rules which empowers the proper to recover penalty by way of sale or disposal of the goods or conveyance so detained where the owner of the goods has not paid the penalty so determined u/s. 129 of the CGST Act, within 15 days of receipt of the order
Disposal of proceeds of sale of goods and movable or immovable property
Rule 154 of the CGST Rules has been so amended to provide appropriation of proceeds of sale of goods or conveyance and movable or immovable property, against the following sequentially:
Thereafter, a sub-rule 2 has been inserted to provide that where it is not possible to pay the balance of sale proceeds to the person concerned within a period of six months, such balance of sale proceeds shall be deposited with the Fund
Provisional attachment of property
Rule 159 of the CGST Rules has been amended to inter alia provide that the Commissioner shall send a copy of the order of attachment in FORM GST DRC-22, be sent to the person whose property is being attached under section 83. The said rule has been further amended to prescribe that the objection to the attachment order is to be filed in Form GST DRC-22A.
CBIC vide Notification No. 40/2021 - Central Tax dated 29 December 2021 notifies the CGST (10th Amendment) Rules, 2021. The said notification inter alia extends the due date for furnishing Annual Return in Form GSTR-9 and Reconciliation Statement in Form GSTR-9C for the F.Y. 2020-21 till 28 February 2022
The Ministry of Corporate Affairs ('MCA') vide General Circular No. 22/2021 dated 29 December 2021 has relaxed the additional fees for annual financial statement/return filings for the F.Y. ended on 31 March 2021. It has been clarified that no additional fees shall be levied upto 15 February 2022 for the filing of e-forms AOC-4, AOC-4 (CFS), AOC-4 XBRL, AOC-4 Non-XBRL and upto 28 February 2022 for filing of e-forms MGT-7/MGT-7A. It has also been clarified that only normal fees shall be payable for the filing of the aforementioned e-forms.
The Applicant had sought an advance ruling before the Maharashtra AAR to ascertain the tariff classification of CNG Dispensers supplied for use at CNG dispensing stations for vehicles and automobiles. The Applicant submitted that although they had been classifying the CNG Dispensers under CTH 8413 chargeable to 28% GST, it seemed to be more appropriately classifiable under CTH 9032 chargeable to 18% GST. The Applicant had submitted that the CNG Dispensers manufactured by them does not have any pumping function of CTH 8413 but act as an automatic control system of CTH 9032.
The Maharashtra AAR observed that the CNG dispenser causes the CNG to flow from the filling station to the CNG tank of the vehicle. Thus, the Dispenser functions as a pump. The AAR further observed CHT 841311 categorically covers ‘pump for dispensing, duel or lubricants of the type used in filling stations or garages’. Accordingly, as the Dispenser is designed to dispense fuel and used in filling stations and acts as a pump which causes CNG to move from one place to another, the same is classifiable as a pump.
In view of the above, the Maharashtra AAR held that the CNG Dispenser performing the function of a pump of a type used in filling stations to dispense CNG Fuel is classifiable under CTH 8413 chargeable to 28% GST and not under CTH 9032 chargeable to 18% GST.
Parker Hannifin India Private Limited [2021-TIOL-298-AAR-GST]
The Applicant, inter alia engaged in manufacturing of electronics equipment for locomotives and coaches for Indian Railways and Metro Railways had entered into contract with South Central Railway for design, supply, installing, testing and commissioning of train collision avoidance system in locomotives. As per the agreement, the Applicant had to supply multiple items and provide various services including annual maintenance. In view of the above, the Applicant had sought an advance ruling before the Telangana AAR to ascertain whether the scope of work, as provided above, is classifiable as composite supply and the applicable rate of GST.
The Telangana AAR observed that the Railways had published a handbook on Train Collision Avoidance System (‘TCAS’) wherein had been provided that the entire system is based on signalling equipment and RFID tags. Further, referring to Section 2(30) of the CGST Act, it had been observed that Composite Supply is essentially a naturally bundled supply where two or more different supplies invariably exist along with each other. In this regard, it was observed that the principal goods in the instant case, would be the electrical signalling equipment classifiable under HSN 8530.
In view of the above, the Telangana AAR held that the supply made by the Applicant to the Railways is a composite supply and the rate of tax applicable is the rate at which the principal supply to be taxed i.e., Electrical signalling equipment with HSN code ‘8530’ chargeable to 18% GST.
Medha Servo Drives Private Limited [TSAAR Order No.23/2021 dated 05 November 2021]
The CBIC vide Notifications No. 38 and 39/2021 – Central Tax dated 21 December 2021 has notified the amendments proposed in the Finance Act, 2021 to be effective from 01 January 2021. The details of the key amendments have been tabulated hereunder:
38/2021 - Central Tax dated 21 December 2021
Notified Rule 10B of CGST Rules pertaining to Aadhaar authentication for registered person
Notified amendment to Rule 23(1) of the CGST Rules pertaining to revocation of cancellation of GST Registration being subject to Aadhaar provisions of Rule 10B
Notified amendment to Rule 89(1) of the CGST Rules pertaining to application for refund of tax, interest, penalty, etc. being subject to Aadhaar provisions of Rule 10B
Notified amendment to Rule 96(1) of the CGST Rules pertaining to refund of IGST being subject to Aadhaar provisions of Rule 10B
39/2021 - Central Tax dated 21 December 2021
Notified amendment to Section 16(2) of the CGST Act to inter alia provide that ITC on invoice or debit note can be availed only when details of such invoice/debit note have been furnished by the supplier in his outward supplies in Form GSTR-1 and such details have been communicated to the recipient of such invoice or debit note
The amendment to Section 16 of the CGST Act had been proposed to avoid the challenge to Rule 36(4) of the CGST Rules. The said rule prescribes a condition for availing 5% ITC on invoices/debit notes not uploaded by the supplier in GSTR-1. However, the said such rule will no longer be relevant w.e.f. 01 January 2022 as the recipient would not be able to take any ITC if the same is not appearing in the recipient’s GSTR-2B. Accordingly, the issues relating to Rule 36(4) have essentialy been put to rest. However, the condition prescribed u/s. 16 of the CGST Act is likely to be challenged.
M/s Prag Polymers (‘the Applicant’), engaged in the manufacture and supply of railway Locomotives parts had sought an advance ruling before the UP AAR to ascertain the classification of Switch Board Cabinet. The Applicant had submitted that the Switch Board Cabinets were manufactured by them specifically on the basis of drawings and designs approved by the Railways. Further, such goods are not viable for use elsewhere. Accordingly, the Applicant opined that the such goods were appropriately classifiable under HSN 8607 chargeable to 12% GST.
The AAR observed that HSN 8607 categorically covers parts of railways, tramways, etc. However, the said heading does not cover switch boards. It was further observed that HSN 8537 clearly includes cabinets for electric control and distribution of electricity. It had also been observed that Note 2(f) to Section XVII inter alia provides that parts and parts and accessories of electrical machinery of Chapter 85 do not apply to HSN 8607 whether or not they are identifiable as goods of Section XVII (Railways).
The AAR further observed that the CBIC vide Circular No. 30/4/2018 – GST dated 25 January 2018 had clarified that goods, falling under any chapter other than 86, would attract the general applicable rate of 18% GST even if supplied to the Railways. It was also observed Entry 8607 is very restrictive entry for the purposes of consideration of goods to be classifiable as parts of railway bogies to avail the benefit of reduced rate of taxes.
Basis the above observations, the AAR held that the switch board cabinet, though to be used in Railway coaches, cannot be called as parts of railway bogies under Chapter Headings 8607 of the Tariff, as a specific HSN is available for the same. Accordingly, it was ruled that switch board cabinets merit classification under HSN 8537 chargeable to 18% GST.
Prag Polymers [Advance Ruling No. UP ADRG 75/2021 dated 19 March 2021]
The Revenue had filed an Appeal against an order of the Commissioner (Appeals), which had been reversed by the Ahmedabad Tribunal. The Tribunal had also held that held that refund of pre-deposit was warranted and interest liability arises from the date of the order of the Tribunal. Aggrieved, the Revenue had preferred an Appeal before the HC, who also ruled against the Revenue and held that the interest liability arises from the date of the order of the tribunal and liability to pay interest would arise from the date of the order of the Tribunal.
Thereafter, the Commissioner (A) had passed an order vide which interest on refund was directed to be calculated from expiry of three months after passing of the Tribunal’s final order at 6% p.a. and the Appellant’s demand of interest on interest was denied. Aggrieved, the Appellant preferred an Appeal before the Tribunal.
The Tribunal held that in view of the concurrent orders of Tribunal as well as High Court, since it was held that the interest arises from the date of order and this finding was not challenged by the revenue, it attains finality. Therefore, it was held that the appellant was entitled for interest from the date of order of the tribunal and not from expiry of three months from the date of order.
As regards the demand for interest on interest, the Tribunal observed that there is no provision under the Customs Act to grant the same. Therefore, the Tribunal being a creature under Statute, cannot decide anything beyond the provisions of the law.
Bochasanwasi Shri Aksharpurushottam Swaminarayan Sansth [Customs Appeal No.63 of 2011]
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