Newsletter

Recently the Apex Court vide its order in RE: Filco Trade Centre [TS-369-SC-2022-GST] had directed GSTN to open common portal for availing Transitional Credit through TRAN-1 and TRAN-2 for two months.

While availing the said benefit, the Petitioner inadvertently reported NIL in the column showing total outstanding credit inputs and the form immediately got frozen. Thereafter, the Petitioner tried for revising the same, however, the same was not permissible in the system. Pursuant to same, the Petitioner had filed an application seeking permission to revise Form TRAN-1 before the concerned authorities. Aggrieved, the Petitioner preferred a Writ before the Chhattisgarh HC.

In respect thereto, the Revenue submitted that the order of the Apex court was a onetime measure that was allowed and was to be considered strictly in accordance with the subsequent Circular No.180/12/2022-GST dated 09 September 2022. Further, the Circular itself restrained permission for revising the Form Tran-1/Tran-2 once submitted.

The Petitioner, referring to the transitional provisions contained in Rule 120A of CGST Rules, argued that in terms of the said provision, every registered person who has submitted a declaration electronically in the form GST TRAN-1 may revise such a declaration once, hence the statute itself provides for a permission to revise the declaration made by the party once.

In view of the above, the HC ruled that that even if for any reason circular is held applicable, it would have an overriding effect over the statute which otherwise may not be permissible under the law. The HC further observed that all circulars and instructions issued by Revenue can be only of clarificatory in nature and it cannot dilute the statutory. In view of the above, the HC directed the Revenue to open the portal so far as the Petitioner is concerned for once in terms of Rule 120A permitting it to revise the declaration and thereafter permit him to submit the same and complete the filing.

Jagdalpur Motors [Writ Petition (T) No.252 of 2022 dated 28 November 2022]

The Petitioner preferred a writ before the Bombay HC seeking relief in relation to the procedural difficulties faced with regards to distribution and eligibility of Input Service Distributor (ISD) credit to their respective units of Service Tax under GST regime.

The HC referred to the decisions in RE: Unichem Laboratories [2022-VIL-716-BOM] and RE: Apar Industries [Writ Petition No.11539 of 2019] wherein the Courts had granted appropriate reliefs where the assessees were facing similar issues. Further, relying on the Apex Court judgement in RE: Filco Trade Centre [2022-VIL-63-SC] and CBIC Circular No. 182/14/2022 – GST dated 10 November 2022, the HC directed the Petitioner through its respective units registered under CGST Act, to avail this open window and file/revise the TRAN-1 at the respective units in terms of the Apex Court decision in RE: Filco Trade (supra). The HC further directed that the TRAN-1/revised TRAN-1 filed by the respective units should be on the basis of manual ISD invoices to be issued by ISD of Petitioner subject to aggregate credit cumulatively not exceeding the ISD credit available with Petitioner.

Nuvoco Vistas Corporation Limited [WP No.437 of 2020 dated 17 November 2022]

The Petitioner being a registered in erstwhile tax regime had carry forwarded their CENVAT credit under GST regime by filing GST TRAN-1. The Adjudicating Officer issued a SCN asserting that the Petitioner cannot claim CENVAT credit in lieu of invoices raised by an entity in the erstwhile tax regime in contravention to the Excise Act, Finance Act, and CENVAT Credit Rules. Thereafter, the Department by adjudication proceedings initiated u/s 73 of the CGST act and disallowed the CENVAT credit in terms of sec 140 of the CGST Act by order. Aggrieved, the Petitioner preferred a Writ seeking relief on whether the GST Authorities can assess the admissibility of CENVAT credit availed under the pre-GST regime?

The HC observed that the assumption of jurisdiction by Department to determine whether the CENVAT Credit was admissible or not under the existing law by invoking provisions of sec 73 of the CGST Act was not proper in the eye of law. Therefore, initiation of proceedings u/s 73 (1) of the CGST Act for contravention of the Excise Act and the Finance Act was beyond the authorities’ jurisdiction. Accordingly, the High Court quashed the said order. 

Usha Martin Limited [TS-609-HC(JHAR)-2022-GST]

The Petitioner was engaged in the export of eggs and since eggs were chargeable to "Nil" GST, there was no tax liability for their exports. The Petitioner while filing refund application for accumulated ITC, had inadvertently erred by filing under the column 'with payment of tax’ instead of opting for exports 'without payment of tax'. Consequently, the refund was rejected on the ground that the refund was filed under the residuary category. Aggrieved, the Petitioner preferred a Writ before the Madras High Court seeking relief.

The HC observed that the Department never raised any dispute on the refund amount that was rightly entitled to the Petitioner. Further, the Department also conceded that the error was made bona fide and that the Petitioner was entitled to the refund claim as the exports made were zero-rated supply. Accordingly, as the refund was solely rejected due to the inadvertent error, the order was set aside.

Abi Egg Traders [2022-VIL-744-MAD]

GLS Comments:

It is now a settled principle of law that substantial claims cannot be denied merely on acount of procedural lapses or inadvertent errors. This principle was even upheld by the Apex Court in RE: Mangalore Chemical & Fertilizers Limited [1991 (55) E.L.T. 437 (S.C]. In a similar matter in RE: Phoenix Contact India Private Limited [2022 (64) GSTL 163 (Del.)], the Delhi HC had held that mere inadvertent selection of the wrong column for refund claim should not lead to denial of the refund claim.

The CBIC vide Notification No. 23/2022 - Central Tax dated 23 November 2022, has empowered the Competition Commission of India ('CCI') as the Anti-Profiteering Authority, replaing the National Anti-Profiteering Authority ('NAA') under GST, w.e.f. 01 December 2022. Thus, the CCI would be empowered to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. Further, vide Notification No. 24/2022 - Central Tax dated 23 November 2022, the CBIC has also made the corresponding amendments in the CGST Rules.   

The Appellant, M/s. Hyderabad Metropolitan Water Supply and Sewerage Board, had paid Medical insurance premium for the employees, pensioners and their family members and vehicle insurance policy for the vehicles owned by the Company. The Appellant claimed that they were exempted from paying GST in accordance with the Entry No. 3 of the Notification No. 12/2017 dated 28 June 2017, being a Governmental Authority. As per the said notification, services (excluding works contract service or other composite supplies involving the supply of any goods) provided to the Central Government, the State Government, Union Territory, local authority, or Governmental authority, related to any function entrusted to a panchayat or municipality under the Constitution of India, would be chargeable to NIL GST. The Appellant had sought an Advance ruling to ascertain whether who were eligible to claim exemption on the GST payable for medical insurance premiums provided to the employees, pensioners, and their family members.

The Appellant contended that they were constituted under the provisions of the Hyderabad Metropolitan Water Supply and Sewerage Act 1989, with various functions and responsibilities in the Hyderabad Metropolitan Area. Hence the supply of services provided by them are eligible for GST exemption. The AAAR observed that in order to claim the exemption under the Entry No 3 of the Notification, three conditions are needed to be satisfied viz. (i) Services provided must be 'Pure Service', (ii) services provided should be by way of any activity in relation to any function entrusted to a Municipality under article 243W of the Constitution; and (iii) After 01 January 2022, exemption is available only if it is provided to Central Government, State Government and Local Authority only.

It was further observed that as the insurance supplies made to the board for its employees and their family members are not in relation to any function entrusted to the municipality, the Appellant did not fulfil the second condition as per the Notification. It was also been observed that the expression 'in relation to' specified in the notification is to be interpreted as a direct and proximate relationship to any function granted to a municipality under Article 243W of the Constitution. Hence, the Appellant does not fall under the exemption of the Notification. Accordingly, the AAAR upheld the order of AAR, concluding that no GST exemption is available on medical insurance premiums taken to provide health insurance to employees, pensioners, and their family members.

Hyderabad Metropolitan Water Supply And Sewerage Board [2022-VIL-86-AAAR]

The Assesse was engaged in the business of power generation in the state of Gujarat, they had leased out their land for 30 years and collected the premium amount as cost of the land which they have to handover to the government. Thereafter, the revenue had held the Assesse liable to pay the service tax on one time premium/salami under the category of renting of immovable property. The Assesse contented that the amount collected is part of the rent and it is the part and parcel of the gross value of taxable service.

The CESTAT by relying upon the case of Greater Noida Industrial Development Authority [2015-VIL-1250-ALH-ST] emphasised that it is a settled legal position that one time premium/salami cannot be considered as consideration towards rent and hence cannot be leviable to service tax for renting of immovable property. Accordingly, the demand of service tax on one time premium/salami under the category of renting of immovable property was set aside.

Gujarat Power Corporation Limited [2022-VIL-862-CESTAT-AHM-ST]

The Applicant is engaged in the business of renting Diesel Generator sets ('DG Set'). The Applicant had entered into agreements with their clients to install DG sets on a hire basis along with reimbursement of diesel costs incurred during the use of the DG Set. The Applicant had sought an Advance ruling to ascertain whether GST is applicably on cost of the diesel incurred for running DG Set in the course of providing DG rental service.

The AAR observed that Diesel is an essential competent for running the DG set. Further, the price of the Diesel to run the DG Set, shall form part of value of supply in view of sec 15 of the CGST Act. Accordingly, it was ruled that 18% GST is payable on the cost of the diesel incurred for running DG Set in the course of providing DG rental service.

M/s Tara Genset Engineers [2022-VIL-297-AAR]

GLS Comments:

It would be pertinent to note that in a similar matter before the Karnataka AAR in RE: Goodwill Auto's [2021-VIL-282-AAR], it had been held that consideration for reimbursement of expenses as cost of the diesel for running of the DG Set is nothing but the additional consideration for the renting of DG Set. Accordingly, it was ruled that in terms of Section 15 of the CGST Act, such cost of diesel attracts GST @ 18%.

We are glad to bring you the 26th Edition of our ‘Vision 360’ Newsletter in association with TIOL. In this edition, we have covered the key judicial and legislative developments in Direct, Indirect Tax other regulatory areas in the month of October 2022. Following are some key highlights of this Newsletter:

• An insightful piece on the Indian Renewable Energy Sector’s growth in respect to Discounted Incentives;
• Recent developments regarding the re-filing/revising TRAN-1 facility on the GSTN portal;
• HC’s decision in relation to interest and penalty provisions are not applicable to additional duties of Customs;
• Annual Progress Report on BEPS released by OECD, inviting comments on Administration and Tax Certainty;
• Judicial and Regulatory updates in the Direct Tax, Indirect Tax and Regulatory fronts!

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 Applicant was engaged in the business of providing services of maintenance of immovable property to tenants. The Applicant sought Advance ruling on whether they are eligible for claiming ITC on solar power panels procured and installed by it.

The AAR observed that electrical energy is ‘goods’ and exempted. Hence, the Applicant's provision of solar-generated electricity to tenants constitutes a supply of exempted items. Hence, ITC on solar panels is ineligible. Subsequently, the AAR did not discuss coverage of solar plant under Section 17(5) of the CGST Act or on inclusion of value of electricity charges in value of supply.

VBC Associates [2022-VIL-257-AAR]

GLS Comments:

It would be pertinent to note that in the instant case, the Applicant had been treating supply of electrical energy as part of composite supply of rental services. Accordingly, Solar Panels cannot be said to be used for making exempted supply. It would further be pertinent to note that the Rajasthan AAR in RE: Pristine Industries Limited [RAJ/AAR/2021-22/16], had held that solar power plant is classifiable as plant and machinery, and therefore, the ITC thereon is not blocked u/s. 17(5) of the CGST Act.