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The Applicant, a Russian entity, had entered into a Maintenance and Repair Contract (‘MARC’) with Bharat Coking Coal Limited (‘BCCL’), an Indian entity. As per the terms of the agreement, the foreign supplier was be responsible for taxes and duties in BCCL’s country during execution of the contract. The services were actually rendered by appointing a sub-contractor to execute a part of the obligations under MARC. The Applicant had specifically deployed its supervising and technical employees at the site of BCCL, whose salaries were also borne by the Applicant. On account of certain problems in the payment channel, the Applicant had opened a branch in India and registered under the CGST Act. According to the Appellant, the recipient of services, i.e., BCCL was liable to pay IGST on the imported services under reverse charge mechanism.

In view of the afore-stated background, the Appellant had sought an advance ruling to specify the person liable to pay tax and whether it is justified by BCCL to deduct GST from payments made to foreign company. The WB AAR had observed that deputation of human and technical resources at the site of BCCL constitutes as 'fixed establishment' and therefore concluded that the location of the 'supplier' in the present case was in India. Therefore, it had been that held that the supply of service to BCCL was not import of service. The recipient was not liable to pay GST on reverse charge basis. The Applicant, being the domestic MARC holder was liable to pay the tax as applicable. Aggrieved, the Applicant had preferred an Appeal against the order of the AAR.

The WB AAAR observed that the AAR had not considered various terms of the agreement which inter alia state that the entire control of the activities would rest with the foreign entity, which had entered into an agreement with BCCL. The AAR had further observed that the service is ensured from the Applicant’s domestic entity for 17 years of the contract. However, it has not taken into consideration the fact that the Applicant is providing service to BCCL since 2015, whereas the domestic entity came into existence in 2018 only. The AAAR had further observed that the registered place of business of the Applicant cannot be termed as 'fixed establishment'. The AAR had not adduced any finding to draw conclusion that the Applicant as registered in India maintains suitable structures in terms of human and technical resources to provide the service for which the MARC has been entered into between the parties Accordingly, it was held by the AAAR that the ruling of the AAR does not hold good.

It was further observed that in terms of Section 2(11) of the IGST Act, import of service contains the following three elements:

• The supplier of service should be located outside India;
• The recipient of service should be located in India;
• The service should be provided in India.

The AAAR noted that the Applicant, being a foreign entity had been raising invoices upon BCCL and therefore the conditions of import as envisaged herein-above were being fulfilled. Accordingly, the AAAR modified the AAR order to the extent the supply of services by the Applicant to BCCL qualified as import and GST on such services is payable under reverse charge mechanism in terms of Notification No. 10/2017 – Integrated Tax (Rate) dated 28 June 2017.

IZ Kartex named after p. G. Korobkov Limited [Appeal case No. 02/WBAAAR/APPEAL/2020 dated 17 August 2020]

The CBIC vide Notification No. 42/2020 - Customs dated 11 November 2020, has increased the Basic Custom Duty on specified components / parts used in manufacture of Open cell of LED and LCD television panels of Tariff Heading 8529, from nil to 5%. The revised rate has been made effective from 12 November 2020

The Petitioner had been supplying anti-virus software services to its clients. The Respondent had raised a tax demand along with interest and penalty on the supply of software services for the period July 2012 to March 2013, by classifying the same as ‘Information Technology Software Services’ under the Finance Act.

Aggrieved, the Petitioner filed a Writ Petition against Service Tax demand order before the Madras HC. It had been argued by the Petitioner that they had discharged VAT on the sale of the Software, since it is deemed to be a 'sale of goods' and has been duly assessed by the authorities under the Tamil Nadu Value Added Tax Act and therefore, the Department’s claim that the same is amenable to service tax is not sustainable.

Referring to the judgement of the Division Bench of Madras HC in the case of ISODA vs. Union of India [2010 (20) STR 289 (Mad)], the HC observed that Anti-Virus software is a representation of instructions recorded in a machine readable form that provides interactivity to the End User through a computer that has working internet connectivity and therefore, Anti-Virus Software squarely falls within the definition of 'Information Technology Software'.

It was further observed by the HC that though the software are goods, when the goods as such are not transferred but the transaction of right to use as transferred to the end-user, it would only be a 'service' and not a 'sale'. Accordingly, applying the rationale of the Division Bench in ISODA (supra), the HC concluded that Anti-Virus Software' in CD forms squarely falls within the essential features of the definition of the 'Information Technology Software. Basis the above observations, the Madras HC upheld the Respondent’s demand of Service Tax along with interest and penalty.

K7 Computing Private Limited [W.P.Nos.25923 & 31485 of 2018]

GLS Comments:

Right from the turn of the decade, the question as to whether ‘software’ can be termed as ‘goods’ or ‘services’ has consistently remained a hot topic. In this regard, a breakthrough came with the judgement of the SC in the case of TCS vs. State of A.P. [271 ITR 401] wherein it had been held that software, which is incorporated on a media, would be goods and therefore, liable to sales tax. 

However, subsequent to the SC judgement, it had been seen that different authorities had been taking different views. The Karnataka HC in the case of Sasken Communications Technologies Limited [Writ Appeal Nos. 90-113 and 118-129 of 2011] had held that the contract for development of software in question is not works contract but a contract for service simplicitor liable to service tax and not VAT.

It would be pertinent to note that conflicting tax treatments of similar transaction by different tax authorities definitely creates hurdles for the businesses. Accordingly, it is likely that legacy cases in relation to tax demands for software would continue.

The CBIC has issued a series Notifications on 10 November 2020 inter alia notifying the CGST Thirteenth Amendment Rules, 2020. Following are the key highlights of the relevant Notification:

• Notification No. 82/2020 – Central Tax dated 10 November 2020
  • The CBIC has notified the 13th CGST Amendment Rules effective from the date of notification;
  • Due date for furnishing GSTR-3B has been prescribed to 20th of the following month of the relevant tax periods;
  • Staggered due dates for furnishing GSTR-3B for taxpayers in specified states have been prescribed as 22nd and 24th days of the month following the relevant tax periods;
  • The Due date for furnishing quarterly returns has been extended to 13th of the month succeeding such tax period;
  • The details of outward supplies furnished by the supplier in GSTR-1 or using the Invoice Furnishing Facility ('IFF') are to be made available electronically to the recipients in Part A of GSTR-2A, in GSTR-4A and in GSTR-6A through the common portal;
  • GSTR-2B has been notified which will generate auto-drafted details of ITC on monthly basis;
  • Taxpayers filing return under GST would be required to deposit their tax dues in GST PMT-06 by the 25th day of the month succeeding the relevant month. 
• Notification No. 83/2020 – Central Tax dated 10 November 2020
  • The time-limit for furnishing the details of outward supplies in GSTR-1 for each of the tax periods w.e.f. 01 January 2021 has been extended till the 11th of month succeeding each tax period;
  • The due date for furnishing GSTR-1 has been further extended to 13th of the month succeeding such tax period for taxpayers required to file quarterly returns;
• Notification No. 87/2020 – Central Tax dated 10 November 2020
  • Time-limit for filing of GST ITC-04, during the period from July 2020 to September 2020 has been extended till 30 November 2020. 
  • Such extension in time-limit shall be deemed to have come into force w.e.f. 25 October 2020
• Notification No. 88/2020 – Central Tax dated 10 November 2020
  • The requirement for issuance of e-invoice w.e.f. 01 January 2021 has been made applicable to persons whose turnover in any preceding financial year from 2017-18 onwards exceeds Rs. 100 crore in respect of supply of goods or services or both or exports

The Officials attached to the Directorate General of GST Intelligence had conducted simultaneous raids on the business units and the residence of the Petitioner without any prior intimation. The Petitioners contended that during the questioning the Respondents, they had been abused in filthy language for not giving satisfactory replies and were also repeatedly assaulted in physical manner. 

As a result of the assault, the Petitioner had been rendered unable to walk on account of the physical assault, as confirmed by a physician. The employees of the Petitioner lodged police complaint for such an assault, in response to which few police officials arrived at the premises but refused to take any action against such officials.

The Respondents contended that the Petitioners were not cooperating with the investigating agency. Preliminary investigation revealed tax evasion of Rs. 5 crores. The Respondents also stated that there was no bar in making enquiries under Section 70 of GST Act, in the night. 

The Petitioners sought to declare the actions of such officials as illegal, arbitrary and unconstitutional apart from being violative of constitutional rights. The Petitioner further sought direction that the Respondents to follow due process of law and comply with the principles of natural justice in further investigation process or seeking transfer of the conduct of enquiry to any other wing /unit established under CGST Act.

It was observed by the HC that the Respondents cannot contend that they will interrogate the persons suspected of committing any tax evasion as per their sweet will, forceably keeping them in their custody for indefinite period. It was observed that such custondy shall be construed as informal custody and the law relating to an accused in custody has to be expressly or impliedly applied. If accused can get all the benefits under Art.22 of the Constitution, a person in such informal custody can say that he is also entitled to get relief under Art.21 of the Constitution of India. This view has been taken by the Gujarat HC in the case of Jignesh Kishorbhai Bhajiawala v. State of Gujarat [2017 Crl.L.J.1760 para 19 at pg.1777] while dealing with similar actions of authorities under the Prevention of Money Laundering Act, 2002. 

Basis the above observations, the Telangana HC allowed the following directions:

• The officials shall not use any acts of violence or torture against the Petitioner or its employees even though they have allegedly evaded tax under the Act;
• The Official responsible for violence shall not participate in such enquiry and the investigation shall be transferred to another official;
• Any interrogation of Petitioner shall be between 10:30 am to 05:00 pm on weekdays in the presence of an Advocate who shall not be in hearing range;
• The Government officials shall adhere to the provisions of the CGST Act, in conducting search, investigation or enquiry in relation to the alleged tax evasion by the Petitioners.

Agarwal Foundaries [Writ Petition No.28268 of 2019]

The GSTN vide their tweet dated 05 November 2020 has issued a comprehensive guide for taxpayers on common errors and their suggested solutions in GST. The comprehensive guide inter alia provides solutions in respect of Registration, Returns, Payments, Refunds, Appeals, etc. The guide has been attached herewith.

The Petitioner had committed an inadvertent error in reporting the credit in Form GSTR-1 in regard to the outward supplies and Intra-state sales had been erroneously reported as inter-state sales, as a result the CGST and SGST credit was reflected in the IGST column. The Petitioner had requested for amendment of GSTR-1, which had been rejected by the Respondents in August 2019 on the ground that there was no provision to grant the amendment sought. Aggrieved, the Petitioner filed a Writ before the Madras HC seeking a mandamus directing the Respondents to permit correction in Form GSTR-1 for the relevant period. 

Referring to the relevant provision of Return filing under the CGST Act, the Madras HC observed that a registered person who files a return involving intra-State outward supply is to indicate the collection of taxes in Form GSTR-1 and the details of tax payment therein are auto populated in Form GSTR -2-A of the buyers. Any mismatch between Form GSTR-1 and Form GSTR-2A is to be notified by the recipient by way of a tabulation in Form GSTR-1A.

It was further observed by the HC that Forms in GSTR-2A and GSTR-1A were not notified by the Revenue. The statutory procedure contemplated for seamless availment was, as on date, unavailable. The HC noted that it is nobody’s case that the error was deliberate and intended to gain any benefit, and in fact, by reason of the error, the customers of the petitioner would be denied credit, owing to the fact that the credits stands reflected in the wrong column.

The HC further observed that had the requisite Form GSTR-1A and Form GSTR-2A been notified, the mismatch between the details of credit in the Petitioner’s and the supplier’s returns might well have been noticed and appropriate and timely action taken. The HC further remarked that in the absence of an enabling mechanism, assessees should not be prejudiced from availing credit that they are otherwise legitimately entitled to. Accordingly, the HC allowed the Writ petition and allowed to re-submit the annexures to Form GSTR-3B with the correct distribution of IGST, CGST and SGST.

GLS Comments:

The Madras HC has passed a well-reasoned order, keeping in mind the natural justice and the intent of the law. In this regard, it would be pertinent to note that Kerala HC in the case of Saji S. [2018 (19) G.S.T.L. 385] had permitted the request of transfer of tax liability from the head ‘SGST’ to ‘IGST’ as it would be inequitable for the Petitioners therein to suffer on the count that the transfer would take some time.

Similarly, the Andhra Pradesh HC in the case of Panduranga Stone Crushers [2019 (30) G.S.T.L. 385] had provided an interim relief allowed the rectification of a clerical error subject to the final outcome of the Writ Petition. 

Dear Readers,

With the festive season round the corner and an apparent rebound in the economy, obviously the spirits are high for the first time this year. At this juncture, we are pleased to present to you the 3rd edition of our Vision 360 Newsletter in association with TIOL, covering all the judicial and legislative developments in the fields of taxation along with our insightful analysis.

In the sparkle zone of this Newsletter, we have analyzed the ‘Pillar One’ approach of the Organisation for Economic Co-operation and Development. Further, we have interviewed the CEO of a well-renowned power Company discussing the investment environment in the dynamic and ever-changing renewable sector.

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

On account of the COVID-19 pandemic, the DGFT vide Public Notice No.26/2015-2020 dated 16 October 2020 has amended the Handbook of Procedures 2015-20 on monitoring of Export Obligation to extend the due date for submission of documents for EO fulfilment upto 31 December 2020 for all Advance Authorisations, wherever EO period is expiring or has expired between 01 February 2020 and 31 December 2020.

The DGFT vide Trade Notice No. 32/2020-21 dated 28 October 2020 has requested the requested the EPCs, Trade and Industry involved in export of items falling under Chapter 86, 88 and 89 to urgently submit data for their respective export items in required format to the RoDTEP Committee, so as to enable working out of suitable rates for export items.

The DGFT vide Trade Notice No. 33/2020-21 dated 28 October 2020 has informed the IEC holders to create login IDs through the online registration process before the roll out of next phase of the platform. The DGFT has further outlined various other action points for exporters and importers regarding revamped DGFT services into the new DGFT IT platform.

The Ministry of Finance vide Notification no. 31/2020-Customs (ADD) dated 16 October 2020 has extended the imposition of Anti-Dumping Duty on imports of Front Axle Beam and Steering Knuckles meant for heavy and medium commercial vehicles classifiable under tariff heading 73261910, 73261990, 73269099, 87085000 and 87089900 of the Customs Tariff Act, 1975, originating or exported from the People’s Republic of China, upto and inclusive of 30 November 2020.

On account of the COVID-19 pandemic and the requirement to maintain social-distancing, the CBIC vide Circular No. 47/2020 – Customs dated 20 October 2020 has allowed contactless delivery of international courier consignments, based on OTP validation. The CBIC has further laid down the procedure to be followed for OTP based contactless delivery being adopted by the domestic courier companies.

In order to bring in greater regulatory clarity and certainty for investors, the CBIC vide Circular No. 48/2020-Customs dated 27 October 2020 has clarified only inputs are allowed to be sent out from a Warehouse unit u/s. 65 of the Customs Act. However, capital goods can be sent to with the permission of the bond officer. Further the Circular specifies certain conditions that the job work shall be subjected to.

The CBIC has further allowed certain tools, fixtures, etc. to be sent out to the job work premises subject to due accounting of the goods by the warehouse unit u/s. 65 of the Customs Act in the specified account as per the GST provisions. The CBIC lastly clarifies that no restrictions is imposed in respect of sourcing of goods by the units, as the units are GST registrants, which are also allowed to procure goods from SEZ / FTWZs by following the applicable procedures.

The Petitioner had been exempted from payment of entry tax on account of the certificate granted under the Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna, 2004 and 2010. In terms of the Yojna, the Companies were entitled for 100% exemption in respect of payment of entry tax. 

The certificate was granted to the Petitioner in February 2017 with retrospective effect, and therefore, all entry tax assessment orders for the period 2004 to 2013 and subsequent assessment orders also upto 2015 became null and void as the exemption was granted for a period of 9 years that too with retrospective effect. However, the Respondent granted exemption only in respect of 5 assessment years, as the re-assessment for four years was not done. The Petitioner wrote letters to the authorities along with the exemption certificate for granting exemption for the remaining years. However, the Respondents did not grant the exemption.

The Respondents argued that that the statute does not provide for grant of exemption as the matter had become time barred. In respect thereto, the MP HC observed that he exemption certificate itself was granted only in the year 2017 and the cause of action arose for the first time in the year 2017 for grant of exemption as exemption certificate was granted with retrospective effect. Thus, there was a sufficient and reasonable cause in respect of condonation of the delay.

It was further observed by the HC that the Petitioner was certainly having a sufficient cause for condonation of delay, as exemption certificate was granted in the year 2017 and, therefore, the stand taken by the Department in respect of the limitation has got no meaning.  It was held by the HC that as the exemption had been granted with retrospective effect, the Respondent Department was certainly under an obligation to abide by the exemption certificates and to provide exemption in letter and spirit of the eligibility certificate. 

It had been further held that once exemption certificate was granted, the Department cannot take advantage of technicalities, especially when the certificate itself was granted in the year 2017 with retrospective effect. Basis the said observations, the HC allowed the Writ Petition and directed the Respondents to confer all benefits to the Petitioner in terms of the Entry Tax Exemption Certificate.

SRF Limited vs. State of Madhya Pradesh [W.P. No. 9628/2020]