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The Applicant, a subsidiary of Airbus Invest SAS (the Holding Company) had entered into a global regional agreement in order to provide primarily assistance to carry out the activities globally. Under the said agreement, the activities to be performed by the Applicant included:

• Procurement Operations; and
• Procurement Transformation & Central Services (which essentially means to procure raw materials from Indian vendors and facilitating supply abroad) for its holding company

In respect thereto, the Applicant had sought an advance ruing before the Karnataka AAR to ascertain whether the activities proposed to be carried out in India by the Applicant would constitute as supply of ’Other professional, technical and business services‘ falling under SAC 9983 or as ’Intermediary service‘ classifiable under SAC 9961/9962 or any other classification of services and also whether the services rendered by the Applicant being an export service in terms of Section 2(6) of the IGST Act would not be liable to GST considering it zero rated supply.

The Karnataka AAR observed that the Applicant plays an important role in identifying the local capabilities in India i.e. identifying the vendors and making them understand the product requirement, advising and guiding them on technical aspect of the product along with the ethical aspect in relation to such activities. 

It was further observed by the AAR that without the assistance of the Applicant, the holding Company would not be able to procure the goods from the vendors. Final approval even if taken by the Holding Company does not make a difference to the role of facilitation undertaken by the Applicant.

The AAR also observed that the work of facilitation undertaken by the Applicant as technical advisory, guidance and business support assistance concerning quality control standards, performance and safety standards of the suppliers, merely facilitate the supplies to their holding company as all these activities are directed at the vendors which in a way forms part of intermediary services. 

It was also observed that the nature of the payment does not form part of the definition of Intermediary. Basis which the cost-plus mark-up method of payment can also be one of the ways for payment in such cases.

Basis the above observations and referring to the definition of the term intermediary services as per section 2(13) of IGST Act, the AAR held that the instant activity of the Applicant being an intermediary service, classifiable under SAC 998599 and applicable rate of GST @ 18% in terms of entry No. 23(ii) of Notification No. 11/2017 – CT (Rate) dated 28 June 2017.

The AAR further ruled that since the Applicant is covered under Intermediary Services classifiable under SAC 998599, the place of supply would be in India in terms of Section 13(8) of the IGST Act shall be considered and the services rendered by the applicant shall not qualify as ‘export of services' in terms of section 2(6) of the IGST Act.

Airbus Group India Private Limited [Advance Ruling No. 31/2021 dated 01 July 2021]

GLS Comments:

Recently, a division bench of the Bombay HC in the case of Dharmendra M Jani [2021-TIOL-1326-HC-MUM-GST] created a lot of stir by pronouncing a dissenting judgement. In this case, while Justice Bhuyan held the Intermediary Service provision to be ultra vires to the scheme of GST law and the Constitution, Justice Ahuja, upheld the constitutional validity of the said provision.

Given the contradictory views of both the judges, the matter has now been referred to the Chief Justice of the Bombay HC on the administrative side for his verdict. Until then, a clarification by the CBIC will go a long way in easing out difficulties of the trade and industry.

In the past 4 years of GST India, there have been significant changes in the economy. However, even with 44 Council meetings and the countless advance rulings, the law is yet far from settled. Nonetheless, the GST law has been developing at a considerable pace.

While other laws, such as Direct Tax and Customs Laws are as old as time, there are still various developments in this regard. In DT, the Government has now increased the fold of TDS from service sector to also include goods. As for Customs, the Government is still bringing in various goods under the umbrella of BIS.

Compiling all such developments, we are glad to bring you the 11th Edition of our ‘Vision 360’ Newsletter in association with TIOL. We have covered all the 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 Trade Notice No. 08/2021-22 dated 08 July 2021 has temporarily kept the issuance of benefits / scrips under MEIS, SEIS on hold due to changes in the allocation procedure. During this period, no fresh applications will be allowed to be submitted online at the IT module and applications that are already submitted and pending for issuance of benefits will also be kept on hold until further notice.

During the filing of an application under the MEIS Scheme on the EDI portal, the Petitioner had inadvertently selected the intent for claim of benefit as ‘No’ instead of ‘yes’. Accordingly, the claim of MEIS had been rejected by the Revenue. Aggrieved, the Petitioner preferred a Writ before the Madras HC seeking quashing of the order rejecting benefit under the MEIS Scheme.

The HC observed that the Petitioner had unintentionally made an error while uploading the shipping bills on the EDI system and the error is hyper-technical, inadvertent and a human error. The HC further observed that the intention of the Petitioner was clearly expressed in the shipping bills. Basis the above observations, the HC set aside the order passed by the Revenue and held that the Petitioner was entitled to the benefit under the MEIS Scheme and also directed the Respondent to grant consequential benefits.

K.I. International Limited [W.P. No. 16328 of 2020 dated 23 June 2021]

Authors’ Note:

It is now a settled principle that the Revenue shall not withhold substantial benefits to an assessee on account of hyper-technical inadvertent errors. Notably, the Bombay HC in the case of Portescap India Private Limited [Writ Petition No. 2532 of 2019] it was held that such errors are a procedural defect and curable considering the fundamental objective of the scheme. However, the Revenue authorities seldom take note of such judgements before rejecting claims. This only adds to the litigation burden on the assessees and the higher judicial authorities.

Taking cognizance of the difficulties faced by the taxpayers in electronic filing of Income Tax Forms 15CA/15CB on the portal, the Finance Ministry vide Press Release dated 05 July 2021 has further extended the date of manual filing of such forms till 15 July 2021. A facility will be provided on the new e-filing portal to upload the forms for the purpose of generation of the Document Identification Number.

The Petitioners, engaged in the business of manufacture of MS Billets in Ingots had been subjected to assessment orders, whereby the Revenue had sought to reverse a portion of the ITC claimed, proportionate to the loss of the input, referring to the provisions of Section 17(5)(h) of the CGST Act. Aggrieved, the Petitioner had preferred a Writ before the Madras HC challenging the assessment order.

The HC observed that Section 17(5)(h) relates to goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. The loss that is occasioned by the process of manufacture cannot be equated to any of the instances set out in clause (h) of Section 17(5). It was further observed that the situations u/s. 17(5)(h) of the CGST Act indicate loss of inputs that are quantifiable, and involve external factors or compulsions. A loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself.

In view of the above observations, the Madras HC held that the reversal of ITC involving Section 17(5)(h) by the Revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h) of the CGST Act.

ARS Steels and Alloy International Private Limited [2021-TIOL-1393-HC-MAD-GST]

Authors’ Notes:

The issue relating to availement of credit in respect of inputs lost during manufacturing process persisted even under the erstwhile VAT and excise laws. The New Delhi Tribunal in the case of Cadbury India Limited [2015-TIOL-1407-CESTAT-DEL] had held that in case of inputs lost in work in process, the assessee is entitled to take CENVAT Credit. The instant judgement of the Madras HC will be a landmark under the GST regime as it brings a huge relief to the manufacturers. 

The CBIC vide Notification No. 28/2021-Central Tax dated 30 June 2021 has waived off the penalty for non-compliance of GST Invoice QR code provisions in respect of B2C invoices for the period from 01 December 2020 to 30 September 2021.

Authors’ Note:

The QR Code provisions had come into effect from 01 October 2020. However, in view of the difficulties faced by the taxpayers in complying with such provisions, the CBIC had waived off the penalty for non-compliance of such provisions till 30 June 2021 vide Notification No. 06/2021 dated 30 March 2021. 

The Appellant had initially availed credit of Education Cess and KKC into GST. Post the amendment to Section 140 of the CGST Act, whereby the term ‘CENVAT Credit’ had been contextualized with the term eligible duties, to disallow credit of cesses, the Appellant had duly reversed the credit of cesses so availed. Thereafter, the Appellant filed a refund claim of such cesses, being credit unutilized. The said refund claim came to be rejected by the Revenue on the ground of it being time barred as the GST came into effect on 01 July 2017.

Aggrieved, the Appellant preferred an Appeal before the Chandigarh CESTAT. The Tribunal observed that the amendment to Section 140 of the CGST Act came on 30 August 2018 i.e., after one year of the switching to the GST Regime which is applicable retrospectively. Accordingly, it was held that the Appellant could not have possibly have filed the refund claim within 1 year from 01 July 2017. Accordingly, it was held that the relevant date for the refund claim shall be 30 August 2018 and therefore, the refund application being filed in September 2018, is within the due date. In view of the above, the Chandigarh Tribunal set aside the refund rejection order and allowed the Appeal.

Authors’ Notes:

Basis the instant judgement of the Chandigarh Tribunal, the taxpayers who had filed refund claims for cesses within 1 year of amendment of Section 140 of the CGST Act, can now represent to the appropriate authorities to allow their refund claims. Similarly, taxpayers can also claim the refund of CVD/SAD, wherein such duties had become payable after 01 July 2017 and credit could not be availed. 

The F.M. Smt. Niramala Sitharaman in her press conference on 28 June 2021 announced various economic reliefs for the trade and industry in wake of the pandemic. Most notably, the tenure of Production Linked Incentive (‘PLI’) Scheme for Large Scale Electronics Manufacturing has been extended by one year (i.e., till 2025-26). The FM reasoned that Companies have been unable to achieve incremental sales condition due to pandemic related lockdowns.

Following are other key reliefs announced by the F.M. in the press conference:

• Support to project exports by extending coverage of National Export Insurance Account (‘NEIA’) additionally by Rs. 33,000 crores for the next 5 years;
• Infusing equity of Rs. 88,000 crores in Export Credit Guarantee Corporation (‘ECGC’) over the next 5 years to boost export insurance cover;
• Free Tourist Visa scheme to be applicable till 31 March 2022 or till 5,00,000 visas are issued, whichever is earlier;
• Extended Atmanirbhar Bharat Rozgar Yojana from 30 June 2021 to 31 March 2022.

The Appellant had purchased melting iron scrap on High Sea Sales (‘HSS’) basis from various sellers during the period 2010-11 to 2012-13. During the course of the audit, the Revenue observed that the Appellant had availed CENVAT credit of input service on the strength of improper documentation in respect to the invoices, which were issued in the name of the high sea seller who sold the goods to the Appellant.

Basis the above observation, the Revenue alleged that the Appellant had availed CENVAT Credit in contravention of the CENVAT Credit Rules (‘CCR’). Basis the said allegation, the Revenue had proposed to recover the CENVAT Credit along with applicable interest and penalty, which had been confirmed by an order. Aggrieved, the Appellant preferred an Appeal before the Tribunal.

The Tribunal observed that goods purchased were indeed inputs for the Appellant. It was further observed that manufacturer can avail CENVAT Credit on the basis of the invoice issued during the clearance of inputs from any of its premises where the goods are sold or on behalf of the said manufacturer. Similarly, it was observed that an importer is entitled to avail CENVAT Credit on inputs if the importer is registered in terms of the provisions of Central Excise Rules.

Further, referring to the Rule 4A(1) of Service Tax Rules it was observed that the Appellant had substantially complied with the documentation requirement except the invoice not being in the name of the Appellant. Most importantly, it was observed that no specific documents had been mentioned considering the transaction of subsequent sale on high sea sale basis, in the Rules. 

Therefore, it was observed that the scheme of the Act is to be read harmoniously with the Rules. Accordingly, the Tribunal held that if something is missing the Rules, reference can be drawn through the Act and credit cannot be denied for some gap left in the statute which will defeat the scheme of CENVAT credit. In view of the above, the Tribunal held that CENVAT credit availed by the Appellant was correct and accordingly the appeal was allowed with consequential reliefs.

Mammon Concast Private Limited vs. Commissioner of CGST, Customs and C. Ex. [Service Tax Appeal No. 53625 of 2018-SM]