GKB Lens Pvt Ltd

Facts: Applicant, GKB Lens Pvt. Ltd., a re-seller and importer of Sun Glasses, Frames, Lenses, Contact Lenses etc. having its head office in West Bengal were transferring goods namely Optical Lenses and Frames for spectacles and accessories from H.O to its branches in other States and had sought an advance ruling on the question as to whether the transfer of goods (optical lenses and frames for spectacles and accessories) supplied to the branches in states other than West Bengal can be valued in terms of the Cost Price under the Second Proviso to Rule 28 of CGST Rules, 2017, instead of 90% of MRP as required under the First Proviso of the same Rule; what is meant by the expression ‘where the recipient is eligible for full input tax credit' as used in the second proviso to rule 28 of the CGST Rules, 2017.

AAR held that -

++ Applicant has the option of not supplying goods to its branches under the first Proviso of Rule 28 and is eligible to value these goods by applying the terms of the second Proviso to Rule 28 of CGST Rules.

++ The expression "where the recipient is eligible for full input tax credit", as used in the Second Proviso to Rule 28 of CGST Rules, 2017, means that the recipient will be eligible to take full input tax credit of the amount of tax paid by the supplier as mentioned in the respective invoice or any other document valid under Section 16(2)(a) of CGST Act.

Appeal has been filed against this order 2018-TIOL-42-AAR-GST by the Assistant Commissioner contending that the wordings of the ruling dated 30.05.2018 have created an impression that the recipient would be eligible for ITC if the supplier paid the tax; that the AAR should have declared in no uncertain terms that no Input Tax Credit would be available for supply at Zero value - Respondent assessee informed that they have no objection to any clarification being added to the aforementioned AAR ruling.

Held: From a plain reading of the law laid down under section 16 of the CGST Act, it is clear that, inter alia , input tax credit is available only when the recipient is in possession of a tax paid invoice or debit note issued by the supplier registered under the Act and in case of a supply between distinct and/or related persons, as between H.O and Branches, the value declared in the invoice shall be deemed to be the open market value of the goods or services supplied; that in case the value declared in such invoice is zero, no Input Tax credit is available to the recipient; question raised by respondent GKB Lens Pvt. Ltd. has been correctly answered by the AAR but for the sake of further clarification, the ruling is modified so as to add at the end of the second paragraph of the said ruling the following sentence viz. ‘No Input tax credit, however, would be available for supply of goods/services at Zero value' - appeal disposed of: AAAR

SERVICE TAX

Ordnance Factory Vs CCE, C & ST

ST - The assessee is a unit of the Indian Ordnance Factory & is engaged in producing combat vehicles for Defence forces - It is also engaged in bullet proofing and mine proofing vehicles for para military forces - For such service, the assessee either received the vehicles from the forces themselves or else procured them from vehicle manufacturers - The Department opined that such activities of the assessee amounted to manufacture - Duty demands were raised for various periods - Duty demands were raised with interest & penalties u/s 76 & 78 of the Finance Act 1994.

Held: The assessee is liable to pay service tax as it was processing goods for its clients - However as such activities were known to the Department, no suppression of facts can be alleged - Hence extended limitation is not invokable and demands raised under normal period of limitation are sustainable - Interest on such duty amount is leviable - Besides, the original adjudicating authority had also offered benefit of abatement to the assessee - However, the assessee did not have the requisite documents to substantiate the claim - Hence matter warrants remand to enable assessee to produce necessary documents - As extended limitation is not invokable, the penalties may be set aside: CESTAT (Para 3,5,6,11,12,13)

- Appeals partly allowed: HYDERABAD CESTAT

2018-TIOL-2956-CESTAT-MAD

Mail Related Services Vs CST

ST - The assessee, engaged in providing mailing service using franking machines licensed from the postal department, would collect mail from clients, frank them by weight and then mail them - For such service, the assessee collected service charges - Besides, the assessee also paid service tax on such charges received, since the date 'Mailing List Compilation and Mailing Services' became taxable - Besides, in respect of franking cost, the clients also take out demand drafts in favour of the Post Master General - In some cases, the assessee pay the franking cost on behalf of their customers, although they get it reimbursed - The assessee also receive a rebate of 3% on the franking charges from postal department - The Department opined that such activities fell within the scope of Business Auxiliary Services u/s 65(19) of the Finance Act 1994 - Also that the franking charges were includible in taxable value & that rebate received from postal department is an amount paid for promoting or marketing postal service & was taxable under BAS - It was also held that cost of postage reimbursed could not be treated as pure agent expenditure - Duty demands were raised with interest and imposition of penalties - On adjudication, the demand pertaining to before 16.06.2005 was dropped with the remaining demand being confirmed & penalties u/s 77 & 78 being imposed.

Held: Postage costs which are reimbursed to the assessee cannot be said to be accruing to the assessee & so cannot be made part of taxable value - Also, the franking costs paid to postal departments are also reimbursed by the clients - Considering the Apex Court's decision in Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. such franking costs cannot be included in value of taxable service - Regarding rebate received from postal department, it cannot be treated as commission or an amount receiving for promoting postal services - Such incentives are given to promote use of franking machines - Hence these cannot be taxed under BAS - Considering the decision of the Tribunal in United Mailing Services the demands are set aside: CESTAT (Para 1,2,6,7)

- Appeal Allowed: CHENNAI CESTAT

2018-TIOL-2955-CESTAT-DEL

Punjab National Bank Vs CCE & ST

ST - Assessee is engaged in providing Banking and other Financial Services - After an audit, it was observed that assessee was also engaged in providing exempted services and has availed and also utilised the cenvat credit in providing both types of services but has failed to maintain separate records as required under Rule 6 Sub Rule 2 (iii) of CCR, 2004 - Alleging a contravention of 6(3), a SCN was served upon assessee and demand was confirmed alongwith interest and imposition of penalty - Perusal of record shows that the assessee has sent a intimation for the impugned period, vide letter dated 01.05.2009 - Though the Department has denied receiving the said letter, it is apparent that at page 149 of appeal, the said letter is found annexed along with the receipt thereof by the Department - The Adjudicating Authority below has failed to appreciate the said evidence - Thus, it becomes clear that there is no absence of proper intimation as required under Rule (6) (3A) CCR - The only question now remains to be adjudicated is whether the assessee is still liable to pay 6% of value of exempted services as is alleged vide impugned SCN and is confirmed vide the Order under challenge - In case of Max New York Life Insurance 2017-TIOL-2385-CESTAT-DEL and Mercedes Benz 2015-TIOL-1550-CESTAT-MUM, it was held that there is no provision that if the assesse fails to opt any of the option at a particular time, then option of payment of 5% will automatically be applied - Where the assesse has categorically by way of intimation opted for option provided under 6(3)(ii), CCR then the Revenue cannot insist the assesse to opt for Rule 6(3)(i) - Adjudicating Authority has failed to interpret Rule 6(3) CCR properly while confirming the impugned demand.

Now coming to the plea of limitation, the assessee since was not maintaining separate accounts for rendering taxable as well as exempted services, they exercised the option as per Rule 6(3)(ii) CCR and had intimated even for the impugned period vide their letter dated 01.05.2009 - Though the Department has denied receiving the same but has already observed they have failed to rebut the dak receipt by them already on record - There is no apparent suppression of facts or fraud committed on part of assessee as is alleged - Otherwise also, assessee is a public sector bank, there seems no motive to have malafide intentions to evade the payment of service tax - As a result, department was not justified in invoking the extended period of limitation - As a result, the SCN stands barred by time: CESTAT

- Appeal allowed: DELHI CESTAT

CENTRAL EXCISE