HIGH COURT CASES

2019-TIOL-1709-HC-MUM-GST

Bhattad Industries Pvt Ltd Vs UoI

GST - Petitioners challenge the action of respondent Assistant Commissioner of Central Goods And Services Tax in having directed the petitioner's bankers to freeze the petitioner's accounts with them - grievance of the Petitioner is that the action of freezing the two bank accounts is arbitrary and high handed for the reason that no show cause notice in respect of any alleged violation of the Act has been issued till date; that the impugned freezing of the accounts is in defiance of and contrary to Section 83 of the CGST Act, 2017, which allows the provisional attachment of bank accounts to protect the Revenue only by an order in writing by the Commissioner and in the present case, no such order has been passed; therefore, the action of freezing the Petitioner's bank accounts is without jurisdiction.

Held: Given the drastic nature of the power (in section 83), the Parliament has provided that such provisional attachment can only be done consequent to an order of the Commissioner - This ensures due application of mind by a senior officer to the facts of the case before an attachment of a bank account is ordered - Counsel for Revenue very fairly states that no order is available on file and this would indicate that there was no application of mind by the Commissioner before the Petitioner's bank accounts in Axis Bank, Tardeo Branch and Indusind Bank, Miraroad Branch were frozen/attached - held that the impugned action of attaching the Petitioner's bank accounts is without authority of law and is, therefore, set aside - Respondent is directed to immediately vacate the freezing/attachment of bank accounts and inform the two banks concerned to vacate the attachment/freezing of the bank accounts - Petitions allowed: High Court [para 4 to 7]

- Petitions allowed: BOMBAY HIGH COURT

2019-TIOL-1708-HC-MUM-GST

Magma Fincorp Ltd Vs State Of Maharashtra

GST/VAT - Petition impugns the investigation initiated and steps taken by Assistant Commissioner of Sales Tax against petitioner u/s 64 of the Maharashtra Value Added Tax Act, 2002 - challenge is essentially on the basis that by reason of the Constitution (One Hundred and First Amendment) Act, 2016 r/w the Maharashtra SGST Act, 2017, the State of Maharashtra could not have continued the application and effect of the provisions of the VAT Act and in particular, section 64 thereof, beyond one year after the appointed day or taken steps thereunder; that Section 78 of the Maharashtra Goods and Service Tax Related Laws (Amendments, Validation and Savings) Act, 2017 by which such provisions are so continued is ultra vires the Constitution Amendment Act.

Held: Amendment made by the Constitution Amendment Act has inserted Article 246A as as is apparent from its opening words, overrides Articles 246 and 254 - Section 19 of the Constitution Amendment Act makes transitory provisions - Both Parliament and the legislature of the State of Maharashtra have made laws with respect to goods and services tax (GST), the Parliament by exercising the Central GST Acts and the State by enacting the State GST Act - State legislature has also enacted the State GST Savings Act, section 78 whereof contains validation and savings provisions in various laws and rules, regulations, notifications, etc. made thereunder which were in force immediately before coming into force of the State GST Act - By virtue of section 78 of the State GST Savings Act read with Section 19 of the Constitution Amendment Act, the VAT Act and the rules, regulations, notifications etc. issued thereunder, which were in force on the appointed day under the State GST Act, continue to have effect for various purposes, which inter alia include assessment, re-assessment, production and inspection of accounts and documents and search of premises, and payment and recovery of any tax under the VAT Act or any other connected or incidental purpose, relating to any period before the appointed day of the State GST Act - There is no inconsistency between the provisions of Section 78 of the State GST Savings Act and the Constitution as amended - Constitution Amendment Act provides for concurrent power of the State legislature to make laws with respect to goods and services tax - State GST Act has been enacted by the State legislature under this power - Just as it could enact any law relating to tax on supply of goods or services or both, it could amend or repeal or save any such law - VAT Act is one such law which it had the power to amend or repeal or save - Section 78 of the State GST Savings Act saves the provisions of the VAT Act insofar as they relate to any payment or recovery of tax under the VAT Act and any purpose connected or incidental thereto relating to any period prior to the commencement of the State GST Act - There is no inconsistency or repugnancy here with the Constitution as amended - No such law made or repealed or saved by the State legislature can be said to be inconsistent with Article 246A of the Constitution brought in by the Amendment Act - at any rate, section 19 of the Constitution Amendment Act cannot be said to have taken away the power of the State legislature to amend or repeal or save any law relating to tax on goods or services or on both in force in any State immediately before the Constitution Act, so long, of course, as such amendment, repeal or saving is not inconsistent with the Constitution as amended - Any amendment or saving made in that respect shall continue to be in force even beyond one year of the coming into force of the Constitution Amendment Act - Sections 64 and 14 of the Act are connected with or incidental to collection or recovery of tax under the VAT Act - It cannot possibly be suggested that the subordinate legislation under the VAT Act such as rules, regulations, notifications etc. issued thereunder has not been expressly saved by section 78 of the State GST Savings Act - wordings of the section leave no manner of doubt that all these are expressly referred to and saved - saving provision is both explicit and expansive and it saves “all rules, regulations, orders, notifications, form, certificate and notices, appointments and delegation of powers issued under” the VAT Act - challenge to the vires of section 78, therefore, has no merit - Writ petition is accordingly disposed of by rejecting petitioner's challenge to the constitutionality of section 78 of the Maharashtra Goods and Services Tax related Laws (Amendments, Validation and Savings) Act, 2017: High Court [para 4, 5, 6, 8, 10, 11, 12, 13]

- Petition disposed of: BOMBAY HIGH COURT  

GST

GST An Update - The Journey to GST (01-08-2019)

GST CONCEPT & STATUS as on 1st August, 2019

Siwal Infracon Pvt Ltd Vs CCE & ST

ST - During the course of audit, the Department observed that the appellant received certain amount on account of mobilisation advances from the service recipient M/s Today Homes Infrastructure Ltd. but have failed to discharge the service tax liability on these advances at the time of receipt - however, the appellant subsequently adjusted the said advance in running bills issued and paid service tax at that later stage - department alleged that since still there is an unadjusted part of the mobilisation advance for the year 2012-13 and 2013-14, the appellant was alleged to have short paid the service tax - demand issued for recovery of service tax of Rs.18,14,860/- along with interest and penalty - lower authorities confirmed the demand etc. and, therefore, appeal before CESTAT.

Held: Though there was an agreement of the appellant with its service provider M/s Today Homes Infrastructure Ltd. to provide the Construction Services in the nature of Works Contract Service however the agreed services could not be provided and there had been a settlement agreement between the two vide which the service provider and the receiver agreed for finalisation of the initial agreement with the payment only to the extent to which the services were provided however the amount of one crore as was paid by the recipient on account of mobilisation amount since was already withdrawn by him, the amount of running bills to the extent of 15 lakhs got adjusted and the balance of 85 lakhs was acknowledged to have been returned to the recipient - Tribunal has already decided the issue of withdrawal of advance money in the case of C.C.E. Bhavnagar Vs. Madhvi Procon Pvt. Ltd - 2015-TIOL-87-CESTAT-AHM holding that Service Tax is not payable when no service provided - Board's Circular B1/6/2005 dated 27.07.2005 in paragraph 27.2 clarifies that when payment is received in advance for services to be provided but subsequently the services are not actually provided, then in such cases service tax paid is liable to be refunded - Commissioner(Appeals) has committed an error while ignoring the relevant piece of evidence as that of agreement just for want of date thereupon and also ignored the affidavit in this respect and even the bank acknowledgement corroborating the subsequent event of withdrawal of the entire mobilisation amount of Rs. 1Cr., however with adjustment of Rs. 15 lakhs - Thus, the amount of Rs. 85 lakh cannot be the part of the taxable value - Order under challenge is set aside and Appeal stands allowed: CESTAT [para 7, 8]

-Appeal allowed : DELHI CESTAT

Avtec Ltd Vs CC & CE

ST - The issue arises for consideration is regarding the exemption of service tax on job workers granted by notfn 8/2005 - The Appellate Authority has denied the benefit of this notification to the assessee for the sole reason that the assessee has not been able to substantiate that the manufacturer namely M/s. H V Axles Ltd., a group company of M/s. Tata Motors, had paid appropriate duty of excise - It is not in dispute that the goods are produced using raw materials or semi finished goods supplied by assessee and the goods so produced are returned back to the manufacturer for use or in relation to manufacturer of goods falling under the First Schedule to CETA, 1985 - What is contended by Department is that the assessee has not been able to substantiate that appropriate duty of excise has been paid by the manufacturer - A perusal of aforesaid notification and the proviso leaves no manner of doubt that the exemption shall apply in a case whether goods so produced by the job workers are returned for use in or in relation to manufacture of any other goods falling under First Schedule to CETA, 1985, on which appropriate duty of excise is payable - This certificate clearly indicates that they have discharged or shall be discharging liability of excise duty for final products upon the clearance from the factory - This would satisfy the requirements of Notfn - The Appellate Authority was, therefore, not justified in holding that it was for the assessee to substantiate whether appropriate duty of excise has been paid by manufacturer - It is therefore not possible to sustain the impugned order: CESTAT

-Appeal allowed : DELHI CESTAT

Sahu Agencies Pvt Ltd Vs CCE & ST

ST - Appellants were appointed as distributor for Recharge Coupon Voucher (RCV) by M/s Tata Sky Ltd. - Revenue treated the amount of discount received by the appellant to the tune of around Rs.36 lakhs as consideration for service tax and demanded service tax under 'Business Auxiliary Service' - demand confirmed, therefore, appeal.

Held: It was very clearly informed by M/s Tata Sky Ltd. through their letter dated 01.04.2008 that the distributors were purchasing RCVs from M/s Tata Sky Ltd. at discounted price and selling the same at MRP to the customers and retaining the difference between the two as profit - therefore, difference between the purchase and sales price is not commission and not covered by 'Business Auxiliary Service' - Bench finds that it is clear case of sale and purchase which is not covered by the provisions of service tax: CESTAT [para 5]

ST - CENVAT - Appellants had availed Cenvat credit of service tax paid by M/s Tata Sky Ltd. through invoices through which RCVs were sold to the appellant - It was stated in the said show cause notice that the said invoices were not eligible documents for availment of Cenvat credit - since the appellants were not providing any output service, therefore, they were not eligible for Cenvat credit of Rs.75,28,164/- - appellant had on their own debited an amount of Rs.4,07,221/- from the Cenvat credit of Rs.75,28,164/- availed by them, therefore, difference between Rs.75,28,164/- and Rs.4,07,221/- needs to be disallowed to the appellant - insofar as imposition of penalty under sub-rule 3 of Rule 15 of Cenvat Credit Rules, 2004 is concerned, the said provision mandates imposition of penlaty on service provider in case of fraud, collusion etc. and if the intention of the service provider is to evade payment of service tax - Since in the present case, the appellant was not required to pay any service tax, therefore, the question of intention to evade payment of service tax does not arise - penalty of Rs.75,28,164/- imposed on the appellant is set aside - Appeal partly allowed: CESTAT [para 7]

-Appeal partly allowed : ALLAHABAD CESTAT

Riddhi Corporation Vs CCE

CX - Assessee is engaged in manufacturing of Front Guard Assy – Black, Front Guard – Kit, Leg Guard, Footrest Step, Round R R Guard, Kit- Guard Activa, Rear Guard with W Fitting, Side Panel, Front Bumper with nuts and parts for M/s HMIPL and M/s IYMPL and M/s Jit Industries - The assessee after manufacturing of such goods are clearing to the buyers without affixing any MRP and assessing the same in terms of Section 4 of Central Excise Act - The buyers in turn affix MRP on said items and pay appropriate duty in terms of section 4A - The goods manufactured by M/s RC have been classified by them as accessories of two wheelers under chapter sub heading 8714 1090 - The assessee during the manufacture of such goods, is also getting some of processes done from the job workers, for which they are sending the inputs on challans to the job workers - Based on investigation, M/s RC were issued SCN wherein it was alleged that the goods are parts of the two wheelers and the valuation of same for the purpose of payment of duty has to be done under Section 4A of CEA, 1944 and in terms of Serial No. 108 of Notfn 49/2008-CE (NT) - The SCN proposed to demand duty on account of differential duty - The show cause notice also alleged that the goods shown to have been removed on incomplete challans and were not found to have been received back and, thus duty is payable by assessee as the goods were cleared without proper invoices - As far as valuation of goods for the purpose of assessment, the impugned goods are being cleared by assessee to M/s HMIPL and IYMPL or Jit Industries on payment of duty under Section 4 of Central Excise Act without affixing any MRP - The buyers in turn are clearing these goods to their dealers after affixing MRP, who in turn sell these goods to the customers as per the choice and willingness of the customers - It is also a fact that the impugned goods are not cleared by M/s HMIPL/ IYMPL and M/s Jit after putting them on Two Wheelers as they are not manufacturers of two wheelers - It depends upon the requirement of these dealers to whom such goods are cleared to decide as to what quantities of goods are to be consigned to them - Also it is not mandatory for the Two Wheeler manufacturers to install the impugned goods on the Two wheelers and it depends on the choice of the customer as to which of these impugned goods he wants to fix on his Two Wheeler when these goods are available at the dealers' shop - Assessee was manufacturing the goods as per the specification provided by industrial consumers, i.e. HMIPL, IYMPL - The impugned goods are not components, parts or assemblies of Two Wheeler but are accessories of two wheelers and hence not liable for valuation in terms of Section 4A and Notfn 49/2008-CE (NT) - Further that the goods were at the time of clearance from the factory of assessee were not intended to be sold to the ultimate consumer in retail but were intended to be cleared in wholesale package to the industrial customer and hence not liable to duty in terms of Section 4A and Notfn 49/2008-CE (NT) - The demand made against assessee in terms of Section 4A and in terms of Notfn 49/2008-CE (NT) is not sustainable - In absence of any buyer and receipt of any consideration it cannot be said that any goods were removed by assessee - No discrepancy in stocks has been shown to have occurred - The allegation lacks any corroborative evidence and hence the demands are not sustainable - In case of demand of Rs. 75,976/- and confiscation of goods, same has been ordered on goods which were to be cleared under invoice - The adjudicating authority has held that the said goods were not accounted in the records and were also cleared without assessing the same under section 4A - At the time of visit of the officers, the invoice for clearance of goods were found to have been prepared - There is no allegation that the goods were to be removed on duplicate invoices - The only lacuna which can at the most be pointed out that the finished goods register was not maintained till date - However only for irregular maintenance of finished goods record the goods cannot be made liable for confiscation especially in the light of fact that there is no dispute about the genuineness of invoices by which the goods were intended to be removed - There is no allegation that assessee intended to clear the goods without payment of duty - Hence, the goods are not liable for confiscation and the duty is payable only on removal - As far as reasoning given by the adjudicating authority that the goods were being cleared without complying with the provisions of Section 4A, since the valuation of goods in terms of section 4 i.e. assessment of duty on transactional value under section 4 is correct, therefore the confiscation of goods is not sustainable: CESTAT

-Assessee's appeal allowed : AHMEDABAD CESTAT

Surana Telecom & Power Ltd Vs CCE , C & ST

CX - The assessee is manufacturer of optical fibre cables - They imported raw material under Customs Notfn 24/2005-CUS which exempts various goods including goods used for manufacture of optical fibre cables classifiable under Chapter heading 8544 70 - It is the case of revenue that they have actually used the imported goods for manufacture of products falling under heading 9001 for which exemption notification is not available - The dispute therefore is regarding the differential Customs duty on inputs - The SCN also alleged that penalty is imposable under section 112 on assessee as well as on Shri Narender Surana, Shri S. Balasubramanian, Shri B. Shekarnath and authorized representative of assessee - The exemption notification is available to optical fibre cables falling under chapter heading 8544 and not to optical fibre cables falling under 9001 - As was evident from the excise returns filed by assessee themselves, the optical fibre cables which they had manufactured fall under Chapter heading 9001 which were not individually sheathed - Therefore, the exemption notification was not available to the products used in manufacture of OFC falling under Chapter heading 9001 - The next question is about the mechanism for recovery of duty - The normal mechanism for recovery of duty not paid, short paid or erroneously refunded is section 28 of the Customs Act, 1962 which provides to recover within the normal period of one year or extended period of 5 years in case there are elements of fraud, collusion, wilful misstatement, suppression of facts - There is no mechanism under section 28 to demand customs duty beyond the period of 5 years even if there is fraud, collusion - In cases where a condition of import has to be fulfilled post importation, the period of one year or 5 years may not be relevant - If the importer uses imported goods in other than the prescribed manner, after a period of one year, one cannot allege that there was fraud, collusion, unless there is evidence to the effect and it is only a failure - The importer may, out of real constraints or practical considerations use the material in some other manner - In such case, the demand under section 28 will not sustain - Further, there are imports in schemes such as EPCG where there is a time limit of 8 years under Foreign Trade Policies for fulfilment of the conditions - This is clearly beyond the normal period as well as extended period of limitation under section 28 - Therefore, Section 28 is the normal section for recovery of duties - Alternative methods have been prescribed under the Act itself - The impugned order sought to recover the amount under Rule 8 of Customs Rules, 1996 which is not a mechanism for demand of duty - Therefore, the impugned order is set aside on that ground alone - As far as the demand under section 28 is concerned, as rightly pointed out by assessee, the same can be demanded only by the Customs officers and not the Central Excise officers - Consequently, penalties imposed under section 112 of Customs Act also need to fail due to lack of jurisdiction itself without going into the merits of the imposition of such penalties - The department is free to take legal action to enforce the bond executed by the assessee: CESTAT

-Appeal allowed : HYDERABAD CESTAT

CC & CE Vs Sanghi Textiles Pvt Ltd

CX - The assessee is processor of textiles - They have entered into an agreement with M/s KHDCL as per which they received grey fabric and returned it after processing - They have been discharging central excise duty as job workers on the cost of raw materials plus processing charges - A SCN was issued alleging that the assessee have not taken full cost of raw materials while arriving at the assessable value - They have only taken the price as declared by KHDCL in their price declaration given to the assessee which is lower than the actual price shown in delivery challans - Therefore, the cost of raw materials has been suppressed resulting in lowering of assessable value and underpaying of excise duty - There is no dispute as far as the processing charges are concerned - The only dispute is regarding the cost of grey fabric supplied by M/s KHDCL for which a lower price is given in their price declarations sent to assessee and a higher price is indicated in the delivery challans - Since there is no sale of grey fabric at all, either by M/s KHDCL or by assessee, the value of the raw material becomes relevant only in case the material is damaged by assessee and they have to reimburse the cost of the material to M/s KHDCL - This should reflect the true value of the goods because assessee will be making up for any loss on their account at this price - It is undisputed that in case of loss, the price to be paid by assessee will be as per the delivery challan price - The price in the delivery challan should, therefore, be considered as correct price of the raw material - No evidence found whatsoever to justify the contentions in impugned order that the price in delivery challan is 15% higher than the actual cost of raw materials to cover the transit risk - Neither the delivery challan nor the price declarations nor the agreement nor any other documents presented before Tribunal would substantiate this claim - Clearly, the Commissioner has erred in holding so merely on the basis of statements and assertions made during the personal hearing before him - The impugned order is not correct - The demand of Central Excise duty on differential value is liable to be recovered under Section 11A(1) of CEA, 1944 read with Rule 4,5,6 & 8 of CER, 2001-2002 - Consequently, the deemed CENVAT credit, if any, also needs to be disallowed - For these reasons, the interest under Section 11AB also needs to be recovered from the assessee - It is not in dispute that the assessee has declared the value which is lower than the value in price declaration and therefore has clearly mis-declared the value and the same is liable to be recovered - However, there is scope to take a view that assessee may have mis-understood about the duty liability and therefore, taking a lenient view, the penalty under Section 11AC read with Rule 25 of CER, 2001-02 is set aside - The penalty on M/s KHDCL under Rule 26 of CER, 2001-02 is also set aside: CESTAT

-Appeals disposed of : HYDERABAD CESTAT

CC Vs Mohiudeen Saw Mills

Cus - The assessee, a proprietorship imported Keruing Face Veneer of various sizes - The material was imported for sale in India on payment of VAT - The importer regularly filed refund applications under Notfn No 102/2007 after sale of the imported items on payment of VAT on production of necessary documents - The proprietor was also the proprietor of another entity - The Revenue raised an objection that the SAD for which refund was being claimed was paid by the assessee herein, whereas VAT had been paid by the other entity - In effect, it was claimed that the entity which paid the VAT was different and so the importer failed to satisfy the mandate of Notfn No 102/2007 - The original authority rejected the refund claims - On appeal, the Commr.(A) quashed the O-i-O and allowed the refund - Hence the Revenue's appeals.

Held - The assessee is a proprietor of both the organizations and has been allocated one TIN number for both the concerns owned by him - Further, the certificate issued by the VAT authorities clearly establishes that one Ahmed Hajee Mohiudeen is the proprietor of both M/s Mohiudeen Saw Mills and M/s Hajee Timber Complex and they have been registered dealer under the Karnataka VAT - Hence the Revenue's objection that both concerns are separate entities is untenable - Hence the findings of the Commr.(A) warrant no interference with: CESTAT

TII

TP - If net margins on cost of goods sold to unrelated parties is less than net margins on sale of related parties, then transaction with AE has to regarded as at arm’s length: ITAT

TP - Taxpayer entity working as independent marketing agency and making payments to third parties for discharging obligations on their behalf, cannot be construed as conduit: ITAT

TP - Absence of segmental information merits rejection of such comparable for purposes of benchmarking: ITAT

TIOLCORPLAWS

Competition Act - Decision involving pure pricing pertaining to insurance industry does not give rise to any competition issue where such decision is not manifestly in abuse of dominant position: CCI

Arbitration and Conciliation Act, 1996 - Grant of pendente lite interest is impermissible if arbitration agreement contains barring clause in respect of post-award interest : HC

Trade Marks Act, 1999 - Use of polo player as logo even if Publici Juris, is barred if similarity of use in relation to registered trademark bearing polo player device causes deception in unwary consumer mind : HC