Uflix Industries Vs UoI

GST - Petition has been filed challenging the attachment order dated 18th March, 2020 issued by respondent No.3 on the ground that it has been issued without jurisdiction – From the paper book, it is revealed that the petitioner, prior to filing of the present writ petition, had filed objections to the impugned attachment order under Rule 159(5) of the CGST Rules, 2017 - present writ petition is, therefore, disposed of with a direction to the respondent No.3 to decide the objections filed under Rule 159(5) of the Rules within three working days - if petitioner is aggrieved by the decision of respondent no. 3, it shall be open to them to file appropriate proceedings in accordance with law: High Court

- Petition disposed of: DELHI HIGH COURT

2020-TIOL-1010-HC-MAD-VAT

Miot Hospitals Ltd Vs State Of Tamil Nadu

TN VAT - Issue is Whether in the course of provision the medical service, petitioners who are private hospitals were liable to pay Value Added Tax (VAT) under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (also referred to as Act for the sake brevity in this Order) on the stents, valves, medicines, x-ray and other goods used while treating their in house patients? - Petitioners claim that they do not charge any amount separately towards the cost of these items and charge a consolidated amount from the patients towards cost of medical treatments and it is inclusive of all the expenditure incurred by it and therefore the respondent is not entitled to issue the impugned notices - respondent has called upon the petitioners to pay Value Added Tax (VAT) on the purported deemed sale of stents, valves, hip replacement and knee replacement etc. in the course of provision of medical services by the petitioners as “works contract” within the meaning of Section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 chargeable to tax under Sections 5/6 of the said Act - respective petitioners have challenged the impugned notices issued under Section 27 of the TNVAT Act, 2006 to reopen the completed assessment made under Section 22(2) of the TNVAT Act, 2006 on the ground that the petitioners have rendered “works contract” within the extended meaning of definition of “sale” under Section 2(33) of the TNVAT Act, 2006, chargeable to tax under Section 5/6 of the said Act.

Held: Petitioners ought to have been relegated to participate in the adjudication proceeding at the time of the admission itself - Perhaps the petitioners feared adverse orders despite favourable decisions of four High Courts and, therefore, faced with the prospect of a mandatory pre-deposit before the Appellate Commissioner, they have approached this Court -Since considerable time has lapsed, Bench is not inclined to relegate the parties to the alternative remedy straight away - It is the contention of the commercial tax department that there is a “sale” within the extended meaning of the definition of “sale” under Section 2(33) read with 2(43) of the TNVAT Act, 2006 and Article 366, 29(A) clause (b) of the Constitution of India - core issue in these cases is whether there is a provision of “works contract” by the Petitioners within the meaning of Section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 and therefore a “deemed sale” for the purpose of Section 2(33) of the Act to attract levy/tax under Section 5/6 of the said Act in the course of the provision of medical/health services to patients admitted in the hospital as in-patients? -  There is no scope for inferring any ambiguity in the definition of ‘sale' and ‘works contract' in the TN VAT Act, 2006 -  Prior to the 46 th amendment to theConstitution of India, no sales tax was payable on composite/indivisible contracts involving the provision of both service and supply of goods involving “works contract”, transfer of right to use, catering service etc. - “Works contract” essentially involves two fundamental elements namely (i)transfer of material and (ii) rendering of service - The supplier transfers the ownership and possession of the material used to the recipient in the course of execution of the work contract - Sometime such work may result in new identity altogether different from the material supplied while sometimes such materials become part of the existing structure or goods.For the purpose of service tax, “health service” could be treated as “works contract” because of a different treatment to it in the Finance Act, 1994 - However, for the purpose of the Tamil Nadu ValueAdded Tax Act, 2006, no such distinction was made - Under Goods and Services Tax Act, 2017, it appears “Health Care Service” is not liable to tax under Notification No. 12/2017-CT (Rate) dated 28.06.2016 vide Sl.No.74 and vide Sl.No.77 of Notification No. 9/2017-IT(Rate) dated 28.06.2017 - Similarly, “Health care service” is exempt in Tamilnadu under the Tamil Nadu Goods and Services Tax Act, 2017 - Thus, the drift of the legislatures both ie. the Union Parliament both under the Finance Act, 1994 and Central GST Act, 2017, Integrated GST Act, 2017 and the State Legislature under the Tamil Nadu GST Act, 2017 has been to exempt the provision/supply of medical service albeit “health care services” from tax - That appears to be the current policy of the Government as well -  However, it cannot be said “health services” involving the implanting of prosthetics and other artificial parts inside the body of a patient were either outside the purview of tax levy under Tamil Nadu Value Added Tax Act, 2006 or earlier under the Tamil Nadu General Sales Tax, 1958 or were exempted by notifications under the respective enactments in absence of a specific notification - In the four cited decisions on the subject, the respective High Court examined the issue from a common perspective - These courts have not examined the issue from the point view of “work contract”, therefore, the ratio given and followed by them are not binding on this Court -The definition of “works contract” in Section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 is of very wide import - It is a generic definition; it is not limited; it is not confined to any specific genreof contract involving service and supply of goods; it is also not confined to immoveable property - Any agreement for fitting or installation of any moveable property such as prosthetics can quality as “works contract” - It encompasses within its fold every possible and conceivable commercial transactions which involve sale and service, therefore, Medical / Health service cannot be carved out as separate specie of service and/or sale different from the definition of “works contract” for the purpose of the Tamil Nadu Value Added Tax Act, 2006 - “Works contract” includes any agreement for “fitting out” of any movable property - It is not confined to any genre of contract, therefore, fitting out or implanting of prosthetics into the physiology or the body of the patient for alleviation of pain or for improvement of the life of the patient in the course of medical/surgical procedure can be construed as “works contract” - It is for the petitioners to demonstrate how the definition of works contract is not attracted to this case - Thus, there is merits in the contention of the respondent that the medical/Health services rendered by the petitioners could fall within the ambit of the Article 366 (29-A) of the Constitution of India read with the provisions of the Tamil Nadu Value Added Tax Act, 2006 - At the same time, dispensing of medicine to such patients while they undergo treatment as an inpatient in the hospital cannot come within the purview of the definition of “works contract” - Consequently, no tax can be demanded on  the value of such medicine - Under section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 the definition of “works contract” includes any agreement for carrying out building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property for cash or deferred payment or other valuable consideration - The words “fitting out of any immovable property” can bring within its purview the fixing of valves, stents  ,  metal plates, artificial hips and knees etc. the extended definition of sale in Section 2(33)(ii) and the definition of the expression “works contract” as defined in section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 makes it clear that it is of wide import as compared to the amended definition of sale in Section 2(h) of the Madras General Sales Tax Act, 1939 vide Madras General Sales Tax (Amendment) Act 25 of 1947 which fell for consideration in first Gannon Dunkerley's case -  While the definition of the expression "works contract” in Madras General Sales Tax Act, 1939 was confined to construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or fitting out, improvement or repair of a immovable property on the other hand, the definition of “works contract” in section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 with which this court is concerned in these cases is of wide import - In the view of the Bench, the expression “works contract” cannot be given a restricted meaning merely because “works contract” as a concept was originally confined to contracts relating to immoveable properties alone as was noted in the definition of “works contract” in Madras General Sales Tax Act, 1939 which fell for consideration in the Ist GannonDunkerley's case -  However, after the 46 th amendment to the Constitution, the definition of “work contract” was widened and it is broad based taking within its fold every possible and conceivable contracts involving transfer of property while providing services - Therefore, the definition of “works contract” can include hospital/health/Medical services involving composite contracts where there is not only a provision of service but also supply of goods along with such service - The definition takes within its fold such services also and the respondents are, therefore, justified in proposing a demand to tax the petitioner - In the view of the Bench, there is not only transfer of possession of prosthetics into the physiology of the patient but also the ownership of such prosthetics by the patient for consideration in the course of the provision of medical/health service - Similarly, in the course of taking x-ray, scan, MRI/CT Scan for such in-patient, cost of which get included into the package are taxable as such activity can be termed as the processing of moveable property - As the notices also deal with other issues, Bench leaves it open for the petitioners to give a proper reply to the respective notices impugned on those aspects - In BSNL versus Union of India 2006-TIOL-15-SC-ST-LB , Supreme Court was not concerned with “works contract” but the Court was concerned with “transfer of right to use” of goods which is different with “works contract”, therefore,the obiter dicta or the observation in para 44 thereof and the illustration in BSNL versus Union of India cannot be construed as a binding ratio for the reason given in this order - Since the dispute pertains to the asssement years 2006 onwards considerable time has lapsed, the petitioners are directed to file their respective replies within two months from the date of receipt of this Order - Petitioner shall co-operate with the respondent assessing officer by furnishing all records that are available with them within 30 days of this order - The respondent shall exclude the value of medicine and other consultation charges while determining the taxable value - The demand shall be confirmed to the value of prosthetics and charges incurred towards X-ray, C.T.Scan, PET Scan etc. - It is for the petitioner to approach the Government independently and request the Government for a suitable retrospective relaxation by way of exemption for hospital/medical services rendered by them in the light of the fact that the same activity/transaction appears to have been exempted under the GST Regime from July 2017 - Writ petitions stand disposed of with the aboveobservation: High Court [para 68, 72, 107, 111, 138, 141, 143, 184 to 191, 194, 195, 198, 200, 201]

- Petitions disposed of: MADRAS HIGH COURT

SERVICE TAX

2020-TIOL-859-CESTAT-DEL

Modi Mundipharma Beauty Products Pvt Ltd Vs CST

ST - It is alleged in the SCNs [dated 26 December, 2012 and dated 17 April, 2014] that the Appellant was inter alia receiving 'intellectual property right' service from a provider situated outside India but was not paying service tax on the gross value paid for receiving the said services - On scrutiny of the documents provided by the Appellant, it transpired that the Appellant had made technical collaboration with foreign companies for which royalty was paid to the foreign collaborators - It was further stated that the Appellant had on the sales made by it, paid royalty to Revlon Mauritius for use of their trademark/name in India and made payment to Revlon Australia for use of their printing and stationery - The department, therefore, formed an opinion that the said activities related to 'intellectual property right' service, which were taxable under section 65(105) (zzr) of the Finance Act – Demand confirmed by Commissioner, hence appeal before CESTAT.

Held:

++ A perusal of the first show cause notice dated 26 December, 2012 clearly shows that it makes no reference to the Agreement executed between Revlon Mauritius and the Appellant, or the Agreement executed between Freya Holdings and the Appellant, though it does make reference to payment of royalty to Revlon Mauritius for the use of the trademark/ name in India - It is, therefore, clear that the two Agreements have been mixed up - The First Agreement between Revlon Mauritius and the Appellant, as noticed above, conferred upon the Appellant the exclusive right to use 'know how' in any plant approved by Revlon Mauritius in connection with the manufacture, marketing, sale and distribution of Revlon products - Royalty under the First Agreement, it needs to be noted, was not paid for use of trademark/name of Revlon Mauritius in India, but the show cause notice mentions that royalty was paid to Revlon Mauritius for use of trademark/name - It is under the Second Agreement executed between Freya Holdings and the Appellant that the Freya Holdings had granted the exclusive license to the Appellant to use the trademarks and all other intangible rights, however, it does not provide for payment of any consideration for this purpose - It also needs to be noted that the term 'trademark' has not been used in Clause 2 of the First Agreement and the term 'know how' has not been used in Clause 2 of the Second Agreement - The first show cause notice, therefore, proceeds on an absolutely wrong footing - A show cause notice is the foundation on the basis of which any demand can be confirmed and it is trite to state that no demand can be confirmed on the basis of an allegation not made in the show cause notice - Thus, the entire demand made under the impugned order cannot be sustained for this reason alone: CESTAT [para 21, 22, 26]

++ A perusal of the first show cause notice indicates that it was the letter dated 30 August, 2012 that was sent by the Deputy Commissioner of Central Excise at Ghaziabad to the Commissioner at Delhi that led to the issuance of the show cause notice - This letter dated 30 August, 2012, though mentioned as (RUD-1) is not on the record of the Appeal and it has been stated by the Appellant that it was not provided to the Appellant with the show cause notice - The irresistible conclusion that can be drawn from the aforesaid discussion is that the First Agreement and the Second Agreement were available with the Authority issuing the show cause notice, but for reasons best known to the Authority, they have not been referred to in the show cause notice - A perusal of the first show cause notice indicates that the demand made has been made under 'intellectual property rights' service from 2007 up to March, 2012, while a perusal of the second show cause notice indicates that the demand has been under 'intellectual property rights' from April, 2012 to June, 2012 - Thus, the entire period for which the demand has been made under 'intellectual property rights' in the two show cause notices is prior to the introduction of the negative list with effect from 1 July, 2012 - The issue that has to be examined is whether 'know how' would be included in any other similar intangible property under any law for the time being in force - Such an intangible property has to be similar to 'trade marks', 'design' or 'patents' for it to be covered under "any other similar intangible property under any law for the time being in force" - All that was required to be examined by the Commissioner was whether 'know how' is any right to intangible property under any law for the time being in force in India for it to fall within the definition of 'intellectual property right' and, accordingly, be taxable - The show cause notice does not make any reference to 'patent' and only makes reference to 'trade marks' - The Commissioner was, therefore, not required to examine the matter in the light of 'patent' or The Patent Act, 1970 - There should be an independent law for the time being in force in India that protects 'know how', if 'know how' is to be included in the residuary clause 'or any other similar intangible property' in the definition of 'intellectual property right' - This issue was also examined at length by a Bench of the Tribunal at Bangalore in ABB Ltd. Versus Commissioner of C.EX & S.T., LTU, Bangalore Final Order No. 21963/2018 dated 31.12.2018 [followed in M/s LM Wind Power Blades India Pvt. Ltd. - 2019-TIOL-3656-CESTAT-BANG ] and it was observed that since 'know how' is not recognized as 'intellectual property right' under Indian law, no 'intellectual property right' service can be said to be provided - A similar view was taken by the Mumbai Bench of the Tribunal in Tata Teleservices Ltd. V/s Commissioner of Service Tax., Mumbai-I - 2016-TIOL-2619-CESTAT-MUM - It is, therefore, more than apparent that the grant of exclusive right to the Appellant by Mauritius Revlon to use the 'know how' in any plant in accordance with the processes, specifications and recipes thereof in connection with the manufacture, marketing, sale and distribution of Revlon Products would not fall in the definition of 'intellectual property right' so as to make it taxable under section 65(105) (zzr) of the Finance Act – impugned order dated 23 December, 2016 passed by the Commissioner is set aside and appeal is allowed: CESTAT [para 28, 32, 35, 39, 43, 46, 49, 50, 51]

- Appeal allowed: DELHI CESTAT

CENTRAL EXCISE

2020-TIOL-846-CESTAT-DEL

Hindustan Zinc Ltd Vs Commissioner, Central Goods & ST

CX - Issue is allowability or otherwise of cenvat credit on repair and maintenance services utilised for dismantling steel structural works, fabrications & erection of columns, trusses, monkey ladder, strengthening of existing structure, maintenance of tailing line, drilling and sand blasting, carried out in the factory premises of the appellant who are engaged in the manufacture of zinc lead which is a taxable output.

Held: Services are not hit by the exclusion clause (A) in Rule 2(l) of Cenvat Credit Rules, 2004 in view of the inclusive part of the definition input service, read with the clarification given by the Board vide Circular 943/4/2011-CX dated 29.04.2011 – Credit is admissible, hence impugned order is set saide and appeal is allowed: CESTAT [para 7]

- Appeal allowed: DELHI CESTAT

LG Balakrishnan And Bros Ltd Vs Commissioner Of GST & CE

CX - Appellant has contested the appeal only on the ground of penalty imposed - It is submitted that the appellant has reversed the credit before issuance of the show-cause notice - Undisputedly, the sister Unit would be eligible for the credit of the electricity consumed by them - The situation is, therefore, a revenue neutral one - penalty imposed is, therefore, unjustified - appeal is partly allowed: CESTAT [para 5]

- Appeal partly allowed: CHENNAI CESTAT

CUSTOMS

2020-TIOL-844-CESTAT-BANG

Epson India Pvt Ltd Vs CC

Cus - 'Business projectors' upon import were classified under heading no. 8528 6100 of CTA, 1975 and benefit of exemption notification no.24/2005-Cus. was claimed – Customs authorities viewed that these goods were not in conformity with the qualification of being 'solely or principally used' in 'automatic data processing system' and, therefore, the impugned goods are classifiable under residuary heading 8528 6900 without the benefit of exemption notification – differential duty demand of Rs.93,25,291/- confirmed along with imposition of equal penalty – appeal to CESTAT.

Held: In circumstances of declared classification, denial by customs authorities shifts the burden on to them for justifying the alternative classification and, in the absence of valid reasons, the declared classification is to be restored - Implicit in the process is resort to physical examination and description or the goods, as presented, for fitment within the description of the heading or in the most proximate one - Trade parlance is to be resorted to only when the commonly used phraseology describes the goods closely enough to the description of the sub-heading in the tariff - It would appear from the proceedings before the adjudicating authority that these principles have been observed in its breach - Trade parlance, used to disambiguate expressions that may be open to a technical definition, is founded on the premise that the tariff is intended for the trade and not for academics with no scope for definitions to be read into or borrowed from elsewhere - Therefore, the reliance placed on the users' guide for each of the models, or any claim of having ascertained trade parlance, cannot guide classifications - The purpose of this exemption notification is to align the tariff structure with international concordat, and more particularly, for Information technology products - To the extent that the Impugned goods are usable as 'projectors' of broadcast signals dues not detract from the usual operation with computer systems - Therefore, there is no requirement to move beyond the specific descriptions to which the impugned goods conform for classification under an alternate subheading - Impugned order is set aside and appeals are allowed: CESTAT [para 6 to 8]

- Appeals allowed: BANGALORE CESTAT

TII

I-T - Activity carried out by BIPL falls under definition of 'business connection' provided in explanation 2 to Section 9(1) of Act: ITAT

TP - Final assessment order passed in remand proceedings without passing draft Assessment order is in violation of Section 144C and is therefore null and void: ITAT

TIOL CORPLAWS

IBC - Iissue pertaining to amendment notification dated 24.3.2020 is first to be adjudicated by Tribunal and writ jurisdiction cannot intervene: HC

IBC - CIRP can be set aside if matter is settled with 'Operational Creditor' prior to constitution of 'Committee of Creditors' : NCLAT