2020-TIOL-2052-HC-AP-GST
Shirdiri Sainath Industries Vs DCST
GST – Point for consideration is - Whether the impugned assessment order levying GST on the estimated by-products value, treating such by-products as part of the consideration for milling, is legally sustainable under the provisions of CGST / APGST Act, 2017 or not?
Held: [para 12, 13, 15, 19, 20, 23]
+ Custom Milling Rice is an arrangement where the Government through the Civil Supplies Corporation gets the paddy milled into rice through the millers. For this purpose, the 4th respondent enters into an agreement with the millers incorporating therein the method and manner of milling the paddy.
+ In the above process, in the context of GST Act, the petitioner shall be regarded as "supplier". Under Section 2(105) of GST Act, supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent as such on behalf of such supplier.
+ The petitioner, in view of undertaking the exercise of milling the paddy, offers "services" to 4th respondent within the meaning of Section 2(102) of the GST Act. Similarly, the 4th respondent Corporation is called as "recipient" of services within the meaning of Section 2(93) of GST Act.
+ What the petitioner undertakes is "job work" as per Section 2(68). The term "job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job work shall be construed accordingly.
+ The returns, which the petitioner gets out of milling is known as "consideration" within the meaning of Section 2(31) of GST Act. As per this provision, the consideration may be either in the form of money or otherwise.
+ A doubt seems to have arisen as to whether custom milling of paddy by the rice millers for Civil Supplies Corporation is liable to GST or whether it is exempted under S.No.55 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017. In this regard, clarification was issued in F.No.354/263/2017-TRU by the Government of India, Ministry of Finance, in its letter dated 20.11.2017 to the Commercial Tax Department and wherein it is communicated that custom milling of paddy is not exempted and on the other hand, it is a taxable service and liable to GST @ 5% on the processing charges and not on the entire value of rice.
+ According to Revenue, not only the milling charges @ Rs.15/- per quintal but also the by-products received by the petitioner constitute the consideration, whereas, the contention of the petitioner is that by-products were just left by 4th respondent with the petitioner as they were not useful to it, for, their disposal was not economically viable. Further, the by-products were left to the petitioner as compensation to replenish the shortfall of the rice to make 67% of yield on milling.
+ The two clauses (clause 17 and 22) couched in the agreement are distinct and independent to each other. Whereas, Clause No.17 says that milling charges will be paid as fixed by the GOI (admittedly @Rs.15/- per quintal), Clause No.22 states that the mill shall retain all the by-products such as brokens , bran, husk etc., derived during the process of milling.
+ There is no slightest insinuation in either clause that the by-products shall form part of the consideration. If the parties to the agreement had such intention, nothing prevented them to do so.
+ Going by the way the aforesaid terms are meticulously incorporated, one can logically conclude that, if the parties wanted to covenant that by-products shall form part of the consideration, they would have mentioned in clear terms. Therefore, Bench has no demur to hold that the absence of such mentioning is an indicative that the by-products which are allowed to be retained by the petitioner are not the part of the consideration. We cannot conjunct both the above clauses to bring the by-products into the purview of consideration.
+ On a conspectus of the terms of agreement, Bench hold that the by-products form part of compensation but not consideration. Bench is constrained to hold that in the impugned order, the 1st respondent erroneously concluded that the miller was allowed to retain the by-products towards consideration, though such import is impermissible from the terms of the agreement. Therefore, the impugned order to the extent of including the value of by-products to the milling charges and assessing tax is legally unsustainable.
+ Writ Petition is allowed and the impugned Assessment Order passed by the 1st respondent vide Ref. No.CGST / 2017-18/05 dated 29.10.2018 insofar as it relates to the levy of GST on the value of by-products i.e., broken rice, bran and husk treating them as part of the consideration paid to the petitioner for milling of the paddy, is set aside.
Maintainability:
+ It is also true that this Court will not generally entertain writ when efficacious alternative remedy is available. However, since the facts in the present case are squarely covered by the ratio laid by the Division Bench in Food Corporation of India vs. State of A.P. and the 1st respondent without considering the same committed legal error on sheer assumptions, we thought it apposite to entertain the writ petition instead of driving the petitioner to the Appellate Authority: High Court [para 21]
+ It should be noted that there are no disputes between the petitioner and the 4th respondent with regard to the implementation of the terms of the agreement. On the other hand, the dispute is between the Revenue and the petitioner as to whether or not the by-products form part of the consideration. Since such a dispute cannot be referred to and resolved by the Arbitrator, the Writ Petition is very much maintainable: High Court [para 22]
- Petition allowed: ANDHRA PRADESH HIGH COURT
2020-TIOL-2051-HC-AP-GST
Sangeetha Jewellers Vs Deputy Assistant Commissioner ST
GST - The 1st respondent issued a notice of confiscation in Form GST MOV-10, dated 21.01.2020, which was served on 2nd petitioner on 25.01.2020 - Against which the 1st petitioner filed a detailed explanation dated 28.01.2020 by enclosing all the relevant documents stating that the seized stock of 69 Kgs of silver ornaments were purchased from the registered GST dealers covered by proper invoice and GST tax and the same ornaments were being shifted to the new business premises at Pavagada - The goods were thus accounted for and suffered tax and hence, the proposed levy of tax and penalty was not justified - 1st respondent treated the seized stock as unaccounted for and rejected the contention of the petitioners and passed the impugned order dated 04.02.2020 confiscating 69 Kgs of silver ornaments worth Rs.28,00,000/- and directing the petitioners to pay tax of Rs.84,000/- (Central Tax and State Tax), penalty of Rs.84,000/- and fine of Rs.26,32,000/- in lieu of confiscation - Petitioner contends that the order of the 1st respondent is highly arbitrary and contrary to the facts and circumstances of the case, besides 1st respondent has no authorisation as contemplated under Section 67 of the CGST Act.
Held:
+ Argument of the petitioners that the 1st respondent is not legally authorised to issue the impugned proceedings is not correct in view of the Gazette notification No.37 of Revenue Department (CT-II) dated 30.06.2017. Section 68(3) of the CGST Act confers power on "the Proper Officer" to intercept any conveyance on the way and require the person in-charge of the said conveyance to produce the documents prescribed under sub-section (1) of Section 68 and the devices for verification in which case the said person shall be liable to produce the same and also allow the inspection of goods. [para 9]
+ In Synergy Fertichem Pvt. Ltd. - 2019-TIOL-2950-HC-AHM-GST, a Division Bench of the Gujarat High Court dealt with the precise question as to whether Section 129 & 130 of CGST Act overlap or are independent to each other. It is held therein that both the sections, though commenced with a non obstante clause, yet are mutually exclusive and independent. It implies that the confiscation proceedings can be taken up by the authorities after exhausting the measures under Section 129(6) and also simultaneously along with Section 129 and there is no bar. However, since the phrase "with an intent to evade the payment of tax" is employed in Section 130 of the Act, before invoking the confiscation proceedings under Section 130 at the threshold, the authority concerned must form a firm opinion that the assessee has deliberately avoided the payment of tax. Such opinion must be an express one and recorded with the reasons. [para 14]
+ Petitioners have not produced records pertaining to the silver ornaments at the time of initial check.However, that cannot be the sole ground to reject the record which was later produced along with explanation. It must not be forgotten that confiscation under Section 130 is a drastic step which will denude the citizen of his right over his property. Therefore, to deprive him of it, the authority must not only afford a personal hearing to the owner in terms of Section 130(4) of CGST Act, but also adduce cogent reasons for discarding the explanation offered by him. Mere non-production of the records at the inception, will not automatically falsify the records produced later. The order must reflect the reasons as to why and how the records are fudged and spurious ones. Mere branding the explanation as afterthought without assigning reasons as to how the documents are fabricated ones will not make the order legally justified. The falsity of the records shall be established by analysing the records but not simply branding them as afterthought. It should be made clear that the orders of Public Servants some of whom are quasi judicial authorities, which have far reaching effect on the life, liberty, property and welfare of the public must be based on cogent reasons. The reason is the live nerve of an order. Unfortunately, in the instant case, the reasons, are a casualty. Therefore, the impugned order does not stand to legal scrutiny and liable to be set aside. [para 17, 18, 19]
+ It is true that an alternative remedy is available in the form of Section 107 of CGST Act. However, it must not be forgotten that the petitioners herein challenged the jurisdictional authority of 1st respondent to pass the impugned order. Besides, they also pleaded that principles of natural justice have not been followed and a fair opportunity was not afforded to them to establish their defence. Therefore, the contention of the Government Pleader that since provision for appeal against the impugned order is provided by the statute under Section 107 of CGST Act, the writ petition is not maintainable, is untenable. [para 19]
Conclusion:
++ Writ petition is allowed and while the confiscation order dated 04.02.2020 passed by the 1st respondent is set aside, the 1st respondent is directed to conduct an enquiry afresh and afford an opportunity of personal hearing to the petitioners with reference to their explanation and pass an appropriate order by giving cogent reasons in accordance with law. The entire exercise shall be completed within eight (8) weeks. Till then, the detention of subject goods and conveyance shall hold good. [para 20]
- Petition allowed: ANDHRA PRADESH HIGH COURT
2020-TIOL-2049-HC-TELANGANA-GST
Kamlesh Steels Vs Deputy State Tax Officer
GST - A notice was issued Ex. P1-Form GST MOV-06 dt. 22.01.2020/order of detention under Section 129(1) of the Act on the ground that prima facie the 'documents tendered were found to be defective' and that the goods were being transported from Salem in the State of Tamil Nadu to Distillery Road, Secunderabad, but the vehicle was checked at IDA Jeedimetla, Hyderabad - vehicle carrying the goods and the vehicle was released on 25-01-2020 upon making online payment of Rs.9,40,628/-towards one time tax of Rs.4,70,315/-and one time penalty of a like sum under protest. Petitioner contends that the action of the 1st respondent is illegal, arbitrary and violative of Article 14 of the Constitution of India as well as Article 301 of the Constitution of India, and seeks a direction to the 1st respondent to refund the tax and penalty illegally collected from the petitioner.
Held: It is not the case of the 1st respondent that he had passed any reasoned order and communicated to the petitioner after considering petitioner's explanation Ex. P4 dt. 23.1.2020 to the Ex. P1 dt. 22.1.2020 in Form GST-MOV-6 issued by him - Without there being any order/decision passed by the 1st respondent and communicated to the petitioner, the petitioner cannot be expected to file appeal invoking Section 107 of the TGST Act, 2017 - It is important to keep in mind that CGST Act, 2017/Telangana GST Act, 2017 are very recent laws and the common businessman is admittedly having difficulty to understand these enactments and the procedures they have introduced - Also interpretation of taxing statutes should be done in a way to facilitate business and inter-State trading, and not in a perverse manner which would result in impediment of the same by harassing business persons - Under Section 168 of the Act, the Central Board of Indirect Taxes and Customs had issued a Circular No. 41/15/2018-GST dt. 13-04-2018 laying down the procedure for inspection of conveyance for inspection of goods in movement and detention, release and confiscation of goods and conveyance and ha issued certain instructions and which instructions are binding on all the officers discharging their responsibilities under the Act - Bench is in complete agreement with the ratio laid down by the Gujarat High Court in Synergy Fertichem P Ltd. - 2019-TIOL-2950-HC-AHM-GST and holds that any defect, if any, in the documentation accompanying the goods for purpose of levy of tax and penalty has to be looked at also in terms of the Circular dt. 13.4.2018 and Circular 64/38/2018-GST dt. 14.09.2018 issued by the Central Board of Indirect Taxes and Customs, New Delhi - In the instant case, one of the grounds for detention in Form GST MOV-06 is that 'the documents which were tendered are found to be defective' - But which document is defective (whether it is e-way bill or the tax invoice/bill and supply/delivery challan) and why it is defective, is not mentioned - Under the CGST/Telangana GST Acts, it is not permissible to detain a vehicle carrying goods or levy penalty on the sole ground that the vehicle is found at a wrong destination without anything more - Reasons given for detaining the goods and the vehicle they were being carried in do not indicate any violation of the provisions of the Act by petitioner warranting levy of tax and penalty on the petitioner under the Act - Bench is of the opinion that the detention of the vehicle at IDA Jeedimetla in spite of the vehicle carrying tax invoice and the e-way bill is in violation of the provisions of the Act, in particular Rule 68 of the Rules framed under the Act and the Circulars dt. 13.4.2018 and 14.9.2018 of the CBIC which are binding and that the 1st respondent was not justified in collecting tax and penalty from the petitioner - Writ Petition is allowed; the action of the 1st respondent in detaining the vehicle carrying the goods purchased by petitioner on 22.01.2020 and forcing the petitioner to pay on 25.01.2020 a sum of Rs.9,40,618/-towards tax and penalty is declared as illegal, arbitrary and violative of Article 14 and 265 of the Constitution of India apart from Article 301 of the Constitution of India and also the provisions of the Act and Rules made thereunder - The 1st respondent is directed to refund the above amount within six weeks together with interest @ 7% p.a. from 25.01.2020 till date of payment: High Court [para 38, 40, 41, 47, 52 to 54, 64, 66, 70]
- Petition allowed : TELANGANA HIGH COURT
2020-TIOL-68-AAAR-GST
NCS Pearson Inc
GST - Respondent offers three types of test-administrative solutions on behalf of its clients to the test-takers/candidates in India - Type 1 tests are self-administered by the candidates and are wholly digital - Test-taker uses an internet browser for the entire process ranging from creating a personal profile, selecting the desired test, remitting payment, taking the test, scoring and viewing test results - tests are not required to be taken from the test centres and can be taken from any location as desired by the candidate - test-taker gets the results in an electronic format immediately on completion of the test - insofar as Type 2 test is concerned, major difference with Type 1 test is that on the day of the test, the candidate is required to go to the test centre - in the Type 3 test, there is a mixture of multiple choice questions and analytical writing assessment section i.e. essay-based questions - test-taker is able to see the score for MCQ and an indicative score (which is not final) for essay based questions marked by the computer-based algorithm - however, essay based questions are sent to a human-evaluator in USA for assessment and final scoring - once the entire scoring activity is completed, the test-taker is then e-mailed a URL to access their official score typically within a week's time - Applicant (now respondent) had sought advance ruling viz. whether the Type 2/Type 3 test classifies as OIDAR service and if not, whether applicant/appellant is liable to pay Integrated Tax - AAR observed that provision of taking tests online at designated test centres are naturally bundled activities and are supplied in conjunction with each other in the ordinary course of business and, therefore, can be termed as Composite supply as per Section 2(30) of the Act, 2017; that since the main object of the whole activity is to take online tests, so the principal supply would be OIDAR service provided by applicant to non-taxable online recipients - Type 2 test, therefore, qualifies for classification as OIDAR services; however, Type 3 test does not classify as OIDAR services since Type 3 tests requires more than 'minimal human intervention' in order to complete the provision of the service, however, IGST is exempted by virtue of Sl. no. 10 of 9/2017-ITR - Aggrieved with this order, Revenue has filed an appeal before AAAR - Appellant Revenue prays that the order of the lower Authority with regard to the Type-3 test not being an OIDAR service be set aside - It is submitted by the Department that the Type-3 test has all the ingredients of an OIDAR service and the lower authority has erred in this regard.
Held: The definition of OIDAR has the following four essential ingredients, all of which are required to be fulfilled for a service to qualify as OIDAR viz. the service is to be delivered over the internet or an electronic network; the supply of service is essentially automated; the service involves minimal human intervention and the delivery of the service is impossible in the absence of information technology - It is abundantly clear that the process of the test registration, conduct of the test and the communication of the results are automated and such a test will not be possible in the absence of information technology and thus three out of the four requirements for being called an OIDAR service are fulfilled - the bone of contention is with regard to the fourth ingredient which is that the service should have 'minimum human intervention' - Lower Authority AAR has taken the view that the scoring by the human scorer for the essay-based responses in the Type-3 test renders the element of human intervention "more than minimal" thereby disqualifying it as an OIDAR service - While grading of multiple-choice questions is done instantaneously using an algorithm, grading of essays involves the use of Automated Essay Scoring (AES) which is a specialised computer program to assign grades to essays - An essay is given to a human scorer as well as to the AES program - If the AES score agrees with the score given by the human scorer, the AES program is considered reliable - A machine-human score correlation serves as a good indicator whether the AES is returning a stable consensus score of the essay, therefore, the role of the human scorer is in effect a means to ensure the reliability of the AES program - For this reason, Appellate Authority holds that the involvement of the human element in the assessment of essay response is well within the realm of ‘minimum human intervention' - even from the perspective of the candidate, the human involvement is minimum in the entire process of the Type-3 computer-based test - respondent accepts the electronic request for a rescore of the essay and returns the result to the candidate electronically - The candidate ,who is the service receiver, has received a fully digitally provided service - When viewed as a whole, the Type-3 computer based test is to be regarded as being within the realm of minimum human intervention - As such, the ingredient of ‘minimum human intervention' required to classify the service as OIDAR is also satisfied - Appellate authority disagrees with the decision of the lower authority that the Type-3 test is not an OIDAR service - Appeal of the Department allowed to the extent appealed: AAAR
- Appeal allowed: AAAR
2020-TIOL-75-NAA-GST
Director-General Of Anti-Profiteering Vs TTK Prestige Ltd
