2021-TIOL-NEWS-186 Dated:Saturday, August 07, 2021

GST - By the impugned order, the respondent No. 3 declined to lift the order of provisional attachment of the petitioner's bank account, which was earlier ordered in purported exercise of power conferred by Section 83 of the Act, 2017 read with Rule 159(1) of the CGST Rules - This order is under challenge in the writ petition.

+ That fraud vitiates even the most solemn proceedings in any civilized system of jurisprudence does not admit of any doubt. However, what is of significance is that the provision of a taxing statute is under consideration and it is settled law that a taxing statute has to be strictly construed. As has been held in M/s. Radha Krishan Industries (2021-TIOL-179-SC-GST), the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled.

+ In the considered opinion of the Court, the approach of the respondent No. 3 that a fraud has been practiced, by itself and without there being any provision in the relevant statute conferring power which could be invoked for such purpose, was not sufficient ground to clothe her with the power to order provisional attachment of a bank account under Section 83 read with Rule 159(1).

+ It is also well settled that where a person on whom fraud is committed is in a position to discover the truth by due diligence, fraud is not proved. [see: Shri Krishnan v. Kurukshetra University, reported in AIR 1976 SC 376] .

+ It is not the case of the Commissioner that the alleged fraudulent acts could not have been detected by exercise of due diligence. In the absence thereof, the inference to be drawn is that due diligence had not been exercised at the end of the revenue, and the orders impugned cannot be defended by reference to the principle urged by the respondent No. 3 that since there has been an alleged fraud, the power to order provisional attachment can be exercised.

+ To empower a Commissioner to order provisional attachment on account of presence of vitiating circumstances, as the one under consideration before the respondent No. 3, the statute itself ought to have provided so and the power to attach property, which is of a drastic nature, ought not to have been exercised on facts and in the circumstances.

+ As a matter of fact, no proceedings under Sections 62 or 63 or 64 or 67 or 73 or 74 of the CGST Act are pending; hence, the respondent No. 3 committed an error of jurisdictional fact for which the Court is constrained to hold that she had no authority to invoke the power conferred by Section 83 of the CGST Act read with Rule 159(1) of the CGST Rules. [para 9]

+ True it is, Section 83 of the CGST Act read with Rule 159(1) of the CGST Rules empowers a Commissioner to protect the interests of the revenue by way of provisional attachment, but such provisional attachment cannot be ordered without fulfilment of the condition(s) precedent, as referred to above. In the absence of fulfilment of such conditions(s) precedent, the respondent No. 3 could not have protected the interest of the revenue in the manner she proceeded to pass the impugned order. [para 10]

+ Order impugned cannot be sustained and is set aside. The respondent No. 3 is directed to forthwith defreeze the bank account of the petitioner. [para 11]

GST - AAR held that 'Air Springs' manufactured by the applicant are rightly classifiable under CTH 8708 and more specifically under CTH 8708 8000 - That they attract GST @28% under Schedule IV of notification 1/2017-CTR - Aggrieved by this order, the appellant is before the Appellate authority.

Held: In the case at hand, the product is not a joint, washer or the like, it is an 'Air bellow', a specifically designed part for use in the Motor Vehicle as a Shock absorbent and therefore, even if the part which gives the essential character of the product is made of vulcanized rubber other than hard rubber and the functionality of the product is extended by the said rubber portion as claimed by the appellant, still as per the dictum pronounced by the Apex Court in the case of GS Auto International Ltd. - 2003-TIOL-92-SC-CX , the test of commercial identity and not the functionality test is relevant - The commercial identity of the product is that the product is a critical component of the air suspension and lift axle system in trucks, trailers and buses - It is also pertinent to note that the product is suitable for use solely or primarily with the articles of Chapter 8701 to 8705 - Product is not a spring classifiable under any of the Chapters mentioned, for the reason that the product is not an article of base metal or alloy of base metal - The product is made of fabric coated soft vulcanized rubber trimmed with the base plate and designed to give its full utility when used in axles of the Motor Vehicles to absorb shock and provide the required suspension - The invoice of the competing manufacturers were provided but the inputs used, process undertaken, or any test reports to establish the similarities or that the receivers are the same buyers are not produced - However, the ruling extended is applicable only to the person who sought the same - Air Springs manufactured by the appellant is classifiable under CTH 8708 as rightly held by the Lower Authority - Appeal dismissed: AAAR

GST - AAR has held that Drilling of Bore-wells for supply of water for agricultural operations like cultivation including seeding, planting and ploughing is not 'Support Service for agriculture' [SAC 9986] and is not entitled for exemption as per Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) ; that letting out of Compressor is also not a 'Support service for agriculture' [SAC 9986] and the applicant is not eligible for exemption as per Sl. No. 54 of Notification No. 12/2017-C.T.(Rate) - Appeal filed before the AAAR.

Held: Delay in filing appeal is condoned - It is noted that the appellant while undertaking the bore-well drilling activity for industries etc., (other than on agricultural lands), it is classified under SAC 995434 leviable to appropriate rate of GST - Without going into the merits of the main argument of the appellant regarding the activity undertaken is by way of agricultural operations relating to production of any agricultural produce, etc., prima facie , in the scheme of things of GST, no two classifications can be adopted for a single activity based on end use or where it is rendered, etc. - The appellant himself has already classified his supply of services of bore-well drilling under 9954 for the purpose of paying the tax; it defies logic as well as law that the same activity if done on agricultural land will be classifiable under a different heading 9986 - Further since the same equipment is used for the drilling activities, whether on agricultural lands or for industries, etc., it would not be possible for the tax administration to identify whether the driller is exclusively undertaking agricultural drilling only thereby leading to evasion of tax only - Fitment Committee while stating that the same issue was already raised in the service tax regime quoting the FM letter, further reasoned as ‘The services covered by the scope of Section 66D (d)(i) of the Finance Act, 1994 and sl. no.25 (a) of the mega exemption notification 25/2012-ST are exempted in GST vide SI.No. 54, and 3 of notification 12/2017-CT(Rate). Thus, the status quo has been maintained in GST vis-a-vis Service Tax regime' - It is clear from the above that as such no exemption was intended by the Government for bore-well drilling for agricultural purposes and continues to be under its examination - No infirmity in the reasoning of the Advance Ruling Authority - appeal dismissed: AAAR

- Appeal dismissed: AAAR