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2022-TIOL-49-SC-GST-LB
UoI Vs Mohit Minerals Pvt Ltd
GST- The issue at hand pertains to the levy of IGST on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India - The High Court of Gujarat vide judgment dated 23.01.2020 held that no tax is leviable under the IGST Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India - Notification No.8/2017 - IT(R) and the Entry 10 of the Notification No.10/2017 - IT(R) both dated 28th June 2017 are declared as ultra vires the IGST Act, 2017 and unconstitutional as they lack legislative competency - Request of the Revenue Counsel to stay the operation, implementation and execution of the judgment was declined.
Held - The deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units - The Government while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council - However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature's power to enact primary legislations - On a conjoint reading of Sections 2(11) and 13(9) of the IGST Act, read with Section 2(93) of the CGST Act, the import of goods by a CIF contract constitutes an "inter-state" supply which can be subject to IGST where the importer of such goods would be the recipient of shipping service - Section 5(4) of the IGST Act enables the Central Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation: SC LB
+ The legislature is required to perform its essential legislative functions. Once the skeletal structure of the policy is framed by the legislature, the details can emerge through delegated legislations.86 It is a settled position that the legislature cannot delegate its 'essential legislative functions'.87 The essential legislative functions with respect to the GST law are the levy of tax, subject matter of tax, taxable person, rate of taxation and value for the purpose of taxation. The principles governing these essential aspects of taxation find place in the IGST Act: Section 5(1) identifies the subject matter of taxation as inter-State supplies of goods, services or both; Section 2(107) of the CGST Act identifies a taxable person; Section 5(1) provides a maximum cap of 40% as the rate of taxation; and Section 5(1) stipulates that the value of taxation be determined under Section 15 of the CGST Act; (Para 84)
+ The CGST Act also stipulates a two-fold requirement for a recipient to be taxed on reverse charge basis the recipient must be a 'person' as defined under Section 2(84) of the CGST; and the person is a "taxable person" only if registered or is liable to be registered under Section 22 or Section 24. Section 24(iii) of the CGST Act states that persons who are required to pay tax under reverse charge must be registered. Therefore, both the IGST and CGST Act clearly define reverse charge, recipient and taxable persons. Thus, the essential legislative functions vis-à-vis reverse charge have not been delegated; (Para 85)
+ Section 24(iii) of the CGST Act mandates persons required to pay tax under reverse charge to be compulsorily registered under the CGST Act. Section 2(107) of the CGST Act defines a "taxable person" to mean a person who is registered or liable to be registered under Section 24 of the CGST Act. Neither Section 2(107) nor Section 24 of the CGST Act qualify the imposition of reverse charge on a "recipient of service" and broadly impose it on "the persons who are required to pay tax under reverse charge". Since the impugned notification 10/2017 identifies the importer as the recipient liable to pay tax on a reverse charge basis under Section 5(3) of the IGST Act, the argument of the failure to identify a specific person who is liable to pay tax does not stand; (Para 91)
+ Rule 31 of the CGST Rules 2017 specifically provides for a residual power to determine valuation in specific cases, using reasonable means that are consistent with the principles of Section 15 of the CGST Act. This is where the value of the supply of goods cannot be determined in accordance with Rules 27 to 30 of the CGST Rules 2017. Thus, the impugned notification 8/2017 cannot be struck down for excessive delegation when it prescribes 10 per cent of the CIF value as the mechanism for imposing tax on a reverse charge basis; (Para 94)
+ Section 13(9) of the IGST Act appears to create a deeming fiction, where in case of supply of services of transportation of goods by a supplier located outside India, the place of supply would be the place of destination of such goods. The supplier, the foreign shipping line, in this case would be a non-taxable person. However, its services in a CIF contract for transport of goods would enter Indian taxable territory as the destination of such goods. The place of supply of shipping service by a foreign shipping line, would thus be India; (Para 103)
+ Thus, Section 2(31) of the CGST Act defines 'consideration' to include payment made or to be made, in money or any other form, for the inducement of supply of goods or services to be made by the recipient or by any other person. Thus, in the case of goods imported on a CIF basis, the fact that consideration is paid by the foreign exporter to the foreign shipping line would not stand in the way of it being considered as a "supply of service" under Section 7(4) of the IGST Act which is made for a consideration, thereby constituting "supply of service" in the course of inter-state trade or commerce that can be subject to IGST under Section 5(1) of the IGST Act; (Para 105)
+ Thus, the language employed in Section 2(93)(a) of the CGST Act clearly stipulates that when a consideration is payable for the supply of services, the recipient would mean the person who is liable to pay that consideration. However, when no consideration is payable for the supply of a service, Section 2(93)(c) states that the recipient shall be the person to whom the service is rendered. Further, Section 2(93) provides that "any reference to a person to whom supply is made shall be construed as a reference to the recipient". Hence, where the statute refers to a person to whom a supply is made, it has to be construed as a reference to the recipient of service; (Para 112)
+ In such a scenario, when the place of supply of services is deemed to be the destination of goods under Section 13(9) of the IGST Act, the supply of services would necessarily be "made" to the Indian importer, who would then be considered as a "recipient" under the definition of Section 2(93)(c) of the CGST Act. The supply can thus be construed as being "made" to the Indian importer who becomes the recipient under Section 2(93)(c) of the CGST Act; (Para 118)
+ This conclusion comports with the philosophy of the GST to be a consumption and destinated based tax. The services of shipping are imported into India for the purpose of consumption that is routed through the import of goods. Although the consideration for shipping is payable by the foreign supplier to the foreign shipping line in CIF contracts, the price is consequently factored into the price of the shipment. The ultimate benefactor of the shipping service is also the importer in India who will finally receive the goods at a destination which is within the taxable territory of India. Thus, the meaning of the term "recipient" in the IGST Act will have to be understood within the context laid down in the taxing statute (IGST and CGST Act) and not by a strict application of commercial principles;
+ Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provisionto resolve the inconsistencies between the Central and the State laws on GST. The 'recommendations' of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation; and
+ The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient - in this case the importer - by Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different from the recipient prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge;
+ The impugned levy imposed on the 'service' aspect of the transaction is in violation of the principle of 'composite supply' enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the 'composite supply', comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the 'supply of services' by the shipping line would be in violation of Section 8 of the CGST Act.
- Appeals dismissed/In favor of assessee: SUPREME COURT OF INDIA
2022-TIOL-730-HC-DEL-GST Blue Water Expotrade India Pvt Ltd Vs Pr.CGST
GST - The principal grievance of petitioner-company is that its bank account maintained at ICICI Bank has been provisionally attached - Having regard to stand taken by revenue that under Rule 159(5) of CGST Rules, 2017 , petitioner-company can file an objection to have provisional attachment lifted, court is inclined to dispose of the petition with direction to revenue to treat the petition as an objection under sub-rule 5 of Rule 159 of 2017 Rules - For this purpose, petitioner-company will present herself/himself before concerned officer on 17.05.2022 - In case the speaking order is adverse to interests of petitioner-company, it shall be at liberty to assail the same, albeit, in accordance with law: HC
- Writ petition disposed of: DELHI HIGH COURT
2022-TIOL-14-NAA-GST
Shree Infra
GST - Anti Profiteering - Proceedings had been commenced against the Respondent alleging that the Respondent did not pass on benefit of Input Tax Credit by way of commensurate reduction of price in respect of two residential flats developed by the Respondent - Subsequently, the DGAP computed the profiteered amount. Held - There are no grounds to differ from the report of the DGAP - Since the Phase-1 was not in existence in the GST period and the said Phase III was yet to be started as on 27.08.2020, hence the Anti Profiteering provisions under Section 171 of the CGST Act 2017 are not applicable on the said Phase I and Phase III of the project of the Respondent - The instant case does not fall under the ambit of the Anti-Profiteering provisions of Section 171 of the CGST Act 2017: NAA
- Application disposed of: NAPA
2022-TIOL-13-NAA-GST
JMD Ltd
GST - Anti-Profiteering - S.171 of CGST Act, 2017 - Applicant submitted that they had purchased a flat in respondent's project ‘JMD HERITAGE SUITES' and have alleged that the respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price - DGAP in its report has submitted that the ITC as a percentage of the turnover that was available to the respondent during the pre-GST period (April 2016 to June 2017) was 3.26% and during the post-GST period (July 2017 to May 2020) was 9.89% and which confirmed that post-GST the respondent had benefited from additional ITC to the tune of 6.63% of the turnover but the same had not been passed to the applicant and others; that the profiteered amount came to Rs. 33,35,330/- which includes 12% GST on the basic price - Authority finds that the respondent has profiteered by an amount of Rs.33,35,330/- during the period of investigation - Authority u/r 133(3)(a) orders that the respondent shall reduce the prices to be realised from the flat/unit buyers in a manner that is commensurate with the benefit of ITC received by him as detailed by DGAP - The profiteering amount alongwith the interest @18% shall be passed on by respondent within a period of 3 months - For the offence committed of violation of s.171(1) the respondent appears to be liable for imposition of penalty u/s 171(3A) - Accordingly, notice be issued to him to explain why penalty as prescribed u/s 171(3A) should not be imposed on him - In this regard an advertisement of appropriate size may also be published in minimum of two local newspapers/vernacular press in Hindi/English/local language with the details i.e Name of builder (respondent) - JMD Ltd., Project - JMD IMPERIAL SUITES, Location - Gurugram, Haryana and amount of profiteering of Rs.33,35,330/- so that the concerned homebuyers can claim the benefit of ITC which is not passed on to them - Homebuyers may also be informed that the detailed NAA order is available on Authority's website www.naa.gov.in - Contact details of concerned jurisdictional CGST/SGST Commissioners responsible for compliance of the NAA's order may also be advertised through the said advertisement - Compliance report to be submitted by CGST/SGST Commissioner within four months - Order passed by NAA falls within the limitation prescribed under rule 133(1) of the Rules, 2017 in view of the orders dated 23.03.2020, 10.01.2022 passed by the Apex Court on the aspect of limitation: NAA
- Application disposed of: NAPA
2022-TIOL-10-NAA-GST
Savaliya Procon
GST - Anti-Profiteering - S.171 of the CGST Act, 2017 - Issue arises for determination is, whether there were benefit of reduction in rate of tax or ITC on the supply of construction service by the respondent after implementation of GST w.e.f. 1.7.2017 and if so whether respondent passed on such benefit to recipients by way of commensurate reduction in price in terms of section 171 of CGST Act, 2017 - DGAP in its report has submitted that the ITC as a percentage of the turnover that was available to the respondent during the pre-GST period (April 2016 to June 2017) was 0.22% whereas during the post-GST period (July 2017 to June 2020) was 2.40% and which confirmed that post-GST the respondent had benefited from additional ITC to the tune of 2.18% of the turnover - The additional ITC of 2.18% of the turnover should have resulted in commensurate reduction in base price as well as cum tax price - Therefore, in terms of section 171, benefit of such additional ITC was required to be passed on to recipients - The profiteered amount came to Rs.85,77,419/- which included 12% GST on the base profiteered amount of Rs.76,58,409 - This amount was inclusive of profiteered amount of Rs 22,292 including GST - Authority finds that the respondent has profiteered by an amount of Rs.85,77,419/- during the period of investigation - Authority u/r 133(3)(a) orders that the respondent shall reduce the prices to be realised from the buyers of flats/shops commensurate with the benefit of ITC received by him - The profiteering amount of Rs.85,77,419/- shall be passed on alongwith interest @18% to be passed on to the home/shop buyer within a period of 3 months - In this regard an advertisement of appropriate size to be visible to public at large may also be published in minimum of two local newspapers/vernacular press in Hindi/English/local language with the details i.e Name of builder (respondent) - M/s Savaliya Procon, Project - Krish Elite, Location - Ahmadabad, Gujarat and amount of profiteering of Rs.85,77,419/- so that the concerned home/shop buyers can claim the benefit of ITC which is not passed on to them - Home/shop buyers may also be informed that the detailed NAA order is available on Authority's website www.naa.gov.in - Contact details of concerned jurisdictional CGST/SGST Commissioners responsible for compliance of the NAA's order may also be advertised through the said advertisement - Compliance report to be submitted by CGST/SGST Commissioner within four months - Order passed by NAA falls within the limitation prescribed under rule 133(1) of the Rules, 2017 in view of the orders dated 23.03.2020, 10.01.2022 passed by the Apex Court on the aspect of limitation: NAA
- Application disposed of: NAPA
2022-TIOL-09-NAA-GST
Mataji Paints And Hardware
GST - Anti Profiteering - A reference was received by the Standing Committee on Anti-Profiteering under Rule 129 of the CGST Rules, to conduct inquiry against the Respondents - It was alleged by the Applicant that the Respondent had not passed on the benefit of reduction in rate of GST on Paints being sold by the Respondent, from 28% to 18% w.e.f. 27.07.2018 and had increased the base price of the paints sold by them that that there was no commensurate reduction in the cum-tax price (inclusive of 18% GST) charged from the recipients - The reference was examined by the DGAP and Investigation Report was subsequently furnished to the NAA - In the report, it was concluded that the allegation of profiteering by way of either increasing the base prices of the products while maintaining the same selling prices or by way of not reducing the selling prices of the products commensurately, despite a reduction of GST rate from 28% to 18% w.e.f. 27.07.2018 stands established against the Respondent. Held - It is evident from narration of facts that the Respondent denied benefit of tax reduction to the customers in contravention of the provisions of Section 171(1) of the CGST Act and has thus contravened the provisions of Section 171(1) of the CGST Act and has thus committed an offence u/s 171(3A) of the CGST Act and it therefore liable for imposation of penalty under this Section - However since the provisionns of Section 171(3A) havecomem into force w.e.f. 01.01.2020 whereas the period during which the contravention occurred is w.e.f. 27.07.2018 to 30.09.2019 - Hence the penalty prescribed u/s 171(3A) cannot be imposed on the Respondent retrospectively - Respondent to deposit profitereed amount in the CWF in two parts: NAA
- Order passed in favor of appellant: NAPA
NAA_IO_03_2022
Indian Oil Corporation Ltd
GST - The applicant alleges profiteering by the respondent in respect of awarding of contract for Maintenance and Inspection of Crude Oil Storage Tanks vide which the applicant was not satisfied with the amount of discount offered and had also alleged that respondent has not passed on the benefit of ITC to him by way of commensurate reduction in price in trms of Section 171 - The DGAP has stated that respondnet had not made any purchases in pre GST era and hence there was no availability of CENVAT/VAT which could be compared with ITC of post GST era - Respondent has himself claimed to have passed on benefit of ITC to applicant amounting to Rs 23,22,493.68/- in respect of both contracts - It is quite apparent from submissions of respondent relied upon by DGAP in his report that he has computed the above amount by comparing tax rates prevalent during pre GST period and ITC available on VAT - Therefore, it was incumbent upon DGAP to investigate whether the methodology and computaions of benefit of GST so made by respondent were correct or not and to submit his findings to this Authority - Therefore, DGAP is directed to re-investigate the matter under Rule 133(4) of CGST Rules, 2017 i.e. whether applicant is entitled to and respondent is liable to pass on benefit of ITC when the prices quoted by respondent were based on prices and rates of tax leviable on goods and services during pre GST period when full benefit of GST was not available and when additional ITC benefit was available to respondent after coming into force of GST at the time of supply of service; that whether the methodology employed by respondent to pass on the benefit of ITC was correct, if not so what methodology should be employed to compute it: NAA
- Application disposed of
NAA_IO_02_2022
Nirma Ltd
GST - Anti Profiteering - The Respondent-company is engaged in manufacture of detergent powder - A reference was received by the DGAP on 24.01.2020 from the Standing Committee on Anti Profiteering to investigate whether benefit of GST rate reduction in respect of the subject goods supplied by the Respondent herein, had been given to the consumers - It was alleged that the respondent had not reduced prices and that benefit of GST rate reduction was not passed on to the consumers - Hence the DGAP commenced an investigation to collect necessary evidence to determine whether benefit of GST rate reduction had been passed on by the Respondent to the recipients in respect of supply of subject goods - SCN u/r 129 of CGST Rules was issued to the Respondent to furnish requisite supporting documents - Meanwhile the Respondent filed writ petition before the High Court of Delhi, claiming that the DGAP had not complied with the mandate of Rule 129 of the CGST Rules.
Held - DGAP's report accepting the Respondent's claims of not having contravened the provisions of Section 171 of the CGST Act, is erroneous and cannot be accepted - Matter remanded for reconsideration of specified issues: NAA
+ It is clear from a plain reading of the provisions of Section 171, that they refer to any supply in a singular manner & not to the price in the same manner but to the prices in plural term for one supply - Therefore it is clear that all prices fixed by a manufacturer or supplier have to be reduced commensurately and not only the base price - It is well established that a SKU may have different prices due to legal provisions, pricing strategy adopted, geographical reasons, availability of tax benefits in a particular state or provision of transport, electricity, capital or other subsidies by the Central or State Governments - Therefore a supplier may fix different prices for the same SKU all of which he is required to be reduced due to tax reduction as per the above provision;
+ Since the respondent is selling detergents and scouring bars as pre-packaged commodities, the provisions of Section 18 of the Legal Metrology Act duly apply - Therefore as per Rule 6(e) of the Legal Metrology (Packaged Commodity) Rules 2011, the retail price of the package has to be fized and declared as defined u/r 2(m);
+ Therefore it is clear that the Respondent was required to re-fix, declaring and re-print the MRPs on all the SKUs which he is selling - Since the Respondent has fixed two different prices, which he is charging to his distributors and his ultimate consumers respectively, he has to reduce both of them to pass on the benefit of tax reduction. There is no provision in Section 171 which states that only base price is required to be maintained or reduced. A supplier has no discretion to claim that he has not violated the provisions of Sectin 171 as he has not increased his base price when he has not reduced the MRP of the same product on which he is selling his buyer to the ultimate buyer. The benefit extended on one hand cannot be withdrawn by the another. Accordingly the finding recorded by the DGAP that the Respondent has not increased his base price and passed on the benefit of tax reduction on the impacted SKUs is not substantiated and hence cannot be accepted;
+ The report of the DGAP stating that the Respondent has not violated the provisions of Section 171 of the above Act cannot be accepted and accordingly the same is rejected and the DGAP is directed to reinvestigate the case as per provisions of Rule 133(4) of the CGST Rules 2017, to examine -
i) whether the Respondent has reduced, re-fixed and displayed the MRPs of the impacted SKus commensurately w.e.f. 15.11.2017 after the ratess of tax were reduced on them and conveyed the same to his dealers;
ii) whether the Respondent has affixed stickers or stamped or online printed the reduced MRPs on the stock lying with him or his Dealers as on 15.11.2017 and thus passed on the benefit of tax reduction on it?
iii) whether the Respondent has charged 18% GST after rate reduction on the impacted SKUs after rate reduction.
-Case remanded |
