2023-TIOL-125-SC-ST
CST Vs 3I Infotech Ltd
ST - In the first round of litigation, the CESTAT observed that it is not borne out from the impugned order of the Commissioner how service tax liability has been computed - CESTAT further observed that if the assessee has purchased software from third parties and sold the same on payment of VAT and supplied hardware on payment of VAT, the same would not be liable to service tax - It was further held that the liability to service tax would arise only in respect of the software which the assessee has developed as per customers' specifications and supplied to their customers - The Tribunal further observed that it was necessary to go through the agreements entered into by the assessee with his clients, bills raised for services rendered, the goods supplied and the payments made towards the service tax liability - In the remand proceedings, the Commissioner held - that the services rendered by the assessee from 10th April 2004 up to 15th May 2008 in relation to software need to be classified under the category of "Intellectual Property Service" defined under Section 65 (55b) of the Finance Act; that from 16th May 2008 onwards, in relation to the software, the classification of service rendered should be under the category of "Information Technology Software" defined under Section 65 (53a) of the Finance Act; that the value of the computer hardware items consumed for providing the services is required to be included in the valuation of the respective services in terms of Section 67 - Aggrieved, the assessee preferred an appeal and the CESTAT held that the services subject matter of dispute were classifiable under the category of "Information Technology Software" with effect from 16th May 2008 and for the earlier period up to 15th May 2008, the same services were classifiable under the category of "Intellectual Property Service". The Tribunal held that the show cause notice dated 19th October 2019 covering the period up to 16th May 2008 was not justified. However, the Tribunal, for the period on and after 16th May 2008 passed a limited order of remand - Both, the Revenue and assessee are in appeal before the Supreme Court.
Held:
++ Demand was made on account of services provided by the assessee in respect of the supply of third party software, software developed in house or customised software - The first show cause notice dated 19th October 2009 contained a demand for service tax under the taxable service of "Management, Maintenance and Repair" and the rest of the three notices contain a demand under classifiable service "Information Technology Software" - Assessee had temporarily transferred the right to use the said software to their clients, thus, prior to 16th May 2008, such service was classifiable under the category of "Intellectual Property Service" and with effect from 16th May 2008, it was classifiable under the category of 'Information Technology Software' - Thus, the classification mentioned in the first show cause notice was completely erroneous - Therefore, CESTAT was right in holding that the first show cause was illegal - Elementary principles of natural justice required that the adjudication on the basis of show cause notice should be made only on the basis of classification stated in the show cause notice - Assessee cannot be subjected to a penalty on the basis of a show cause notice containing a completely erroneous category of service - Demand made on the basis of the first show cause notice was illegal and, therefore, there is no merit in the appeal preferred by Revenue - Appeal dismissed: Supreme Court [para 10]
++ Order of remand does not decide any issue on merits and, therefore, after the remand, the issue was wide open - Findings rendered by the Tribunal call for no interference - However, in the proceedings pursuant to remand, it will be open for the assessee to show that an exemption was available under subsection (2) of Section 26 of the SEZ Act - Appeal dismissed subject to the clarification made to paragraph no.10.16 of CESTAT order: Supreme Court [para 11, 14]
- Appeals dismissed: SUPREME COURT OF INDIA
2023-TIOL-759-CESTAT-MAD
Dorma India Pvt Ltd Vs CGST & CE
CX - CENVAT - Rule 6 of CCR, 2004 - Matter referred third Member due to difference in opinion between members of the Division Bench inasmuch as the following question is sought to be resolved viz. (i) Whether part of the demand is barred by limitation as held by Member (Judicial)Or(ii) Whether the extended period is invocable and the entire demand is to be confirmed as held by Member (Technical).
Held:
+ In response to letter dt. 21.07.2008 addressed by the Superintendent, Range-I enquiring about the activity of trading after a visit to their unit, the appellant answered the queries raised by the Range Superintendent - A reading of the said letter does not disclose that earlier the appellant had clearly and categorically informed the Department about undertaking of trading activity along with the manufacturing activities - Reading these letters in juxtaposition, it can fairly be inferred that the trading activity by the Appellant have not been disclosed in clear terms but came to the knowledge of the Department only after a visit of the in-charge Range Superintendent to their premises on 21.07.2008. [para 12]
+ There is no letter nor any communication addressed by the appellant to the Department disclosing the activity of trading before that date. In the returns filed with the department it is not disclosed that the CENVAT credit has been availed on common input services and a portion of it was attributable to trading activity. [para 13]
+ It is pertinent to note that the appellant in none of their communication addressed to the Department during the said period, have ever made such a plea that due to confusion on the issue of admissibility of credit on common input services, the credit was availed pending clarity on such issues, when the revenue from the activity of trading is almost equal to the manufacturing activity. [para 15]
+ Methodology of reversing proportionate credit attributable to trading activity during the relevant period has been considered as a reasonable method/option by the Hon'ble Madras High Court in Ruchika Global Interlinks = 2017-TIOL-1235-HC-MAD-ST [para 17]
+ Appellant ought to have reversed the credit, which they have implemented by them from 01.04.2009, for the earlier period also, as activity of trading was neither a service amenable to service tax nor fall within the scope of manufacturing activity. Extended period is invokable in the present case. [para 18]
+ Credit availed on common inputs services attributable to the trading activity can be recoverable for the period for the period prior to 01.4.2009 invoking extended period. [para 21]
Majority order - Extended period is invocable. The demand confirmed along with interest is sustained. Appeal is disposed accordingly.
- Appeal disposed of: CHENNAI CESTAT
2023-TIOL-111-AAR-GST
TPSC India Pvt Ltd
GST - As no supply has happened during the GST regime, as per Section 142(10) of the Act ibid no GST shall be payable - Further, the additional payment received by way of compensation through award by Tribunal for Arbitration is not falling under Section 142(2)(a) and hence not chargeable to GST - In view of the clarification issued vide CBIC circular No. 178/10/2022 , dated: 03-08-2022 and in terms of the transitional provisions under CGST ACT, 2017 the liquidated damages, without any supply of materials and labor cannot be assessed to GST under GST Act, 2017 - There is no GST on the interest of 13% p.a., awarded by Tribunal for Arbitration as the principal supply itself is not taxable - Concurrent views of both the Members of the Authority for Advance Ruling, although discussed independently: AAR
- Application disposed of: AAR
2023-TIOL-22-AAAR-GST
Karnani FNB Specialities LLP
GST - AAR held that r eversal of tax charged on inward supplies which are altogether different from outward exempted supplies of alcoholic liquor for human consumption would no way lead to discharging of GST liability on outward supply - Activities of selling of alcoholic liquor for human consumption by the applicant would be treated as 'non-taxable supply' and, therefore, falls under the category of 'exempt supply' under the GST Act; that the applicant is required to reverse input tax credit attributable to the exempt supply - Argument of applicant by reference to maxim "Quando aliquid prohibetur fieri, prohibetur ex directo et per obliquum" that reversal of input tax credit would other way mean discharging of GST liability on output supply of alcoholic liquor for human consumption is unacceptable - Applicant is required to reverse input tax credit ('ITC') in terms of sub-section (2) of section 17 of the GST Act read with Rule 42 of the GST Rules for sale of alcoholic liquor for human consumption - Aggrieved by this order, the present appeal.
Held: It came to the notice that the appellant is availing some common input tax credit (ITC) at Head office which is being used both for the supply of services provided at Banquet Hall as well as the services provided at their Restaurant from where alcoholic liquor for human consumption is supplied - From a plain reading of the explanation to the Rule 42(1) of the GST Rules, 2017 as well as Entry 51 and 54 of List II of Seventh Schedule, it is clear that for the purpose of computation of exempt turnover as well as total turnover, duties and taxes on alcoholic liquor for human consumption shall be excluded and not the whole value of sales of alcoholic liquor for human consumption - Clause 12A of Article 366 of the Constitution which was inserted vide Section 14 of the Constitution (101st Amendment) Act, 2016 also establishes alcoholic liquor for human consumption as goods even though that is in exclusion for the purpose of charging GST, therefore, the claim of the appellant that under several legislations in India the term "goods" has been defined for charging of taxes on alcoholic liquor, and so the definition of ‘goods' under section 2(52) of the GST Act, 2017, cannot include alcoholic liquor for human consumption is untenable - Therefore, it is established that alcoholic liquor for human consumption is "goods" even under virtue of the Constitution - Section 9 of the GST Act, 2017 provides for levy of GST on intra-state supplies of goods and/or services except on the supply of the alcoholic liquor for human consumption - Hence, as alcoholic liquor for human consumption is non-taxable, ITC cannot be allowed for supply of the same - Held, therefore, that sale of alcoholic liquor for human consumption is a non-taxable supply under Section 2(78) of the GST Act, 2017 and subsequently is an exempt supply under Section 2(47) ibid - Therefore, the appellant is required to reverse input tax credit (ITC) in terms of sub-section (2) of section 17 ibid read with Rule 42 of the GST Rules, 2017 for sale of alcoholic liquor for human consumption. AAR order is confirmed and appeal is rejected: AAAR
- Appeal rejected: AAAR |
