MARCH 10, 2021

By Vijay Kumar

AS per Rule 46 of the CGST Rules,

Subject to rule 54, a tax invoice referred to in section 31 shall be issued by the registered person containing the following particulars, namely,-

(a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) a consecutive serial number not exceeding sixteen characters, ……..

(c) date of its issue;

(d) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(e) name and address of the recipient …….

(f) name and address of the recipient and the address of delivery, …….

(g) Harmonised System of Nomenclature code for goods or services ;

(h) …..

Provided that the Board may, on the recommendations of the Council, by notification, specify-

i. the number of digits of Harmonised System of Nomenclature code for goods or services that a class of registered persons shall be required to mention, for such period as may be specified in the said notification; and

ii. the class of registered persons that would not be required to mention the Harmonised System of Nomenclature code for goods or services, for such period as may be specified in the said notification:

What is this Harmonised System of Nomenclature code and what is it doing in GST? Actually this nomenclature itself seems to be a bad nomenclature. This Harmonised System of Nomenclature a.k.a HSN is a product of the WCO - the World Customs Organisation and liberally adapted by several countries.

The WCO describes it as:

The Harmonized Commodity Description and Coding System generally referred to as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).

It comprises more than 5,000 commodity groups; each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.

The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international trade is classified in terms of the HS.

The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.

It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.

In India, we used several versions of it in our Customs, Excise and VAT Tariffs. So, when GST came, it was certainly most convenient to turn to HS (or is it HSN?) but is it the Harmonised System of Nomenclature or the Harmonised System Nomenclature. The WCO calls it the Harmonised System Nomenclature (without 'of')

WCO clarifies, "At present, the Harmonized System Nomenclature 2017 Edition is the valid version applied in international trade transactions." The next version will be HS 2022 effective from 1.1.2022.

Coming back to our GST, remember Rule 46 stipulates that a tax invoice shall contain the Harmonised System of Nomenclature code. Also remember that the rule allows the CBIC to specify the number of digits of the Harmonised System of Nomenclature code to be shown on the invoice. The Board can also notify as to who need not mention the Harmonised System of Nomenclature code and for how long.

In exercise of these powers, the Board by Notification No. 12/2017 - Central Tax, dated 28th June, 2017 fixed the following limits, effective from 1st day of July, 2017.

On 15th October 2020, the Board amended the above notification by Notification No. 78/2020 - Central Tax to substitute the above table with effect from the 01st day of April, 2021. This is the new table:

We were in the thick of Covid and nobody took it seriously; in any case it was to be effective from 1st April 2021 - long way to go. No, we are almost there. Did you expect the bright bureaucrats to forget this notification? They don't make notifications six months in advance to forget them. In case you have forgotten, the Board is kind to remind you. The CBIC website prominently flashes:  

So, if you didn't have the good fortune of showing the Harmonised System of Nomenclature code on your invoices, now is your chance; enjoy.

But where do you find the Harmonised System of Nomenclature code and what will happen if you show the wrong numbers? Well, these are questions we will have to answer eventually, but immediately make arrangements to show the code in your invoices, from 1st April 2021. All the best.

Who is the Proper officer? Not DRI

The power of DRI to issue Show Cause Notices and adjudicate cases in Customs demands, has seen interesting litigation and legislation in several rounds.

In a landmark judgement delivered yesterday - 2021-TIOL-123-SC-CUS-LB, the Supreme Court held that the entire proceeding initiated by the Additional Director General of the DRI by issuing show cause notices are invalid without any authority of law and liable to be set-aside and the ensuing demands are also set aside .

All because the Show Cause Notices were issued by the DRI and not the proper officer. Is the DRI ADG not the proper officer? The Supreme Court observed,

The question that arises is whether the Directorate of Revenue Intelligence had authority in law to issue a show cause notice under Section 28(4) of the Act for recovery of duties allegedly not levied or paid when the goods have been cleared for import by a Deputy Commissioner of Customs who decided that the goods are exempted. It is necessary that the answer must flow from the power conferred by the statute i.e. under Section 28(4) of the Act. This Section empowers the recovery of duty not paid, part paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts and confers the power of recovery on "the proper officer". The obvious intention is to confer the power to recover such duties not on any proper officer but only on "the proper officer"

'a' or 'the' of DRI

The Supreme Court observed,

There are only two articles 'a (or an)' and 'the'. 'A (or an)' is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, 'the' is called the Definite Article because it points out and refers to a particular person or thing.

There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word 'any'.

Parliament has employed the article "the" not accidently but with the intention to designate the proper officer who had assessed the goods at the time of clearance. It must be clarified that the proper officer need not be the very officer who cleared the goods but may be his successor in office or any other officer authorised to exercise the powers within the same office.

The Court concluded:

It is, therefore, clear to us that the Additional Director General of DRI was not "the" proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside.

We, therefore, hold that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be set-aside and the ensuing demands are also set aside.

Positively, not the end...

Until next week