Indirect Tax Newsletter June 2021 – Tax

Indirect Tax Newsletter June 2021 – Tax

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India Regulatory & Trade Highlights

Foreign Trade

  • Import policy and condition revised to free for goods covered
    under HS Code 85423100, 85423900, 85423200, 85429000, 85423300,
    subject to registration under Chip Import Monitoring Systems
    (CHIMS) and condition 6 of Chapter 85. [Notification No.
    5/2015-2020 dated May 10, 2021]

  • New online module (https://www.dgft.gov.in) introduced for
    filing of electronic, paperless applications for export
    authorizations (except SCOMET) with effect from May 17, 2021.
    [Trade Notice No. 3/2021-22 dated May 10, 2021]

  • Requirement of presentation of valid Registration Cum
    Membership Certificate (RCMC) relaxed till September 30, 2021 for
    filing of any incentives/ authorizations, where such RCMC expired
    on or before March 31, 2021. [Trade Notice No. 4/2021-22 dated May
    10, 2021]

  • Filing of application, any further submission and decision for
    relaxation in policy and procedures shall only be dealt in
    electronic mode at DGFT portal w.e.f. May 19, 2021. [Trade Notice
    No. 5/2021-22 dated May 19, 2021]

The Directorate General of Trade Remedies, Ministry of Commerce
& Industry

a. Anti-Dumping Duty investigation initiated against import
of:

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b. Sunset Review investigation initiated for review of levy of
Anti-Dumping Duty against import of:

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c. Final Findings in Sunset Review investigation issued
concerning on import of:

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d. Final findings issued in Anti-Dumping Duty investigation
concerning import of:

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e. Final findings for Anti-Subsidy Investigation concerned on
import of:

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Ministry of Finance

a. Levy of Anti-Dumping Duty on import of:

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India Custom Highlights

  • Integrated Goods and Services Tax (IGST) applicable @12% on
    oxygen concentrator imported for personal use. [Notification
    No.30/2021-Cus dated May 1, 2021]

  • Exemption from IGST on import of goods such as Remdesivir,
    APIs, injection Remdesivir, oxygen concentrator, medical oxygen,
    oxygen related equipment, goods used in the manufacture of
    equipment related to production, transportation, distribution or
    storage of oxygen, ventilators, masks for ICU ventilators, COVID-19
    vaccine etc., for purpose of providing Covid relief subject to
    following conditions:

    • Goods are imported free of cost.

    • Goods are received from abroad for free distribution in India
      and a certificate from nodal authority of State Government is
      submitted to the Deputy or Assistant Commissioner of Customs before
      clearance of goods.

    • Statement containing details of goods distributed free of cost
      duly certified by the Nodal Authority of the State Government is
      submitted before the Deputy or Assistant Commissioner of Customs
      within six months from the date of importation.


    [Ad hoc Exemption Order No. 4/2021-Customs dated May 3, 2021,
    Instruction No. 09/2021-Cus dated May 3, 2021]


  • Restoration of facility of acceptance of undertaking in lieu of
    bond by custom formations in certain cases of customs clearance
    till June 30, 2021. [Circular No. 9/2021-Cus dated May 08,
    2021]

  • Changes introduced through the Customs (Import of Goods at
    Concessional Rate of Duty) Amendment Rules, 2021 clarified.
    Further, all intimations and other communications as specified in
    said Rules to be shared with the Customs Officers through e-mail
    till the time suitable changes are made in ICEGATE portal.
    [Circular No.10/2021- Cus dated May 17, 2021]

  • The Sea Cargo Manifest and Transhipment (Second Amendment)
    Regulations, 2021 notified. [Notification No.44/2021- Cus (N.T.)
    dated April 15, 2021]

  • The Sea Cargo Manifest and Transshipment (Second Amendment)
    Regulations, 2021 notified. [Notification No.44/2021- Cus (NT)
    dated April 15, 2021]

  • Instructions issued for custom clearance of cylinders and
    pressure vessels for storage and transportation of medical oxygen
    imported in relation to COVID-19 pandemic, without approval from
    Petroleum and Explosive Safety Organization [Instruction
    No.12/2021- Cus dated May 25, 2021]

India GST Highlights

  • Interest rate revised w.e.f. April 18, 2021 and late fees
    w.e.f. April 20, 2021 for filing Form GSTR-3B

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[Notification No. 8 and 9/2021-CT, both dated May 1, 2021,
Notification 1/2021-IT dated May 1, 2021 and Notification 1/2021-UT
dated May 1, 2021]

  • Amendment made in the Central Goods and Services Tax Rules,
    2017 (the CGST Rules)

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Further, Form REG-21 (Application for revocation of Cancellation
of Registration), Form GST RFD-07 (Order for withholding the
refund/release of withheld refund) amended and Form GST RFD-01W
(Application for withdrawal of refund application) inserted.

  • Standard operating procedure (SOP) prescribed for
    implementation of provision of extension of time limit to apply for
    revocation of cancellation of registration. [Circular No.
    148/04/2021-GST dated May 18, 2021]

  • Guidelines issued for department regarding issuance of order
    within 30 days from the date of filing application for cancellation
    of registration. [Circular No. CBEC 20/16/34/2019-GST/802 dated May
    24, 2021].

Important Case Laws

GST

The Appellant approached the Hon’ble Supreme Court against
order of the High Court whereby order of Provisional Attachment of
property (Attachment Order) was disposed as being not
maintainable.

The Hon’ble Supreme Court held that appeals under Section
107(1) of the Himachal Pradesh Goods & Services Tax Act, 2017
(the HPGST Act) can be filed against order passed by adjudicating
authorities, and that the Commissioners are specifically excluded
from the definition of adjudicating authorities under Section 2(4)
of the HPGST Act. Therefore, Order passed by the Joint Commissioner
as a delegate of the Commissioner is not an appealable order under
Section 107(1) of the HPGST Act. Thus, the only remedy available to
the Appellant against the Attachment Order was in the form of
invocation of Writ Petition under Article 226 of the
Constitution.

The Hon’ble Supreme Court further held that an order to
provisionally attach a property under Section 83 of the HPGST Act
can be issued during pendency of proceeding under Section 74 of the
HPGST Act. Since, the impugned Attachment Order was passed before
issuance of Show Cause Notice under Section 74 of the HPGST Act, it
was held to be ultra vires Section 83 of the HPGST Act. It has been
further held that the power to order provisional attachment of
property is draconian in nature and must be exercised only on
formation of opinion basis tangible matter that the same is
necessary to protect the interest of revenue. Since, there was no
basis for formation of such opinion, the Hon’ble SC has allowed
the appeal setting aside the Attachment Order.

Takeaway: Attachment Order must be passed on formation
of opinion basis tangible material that such provisional attachment
is necessary to protect the interest of the government

[M/s Radha Krishan Industries V. State of Himachal Pradesh &
Ors, Civil Appeal No. 1155 of 2021 dated April 20, 2021 (Supreme
Court of India)]

 

The Petitioner hired transporter for transporting goods (the
Goods) from Dadra and Nagar Haveli to Secunderabad (distance of 867
km). The said transporter was also transporting goods belonging to
another party from Dadar & Nagar Haveli to Adoni (distance of
940 Kms). The transporter decided to unload goods of the other
party at Adoni first and then head to Secunderabad for delivery of
the Goods.

The vehicle was intercepted and detained on its way to Adoni on
the ground that documents of the vehicle were defective and that
transaction wrt transportation of goods from Dadar & Nagar
Haveli to Secunderabad got concluded at Secunderabad (as it comes
before Adoni), however, the goods were further transported without
invoice or e-way bill. The Petitioner was directed to pay tax along
with penalty under Section 129 of the Central Goods and Services
Tax Act, 2017 (the CGST Act) which was paid by Petitioner under
protest.

The Petitioner filed a writ petition before the Hon’ble High
Court seeking directions to declare action of the Respondent as
illegal, arbitrary and violative of Article 14 and 300A of the
Constitution of India and prayed for refund of amount deposited
under protest.

The Hon’ble High Court allowed the writ petition filed by
the Petitioner and held that there is no prohibition for a
transporter to load two different consignments in a single
conveyance for two different parties which are to be delivered in
two different States. Further, it has been held that there is no
rule that consignments intended for a party at a shorter distance
should be offloaded first and that the transporter can deliver the
goods as per its operational convenience.

Takeaway: Benefit of operational convenience of the
transporter to be given in case there is no intention to evade
Tax

[M/s Vijay Metal Vs. The Deputy Commercial Tax Officer, W.P. No.
2869/2021 dated April 28, 2021 (Telangana High Court)]

 

The Petitioner was acting as a director and also working in the
capacity as a mentor/advisor for Milk Food Limited (the Company).
An investigation was initiated under Section 67 of the CGST Act
against the Company wherein it was alleged that the Company has
availed ITC against fake invoices. In this connection, several bank
accounts of the Petitioner were provisionally attached vide
Attachment orders issued under Section 83 of the CGST Act.

The Petitioner filed a writ petition before the Hon’ble High
Court challenging the attachment orders on the ground that the same
were passed without jurisdiction.

The Hon’ble High Court allowed the writ petition filed by
the Petitioner and held that the property, including bank accounts
belonging to taxable person can be provisionally attached in terms
of Section 83(1) of the CGST Act. Since, the Petitioner is not a
taxable person, therefore, his property cannot be provisionally
attached. Further, it has been held that the Department has not
placed any material on record which links the Petitioner with the
fake invoices and therefore, the action of provisionally attaching
the bank account is unsustainable.

Takeaway: Attachment Orders can be issued only against
taxable persons

[Roshni Sana Jaiswal Vs. CCT, WP(C) No. 2348/2021 dated May 12,
2021 (Delhi High Court)]

Service Tax

The appellant entered into a partnership with two other persons
to form a partnership firm. The appellant was providing marketing
and distribution services to the partnership firm wrt products
thereof, and paying Service Tax on the services provided to
partnership firm. However, later the appellant filed refund claim
on the ground that partner and partnership firm are one and the
same, thus, there was no provision of services. The said refund
claim was rejected by the department. Against the denial of refund
claim, the appellant filed an appeal before the Customs, Excise and
Service Tax Appellate Tribunal (the CESTAT).

The Hon’ble CESTAT held that the services so rendered by the
appellant are in accordance with the deeds of partnership and not
under a separate and independent agreement. The activities carried
out by the appellant are part of the duties of the partner. The
CESTAT also discussed that for levy of Service Tax, service
provider and service recipient must be two distinct persons.
However, as per the provisions of General Clauses Act as well as
Service tax laws as existing prior to July 1, 2012, partner and
partnership firm are same person and as such no services can be
rendered between the same persons.

Further, relying on a decision rendered under the Income tax
laws, the CESTAT also held that all amounts received by the partner
from the partnership firm are in the nature of share of profit and
not ‘consideration’ for rendering any services. Therefore,
Service Tax cannot be levied on activities provided by partners to
the partnership firm in the due course of partnership.

Takeaway: No Service Tax is leviable on activities
performed by a partner for the partnership firm which are specified
in the partnership agreement.

[Cadila Healthcare Ltd vs CST, Final Order No.
A/11661-11675/2021 dated April 27, 2021]

 

The Appellant entered into an agreement with a contractor for
crushing, pulverizing, and converting whole ‘turmeric’ and
‘chilly’ as well as seeds of ‘coriander’ and
‘cumin’ supplied by the latter into powder which is then
packed and returned.

The department raised Service Tax demand on the appellant under
Business Auxiliary Service. The Appellant contended that activities
amount to ‘manufacture’ which are covered within the scope
of the Central Excise Act, 1944 and thus, not liable to Service tax
in accordance with Section 65(19) of Chapter V of the Finance Act,
1994.

The Hon’ble CESTAT held that as a result of the processing
of spices and seeds, the final product i.e. the powder has a
separate market of its own. In case this activity is not carried
out, there would be an unsatisfied demand of this powder in the
market. Therefore, one of the basic test of manufacture has been
passed as laid down in various judicial precedents. Thus, the
activity amounts to manufacture and not liable to Service Tax.

Takeaway: Activity of processing of spices into powder
amounts to manufacture and not liable to Service Tax

[Nilgiri Oil And Allied Industries Vs CCE, Order No. 4-5/2021
dated May 25, 2021]

Central Excise

The Appellant is a contract manufacturing unit engaged in
manufacture of biscuits for its principal. The Principal raised
invoices in the capacity of Input Services Distributor (ISD) in
respect of advertisement and marketing expenses incurred by the
principal to the appellant.

The issue before the Hon’ble CESTAT was whether issuance of
ISD invoices by principal to the appellant which is a separate
legal entity was correct. Further, another issue before the
Hon’ble CESTAT was to decide if the appellant was eligible to
claim credit of services whose cost was already included in the
value of excisable goods sold by it.

The Hon’ble CESTAT held that Rule 7 of the CENVAT Credit
Rules, 2004 (the CENVAT Credit Rules) does not use the word
‘own’ manufacturing unit and therefore, covers within its
ambit a contract manufacturer who manufactures in accordance with
the provisions of registration exemption certificate. As per the
facts of the case, the contract manufacturer had stepped into the
shoes of the principal for the purpose of manufacturing since it
was carrying out all the tasks in accordance with the directions of
the principal contractor.

Further, the CESTAT also discussed that the sale price fixed by
the principal includes sales promotion and marketing expenses.
CENVAT credit is a beneficial scheme which avoids cascading effect
of taxes and duties. Therefore, credit is allowed on services whose
cost was already included in the value of goods.

Takeway: Principal manufacturer can distribute credit of
input services to a contract manufacturer under Rule 7 of the
CENVAT Credit Rules even if the latter is a separate legal
entity.

[Krishna Food Products Vs CCE, Order No. 51512-51514/2021 dated
May 25, 2021 (CESTAT, Delhi)]

Customs

The Petitioner challenged validity of Notification 30/2021-Cus
dated May 1, 2021 imposing IGST @12% on Oxygen Concentrator
imported for personal use. Exemption from IGST vide Notification
No. 4/2021-Cus dated May 3, 2021 (Exemption Notification) was
provided only to oxygen concentrators imported by the State
Government, or via any entity, relief agency or statutory body
authorised by the State Government and not to individuals.

The Hon’ble High Court held that the Petitioner could not be
denied benefits of Exemption Notification since it was violative of
Article 14 of the Constitution of India since an artificial, unfair
and unreasonable distinction has been drawn between persons, who
are similarly circumstanced as the Petitioner and those who import
oxygen concentrators through a canalizing agency.

Further, it has been held that there is no justification
whatsoever in excluding individuals from the purview of Exemption
Notification only on the ground that they received oxygen
concentrators directly as gifts from their friends and/or relatives
located outside the country. Thus, imposition of IGST on oxygen
concentrators which are imported by individuals and are received by
them as gifts i.e., free of cost for personal use is
unconstitutional.

Takeaway: Exemption from IGST on import of oxygen
concentrators on the State Government, or via any entity, relief
agency or statutory body authorized by the State Government and not
to individuals is unconstitutional.

[Gurcharan Singh v. Ministry of Finance, W.P.(C) 5149/2021, CM
No. 16554/2021 Order dated May 21,2021 (Delhi High Court)]

 

The Larger Bench of Hon’ble CESTAT has held that notional
cost towards freight charges is not required to be added to the
Value of Aviation Turbine Fuel (ATF) remaining in the aircraft
after its international flight into India.

The issue before the Hon’ble CESTAT was valuation of this
remnant ATF. Department argued that in view of rule 10(2) of the
Customs Valuation Rules, 2007 cost of transportation of the remnant
AFT should be added to the Indian Oil Corporation Limited price, on
which customs duties have been discharged by the Appellant.

The Hon’ble CESTAT held that there was no cost of
transportation incurred by the airline towards ATF and therefore,
only actual cost paid or payable can be added to the transaction
value.

Takeaway: Transportation cost not to be included in the
remnant ATF.

[M/s Jet Airways (India) Limited v. CC, Appeal No. 86898 of
2017, Order dated May 25, 2021 (CESTAT, Mumbai)]

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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