I. HIGH COURT
8 Meghdoot Logistics [2021 (47) GSTL 113 (Kar)] W.P. No. 10832 of 2020 Date of order: 21st December, 2020
Sections 129 and 130 of the Central Goods and Services Tax Act – Simultaneous proceedings can be initiated under both sections
FACTS
The petitioner is a transporter moving tobacco products from Delhi to Salem (Tamil Nadu). The vehicle was intercepted and an order for detention was passed u/s 129(1) of the CGST Act for non-confirmation of the existence of a consignor and a consignee. Thereafter, a show cause notice u/s 129(3) of the CGST Act dated 25th August, 2020 was issued calling on the petitioner to show cause why there should not be a levy of tax and penalty as contemplated u/s 129(1)(b). The petitioner filed objections vide reply dated 1st September, 2020 but could not establish the existence of a consignor and consignee. Therefore, it appeared to the Respondent that there existed an intent to evade tax, resulting in issuance of another show cause notice dated 7th September, 2020, this time u/s 130. This show cause notice stated that the earlier show cause notice dated 25th August, 2020 u/s 129(3) stood abated.
The petitioner challenged the validity of the second notice dated 7th September, 2020 as improper exercise of power because no order was passed for concluding proceedings initiated vide the earlier notice dated 25th August, 2020.
HELD
The High Court held that both sections 129 and 130 of the CGST Act begin with a non-obstante clause which establishes that commencement of proceedings u/s 130 does not require that proceedings initiated u/s 129 should have ended. Thus, the proper officer can determine applicable tax and penalty u/s 129 whilst simultaneously adjudging confiscation u/s 130 of the CGST Act.
9 Lupita Saluja vs. DGGI [2021 (47) GSTL 3 (Delhi High Court)] Date of order: 11th February, 2021
Anticipatory bail granted when proved that ITC is not fraudulently availed under Central Goods and Services Tax Act, 2017
FACTS
It was alleged by the Department that the petitioner and her husband had created five bogus export firms and fraudulently availed ITC of Rs. 45 crores on the strength of fake invoices providing fabricated information on the E-way bill portal. It was further alleged that on inquiry it was found that all their suppliers were either non-existent at the declared principal place or at the business address given in the GST registration. Moreover, none of the transporters transported the goods for the companies in question except one transporter who disclosed that he transported the goods from a warehouse to ICD TKD and not from any of the suppliers as claimed by the husband of the petitioner.
The petitioner submitted that the companies availed the ITC as per section 16 of the CGST Act, 2017 after fulfilling the criterion mentioned therein. The suppliers of the companies have been filing GSTR1 and GSTR3B returns and the tax liability of the companies is auto-populated in GSTR2A. The companies have been filing GSTR3B and GSTR9C with Audit, which matches with the returns filed by the suppliers.
Therefore, the petitioner filed a petition u/s 438 of the CrPC seeking anticipatory bail in relation to the inquiry / investigation being conducted by the Respondent under the CGST Act, 2017.
HELD
The High Court observed that the suppliers had supplied goods to the companies which had been further exported by them to the buyers. In addition to this, payments received by the companies from their foreign buyers were transferred online to the account of the suppliers. Therefore, it was wholly misconceived that the suppliers were non-existent. As regards the supply of goods by the transporter, the E-way bills were uploaded by the supplier wherein the vehicle number and HSN code are mentioned. Moreover, after uploading the E-way bill, the goods were transported by the vehicle concerned at ICD, Tughlakabad, wherein the entry passes were issued by the Custom authorities, the goods were unloaded from the vehicle and inspected by the authorities. This leaves no doubt that the goods are not transported by the vehicle concerned as they go through different levels of checks and inspections.
Therefore, in view of the above facts, it was held that custodial interrogation of the applicant was not required. Anticipatory bail was granted and the arresting officer was also directed that in the event of arrest, the petitioner shall be released on her furnishing a personal bond in the sum Rs. 25,000.
II. ADVANCE RULING
10 M/s Guitar Head Publishing LLP [2021-TIOL-135-AAR-GST] Date of order: 16th April, 2021 [AAR-Karnataka]
Supply of goods from a warehouse located outside India to customers located outside India is not a supply under GST – Printing charges and shipping charges paid to vendors outside India are liable to service tax under reverse charge mechanism – Warehousing charges paid outside India are not liable to GST
FACTS
The applicant is engaged in the business of selling guitar training books in the USA, the UK and Canada through its website. The applicant sends soft copies of the book to the printer located in the USA who prints it and ships it to the customers in those countries. In another business model, the applicant has an agreement with Amazon Inc. which, through its website ‘amazon.com’ and based on the choice of the customers, either prints the books and sells these to the consumers on their own account, or shares the link to download the e-books in electronic devices and pays royalty to the applicant as agreed between them. The question before the Authority is whether the supply of goods outside India from the warehouse located outside India is a supply under GST. Further whether GST is applicable on the shipping charges collected from the customer for delivery outside India. And where the content is supplied from India, whether GST is applicable on the printing charges undertaken outside India and the storage of books in the warehouse outside India.
HELD
The Authority noted that the goods (books) are supplied by the person from the warehouse located in USA which is outside India (a non-taxable territory) to the customers in USA / UK / Canada which are outside India (a non-taxable territory). Schedule III, relevant to section 7 of the CGST Act, 2017, at clause 7 specifies that ‘Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India’ shall be treated neither as a supply of goods nor a supply of services. Therefore, the said supply is not liable to GST. Similarly, shipping charges collected from the recipients outside India is not liable to GST. However, the supplier providing the shipping service is outside India and the recipient, viz., the applicant is in India and therefore the expenses incurred on the shipping charges is liable to GST under reverse charge. Similarly, printing charges paid outside India are liable to GST under reverse charge mechanism. In case of warehousing services, since the books are stored in a warehouse outside India, the same is not taxable under GST.
11 M/s Haldi Power System [2021-TIOL-133-AAR-GST] Date of order: 6th April, 2021 [AAR-Karnataka]
Concessional rate of GST is not applicable to the sub-contractor as the main contractor is neither a Central Government, nor State Government or local authority
FACTS
The applicant has received a sub-contract from the main contractor who has been awarded a contract by a Government department for civil, electrical and mechanical work related to an irrigation scheme. The question before the Authority is whether concessional rate of GST shall apply to the sub-contractor, the main contractor being the provider of works contract to a Government entity.
HELD
The Authority noted that privity of the contract is between the applicant and the. main contractor; however, the main contractor is not covered under a Central Government, State Government, Union Territory, local authority or a Governmental Authority and is not a Government entity, hence the supply made by the applicant is not covered by the concessional rate of GST applicable to the main contractor.
Note: In this regard the readers may note the decision of the Supreme Court in the case of State of A.P. vs. Larsen and Toubro Ltd. [2008-TIOL-158-SC-VAT] where the court has held that ‘Even if there is no privity of contract between the contractee and the sub-contractor, that would not do away with the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view in such a case the work executed by a sub-contractor results in a single transaction and not multiple transactions. The Apex Court in this case holds that transfer of property directly happens from the sub-contractor to the client / contractee and not the main contractor. Accordingly, the service is consumed only once from the sub-contractor to the client.
12 M/s Bowring Institute [2021-TIOL-131-AAR-GST] Date of order: 24th April, 2021 [AAR-Karnataka]
The amendment related to mutuality between club / unincorporated associations and its members is not yet notified and therefore the same will continue to remain non-taxable by virtue of the Supreme Court judgment in the case of M/s Calcutta Club Ltd.
FACTS
The applicant is a club and a non-profit organisation established by the British as a literary and scientific society. It has sought an advance ruling on the following questions: (i) Whether the amounts collected as membership subscription fees paid by the members towards facilities provided are liable as supply of service under GST? and (ii) Whether the amounts collected as infrastructure development fund for the development and maintenance of the facilities provided by the applicant are liable as supply of service under GST?
HELD
The Authority noted that the Supreme Court judgment in the case of
M/s Calcutta Club Limited 2019-TIOL-449-SC-ST-LB is fully applicable to the applicant. It is held therein that the doctrine of mutuality applies and these clubs which are similar to that of the applicant are not exigible to service tax. The Finance Act, 2021 has overruled what the Courts have held till now and has countered the Principle of Mutuality by way of Explanation which states that the members or constituents of the club and the club are two separate entities and persons for the purpose of section 7 of the CGST Act, 2017 which defines supply. However, by virtue of section 1(2)(b) of the Finance Act, 2021, the amendment brought in section 7 of the CGST Act, 2017 by way of section 108 of the Finance Act, 2021 will come into effect only on the date when the Central Government notifies the same and then the same will be notified with the corresponding amendments passed by the respective States and Union territories in the respective SGST / UTGST Acts.
Therefore, the Authority concluded that unless the amended section 7 of the CGST Act, 2017 is notified, the applicant is not liable to pay GST on the subscription fees and infrastructure development fund collected from the members as per the Supreme Court judgment in the case of M/s Calcutta Club Ltd.
