I.
HIGH COURT
10. [2020 (122) taxmann.com 32 (Guj.)] Britannia
Industries Ltd. vs. UOI Date of order: 11th March, 2020
SEZ unit is
entitled to refund of unutilised ITC distributed to it under ISD mechanism
FACTS
The petitioner
is an SEZ unit making zero-rated supplies under GST. The petitioner was not
able to utilise the Input Tax Credit (ITC) of IGST from its ISD and hence filed
applications for refund. But the applications were rejected inter alia on
the ground that for supply received from outside SEZ or within SEZ, SEZ unit is
not supposed to pay any tax and thus there would be no question of ITC.
HELD
Referring to
various provisions of the Act, the High Court held that the contention of the respondents
that as the petitioner is not the supplier of the goods and services he would
not be entitled to file an application for refund is not tenable because in the
facts of the present case, the input service distributor, i.e., ISD as defined
u/s 2(61) of the CGST Act is an office of the supplier of goods and services
which receives tax invoices issued u/s 31 of the CGST Act towards the receipt
of input services and issues a prescribed document for the purpose of
distributing the credit of CGST, SGST or IGST paid on such goods or services.
Therefore, in the facts of the case it is not possible for a supplier of goods
and services to file a refund application to claim the refund of the ITC
distributed by ISD.
The Court also
referred to the terms of Notification No. 28/2012 CE-(NT) dated 20th
June, 2012 applicable to the service tax regime providing that credit of input
services to be distributed by ISD to all units. The High Court also accepted
that there is no express provision in section 54 of the CGST Act denying refund
claims filed by SEZ units and relied upon the decision in the case of
Amit Cotton Industries 2019 (29) GSTL 200 (Guj.) wherein in similar
facts this Court allowed the claim made by the petitioner for a refund of the
IGST in case of an export unit.
11. [2020 (122) taxmann.com 25 (A.P.)] Shiridi Sainath
Industries vs. Deputy Commissioner of Services Tax (International Taxation) Date of order: 20th November, 2020
Agreement
permitting millers to retain the by-products generated in the course of the
milling process cannot be termed as granting additional consideration (in the
form of the by-products) payable to the millers for providing milling services
and hence cannot form part of the value or be liable to be taxed under GST Act
FACTS
The petitioner
is a rice miller and registered dealer under the APGST Act, 2017 (GST Act). The
State Government procures paddy from the roots and gives it to the rice mills
for milling and handing over to the Andhra Pradesh Civil Supplies Corporation
(APCSC) for public distribution. As consideration for milling, APCSC pays at
the rate of Rs. 15 per quintal of paddy milled. As per the terms of the
agreement, the rice millers have to supply rice equivalent to 67% of the paddy
given for milling irrespective of the yield. In fact, the actual yield will be
only around 61% to 62%. The balance of 5% to 6% has to be provided by the
petitioner to the APCSC out of his own stock. Therefore, as a compensation /
exchange for the same, APCSC allows the petitioner to retain the broken rice,
bran and husk obtained in the course of milling of the paddy. The petitioner
sells the said broken rice, bran and husk. The broken rice and husk are
exempted from tax and the petitioner pays tax on the bran at the rate of 5%.
The Department
contended that the by-products which are retained can only be treated as part
of the consideration for the work agreed to be done, i.e., custom milling, as
both the parties arrived at the rate of Rs.15 per quintal only after
considering the fact that the petitioner would retain the by-products. Hence,
in the present case the price is not the sole consideration for custom milling
of rice as the consideration involves something other than cash. Thus, even the
monetary value of the goods and services will form part of the consideration.
It further contended that the by-products may include some exempted products
like husk. However, their value shall be taken for the purpose of calculation
of consideration.
HELD
The High Court
referred to the decision in the case of Food Corporation of India vs.
State of AP and held the following:
- When the terms are entered in the form of a
written agreement, the same are sacrosanct and shall be looked into to know the
purpose for which the by-products were given to the miller and not by adducing
oral evidence;
- When the terms only specify a certain amount as
remuneration and nothing else is indicated towards remuneration, no further
condition can be regarded as remuneration; and
- When the terms say that the by-products shall be
the property of the agent (miller), such transfer of property in the goods
cannot be treated as a sale.
The Court thereafter referred to the agreement between the parties and held
that Clause 22 allowing millers to retain the by-products and Clause 17 dealing
with consideration for the milling process are distinct and independent of each
other and that there is not even the slightest insinuation in either clause
that the by-products shall form part of the consideration. The Court further
noted that in the said agreement all the terms, trivial as well as significant,
are meticulously incorporated and hence one can logically conclude that if the
parties wanted to covenant that by-products shall form part of the
consideration they would have mentioned it in clear terms. In these
circumstances, the High Court held that the by-products which are allowed to be
retained by the petitioner are not part of the consideration.
12. [2020 (122) taxmann.com 114 (Ker.)] Uniroyal Marine Exports Ltd. vs. CCE Date of order: 17th November, 2020
If the amounts paid by the assessee as tax under a mistake of law / fact
are refunded to it by the tax authorities, the same cannot be ordered to be
recovered back from the assessee as it does not partake the character of tax
under Article 265 of the Constitution of India
FACTS
The controversy herein is with respect to the
refund of service tax paid by the appellant for services rendered prior to 18th
April, 2006 when service tax was not levied on foreign agency commission. The
appellant had paid the tax without demur. Later, the High Court of Bombay in Indian
National Ship Owners’ Association vs. Union of India [2009 (13) STR 235 (Bom.)]
held that the service recipient in India is liable to service tax for payments in
lieu of service received from abroad only from 18th April, 2006
after section 66A was incorporated in the Finance Act, 1994. The Supreme Court
upheld the judgment of the Bombay High Court on 14th December, 2009;
within eight months of that, the application for refund was filed by the
appellant before the original authority. The original authority allowed the
claim. A review was filed, which was rejected. In the first appeal, by
Annexure-A4, the refund order was set aside, by which time the refund had been
made. A further appeal before the CESTAT also ended in rejection.
The appellant contended that the payments were made by a mistake in law
and hence the same has to be refunded even if the application is not filed
within the time provided.
HELD
Referring to the decision in the case of Southern Surface
Finishers and Another vs. Assistant Commissioner of Central Excise [2019 KHC
47], the Court held that in the said case the Court considered the
Constitutional Bench decision in the case of Mafatlal Industries Ltd. vs.
Union of India [(1997) 5 SCC 536] and found that the mistake if
committed by the assessee, whether it be on law or facts, the remedy would be
only under the statute. Accordingly, the Court decided the matter in favour of
Revenue. However, the Court noted that in the instant case the amounts have
been refunded to the assessee as per the order of the original authority. In
such circumstances, the Court held that as the amount cannot be treated as tax
due under Article 265 of the Constitution, recovery thereof cannot be directed.
For this proposition, the Court also relied upon the decision of the Supreme
Court in CIT Madras vs. Mr. P. Firm Muar [AIR 1965 SC 1216]. The
Court accordingly held Revenue to be incapable of recovery of the amounts
refunded as tax due.
II. TRIBUNAL
13. [2020-TIOL-1694-CESTAT-Mum.] Man Infraprojects Ltd. vs. CCGST Date of order: 9th December, 2020
A residential complex of nine floors comprising of nine duplex flats is
eligible for exemption before 30th June, 2012 as it has less than 12 residential units
FACTS
Rejection of refund claim of service tax paid for construction of
residential complex before 30th June, 2012 on the ground that the
appellant failed to establish that it comprises of less than 12 residential
units so as to be covered under exemption clause is assailed in this appeal.
HELD
The Commissioner (Appeals) had failed to arrive at a conclusion that the
complex had less than 12 residential units as it had 13 floors. However, going
by the architect certificate, floor plan and the full occupation certificate
issued by the Executive Engineer of the Municipal Corporation of Greater Mumbai
dated 2nd August, 2013, it clearly indicates that the complex
comprises of nine residential units, taking each duplex to be counted as one
unit. Therefore, the appellant is entitled to get the refund sought for. The
appeal is allowed. The Department is directed to refund the tax with applicable
interest as per section 11AA of the Central Excise Act, 1994 within three
months of receipt of the order:
14. [2020-TIOL-1676-CESTAT-Del.] M/s Rohan Motors Ltd. vs. Commissioner of Central
Excise Date of order: 5th October, 2020
Incentives received are not liable to service tax pre- and post-July,
2012 – Bouncing of cheques and cancellation of orders are penal in nature and
therefore cannot be viewed as consideration for a service
FACTS
The appellant buys vehicles from Maruti
Suzuki India Ltd. for further sale to buyers under a dealership agreement
entered into between them. Under the said agreement, they receive discount
which is referred to as ‘incentives’ under the schemes. The Department has
sought to levy service tax on the incentives received under the category of
‘business auxiliary service’. The period involved is both pre- and
post-negative list. Further, demand is also confirmed on bouncing of cheques
and cancellation of orders.
HELD
The Tribunal primarily noted that the appellants are traders in vehicles
and work on a principal-to-principal basis. The sales promotion activities
undertaken are for the mutual benefit of their business. The amount of incentives
received cannot therefore be treated as consideration for any service. Further,
it was also noted that for the period after July, 2012 a different view cannot
be taken when in the appellant’s own case (2018- TIOL-2860 – CESTAT-Del.),
incentive was held as non-taxable. Reliance was also placed on the decisions of
Toyota Lakozy Auto Pvt. Ltd. vs. Commissioner of Service Tax &
Central Excise [2016-TIOL-3152-CESTAT-Mum.] and Sai Service
Station Ltd. vs. Commissioner of Service Tax, Ahmedabad [2014 (34) STR 416
(Tri.-Ahmd)]. Further, with respect to bouncing of cheques and
cancellation of orders, it was held that these amounts are penal in nature and
not towards consideration for any service.
Note: A similar decision is also passed by the Hon’ble Bangalore CESTAT
in the case of Popular Vehicles and Service Ltd. vs. CCE [2020 (120)
taxmann.com 305 (Bangalore-CESTAT), 12th February, 2020].
