GOODS AND SERVICES TAX (GST)

 I. HIGH COURT

Date of order: 14^th
February, 2019

If States do
not have power to levy tax on any particular activity, municipal corporations
cannot enjoy such power – No taxes can be levied without power

FACTS

A writ petition was filed by
the petitioner, an advertising company, challenging the vires of the
Mathura Vrindavan Nagar Nigam (Vigyapan Kar Ka Nirdharan and Wasuli Viniyaman)
Upvidhi, 2017 which enforced bye-laws with effect from 6^th January,
2018 by virtue of section 172(2)(h) of the U.P. Municipal Corporation Act
whereby advertisement tax was levied. However, the said provision had stood
deleted vide section 173 of the U.P. GST Act enforced on 1^st July,
2017. Moreover, the power to impose advertisement tax by the state was divested
through section 17 of the Constitution 101st (Amendment) Act with effect from
16^th September, 2016 which deleted Entry 55 of List-II of the VIIth
Schedule of the Constitution of India by which the state legislature was
invested with the power to make laws in respect of taxes on advertisement.

HELD

The
Hon’ble Court held that when the state legislature was deprived of power to
levy tax on advertisement, clearly the municipal corporations also ceased to
have the power to impose any tax on advertisement. Therefore, Mathura Vrindavan
Nagar Nigam had no legislative competence on 6^th January, 2018 to
promulgate the aforesaid bye-laws. Accordingly, the writ petition was allowed,
striking down the aforesaid bye-laws as ultra vires.

A writ of habeas corpus shall not be maintainable when a
person is in custody on the basis of orders passed by a court of competent
jurisdiction

FACTS

A writ of habeas corpus
was filed directing the respondents to produce the detainee before the Court.
The detainee was arrested u/s. 69 of the Central Goods and Services Tax Act,
2017 for the offences specified in section 132(1) of the said Act. The detainee
had also filed a bail application before the Chief Judicial Magistrate which
was subsequently rejected, in response to which the aforementioned writ was
filed.

HELD

The
Hon’ble High Court dismissed the writ petition stating that writ of habeas
corpus shall not be maintainable since the person detained was in custody
on the basis of the orders passed by a Court of competent jurisdiction.

Goods seized
as they were not offloaded at designated place but taken further to another
delivery point. But tax was duly paid on said goods, thus seizure order was
held to be grossly unreasonable

FACTS

A writ petition was filed
challenging the vindictive and drastic order levying penalty and detention of
goods and vehicle. E-way bill was generated by the petitioner having separate
billing and shipping addresses. The goods under transit were not offloaded at
the designated place; instead, they were taken further towards the billing
address. The said goods were also covered under appropriate documents and the
tax was remitted. There was no attempt of evasion. The vehicle in transit was
intercepted by the respondent Department when it was en route to the
billing address. The vehicle was seized and the driver of the vehicle was asked
to co-operate. It appeared that he did not co-operate with the authorities.
Therefore, owing to the circumstances, the impugned order was passed by the
respondent. Hence, writ petition was filed questioning the detention order.

HELD

The Hon’ble High Court held
that the order passed by the respondent was grossly unreasonable and
disproportionate; it said the respondent ought to have taken a sympathetic and
indulgent view. Hearing both the parties, the petitioner was directed to pay a
sum of Rs. 5,000 as fine to the respondent and ordered the release of the goods
and the vehicle, thereby quashing the impugned orders and allowing the
petition.

E-way bill
expired due to breakdown of the vehicle, goods and vehicle directed to be
released on personal bond without bank guarantee

FACTS

The present writ petition was
filed against the detention order passed by the Department despite reasonable
submissions for interim release. The petitioner had purchased goods from a
company in Maharashtra. These were entrusted to the parcel agency after
generating the E-way bill. En route to the destination, the vehicle
broke down and required repairs in Karnataka. In the meanwhile, the state of
Kerala was caught in unprecedented floods which made it impossible for the transporter
to resume the journey. Thus, the E-way bill expired since it took more time
than usual for the transporter to reach the destination. The vehicle was
intercepted by the respondent and the goods were seized u/s. 129 of the GST
Act, 2017. Hence the writ petition.

HELD

The
Hon’ble High Court of Kerala held that that once the petitioner had explained
the circumstances through submissions, the respondent ought to have taken a
lenient view rather than a practical view. The said writ petition was disposed
by holding that the goods be released under security of personal bond from the
petitioner without insisting on the bank guarantee.

Bank guarantee
submitted with regard to detention of goods cannot be enchased during
limitation period of appeal

FACTS

The petitioner, a dealer in
timber, purchased timber in Tamil Nadu and was transporting it to Kerala. The
said goods were intercepted and detained u/s. 129 of the Kerala GST Act, 2017
for the supplier’s failure to collect IGST. Subsequently, an order was passed
imposing tax and penalty. The petitioner obtained provisional release of goods
after furnishing a bank guarantee for tax and penalty and also tendered bond
and security for the value of the goods.

Later, he
decided to contest the adverse order by filing a statutory appeal u/s. 107 of
the said Act. But before the petitioner’s action on the Department, it
threatened to apprehend him to invoke the bank guarantee on failure to produce
goods at the appointed date and time as laid down under Rule 140(2) of the CGST
Rules, 2017 and confiscate them. Aggrieved by the same, the petitioner
preferred a writ petition before the Hon’ble High Court.

HELD

The
Hon’ble High Court, while deciding the issue, relied on the decision of Commercial
Tax Officer vs. Madhu M.B. 2017 (6) GSTL 150 (Ker.) wherein it was held
that a dealer ought to produce the goods at the time of adjudication, which was
not produced by the petitioner; therefore, he was held liable for penalty. But
the Court also left room for the petitioner to distinguish the judgement and
assert its case before the Appellate Forum. It was further held that pending
the petitioner’s three months’ time to prefer an appeal against the impugned
order, the act of the respondent was inequitable to invoke the bank guarantee.
The writ petition was disposed with a direction to the Department to not invoke
the bank guarantee for three months. In the interim, the petitioner was
directed to make efforts before the appellate authority to get an interim
protection, pending appeal.

In case of an
offence punishable under GST Law, anticipatory bail granted on imposing
stringent conditions

FACTS

A group of
petitioner companies along with other companies indulged in continuous issuance
of fake invoices without actual supply of goods with an intention to enable
them to avail the input tax credit fraudulently. Revenue registered a complaint
against these companies upon finding that the invoices which were issued and
circulated among these companies and other companies reached back to the
originating companies without actual movement of goods, thereby transferring
the irregular input tax credit to the originating companies for payment of GST
and Sales Tax; it held that this was offensive and criminal in nature.

Consequently,
the Revenue issued arrest orders against this group of companies. The
petitioner filed an anticipatory bail application before the Hon’ble High Court
contesting the arrest order stating that as per section 137 of the GST Act, the
maximum punishment which can be imposed upon making out of offence and
conviction is five years and as per section 138 of the said Act, offence can be
compounded before the Commissioner on payment (of penalty). It further
contested that there was no irregularity or loss to revenue of Central or State
Governments. The GST was paid by creating invoices. The only allegation against
the petitioner was that it gave only inflated transaction, therefore this
cannot be an offence under the said Act.

The
respondent, however, vehemently objected to the contention of the accused,
stating that the petitioner claimed ITC without any payment of tax and without
there being any movement of goods, due to which the economy of the country
could be affected. Further, the respondent contested that actually no tax was
paid to anybody and rather only paper transactions happened and such acts would
affect trade transactions of the nation. The act of the petitioner appeared to
be a scam and if allowed to be continued it would have its own cumulative
effect on the economy as a whole. And if the accused were released on bail then
the entire investigation would be affected which may hamper the case of the
prosecution.

HELD

The
Hon’ble High Court relied on the Hon’ble Supreme Court decision passed in the
case of Om Prakash & Anr. vs. Union of India & Anr. 2011 (24) STR
257 (SC) and in the case of Siddharam Satlingappa Mhatre vs.
State of Maharashtra and others, reported in (2011) 1 SCC 694 to
understand the parameters to follow while dealing with anticipatory bail. The
Court observed that no material was produced by the Revenue to show the
magnitude of loss likely to be caused and how the said act could affect the
economy of the country.

Thus,
considering the gravity of the offence and punishment which was likely to be
involved, the Court ordered the accused to be released on bail to meet the ends
of justice with imposition of some stringent conditions, that each petitioner
would have to execute a bond of a sum of Rs. 5,00,000 with two sureties for the
like sum to the satisfaction of the authority and to surrender before the
Investigating Officer within 15 days from the date of passing of the High Court
order. Further that they should not tamper with the prosecution evidence or any
documents required for the purpose of investigation and should co-operate with
the investigation and should not leave the country without prior permission of
the Special Court for Economic Offences and refrain from undertaking similar
type of criminal activities covered under the Act.

AAAR held that the scope of
exemption under Entry No. (69) of Notification No. 12/2017-CT(R) is restricted
only to the activities in relation to specific schemes implemented by National
Skill Development Council and not to other skill development training
programmes provided by approved training partners of NSDC under its general
mandate to promote skill development

FACTS

The
appellant offers educational training and skill development courses through
classroom training and virtual coaching for various national and international
certifications. The appellant is an approved training partner of the National
Skill Development Corporation (NSDC) and the courses offered are approved by
NSDC. However, in some cases, the qualification packs (QPs) / National
Occupation Standards (NOS) with reference to certain courses are pending final
approval and hence such courses are conditionally / exceptionally approved by
NSDC. The appellant is offering such courses to corporates and business
institutes. In some cases, the training part is sub-contracted to business
partners of the appellant.

The
appellant sought advance ruling as to whether they would be entitled to
exemption provided under Entry No. (69) of Notification No. 12/2017-CT (R)
dated 28th June, 2017 in respect of 
services provided by the training partner approved by NSDC in relation
to any other scheme implemented by NSDC.

AAR held
that the NSDC programme would cover only the actual schemes and programmes of
skill development that are undertaken by government through its various
ministries, departments, directorates, attached offices and organisations and
cannot in any way be construed to include all the courses that enhance skills.

Aggrieved
by this ruling of the AAR, the appellant filed the appeal. Referring to clause
(i) and (iii) of Entry No. 69(d), the appellant submitted that the scope of the
said entry is broad as it covers activities in relation to schemes implemented
by NSDC and hence, once it is established that NSDC is involved in
implementation of the activity of training programmes / courses, the exemption
should be granted to the appellant.

HELD

The
appellate authority observed that NSDC is acting as the nodal implementing
agency for various schemes implemented by the Ministry of Skill Development and
Entrepreneurship. The AAAR held that, as regards various courses run by it,
there is no conclusive evidence that such training programmes are covered under
clauses (i) or (iii) of Entry 69(d). As regards the appellant’s submission that
the scope of the said entry is broad as it covers activities in relation to
schemes implemented by NSDC, the appellate authority noted that NSDC has two
mandates, i.e., to implement specific schemes of government and a general
mandate to encourage and support the private sector and skill development.

Thus, the
appellate authority held that the scope of exemption given under said Entry No.
(69) is restricted to the schemes implemented by Ministries through NSDC acting
as nodal agency and cannot be extended to general initiatives undertaken by
NSDC. For arriving at such a conclusion, the AAAR took a view that the words
“National Skill Development Programme” is very limited in scope and is
restricted only to the efforts that are undertaken through government funding,
government schemes and specially-designed government programmes. Accordingly,
the appellate authority upheld the order of AAR that since the training
provided by the appellant is covered under the general mandate of NSDC and is
not related to specific government-funded schemes implemented by NSDC, the
appellant is not entitled for this exemption.

Date of order: 13^th
March, 2019

AAAR held that
duty-free import authorisation (DFIA) are included in duty credit scrips, as
referred under the Foreign Trade Policy. The sale or purchase of DFIA are
exempt from GST in light of Sr. No. 122(a) of Notification No. 02/2017-CT (R)

FACTS

The
appellant sought an advance ruling to decide whether GST is applicable on sales
and / or purchase of DFIA (Duty-Free Import Authorisations) as Sr. No. (122a)
of Notification No. 2/2017-CT (R) exempts duty credit scrip (DCS). The AAR
observed that the DSC are issued under chapter 3 of the Foreign Trade Policy,
whereas DFIA are issued under chapter 4 of FTP; observing other procedural
differences between DSC and DFIA, AAR held that DFIA are liable to GST. Being
aggrieved, the appellant filed the present appeal.

HELD

The appellate authority
observed that DCS are rewards provided to exporters under MEIS / SEIS schemes
and the goods imported / domestically procured against them are freely
transferrable. DCS can be used to offset basic custom duty and additional
custom duty for import of goods. The DFIA is issued to allow duty-free imports
of inputs, i.e., it is an instrument to extend incentive to exporters by
entitling them to import the goods specified under the import authorisation,
without payment of customs duties.

Thus, the appellate authority
found that though the DCS and the DFIA have been envisaged under different
chapters and under different schemes of the export of the FTP followed by DGFT,
the basic nature and functionality of both the instruments is the same, i.e.,
to set off basic customs duty on imports of goods. Further, it was noted that
in Atul Glass Industries Ltd. 1986 (25) ELT 473 (SC), the Supreme
Court had held that the words and expressions must be construed in the sense in
which they are understood in trade, by the dealer and the consumer. The DCS and
DFIA are construed as same in trade parlance and are widely known as
duty-paying scrips or licenses or duty credit scrips due to their common
functionality and nature.

Further,
the appellate authority observed that since the said DCS cannot be used for
payment of GST, the GST rate on sale / purchase of DCS was reduced from 5% to
0% so as to restore the lost incentive on sale of DCS to exporters.
Accordingly, the appellate authority set aside the ruling of AAR by holding
that DFIA is equivalent to DCS and thus chargeable to nil rate of GST on sale or
purchase of DFIA.

AAR held that
the exemption for healthcare services provided by clinical establishments is
not applicable to entities functioning as sub-contractors of clinical
establishments

FACTS

The
applicant, a healthcare company, is engaged in diagnosis, pre- and
post-counselling therapy and prevention of diseases by providing necessary
sophisticated tests. It also provides genomic information which helps
physicians and wellness professionals in curing diseases and improving human
health. The applicant has a collaboration with diagnostic companies accredited
by NABL (National Accreditation Board for Testing and Calibration Laboratories)
and DSIR (Department of Scientific and Industrial Research) certified to
provide advanced genetic tests that help in prevention and management of cancer
and various health and metabolic disorders. The applicant sought an advance
ruling as to whether it qualifies to be a ‘clinical establishment’ and eligible
for exemption from GST to healthcare services provided by clinical
establishments in terms of Notification No. 12/2017-CT (R).

HELD

AAR noted
that the applicant has a collaboration with diagnostic companies accredited by
NABL and DSIR, which indicates that the applicant does not have their own
authority for giving clear report / opinion of their own for the tests and they
have to get all the tests conducted and certified by the said NABL-accredited
laboratory. Thus, AAR held that the applicant is functioning as sub-contractors
to the said accredited companies and not as an independent clinical
establishment.