From Volume 53, GST decisions will be displayed under PART A (as opposed to PART C) and Service Tax Decisions will be taken under PART B (as opposed to PART A). VAT decisions, which were earlier reported under PART B, have been discontinued. This is done considering the relevance of decisions / ratios and the overall importance of each of the laws going forward.
I. HIGH COURT
1. [2021-TIOL-57-AAR-GST] M/s Bhushan Power and Steel Ltd. vs. ACST & E (Proper Officer) Date of order: 11th February, 2020
Where only the validity of the E-way bill had expired and all the documents were accompanying the invoice, the invocation of penalty proceedings u/s 129(1) was harsh and unsustainable
FACTS
In pursuance of orders received, the appellant generated several invoices for movement of goods to Himachal Pradesh from its manufacturing unit in Odisha. When the goods reached Chandigarh, they were transferred to different vehicles because the original driver of the vehicles was unable to drive in the hilly terrain of Himachal Pradesh. In transit, the Revenue authority concerned found that the validity of the E-way bill of one of the vehicles had lapsed. The vehicle was seized and duty demand was raised. They were directed to furnish bank guarantee and personal bond to secure release of the vehicles and the goods.
HELD
The Authority noted that the validity of the E-way bill had expired when it was detained by the Revenue. The vehicle was stationary and parked by the roadside and the driver was called telephonically and proceedings were initiated u/s 129(1) for expiry of validity of the E-way bill. There were no discrepancies either with regard to the other documents or with the quantity of goods being transported. It was noted that Part-B of the E-way bill was duly filled which puts to rest any doubts about the intention of the appellant to evade tax. It appears that an E-way bill is invalid only if Part-B is not filled or a considerable time has gone by before updating Part-A of E-way bill. Paragraph No. 5 of Circular No. 64/38/2018-GST dated 14th September, 2019 provides that in case a consignment of goods is accompanied with an invoice or any other specific document and also an E-way bill, proceedings u/s 129 of the GST Act may not be initiated. Therefore, since all the documents were available and only the validity of the E-way bill had expired, the imposition of tax and penalty by the Revenue is harsh and therefore unsustainable.
II. ADVANCE RULING
2. [2021-TIOL-53-AAR-GST] Thirumalai Chemicals Ltd. Date of order: 18th December, 2020
Where distinct persons are eligible for full Input Tax Credit, the amount charged in the invoice is deemed to be the open market value
FACTS
The applicant is engaged in the business of manufacture and trading of chemicals. It has sought a ruling on the value to be adopted in respect of transfer to branches located outside the State. The question before the Authority is whether the value of supplies can be determined in terms of the second proviso to Rule 28 in respect of supplies made to distinct units in accordance with clauses (4) and (5) of section 15 of the GST law.
HELD
The Authority noted that they supply material to their branches and in turn the branch supplies to the ultimate consumer. It was noted that the branch is eligible to avail full Input Tax Credit (ITC) of the tax paid by the applicant. Therefore, following the judicial discipline [Specsmakers Opticians Private Limited – 2020-TIOL-05-AAAR-GST], the Authority holds that the value to be adopted can be arrived at by following the methodology of one of the methods provided under Rule 28 of the Rules read with section 15 of the Act, 2017: (a) Open Market Value as is presently being adopted; (b) 90% of the ultimate sale value as raised by the distinct persons to the unrelated ultimate customers based on the purchase orders in cases of ‘as such’ supplies. Since the distinct person is eligible for full ITC, the ‘invoice value’ charged is deemed to be the open market value.
3. [2021-TIOL-49-AAR-GST] M/s Khatwani Sales and Services LLP Date of order: 28th August, 2020
GST on demo or demonstration cars is not available as Input Tax Credit to a dealer in vehicles
FACTS
The applicants are authorised dealers of KIA cars. The question before the Authority is whether ITC is available on the motor vehicle purchased by them for demo purposes. The vehicle is purchased against tax invoice after paying tax and is capitalised in the books of accounts. The applicants further submit that every model of the car is used for demonstration for a limited period and is usually replaced every two years or after 40,000 kilometres, or up to continuation of the model, whichever is earlier. The vehicles used for demo purposes are sold in subsequent year(s) at the written down value. It was also stated that no depreciation will be claimed on the tax component of such capitalised vehicles.
HELD
For deciding the eligibility of ITC on demo vehicles, the provisions of section 17(5)(a) of the GST Act, 2017 are relevant. A reading of section 17(5)(a) indicates that ITC shall be available in respect of motor vehicles which are further supplied as such, or which are used for transportation of passengers, or which are used for imparting training for driving of such vehicles. Subsequent sale of the demo vehicle after one or two years cannot be said to be further supply inasmuch as the sale of the demo vehicle in a subsequent year on which depreciation has been charged is to be treated as a sale of used second-hand vehicle and not a sale of a new vehicle. Therefore, although the demo vehicles are for furtherance of business, even then they are not eligible for ITC in view of the provisions of section 17(5)(a) of the Act.
Note: Readers may note a contrary decision in the case of Chowgule Industries Private Limited [2020-TIOl-05-AAR-GST-Maharashtra] dated 26th December, 2019 where the credit is allowed on demo cars to a trader in motor vehicles. Similarly, the decision in AM Motors reported at [2018-TIOL-185-AAR-GST, Kerala] has also allowed ITC on the purchase of demo cars.
