GOODS AND SERVICEs TAX (GST)

I.  
SUPREME COURT

13. [2020 116 taxmann.com 401 (SC)] CCE vs. Uni Products India Ltd.

Textile car
matting comes under the ambit of Chapter 57, i.e. ‘Carpets and Other Textile
Floor Coverings’ and not under Chapter 87, ‘Vehicles other than Railway or
Tramway Rolling-Stock and Parts and Accessories Thereof’. There is no necessity
to import the ‘common parlance’ test or any other similar device when one
tariff entry specifically covers the subject goods and the other specifically
excludes the same

FACTS

The issue before the Hon’ble
Apex Court was whether ‘car matting’ would come within Chapter 57 of the First
Schedule to the Central Excise Tariff Act, 1985 under the heading ‘Carpets and
Other Textile Floor Coverings’ or they would be classified under Chapter 87
thereof which relates to ‘Vehicles other than Railway or Tramway Rolling-Stock
and Parts and Accessories Thereof’. The assessee contended that their goods
will be classified under Chapter heading 5703.90, whereas the authorities’
stand has been that the subject items ought to be classified under sub-heading
8708.99.00. The two competing entries are listed below:

HELD

The
Hon’ble Apex Court observed that Chapter 87 of the Central Excise Tariff of
India does not contain car mats as an independent tariff entry. The Department
was trying to include the same under the ‘residuary entry’. Having regard to
the various parts and accessories listed against tariff entry 8708, the Court
observed that all of them are mechanical components and Revenue wanted car mats
to be included under the residuary sub-head ‘other’ in the same list. The Court
further noted that the HSN Explanatory Notes [Note IV (b) to Rule 3(a)] dealing
with the interpretation of the rules specifically exclude ‘tufted textile
carpets, identifiable for use in motor cars’ from 87.08 and place them under heading
57.03. The Court also observed that the explanatory notes below the Chapter
‘Parts and Accessories’, especially (C), reads as under:

(C) Parts
and accessories covered more specifically elsewhere in the Nomenclature –

Parts and
accessories, even if identifiable as for the articles of this section, are
excluded if they are covered more specifically by another heading elsewhere in
the Nomenclature, e.g: –

Referring to the said note,
the Court held that a plain reading of clause (C) thereof excludes ‘textile
carpets’ (Chapter 57).

The main argument of the
Revenue was that because the car mats are made specifically for cars and are
also used in the cars, they should be identified as parts and accessories. It
was also urged by the Revenue that these items are not commonly identified as
carpets but are different products. The Court held that ‘the common parlance
test’, ‘marketability test’, ‘popular meaning test’ are all tools for
interpretation to decide on the proper classification of a tariff entry. These
tests, however, would be required to be applied if a particular tariff entry is
capable of being classified under more than one head. However, as regards the
subject dispute in the present case, Chapter Note 1 of Chapter 57 stipulated
that carpets and other floor coverings would mean floor coverings in which
textile materials serve as the exposed surface of the article when in use. This
feature of the car mats was not rejected by the Revenue authorities. Further,
textile carpets are specifically excluded from parts and accessories. The Apex
Court therefore held that there is no necessity to import the ‘common parlance’
test or any other similar device of construction for identifying the position
of these goods against the relevant tariff entries. Thus, the subject goods
would be covered by Chapter heading 57.03.

(Although
the decision is in relation to Central Excise, it would impact classification
under the GST law as well. Hence it is included here.)

II. 
HIGH COURT

14. [2020 116 taxmann.com 255 (Bom.)] Nelco Ltd. vs. UOI Date of order: 20^th March, 2020

The time limit in Rule 117(1) is traceable to the rule-making power
conferred in section 164(2) and is not unreasonable, arbitrary or violative of
Article 14. Further, having regard to the objective of Rule 117(1A), the
categorisation made by the Cell, based on the system log to identify users who
have faced technical difficulties, would not amount to fettering the discretion
but involving rules of evidence to determine whether a registered user encountered
difficulties while submitting forms on the common portal

FACTS

In this writ petition, Rule
117 of the Central Goods and Services Tax Rules, 2017 is challenged as being ultra
vires of sections 140(1), 140(2), 140(3) and 140(5) of the Central Goods
and Services Act, 2017 to the extent it prescribes a time limit for filing of
TRAN-1 Form. The High Court decided the challenge on three grounds: (i) whether
the impugned Rule is ultra vires the parent statute; (ii) whether the
Rule is unreasonable, arbitrary and violative of Article 14 of the Constitution
of India; and (iii) the meaning of the phrase ‘technical difficulties’ under
Rule 117(1A) and the role of the IT Redressal Cell, i.e. whether the discretion
is fettered.

HELD

As regards the issue relating
to the absence of rule-making power to prescribe a time limitation, the Hon’ble
Court held that the time limit in Rule 117(1) is traceable to the rule-making
power conferred in section 164(2). The credit envisaged u/s 140(1) being a
concession, it can be regulated by placing a time limit. Therefore, the time
limit under Rule 117(1) is not ultra vires of the Act. As for the
challenge on the ground of the rule being unreasonable and violative of Article
14, the Hon’ble Court referred to various authorities dealing with the scope of
judicial scrutiny in the matters of economic legislation. The Court stated that
the trial and error method is inherent in the economic endeavours of the state
and hence the constitutionality of such legislation must be decided by the
generality of its provisions and that the Court cannot assess or evaluate the
impact of the provision and whether it would serve the purpose in view or not.
In matters of economic policy, the accepted principle is that the Courts should
be cautious to interfere.

The Hon’ble Court held that
the time limit for availing of the Input Tax Credit in the transitionary
provisions is thus rooted in the larger public interest of having certainty in
allocation and planning. Accordingly, the time limit under Rule 117 is thus not
irrelevant. Upholding only the right to carry forward the credit and ignoring
the time limit would make the transitional provision unworkable. The credit
under the transitional provision is not a right to be exercised in perpetuity.
By the very nature of the transitional provision it has to be for a limited
period. Referring to the provisions of section 16(4), the Court further held
that even under the GST law the Input Tax Credit (ITC) cannot be availed
without any time limit. Hence, it cannot be that under the GST law there is a
time limit, but for the transitional period there is no such time limit. Once
under the GST law for future transactions a time limit is stipulated, then
there is nothing unreasonable in the stipulated time limit for the transitional
period. The Court accordingly held that the time limit stipulated in Rule 117
is neither unreasonable nor arbitrary or violative of Article 14 and that this
rule is in accordance with the purpose laid down in the Act.

As regards the meaning of the
phrase ‘technical difficulties’ under Rule 117(1A) and the role of the IT
Redressal Cell, the Hon’ble Court held that the GST Council is not a body to
resolve technical issues. Therefore, an IT Grievance Redressal Mechanism was
developed by the GST Council. This committee involved the CEO of the GST,
Network Director-General of Systems, CBSC and the nominee from the state as
technical persons. Based on the report of this Technical Committee a further
recommendation would be made. Hence, there is no merit in the contention that
the power could not have been delegated to the IT Grievance Redressal
Committee.

Further, the Court did not
accept the contention of the petitioner that the term ‘technical difficulty’ is
to be given broader meaning and held that the Rule 117(1A) refers to technical
difficulties in online submission of the TRAN-1 Form on the common portal,
hence it is clear that the meaning of the phrase ‘technical difficulty’ is
restricted to those which arise at the common portal of the GST and are not the
ones faced in general.

The Court also held that the
object of bringing in Rule 117(1A) did acknowledge that certain registered
users encountered technical difficulties in the common portal. However, it did
not mean that the common portal had stopped working, only that some registered
users could not submit their forms. There would also be some who never
attempted to submit the TRAN-1 Form. There would be some who attempted it but
encountered difficulties at their end. There would be some who encountered
difficulties on the common portal. Since it is only the third category covered
by Rule 117(1A), it had to be asserted from the system log of the common portal
itself. Insisting on the system log as proof of technical difficulties, thus,
is not arbitrary. The categorisation made by the Cell based on the system log
is therefore not fettering the discretion as contended by the petitioners but
involving rules of evidence to determine whether a registered user encountered
difficulties while submitting forms on the common portal. It is only if the
registered user encountered technical difficulties on the common portal that
Rule 117(1A) comes into play.

15. [2020 116 taxmann.com 415 (Del.)] Brand Equity Treaties Ltd. vs. UOI Date of order: 5^th May, 2020

In absence
of any specific provisions as regards the time limit in section 140(1) of the
CGST Act, a period of three years from the appointed date (in terms of the
residuary provisions of the Limitation Act) would be the maximum period for
availing of the transitional CENVAT credit. All taxpayers who have not filed
TRAN-1 are permitted to do so on or before 30^th June, 2020

FACTS

In these writ petitions, the
petitioners sought relief of directing the respondents to permit them to avail
Input Tax Credit (ITC) of the accumulated CENVAT credit as of 30^th
June, 2017 by filing declaration Form TRAN-1 beyond the period provided under
the Central Goods and Services Tax Rules, 2017. The petitioners also challenged
the constitutional validity of Rule 117 on the ground that it is arbitrary,
unconstitutional and violative of Article 14 to the extent it imposes a time
limit for carrying forward the CENVAT credit to the GST regime. In this case,
the non-filing of TRAN-1 within the prescribed time limit is not attributable
to error or glitch on the network / GST portal.

The
respondent argued that the petitioners do not deserve any sympathy from the
Court as the facts of each case exhibit a casual approach on their part. The
petitioners argued that the CENVAT credit accumulated in the erstwhile regime
represents the property of the petitioners which is a vested right in their
favour. Such accrued or vested right cannot be taken away by the respondents on
account of failure to fulfill conditions which are merely procedural in nature.
The respondents, on the other hand, emphasised on the words ‘in such manner
as may be prescribed’ which appear in section 140(1) to contend that this
provision read with section 164 of the CGST Act empowers the government to fix
the time frame for availing the carry forward of the transitional ITC and that
the benefit of taking credit is not a vested right of an assessee and certainly
cannot be claimed in perpetuity.

HELD

The Hon’ble Delhi High Court
noted that evidently there is no other provision in the Act prescribing time
limit for the transition of the CENVAT credit and the same has been introduced
only by way of Rule 117. Hence, it is not as if the Act completely restricts
the transition of CENVAT credit in the GST regime by a particular date and
there is no rationale for curtailing the said period, except under the law of
limitations. The Court further held that the period of 90 days has no rationale
especially since the extensions have been granted by the government from time
to time, largely on account of its inefficient network. Therefore, the
arbitrary classification introduced by way of sub Rule (1A) restricting the
benefit only to taxpayers whose cases are covered by ‘technical difficulties on
common portal’ subject to recommendations of the GST Council is arbitrary,
vague, and unreasonable.

The Court further stated that
the term ‘technical difficulties’ is too broad a term and cannot be interpreted
narrowly and would cover  the difficulty
faced by the respondents as well as the taxpayers. After all, a completely new
system of accounting, reporting of turnover, claiming credit of prepaid taxes,
and payment of taxes was introduced in the GST regime. New forms were
introduced and all of them were not even operationalised. Hence, the High Court
held that just like the respondents, even the taxpayers required time to adapt
to the new system and it would be unfair to expect that the taxpayers should
have been fully geared to deal with the new system on day one when the Revenue
itself was ill-prepared and the messy situation is not debatable, and thus held
that taxpayers cannot be robbed of their valuable rights on the unreasonable
basis of them not having filed TRAN-1 Form within 90 days when civil rights can
be enforced within a period of three years from the date of commencement of
limitation under the Limitation Act, 1963.

It was further held that the
CENVAT credit which stood accrued and vested is the property of the assessee
and this is a constitutional right under Article 300A of the Constitution. The
same cannot be taken away merely by way of delegated legislation by framing
rules without there being any overreaching provision in the GST Act. The
legislature has recognised existing rights and has protected the same by
allowing migration thereof in the new regime u/s 140(1) without putting any
restrictions as regards the period for the transition. Hence, the time limit
prescribed for availing ITC with respect to the purchase of goods and services
made in the pre-GST regime cannot be discriminatory and unreasonable.

It also held that Rule 117,
containing the mechanism for availing the credits is procedural and directory
and cannot affect the substantive right of the registered taxpayer to avail of
the existing / accrued and vested CENVAT credit. Only the manner, i.e. the
procedure of carrying forward was left to be provided by the use of the words
‘in such manner as may be prescribed’. Thus, it was held that Rule 117 has to
be read and understood as directory and not mandatory and in the absence of any
specific provisions under the Act, a period of three years from the appointed
date (in terms of the residuary provisions of the Limitation Act) would be the
maximum period for availing of such credit. The Court also opined that other
taxpayers in a similar situation should also be entitled to avail the benefit
of this judgment and hence directed to publicise this judgment widely so that
others who have not been able to file TRAN-1 till date are permitted to do so
by 30^th June, 2020.

(Note: It appears that
in the above case the Bench’s attention was not drawn to the decision of the
Hon’ble Bombay High Court in the case of Nelco Ltd. vs. UOI dated 20^th
March, 2020 wherein it was held that the time limit prescribed in Rule
117(1) is traceable to the rule-making power conferred in Section 164(2) and
therefore not unreasonable or arbitrary or violative of Article 14. In the
Nelco case a very narrow meaning is given to the term ‘technical difficulties’
to limit it only to problems attributable to the GST portal. Further, the
Hon’ble Bombay High Court also did not comment on the adequacy (or otherwise)
of the time limit prescribed in Rule 117, relying on the principle that in
matters of economic policy the Courts should be cautious to interfere. Various
factors pointed out by the Hon’ble Delhi High Court such as hardship caused to
the taxpayers due to changes in the system, lack of preparedness and the trial
and error approach of the government in the implementation of GST, etc. in
considering a larger period of limitation are not considered by the Hon’ble
Bombay High Court as the main issue was decided by it against the petitioner.
Hence it appears that the matter may attain finality if and when it is dealt
with by the Apex Court.)

16. [2020 116 taxmann.com 416 (Del.)] Bharati Airtel Ltd. vs. UOI Date of order: 5^th May, 2020

The
rectification of the return (GSTR3B) for that very month to which it relates
(and not necessarily in the subsequent months) is imperative and a substantive
right of the assessee. Paragraph 4 of the impugned Circular No. 26/26/2017-GST
dated 29^th December, 2017 to the extent that it restricts the
rectification of Form GSTR3B in respect of the period in which the error has
occurred, is arbitrary and contrary to the provisions of the Act and hence
Circular is read down to that extent

FACTS

The petitioner claimed ITC
for the period from July, 2017 to September, 2017 in its monthly GSTR3B on
estimated basis. As a result, the petitioner paid GST in cash, although
actually ITC was available with it but was not reflected in the system on
account of lack of data. The exact ITC available for the relevant period was
worked out only later in the month of October, 2018 when the government
operationalised Form GSTR2A for the past periods. Thereupon, precise details
were computed and the petitioner realised that for the relevant period ITC was
under-reported. The petitioner, however, could not correct the returns for the
past period as the system did not permit rectification of the return in the
same month for which the statutory return was filed.

Therefore, the petitioner
challenged Rule 61(5) of the GST Rules, Form GSTR3B and Circular No.
26/26/2017-GST (hereinafter referred to as the ‘impugned circular’) dated 29^th
December, 2017 as ultra vires the provisions of the Central Goods and
Services Tax Act, 2017 (CGST Act) and contrary to Articles 14, 19 and 265 of
the Constitution of India to the extent that they do not provide for the
modification of the information to be filled in the return of the tax period to
which such information relates. The petitioner also sought the refund of the
excess tax paid.

HELD

The Hon’ble High Court found
merit in the submission of the petitioner that since Forms GSTR2 and 2A were
not operationalised and because the systems of various suppliers were not fully
geared up to deal with the change in the compliance mechanism, the petitioner
did not have the exact details of the ITC available for the initial three
months. As a consequence, the deficiency in reporting the eligible ITC in the
months of July to September, 2017 in the form GSTR3B has resulted in excess
payment of cash by them. The High Court also noted that the scheme of the Act
permits the assessee to rectify mistakes in the return. However, in terms of
paragraph 4 of Circular No. 26/26/2017-GST, adjustment of tax liability of ITC
is permissible only in subsequent months. The High Court held that even if
there is a possibility to adjust the accumulated ITC in future, that cannot be
a ground to deprive the petitioner the option to fully utilise the ITC in the
same month in which it is statutorily entitled to do so by way of
rectification.

The High Court held that
there is no cogent reasoning behind the logic of restricting rectification only
in the period in which the error is noticed and corrected, and not in the
period to which it relates. In fact, the Court noted that the Revenue has not
been able to expressly indicate the rationale for not allowing the
rectification in the same month to which the Form GSTR3B relates. Further,
there is no provision under the Act which would restrict such rectification.
The Court held that the Revenue has failed to fully enforce the scheme of the
Act and cannot take benefit of its own wrong of suspension of the statutory
forms and deprive the rectification / amendment of the returns to reflect ITC
pertaining to a tax period to which the return relates. The Court therefore
held that paragraph 4 of the said Circular is arbitrary and contrary to the
provisions of the Act and allowed the petitioner to file the corrected returns
for the said period and directed the Revenue to verify the same and give effect
thereto.

17. [2020 (4) TMI 797] Kanchan Metal vs. State Of Gujarat (Gujarat High Court) Date of order: 29^th January, 2020

Without
application of mind and without justifiable grounds or reasons to believe, all
detention and seizure cases cannot straightway lead to confiscation route u/s
130 of CGST Act

Once a
notice u/s 130 of CGST Act is issued right at the inception, i.e., right at the
time of detention and seizure, the provisions of section 129 of the Act pale
into insignificance

FACTS

Owing to an interim order,
the seized truck along with the goods was released on payment of GST. The
proceedings were at the stage of show cause notice issued u/s 130 of the CGST
Act.

HELD

The Hon’ble High Court relied
on important observations made by the Court in the case of Synergy
Fertichem Pvt. Ltd. vs. State of Gujarat (Special Civil Application No. 4730 of
2019) that all cases of detention and seizure, without application of
mind and without justifiable grounds or reasons to believe, cannot be taken
straightway to the route of confiscation u/s 130 of the CGST Act. Section 130
is an independent provision which shall be invoked only in cases of intentional
evasion of GST. Many times, vehicles are not released even if the owner is
ready to pay tax and penalty as per section 129 of the Act. Such an approach
leads to unnecessary detention of goods and inconvenience for an indefinite
period of time. It was, therefore, held that the applicant shall make good the
case for discharge of the show cause notice and proceedings shall go ahead in
accordance with the law.

18. [2020 (4) TMI 666] Mahadeo Construction Co. vs. Union Of India (Jharkhand High Court) Date of order: 21^st April, 2020

SCN is a sine
qua non for recovery of interest

FACTS

The petitioner had reasonably
believed that the due date of filing GSTR3B for February, 2018 and March, 2018
was extended to 31^st March, 2019. As a result, it was of the view
that it had filed GSTR3B within the due date. However, interest was demanded on
the grounds of delay in filing GSTR3B and the petitioner’s bank account was
frozen through garnishee proceedings u/s 79 of the CGST Act. The present writ
was filed seeking relief to quash the order demanding interest without
adjudication under sections 73 and 74 of the CGST Act and to set aside the
garnishee proceedings. The Department contended that interest is automatic and,
therefore, recovery can be made without adjudication.

HELD

The Hon’ble High Court, while
interpreting the term ‘tax not paid’ for the purpose of initiating proceedings
under sections 73 or 74 of the Act placed reliance on the case of Godavari
Commodities Ltd. vs. Union of India and Ors., reported in 2019 SCC Online Jhar
1839 and held that if a tax has not been paid within the prescribed
period, the same would fall within the expression ‘tax not paid’. Further, the
Hon’ble Court also placed reliance on Assistant Commissioner of CGST
& Central Excise and others vs. DaejungMoparts Pvt. Ltd. and Ors. (Mad.
High Court order dated 23^rd July, 2019) and held that though
the liability of interest u/s 50 of the CGST Act is automatic, the amount of
interest is required to be calculated and intimated to the assessee. If the
assessee disputes the computation, or the very leviability of interest,
adjudication proceedings under sections 73 or 74 of CGST Act shall be
initiated. Thus, interest cannot be recovered u/s 79 without passing through
adjudication under sections 73 or 74 of the Act.

III.   AUTHORITY
OF ADVANCE RULING

19. [2020-TIOL-95-AAR-GST] M/s Anil Kumar Agrawal [Karnataka AAR] Date of order: 4^th May, 2020

Aggregate
turnover will include renting of commercial property, interest on deposits /
loans and advances. Dividend on shares, capital gains, maturity on insurance
policies, salary received by non-executive director is neither supply of goods
nor service and therefore is not includible in aggregate turnover

FACTS

The applicant is an
unregistered person and is in receipt of various types of income / revenue,
viz. salary / remuneration as a non-executive director, renting of immovable
property, interest on deposits / loans and advances and income from renting of
residential property, dividend on shares, capital gains and amounts received
from maturity of insurance policies. The question before the Authority is,
which sources of income / revenue should be considered for aggregate turnover
for registration.

HELD

The
Authority noted that the definition of aggregate turnover is the sum of the
value of all taxable supplies, exempt supplies, exports and the value of
inter-state supplies having the same PAN to be computed on an all-India basis
excluding the value of tax payable under reverse charge. With respect to the
interest income it was held that it is an exempted service and therefore should
be included in the aggregate turnover for registration. The salary received is
neither a supply of goods nor a supply of services and hence the salary is not
required to be included in the aggregate turnover. It also held that salary
received by non-executive directors also being salary will not be included in
aggregate turnover. Further, rental income from commercial property is a
taxable supply to be included in the aggregate turnover. Similarly, rental
income from residential property is an exempt supply which is also to be
included in the definition of aggregate turnover which includes exempt
supplies. Income received on maturity of policies is nothing but application of
money which is excluded from the definition of goods or service and therefore
is not includible in the aggregate turnover.

20. [2020-TIOL-86-AAR-GST] M/s T&D Electricals [Karnataka AAR] Date of order: 31^st March, 2020

In absence of a Fixed Establishment, there is no requirement of
obtaining registration in any state where projects are executed. Business can
continue from the registered principal place of business itself

FACTS

The
applicant is registered as a works contractor and a wholesale supplier in
Jaipur, Rajasthan. It has received a contract from a company in Karnataka to
undertake an electrical / installation job. The question before the Authority
is whether a separate registration is required in Karnataka. If not, then
whether the goods can directly be shipped from a dealer in Rajasthan to
Karnataka and whether CGST+SGST or IGST will be charged. Similarly, if the
goods are purchased from Karnataka then whether CGST+SGST or IGST will be
charged.

HELD

The
Authority noted that section 22 of the CGST Act, 2017 stipulates that every
supplier shall be liable to be registered in the state from where the supplier
makes a taxable supply of goods or services or both. In the instant case, the
applicant has only one principal place of business located in Rajasthan for
which registration has been obtained and there is no other fixed establishment.
Therefore the location of the supplier is none other than the principal place
of business in Rajasthan.

For the
second issue, it was noted that the transaction will be a Bill to Ship to
transaction and when the goods are purchased from Rajasthan and shipped to
Karnataka, the vendor in Rajasthan will charge CGST+SGST to the applicant
registered in Rajasthan. The applicant will in turn charge IGST to its customer
in Karnataka. Similarly, the vendor in Karnataka will bill to the applicant in
Rajasthan and charge IGST and the applicant will also charge IGST to the
customer in Karnataka.

21. [2020 (4) TMI 871] M/s DKMS BMST Foundation India [Karnataka AAR] Date of order: 23^rd April, 2020

Human Leukocyte Antigen (HLA) testing services is a prerequisite to
stem-cell transplantation and therefore is ‘healthcare services’. Since this is
an investigative service, service provider is a ‘clinical establishment’ under
GST law

FACTS

The
applicant is engaged in facilitating a treatment of blood cancer and other
blood disorders and encourages people to register as potential blood-stem cell
donors. Most of the patients living with blood cancer require a stem-cell
transplant for a longer life. For successful transplant, one DNA test is
required to be done to match the Human Leukocyte Antigen (HLA) tissue. To carry
out this HLA testing, the applicant collects samples of DNA and sends them to
DKMS Life Science Lab GmbH in Germany (LSL DE). LSL DE performs tests on these
samples and shares the results with the applicant. The issue involved was
whether the HLA testing services fall under the scope of ‘health care services
by a clinical establishment’ and are thereby exempt from levy of IGST in view
of Entry No. 77 of Notification No. 09 /2017-IGST (Rate) dated 28^th
June, 2017.

HELD

Considering
the agreement between the applicant and LSL DE, it was held that LSL DE was
providing testing services to the applicant. Since the services, received to
increase the database of donors and find appropriate matches, were a sine
qua non for transplantation, it was held to be healthcare service. Further,
since HLA testing involves various tests for identification of alleles of the
donor cells, such investigative services would be covered under the definition
of ‘clinical establishment’ as defined under paragraph 2 of Notification
No.12/2017-Central Tax (Rate) dated 28^th June, 2017. Since the
service is exempt, the applicant is not liable to pay IGST under reverse charge
mechanism. The question of provision of service outside India was unanswered
considering it to be outside the jurisdiction of the Advance Ruling
authorities.

22. [2020 (4) TMI 874] Sri Ghalib Iqbal Sheriff (M/s Emphatic
Trading  Centre) [Karnataka AAR]

Date of order: 23^rd April, 2020

Assessee supplying goods as well as services may opt for composition
scheme only if the turnover of services does not exceed 10% of turnover in a
state / Union Territory in preceding F.Y. or Rs. 5 lakhs, whichever is higher

Notification No. 02/2019 Central Tax (Rate) dated 7^th March,
2019 is not a composition scheme but is just an optional scheme

FACTS

The
applicant is engaged in the business of supply of goods as well as services.
The issue raised is whether he can opt for composition scheme as his aggregate
turnover is less than the aggregate turnover specified in section 10 of the
CGST Act and whether he may pay GST @ 1% on supply of goods and 6% on supply of
services.

HELD

If the
turnover of the service exceeds 10% of the turnover of the state or Union
Territory in the preceding financial year or Rs. 5 lakhs, whichever is higher,
then the applicant shall not be eligible for composition scheme. Therefore,
even if the applicant obtains registration separately for goods and services,
he would not be eligible for composition scheme for both the lines of business.
Notification No. 02/2019 Central Tax (Rate) dated 7^th March, 2019
allowing payment of GST @ 6% on supply of goods or services subject to
specified conditions is not a composition scheme but an optional scheme. Since
the applicant was already a composition dealer, he was held not eligible to pay
tax under the Notification No. 02/2019 Central Tax (Rate) dated 7^th
March, 2019.

23. [2020 (4) TMI 795] M/s Satyesh Brinechem Private Limited (Gujarat AAAR) Date of order: 28^th January, 2020

Input Tax
Credit shall not be available on goods or services covered by section 17(5) of
CGST Act, even if the same are indispensable in the process of manufacture and
are used for making zero-rated supply

FACTS

The
applicant is a manufacturer and exporter of salt. It was  of the view that bunds / crystallizers used
for manufacturing salt qualify to be ‘plant and machinery’ as bunds are
essentially used in the manufacturing process. Consequently, the applicant may
avail ITC and refund thereof. The AAR in the applicant’s case had ruled that
ITC on goods and services used to construct the ‘bunds’ is admissible to the
applicant provided the bunds are used for making zero-rated supplies and
fulfill the conditions necessary to treat bunds as ‘plant and machinery’.
Aggrieved by the aforesaid order, the Department filed an appeal before the
Appellate Authority for Advance Ruling, Gujarat contesting that the bunds /
crystallizers are ‘any other civil structure’ and hence ITC is not available in
view of sections 17(5)(C) and (d) read with Explanation to section 17 of the
CGST Act.

HELD

The
Appellate Authority for Advance Ruling, Gujarat (AAAR) examined the process of
construction of bunds / crystallizers and manufacturing of salt. It analysed various
judgments, including Singh Alloy and Steel Ltd. 1993 (1) TMI 97 and
Modern Malleable Ltd. vs. Commissioner of Central Excise, Calcutta-II,
2008 (228) ELT 460 (Tri. Kolkata) for deep understanding of the
apparatus, equipments and machinery covered under the definition of ‘plant and
machinery’. It was held that bunds do not fall under the term ‘plant and
machinery’ as these can be considered as ‘any other civil structure’ under the
exclusion clause (i) of Explanation to section 17 of the CGST Act. Thus, ITC on
bunds was held to be inadmissible to the applicant.

24. [2020 (4) TMI 872] M/s Solize India Technologies Private Limited [Karnataka AAR] Date of order: 23^rd April, 2020

Supply of pre-designed and pre-developed software made available through
the use of encryption keys is supply of goods

FACTS

The
applicant is engaged in trading of packaged software. The principal partner
delivers such software to the customer directly by providing the license keys
to download online and run the software. Advance ruling was sought on whether
such software qualifies to be a ‘computer software’ resulting in supply of
goods to claim benefit of Notification Nos. 45/2017-Central Tax (Rate) and
47/2017-Integrated Tax (Rate) dated 14^th November, 2017 providing
for concessional rate of GST for goods.

HELD

The
software sold by the applicant is pre-developed or pre-designed software and
made available through the use of encryption keys, and hence it satisfies the
definition of ‘goods’. Further, it is to be loaded on a computer to become
usable on activation and hence is a ‘computer software’, i.e. an application
software. Thus, the present transaction is supply of goods and is eligible for
concessional rate of GST under Notifications No. 45/2017-Central Tax (Rate) and
47/2017-Integrated Tax (Rate) dated 14^th November, 2017 subject to
fulfillment of specified conditions.