GOODS AND SERVICES TAX (GST)

FACTS
Petitioner was engaged in the manufacture of ghee. The process of manufacturing invariably results in invisible loss of input through evaporation, creation of by-products etc. Department had rejected the Input Tax Credit to the extent of such loss by invoking section 17(5)(h) of the Central Goods and Service Tax Act, 2017 which talks about blocked credit in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples and asked Petitioner for reversal of such Input Tax Credit. Being aggrieved by the assessment order passed by Department, the Petitioner filed a petition before the Hon’ble High Court of Madras.

HELD
Hon’ble High Court strongly relied upon the judgement of A.R.S. Steels and Alloy International Pvt. Ltd. 2021 (52) GSTL 402 and held that the cases covered by section 17(5)(h) of CGST Act, 2017 indicate the loss of inputs that are quantifiable, involve external factors or compulsion. It does not cover the loss of inputs that arises from the consumption process, which is inherent to the process of manufacturing itself. Thus, reversal of Input Tax Credit is not contemplated under section 17(5)(h) of CGST Act, 2017 on the invisible loss of inputs during the manufacture of Ghee.

37 Ali Cotton Mill vs. Appellate Joint Commissioner (ST)  [2022 (56) GSTL 270 (A.P.)] Date of order: 11th February, 2021

FACTS
Petitioner had first attempted to file an appeal electronically under Rule 108 of Andhra Pradesh Goods and Service Tax Rules, 2017. However, the same was not received by the department due to some technical glitches. As a result, the petitioner filed the same manually and obtained acknowledgement. Approximately 11 months later, Respondent rejected the appeal on the sole ground that the appeal was not filed electronically. Being aggrieved by such rejection, the petitioner preferred the writ petition.

HELD
It was held that when substantial justice is pitted against technical considerations, it is always necessary to prefer the ends of justice. Rule 108(1) of Andhra Pradesh Goods and Service Tax Rules, 2017 prescribes that an appeal can be filed either electronically or otherwise as may be notified by the Chief Commissioner. So, till the time Chief Commissioner specifies any particular mode of filing, the concerned appellant can choose to file the appeal either electronically or otherwise, i.e. manually. The view that, till the time Chief Commissioner specifies any other mode of filing, the appellant has to file an appeal electronically is contrary to the purport of Rule 108(1) of Andhra Pradesh Goods and Service Tax Rules, 2017. Thus, the petition was allowed, and the respondent was directed to receive the appeal, process the same and issue suitable check memos for compliance, in which case Petitioner shall comply the same within the prescribed time and resubmit the appeal either electronically or manually.

38 Kapil Sons  [2022-TIOL-26-AAR-GST] Date of order: 8th February, 2022 [AAR-Maharashtra]

Drilling and blasting works include both services as well as goods in the form of explosives and tools and thus the service is classified as a works contract
 
FACTS
In relation to the work awarded under EPC Agreement, the main contractor engaged the applicant for a sub-contracting arrangement for the construction of tunnel by drilling and blasting method and issued a work order for subject work. Applicant seeks an advance ruling as to whether the activity carried out shall be classified as supply of goods or services or a composite supply of ‘Works Contract’ under Entry no. 3(iv) of 11/2017-Central Tax (Rate) and taxable @12%.
 
HELD
The Authority noted that the impugned supply undertaken by the applicant as per the Work Order is ‘drilling and blasting including all tools, materials, explosive vans etc. complete for approach roads and Tunnel Works’. There is definitely involvement of supply of services in the form of drilling and blasting and clearing of rubble etc. Further, to perform such services there is requirement of goods which include explosives. The service of drilling and blasting cannot be conducted without the use of explosives and, therefore, there is an element of composite supply. Thus the said supply will be covered under Entry 3(iv) of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 and is taxable @12%.

39 Rakesh Kumar Gupta  [2022-TIOL-23-AAR-GST] Date of order: 6th January, 2022  [AAR-Madhya Pradesh]

FACTS
The applicant is a rice dealer. The supplier offers an incentive for early payment by offering a cash discount if payment is made before the due date or within certain days. The credit note of cash discount is issued without considering GST on such discount. The supplier does not reverse its output liability of GST, and likewise, the applicant does not reverse its input tax credit on such commercial credit notes issued by the supplier. The question before the authority is whether input tax credit can be fully availed or proportionate reversal is required with respect to the cash discount received? And, whether GST is applicable on the cash discount offered by the supplier as an output supply?

HELD
The Authority noted that as per section 15(3), for the cases where supply has already been effected, and discount given after supply shall be in terms of prior agreement before effecting the supply of goods and specifically linked to relevant invoices, then such discount shall not be included in the value of supply and input tax credit has to be reversed by the receiver. In the applicant’s case, the supplier of goods is issuing a commercial credit note for cash discount for early payment and quantity discount after post supply without adjustment of GST. As per the applicant’s submission, the Authority observed that the commercial credit notes issued by the supplier/Principal Company do not satisfy the conditions prescribed in sub-section (3) of section 15 of the CGST/SGST Act; the supplier is not eligible to reduce the original tax liability. As the supplier of the goods is not reducing the original tax liability, the applicant will be eligible to avail the credit of the tax paid as per the invoice of the supplier subject to payment of the value of supply as reduced by the commercial credit notes plus the amount of original tax charged. In other words, the applicant will not be required to reverse proportionate input tax credit. Similarly, target incentives offered which is not as per the agreement and where the supplier has not reduced its output tax liability, proportionate credit reversal is not required. Further, the credit note issued is in the form of a discount and therefore cannot be considered as an output supply.