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July 2024 brought several significant updates and landmark court decisions affecting the Goods and Services Tax (GST) framework. This summary highlights the key developments and their implications for businesses and tax professionals. Stay informed about the latest changes to ensure compliance and optimize your GST strategies.

Section A: News & Updates

1. Advisory on Enhancements to Address-Related Fields in GST Registration Functionalities

The Advisory published on 4 July 2024 mentions about the enhancements made to address-related functionalities i.e. new registration, Amendment Application (Core & Non-Core), and Geocoding Business Addresses. Further, while filling the address details (for Indian address) the fields of PIN Code, State, District and City/Town/Village etc. are interlinked and must be selected from auto-suggestions and for address outside India, the Zip code, State and District would have to be entered by the taxpayer other than special characters.

Additionally, it is not mandatory to fill the locality/sub-locality field

2. Advisory for Form- GSTR-1A

CBIC vide Notification No. 12/2024 – Central Tax dated 10.07.24 introduced Form –GSTR 1A. From August 2024 onwards, the said Form enables taxpayers to add or amend particulars of supply of the current tax period which was either missed out or was wrongly reported in Form GSTR-1 of the said tax period. The same is required to be filed before filing of GSTR-3B return of the said tax period.

The salient features of Form GSTR-1A are:-

• This is an optional facility and can be filed only once for a particular tax period
• The corresponding effect of the changes made through the said Form shall be reflected in Form GSTR-3B for the same tax period.
• The ITC for the supplies declared or amended by the suppliers through FORM GSTR-1A will be available to the recipient in FORM GSTR-2B generated for the next tax period.
• For QRMP taxpayers, who file GSTR-1 on Quarterly basis, FORM GSTR-1A shall be available quarterly after actual filing of FORM GSTR-1 (Quarterly) or the due date of filing of FORM GSTR -1 (Quarterly), whichever is later.
• In case where change is required to be made in GSTIN of a recipient for a supply reported in FORM GSTR-1 of a tax period, the same can be rectified through FORM GSTR-1 for the subsequent tax period only and not through Form GSTR-1A.

The complete advisory on the captioned subject is provided in the link mentioned below

3. Advisory: Detailed Manual and FAQs on filing of GSTR-1A

In light of Notification No. 12/2024 dated 10th July 2024, Form GSTR-1A is now available on the GSTN portal. Further, links to the detailed manual for filing of GSTR-1A and related FAQs have been provided in the said advisory.

The complete advisory on the captioned subject is provided in the link mentioned below.

4. Advisory in respect of Changes in GSTR 8

This is to give effect to Notification no. 15/2024 dated 10-07-2024 issued by CBIC, whereby the TCS rate has been reduced from 1% (CGST 0.5% + SGST 0.5% or IGST 1%) to 0.5% (CGST 0.25% + SGST 0.25% or IGST 0.5%). The said change in rate is effective from 10-07-2024. Consequently, taxpayers are required to collect & report TCS as per the old rate i.e. 1% for the period 1 July 24 to 9 July 24 and from 10 July 2024 the revised TCS rate of 0.5% shall be applicable.

For the reports pertaining to validation error while filing GSTR-8 for the month of July 2024, GSTN team is expected to incorporate the changes soon and E-commerce operators will be able to file returns from 6 August 2024 midnight onwards.

The complete advisory on the captioned subject is provided in the link mentioned below.

5. Notification S.O 3048 (E) dated 31 July 2024.

Central Government on recommendation of GST Council vide captioned Notification superseding the previous Notifications S.O.1 (E) and S.O 4073 (E) establishes the Goods and Services Tax Appellate Tribunal (GSTAT) with effect from 1 September 2023.  Also, it constitutes the Principal Bench of GSTAT at Delhi and various State Benches as specified in the said Notification.

GSTAT is a crucial step towards ensuring a more efficient and transparent resolution process for GST-related disputes. Taxpayers across the country will now have better access to legal recourse and a streamlined appellate process.

The detailed Notification is provided in the link mentioned below.

Section B: Case Laws (GST)

INDIAN MEDICAL ASSOCIATION V. UOI & Ors. [2024-VIL-744-KER]

In the captioned petitioner challenged the levy of GST on services provided by club/association to its members based on principle of mutuality. Also, petitioner has challenged Section 7 (1)(aa) of the CGST Act and explanation thereto r/w Section 2(17)(e) of the CGST Act, 2017, introduced vide Finance Act, 2021.

Petitioner contented that unless Article 246A of the Constitution is amended providing for taxability of services provided by the club/association to its members, the activities of club/association cannot be brought within the ambit of GST. Petitioner placed reliance upon the judgement of Apex Court in case of Gannon Dunkerly and Calcutta Club to defend its argument. However, HC held that these judgements does not lay down a principle that for bringing every transaction involved in the supply of goods or services, the Constitution is required to be amended. Article 246A empowers the parliament and State Legislature to enact law(s) with respect to the goods and services tax whether the supply of goods or services or both takes place. The power conferred under Article 246A is plenary power for making laws by the parliament and State Legislature for imposing tax on the supply of goods and services and without any limitation put by the Parliament in the provision of Article 246-A.

HC also held that Article 246A does not have any reference to the term Person. The tax is on activities, i.e., the supply of goods and services or both. Therefore, the Parliament as well as the State Legislature, in the exercise of their power under Article 246A is empowered to legislate for imposing tax on the supply of goods and services, irrespective of the person / individual involved. The Constitution does not put any restriction or limitation from defining a person(s) for the purpose of levy of GST. This supply of goods and services may be by club / association to its member and therefore, the principal of the mutuality will not come in a way of the Parliament or the State legislature to enact law for tax on supply of goods and services.

In light of the above, HC held that the amendment (vide Finance Act, 2021) in Section 7(a) by inserting Section 7 (aa) of the CGST Act is neither beyond legislative competence nor offends any of the fundamental rights guaranteed under Part III of the Constitution of India nor is manifestly arbitrary or capricious. However, it is held that the provisions of Section 7(aa) will have prospective operation with effect from 01.01.2022 owing to the fact that the petitioner had not collected GST due to the understanding of the law of mutuality (as held in the Calcutta Club) prior to the said amendment.

The matter has been remanded back to authorities for completing the assessment after examining each activity independently to arrive at a conclusion as to whether such an activity involves the supply of goods and services so that the tax may or may not be imposed on such activity.

ASHOKA FABRICAST PVT. LTD. Versus UNION OF INDIA [2024 (7) TMI 1023 – RAJASTHAN HIGH COURT]

In the captioned case, the petitioner applied for cancellation of its GST registration and the same was cancelled in January 2020. Petitioner was served with a Notice for conducting GST Audit on 6 March 2023.

Petitioner argued that Section 65 of the CGST Act (Audit by tax authorities) applies only to registered persons. Also, at the time of cancellation, the Authority should have calculated any outstanding amount and if there was any outstanding amount, the same should have been cleared before issuing the cancellation Order. Further, reliance was placed upon the judgement of Hon’ble Madras HC in case of Tvl. Raja Stores vs. The Assistant Commissioner (ST) MANU/TN/6752/2023″wherein, learned Single Judge of the Madras High Court has held that audit can be conducted only against a registered person.

The respondents, on the other hand contended that assessment order has been passed for the financial years 2017-2018, 2018-2019 and 2019-2020 and at that relevant time, petitioner was a registered person. Also, Section 29(3) of the CGST Act specifically provides that cancellation of registration shall not affect the liability of a person to pay tax and other dues under this Act or to discharge any obligation. Further, the respondent has issued the SCN under Section 73 of the CGST Act after conducting Audit. After considering the reply, the impugned assessment order was passed. Thus, the principles of natural justice was duly followed. It was also contended that petitioner had not filed any writ petition after issuance of notice for GST Audit (unlike the case in the Madras Judgement) and has filed the captioned petition only pursuant to passing of assessment order. Also, it was alleged that petitioner has fraudulently availed the ITC and thereafter applied for cancellation of GST registration.

In light of the above, Hon’ble HC held that in view of Section 29(3) of the CGST Act, it is adequately clear that even after cancellation, if any tax liability subsists, the registered person is required to pay the tax. Further, the petitioner was a registered person for the period for which assessment order is passed and therefore there is no error in proceedings initiated by respondent under Section 65 of CGST Act.  . Also, HC held that the petitioner, who has fraudulently availed the ITC and has thereafter, applied for cancellation of registration, is not entitled for any relief from the Court.

Thus, HC denied to entertain the said matter and dismissed the writ petition with costs. Also, liberty was granted to the petitioner to appeal before the Appellate Authority.

TVL. SHIVAM STEELS VERSUS ASSISTANT COMMISSIONER (ST) (FAC), HOSUR [2024 (6) TMI 1381 – MADRAS HIGH COURT]

Petitioner in the said case has preferred the captioned writ against one of the allegations confirmed by the authorities in its Order. The said allegation was based on the conclusion made by authorities that the petitioner in this case is providing a service to the supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier. Hence, the petitioner preferred the present writ against this allegation.

The counsel appearing on behalf of the respondent made an argument that the petitioner has approached this Court for one of the allegations in the Order and for other allegations he has filed an appeal before appellate authority. Such practice should not be encouraged and therefore petitioner should be relegated to the statutory remedy.

In light of the above, HC held that a writ petition would not ordinarily be entertained once the person aggrieved has chosen to challenge other issues in an order before an appellate authority. However, in the captioned case the issue at defect no. 3 is a pure legal issue and the appellate authority under applicable GST statutes does not have the power to remand; thus impugned order is set aside only insofar as defect no.3 and is remanded for re-consideration by the original authority.

IN RE: M/S. TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED [2024 (7) TMI 155 – AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH]

The Applicant in the captioned case had sought Advance Ruling with respect to levy of GST on the penalties in form of liquidated damages recovered from the Contractors/Suppliers on account of breach of contract.

In the said regard, AAR observed that following:-

• Although the terms ‘Damages’ and ‘Liquidated damages’ has not been defined under the Indian Contract Act, 1872; however, Section 73 and Section 74 of the Indian Contract Act provides for compensation and penalty for loss or damage caused by breach of contract.

• Clause (e) of Para 5 of Schedule II to CGST Act provides that the activity of “agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act” shall be treated as supply of service. The said clause includes the activity of tolerating the act of customer for non-performing of contractual obligations or breach of contract and therefore shall be considered as supply of service.

• While discussing the definition of consideration, AAR has also made reference to the concept ‘the activity for a consideration’ discussed in Service tax education guide. Accordingly, it concluded that in order to make a transaction liable to tax, the nexus between the activity and consideration should be direct and clear.

• Liquidated damages arises from an obligation on the part of the defaulting parting and not towards making good the losses from unintended events. The damages are towards disruption or non-performance of service. Therefore, it is to be viewed as an alternate mode of performance and shall be subject to tax.

• AAR held that the amount paid by customers is neither ad-hoc nor unconditional. There are conditions/scenarios defined in the agreement upon which the same is payable by the customer. In terms of Para 7.1.6 of Circular No. 178/10/2022-GST dated 03.08.2022, AAR held that payments referred to as ‘fine’ or ‘penalty’ are nothing but consideration for supply. Since the non-performance of contractual obligations is an ancillary supply, they shall be assessed as principal supply. Therefore, if principal supply is taxable, the ancillary supply is also taxable and vice versa.

• Hence, the compensation amount paid by defaulting party to the non-defaulting party for tolerating the act of non-performance or breach of contract shall be treated as consideration for tolerating an act or situation. Therefore, the said activity constitutes supply of service and is exigible to GST.

Ruling: The compensation amount paid by defaulting party to the non-defaulting party for tolerating the act of non-performance or breach of contract shall be treated as consideration for tolerating an act or situation. Therefore, the said activity constitutes supply of service and is exigible to GST.  

ARYA COTTON INDUSTRIES & ANR. VERSUS UNION OF INDIA & ANR. [2024 (7) TMI 239 – GUJARAT HIGH COURT]

The petitioners in the captioned case have challenged the order raising demand for short payment of interest under Section 50 of the CGST Act for the period post deposit of tax by the petitioners in the electronic cash ledger (i.e. period from the date of deposit of tax in the electronic cash ledger till the date of filing of return).

In the said regard, Hon’ble Gujarat HC opined the following:-

1. In light of the explanation to Section 49 of the CGST Act, the date of credit to the account of the Government in the authorized bank shall be deemed to be the date of deposit in electronic cash ledger. Thus, when GSTR-3B is filed and if there is sufficient balance available in the electronic cash ledger, then liability as per the return is simply offset against such balance by debit in electronic cash ledger. Hence the amount in electronic cash ledger is nothing but in nature of advance tax lying in assessee’s account which cannot be withdrawn or utilised in any manner except for payment of tax liability as per the return. 

2. HC observed that the provisions of Section 50(1) of CGST Act cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax. Such an interpretation would lead to a conclusion that interest is in the nature of penalty and not compensatory.  The proviso to said section was added to remove the controversy that interest is leviable on the Gross tax liability.

3. HC with respect to judicial precedents relied upon by the respondent (department) i.e. M/s. Megha Engineering & Infrastructures Ltd, M/s RSB Transmissions (India) Limited and India Yamaha Motors Private Limited held that the same are not in line of the provisions of the Act and the Rules made thereunder and therefore, the same are not followed but the judgment in case of the Vishnu Aroma Pouching Pvt. LTD is followed and it is therefore held that the tax amount which has already been credited to the Government by depositing an electronic cash credit ledger by the petitioner is required to be considered as a payment of tax which gets adjusted at the time of filing of the return by debit in the electronic cash ledger as per the scheme of the CGST Act. Therefore, the question of payment of interest would not arise for the period from the date of deposit of the amount in the electronic cash ledger by the petitioner till the date of filing of the return.

In light of the newly added proviso to Rule 88 B (1) of CGST Rules vide Notification No.12/2024- Central Tax dated 10 July 2024, interest shall not be applicable in case any amount has been credited to Electronic cash ledger on or before the due date of filing GSTR-3B but debited from said ledger after the due date of filing of said return.

KONKAN LNG LIMITED VERSUS THE COMMISSIONER OF STATE TAX MUMBAI & Others [2024 (7) TMI 289 – BOMBAY HIGH COURT]

The petitioner in the captioned case deals into the services of regasification of Liquid Natural Gas (LNG) to Ratnagiri Gas and Power Company. The imported LNG (by sea) is first received through LNG carriers, which are berthed at the captive jetty and the said LNG is then transferred to the petitioner’s unit for regasification. Adjacent to the jetty, the petitioner reconstructed the incomplete breakwater to ensure safety of the jetty and the LNG carriers for smooth loading and unloading of LNG carriers even during monsoons.  The petitioner sought an advance ruling to seek eligibility of ITC on the construction of such breakwater and being aggrieved by the order of the AAR, as well as the AAAR, the petitioner had filed the captioned petition.

The petitioner contended that in light of the definition of “plant and machinery,’ as provided in the explanation to Section 17 of the CGST Act, the breakwater consisting of accropodes, rocks and boulders is covered by the term “apparatus” since it is a collection of materials with specific function of absorbing or throwing back the energy of the maximum sea waves assailing the coast and thus falls under the definition of ‘Plant and machinery’. Further, it was immaterial whether the breakwater is an immovable property since it already considered to be “apparatus” as all immoveable structures are not disqualified from being covered as ‘Plant and machinery’. Thus, the ITC must be allowed.

The respondent contended that the word “plant” would mean where industrial activity takes place or factory where certain material is produced or machinery are used to carry out the certain process or for production. Further, apart from comprising of accropodes, the breakwater for the construction of its wall involves extensive civil work and foundation and therefore is a “civil structure” and not “plant and machinery”.

The Hon’ble HC held that plant and machinery should be interpreted to mean a place where certain manufacturing activities of production are carried out with the help of inputs. Since accropode loses its identity when breakwater wall is constructed, it cannot be called “plant and machinery”. Further in view of explanation to Section 17 of the CGST Act, “plant and machinery” should be used for making outward supply of goods or services. However, in the instant case the breakwater wall is used for protecting the vessel from tides while unloading the LNG received and not for making outward supply of goods or services. Therefore, petitioner does not satisfy the condition provided in the Explanation to Section 17 of CGST Act for ITC. Accordingly, the HC held that there is no infirmity in the impugned orders and no merits in the petitioner’s contention.  Hence, the petition is dismissed

TVL. S.S. METALS VERSUS THE STATE TAXOFFICER, CHENNAI  [2024 (7) TMI 54 – MADRAS HIGH COURT]

In the captioned case, petitioner has assailed the impugned Order on the ground of breach of principle of natural justice. The petitioner had availed ITC in relation to supplies received from a supplier who was alleged as ‘non-existent’ by the respondent. While responding to the SCN, petitioner submitted that only eligible ITC was availed and enclosed the tax invoice, bank statement, e-way bill and the GSTR 2A. Consequently, impugned Order was issued. Learned Counsel for the petitioner submitted that ITC has been denied even after submitting relevant tax invoice, e-way bill and bank statement. Also, he pointed out that the supplier had filed returns during the relevant period and therefore the same is appearing in GSTR-2A.

Reliance was placed on several judgements including the judgement of D Y Beathal Enterprises.

Counsel appearing on behalf of respondent argued that the burden of proof is on the taxpayer to establish entitlement to ITC, including by showing movement of goods. The petitioner did not provide documents such as lorry receipts or weighment slips to establish actual movement of goods. In the absence thereof, he contends that the reversal of ITC was entirely in consonance with Section 16(2)(b) of applicable GST statutes.

HC upon perusal of the arguments made by Petitioner and respondent, made an observations from the impugned Order that even after petitioner requesting for the documentary evidence for drawing a conclusion that the invoices issued by supplier were fake, the respondent refused to provide the same. Without respondent stating the basis for conclusion that fake invoices were issued and submitting relevant documents, it is not possible for the petitioner to respond to said allegation. With respect to the contention that petitioner did not satisfy the requirements of Section 16(2)(b) of CGST Act, it appears that the petitioner has not submitted lorry receipts and weighment slips. Therefore, petitioner had failed to establish actual movement of goods. In light of these observations, it is necessary to reconsideration is necessary subject to putting the petitioner depositing 20% of tax demand.

Also, HC directed that in case respondent intends to proceed against the petitioner on the basis that the supplier’s invoices were fake, they shall provide the particulars and any documents relied upon in such regard so as to enable the petitioner to respond thereto. Upon receipt of such communication with documents, the petitioner is permitted to submit a reply. Upon receipt of such reply and on being satisfied that 20% of disputed tax demand is received, the respondent shall issue a fresh Order after providing a reasonable opportunity to petitioner, including a personal hearing.

M/S. MADEENA STEELS VERSUS THE ASSISTANT COMMISSIONER ST AND OTHERS [2024 (7) TMI 664 – ANDHRA PRADESH HIGH COURT]

In the captioned case, the petitioner was issued a show cause notice under Section 29 of the CGST Act read with Rule 21 of the CGST Rules, proposing to cancel the registration on the ground that the petitioner has indulged in bogus purchases or supplies to accommodate his suppliers for claiming ITC fraudulently. The said allegation was made on the basis of certain reports submitted to the respondent by their internal team.

The petitioner argued that the reports based on which the impugned SCN had been issued was not shared, and therefore, an effective reply could not be filed. Thus, the impugned Order was in violation of principles of natural justice and is liable to be set aside. Also, the lack of proper advice resulted in non-filing of petition under Section 30 of the CGST Act for revocation of registration. The respondents in their contradiction argued to dismiss the writ petition as alternative remedy to file petition under Section 30 of the CGST Act for revocation of cancellation or to file an appeal under Section 107 of the CGST Act was available.

The Hon’ble HC delineating the contingencies where the writ petition could be maintainable stated that when writ petition is filed for enforcement of fundamental rights, or where there is violation of principles of natural justice, or when the proceedings impugned are wholly without jurisdiction or the vires of an act is challenged, the writ petition could be maintainable despite of availability of alternative remedy. In the instant case the HC did not find the impugned SCN to be bereft of any required particulars and thus there was no violation of principles of natural justice. Hence, the captioned writ is not maintainable. However, considering the fact that petitioner’s registration has been cancelled, it is apposite to afford an opportunity to the petitioner.

Accordingly, the writ petition was dismissed after giving the petitioner an opportunity to either file an application under section 30 of the CGST Act for revocation of cancellation, or to challenge the impugned order by way of filing an appeal within stipulated time.

VISHAL KUMAR GUPTA VERSUS UNION OF INDIA & ORS., [2024 (7) TMI 610 – PATNA HIGH COURT]

The captioned writ petition was filed against the appellate order which rejected the appeal on the ground of delay (The appeal was filed after expiry of more than 2 months from the date on which even the period for delay condonation, as per statute expired.).  The petitioner took shelter under Section 5 of the Limitation Act.

In the said regard, Hon’ble Patna HC took a note of the decision of Calcutta HC in case of S.K. Chakraborty & Sons v. Union of India & Ors. Referred by petitioner.

HC held that the decision of Calcutta HC does not have a binding effect and only has a persuasive effect. Also, HC have perused the decisions of Honorable SC cited in the said Calcutta HC judgement and held that the principles that can be culled out from the binding precedents are dependent upon the language used in the statute, which throws light on the statutory scheme. When there is a period provided for initiating a proceeding and it is also provided that the authority/tribunal/court before which a proceeding is to be initiated would have the power to condone the delay if sufficient cause for the delay is shown, without specifying the period within which delayed proceedings can be initiated, then necessarily the provision under Section 5 of the Limitation Act would be fully applicable; or rather, the provision would be similar to Section 5 of the Limitation Act.

HC also held that when a specific time period is provided for the authority/tribunal/court before which a proceeding is to be initiated and a further period is specified for delay condonation, then there is exclusion of Section 5 of the Limitation Act. However, when there is no provision for delay condonation expressly provided and only a period of limitation for initiating the proceeding stipulated, then the scheme of the special statute will have to be looked at to understand whether Section 5 is excluded or not.

In light of the said interpretation and upon perusal of Section 107 of the Act of 2017, the captioned writ petition cannot be entertained. Hence, HC stated they respectfully disagree with the dictum of the decision of the Division Bench of the Hon’ble Calcutta High Court.

HC also noted that the petitioner has not availed the remedy provided vide Notification No. 53/2023-Central Tax dated 2 November 2023 wherein the timeline to file appeal was extended till 31 January 2024. Therefore, HC found no reason to invoke the extraordinary jurisdiction under Article226 especially considering that alternate remedies were available, and the assessee has not been diligent in availing such alternate remedies within the stipulated time. Also, HC stated that the law favours the diligent and not the indolent. The delay stands against the petitioner.

M/S. VIVEGAM TRAVELS. VERSUS THEASSISTANT COMMISSIONER (ST) (CIRCLE) , TUTICORIN [2024 (7) TMI 244 – MADRAS HIGH COURT]

In the captioned case, the petitioner has assailed overlapping of demand. The demand which was confirmed vide impugned orders under Section 63 of the TNGST Act earlier, was re-confirmed in subsequent Orders passed under Section 74 of the TNGST Act for the assessment years 2018-19 and 2019-20.

The Hon’ble HC held that the writ petitions are liable to be dismissed since the challenge to overlapping between demands confirmed under Section 63 of the TNGST Act earlier for the same assessment years, cannot be admitted. However, since the petitioner has not replied to the show cause notices and the matter would require detailed consideration, HC quashed the impugned orders and remitted the case back to respondents subject to petitioner depositing 25% of the disputed tax in each financial year.

M/S. ABHISHEK APPLIANCE PVT.LTD. VERSUS ASSISTANT COMMISSIONER, CGST-DELHI NORTH COMMISSIONERATE & ORS.  [2024 (7) TMI 532 – DELHI HIGH COURT]

The petitioner in this case had challenged the impugned Order whereby the petitioner’s GST Registration was cancelled. Petitioner also impugned the SCN pursuant to which impugned Order was passed, The reason provided in the impugned SCN for cancelling the registration was that the same is in compliance to letter issued by Anti-evasion authorities. Petitioner contended that SCN was invalid for the following reasons:-

• It was bereft of independent evaluation and was issued pursuant to letter issued by the Anti Evasion Branch of Delhi without application of mind;
• The personal hearing was provided at a date prior to last date of submission of reply, thus showcasing it to be a mere formality instead of an effective opportunity;
• SCN was devoid of basis details i.e. Name of the concerned officer and venue for personal hearing was not mentioned therein

The letter dated 6.02.24 issued by the Anti-Evasion Branch, forming basis of the petitioner’s cancellation of GST registration, stated that during the inspection at the petitioner’s principal place of business it was found that petitioner’s principal place of business was non-existent. Also, the Panchama provided to petitioner indicates that during course of inspection, the concerned officers made an attempt to locate the petitioner, but the firm could not be located. Upon enquiry it was found that the building was under construction for more than two years. The officials had also attempted to contact the petitioner at his registered mobile number, who had been contacted and stated that he was out of station. He also informed that he had applied for the change of his principal place of business and the same was rejected by the jurisdictional officer.

Learned Counsel for the petitioner submitted that the petitioner’s GST registration not only reflected principal place of business but also an additional place of business. However no inspection was carried out there.  Further, the petitioner claims that post the inspection by the Anti-Evasion Branch, the petitioner again applied for change of address and the same was approved on the very next day and the amended certificate was issued. Thus, the petitioner had changed its principal place of business, which was found to be under construction. The petitioner applied for a change of its principal place of business prior to inspection, however the application was rejected.

The petitioner contested that the retrospective cancellation of registration on the ground that its principal place of business had been earlier visited by the officials in 2021 was acknowledged in the order freezing the petitioner’s accounts and thus, there was no occasion to cancel the GST Registration, ab initio. The impugned order indicated that the GST Registration was cancelled merely because no response to the impugned SCN was submitted.

In view of the afore-said, HC held that petitioner be permitted to file a response to the allegation regarding the non-existence at its principal place of business. Also, petitioner to set out the complete details as to when it has ceased to carry on its business from its principal place of business and also to furnish sufficient evidence as to the place from where it continued to carry on its business. The petition was disposed of.

RE: M/S. FIDELITY INFORMATION SERVICES INDIA PRIVATE LIMITED [2024 (7) TMI 520 – AUTHORITY FOR ADVANCE RULINGS, KARNATAKA]

The applicant is engaged in the in the business of providing software development and maintenance services and Information technology enabled services (ITES) and offers a one-time joining bonus, work from Home set-up allowance and Tuition assistance program (TAP) to their employees subject to serving of pre-defined period by employee. However, if the said employee wishes to exit before the pre-defined serving period, the said amounts so paid is recovered from the employee. The Applicant, vide captioned application has raised the question related to the applicability of GST on the recovery of the above-mentioned bonus/allowance.

AAR, in view of Circular No. 178/10/2022 dated 3.08.2022 which clarifies the scope of entry no. 5 (e) of Schedule II (agreeing to the obligation to refrain from an act or to tolerate an act or situation, or to do an act), and the contractual agreement between the parties at para 7.5, held that the amount recovered from employee on account of bonus, WFH allowance or amount under TAP is not as a consideration for tolerating the act of employee of not serving the pre-agreed period in the organization but a mere recovery for dissuading the non-serious employees from taking up the employment. Further, in light of SI. No.5 of Circular No. 172/04/2022-GST dated 06.07.2022 clarifying taxability of perquisites provided by employer to the employees as per contractual agreement, AAR held that retention bonus, joining bonus, work from home allowance and expenses under TAP are also in the nature of perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and employee and hence not taxable under GST.

M/S ELIXIR INDUSTRIES PRIVATE LIMITED OF GUJRAT [2024 (7) TMI 982 – AUTHORITY FOR ADVANCE RULING]

The applicant had filed the captioned application to sought advance ruling with respect to eligibility of ITC on the capital goods viz wires/cables, electrical equipment’s for installation of feeder bay at sub-station of GETCO [Gujarat Energy Transmission Corporation Ltd].  As per the requirements provided by GETCO, applicant will have to purchase materials for installation of 1000 KVA facility & handover the same to GETCO, who will provide installation and supervision service. It will be maintained by GETCO & all the goods and equipment used in the said line which will be installed outside the factory premises will be a property of GETCO

Applicant had submitted to the AAR that the above-referred goods have been capitalized only on the basic value and installation charges. He will avail the credit of tax charged on purchase of said goods. The goods shall be subsequently transferred to GETCO in terms of the agreement and the said goods will become the property of GETCO. AAR accepted the submission of the applicant with respect to fulfillment of conditions envisaged Section 16 of the CGST Act. With respect to the contention of the applicant that it is not hit by clauses (c) and (d) of Section 17 (5) of CGST Act, applicant submitted that they are covered by explanation which defines plant & machinery and they are also not hit by three exclusions listed in the said explanation. Further, the applicant submitted that these are underground cables and were not fixed to earth. They are kept in a duct and can be removed/opened as and when any maintenance was required to be done on these goods. Hence, ITC sought by applicant is not blocked by Section 17(5) (c) or (d) of CGST Act.

Further, AAR held that there is no provision under the CGST Act, 2017 which bars availment of ITC by the applicant if subsequently the capitalized goods are handed over to GETCO/others. However, AAR has highlighted the liability casted upon applicant in in terms of section 18 (6) of the CGST Act, 2017. The same has not been discussed in this case as it was not forming part of the questions raised before the AAR.

IN RE: M/S. PAYLINE TECHNOLOGY PRIVATE LIMITED [2024 (7) TMI 1060 – AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH]

The applicant in this case is engaged in the business of selling and purchasing Gift cards, vouchers, and pre-paid Vouchers (closed or semi-closed-ended vouchers against which goods or services can be purchased from specific brands on e-commerce platforms such as Amazon, Flipkart, etc.). These vouchers were purchased by the applicant at a discounted price from the vendors and supplied to clients as per the order placed. Whether the said transaction is taxable and the stage at which it is taxable are questions for which advance ruling has been sought.

AAR, observed that the Applicant is not the issuer of the voucher but is the third party who buys and sells the vouchers. He purchases the vouchers by paying a consideration to the issuer. The vouchers are also sold to the clients of the Applicant for a consideration. The vouchers have both a value and an ownership, which is transferred by the issuer of these vouchers to the Applicant, and then to the ultimate beneficiary who redeems the voucher. There is no element of service is involved between the issuer of vouchers and the Applicant and also between the Applicant and the purchaser. These vouchers are freely transferrable. Therefore, the vouchers qualify to be considered as movable property and the goods.

With respect to the contention that voucher can be treated as money, AAR referred the definition of money as defined in Section 2(75) of CGST Act and conclude that vouchers cannot be treated as money. Whether vouchers are in the nature of actionable claims, AAR held that as per the definition of ‘goods’ provided in Section 2(52) of the CGST Act, it includes ‘actionable claims’. Further in terms of Sl. No. 6 of Schedule III of the CGST Act, actionable claims other than lottery, betting and gambling are neither a supply of goods nor a supply of services. Therefore, only lottery, betting and gambling shall be treated as actionable claims which are goods under GST. All other actionable claims shall not be treated as either goods or services. Actionable claims have been defined under Section 2(1) of CGST Act, which provides that it shall have the same meaning as defined under Section 3 of Transfer of property Act, 1882. AAR held that voucher by itself is a movable property and hence constitutes goods. Since the Voucher is in the possession of the claimant at the time of the claim, hence it cannot be considered as actionable claim.

AAR, with respect to the reliance placed by Applicant on the judgements of Sodexo SVC India Pvt. Ltd (SC) and Kalyan Jewellers India Ltd. (AAAR-TN), held that the said judgements are applicable to the issuer of the vouchers. Hence, these judgements shall not be applicable in the present case, since the Applicant is a trader of the vouchers. Further, with respect to reliance placed upon the judgement of Premier Sales Promotion (Karnataka HC), AAR held that in the said case assessee was intermediary. Even intermediaries are liable to pay GST on their service charges. In the present case, Applicant purchases the vouchers, holds in stock and sells it to its clients and not acting as an intermediary.

AAR held that while the supply of vouchers by applicant qualifies to be goods, it shall be treated as supply of goods in terms of Section 7(1) (a) of CGST Act since the vouchers are traded for consideration in course or furtherance of business. Further, transaction of sale of vouchers in the instant case involves transfer of the title, and hence they are covered under “goods” in terms of of Para 1(a) of Schedule II to CGST Act. With respect to applicability of time of supply provisions, AAR held that the same shall be determined I terms of Section 12 (2) as Section 12(4) of the CGST Act applies to issuer of vouchers and not to its traders. The value of vouchers is to be determined in terms of Section 15(1), (2) and (3) of CGST Act. The rate of tax on supply of vouchers by applicant shall be determined as per residual entry no. 453 of Third Schedule of Notification No. 01/2017-Central Tax (Rate)dt. 28.06.2017 i.e. CGST and UGST of 9% each.

ITARES SHOES PRIVATE LIMITED VERSUS THE ADDITIONAL COMMISSIONER AND OTHERS [2024(7) TMI 856 – MADARS HIGH COURT]

The captioned petition has been filed against an impugned order wherein it alleged that there is disparity between the value of e-way bills generated on the e-way bill portal and returns filed by petitioner in Form GSTR-3B for assessment periods 2018-19 to 2020-21. The petitioner also submitted that before the impugned Order was served upon him he had submitted additional replies clarifying the said disparity in value. In its reply towards impugned SCN, petitioner explained that the e-way bills were raised under several categories including categories where there was no taxable supply. Consequently, the petitioner stated that there would be a mismatch between the data reflected in the e-way bill portal and the petitioner’s GSTR 3B returns.  . In its subsequent replies filed before the Order was served, petitioner submitted the supporting documents viz. outward and inward delivery challans and outward and inward e-way bill reports.  Further, learned counsel for the petitioner submits that they were not provided opportunity to show cause in respect of returns filed in Form ITC-04. If such opportunity would have been provided, the petitioner would have been able to establish that the requirement of filing Form ITC-04 was not applicable for the period running from July 2017 to March 2019 in terms of Notification No.38/2019 -Central Tax dated 31.08.2019. Without prejudice to these contentions learned counsel for the petitioner submitted that the petitioner agrees to remit a sum of Rs. 3,00,50,000/- towards disputed tax demand, if reasonable time is provided to make such payment.

HC upon perusal of the impugned SCN with regards to disparity in value reflecting in e-way bill and outward supply reported in GSTR-3B, noted that the petitioner had submitted in its initial reply that the same was on account of non-taxable supplies reflecting in e-way bill portal. However, the petitioner failed to enclose the supporting documents in its reply against the impugned SCN. Also, in the impugned SCN while respondent did not refer to the returns filed in Form ITC-04, whereas such returns were the basis for confirming the tax proposal to the extent specified therein. Accordingly, HC held that since the petitioner was put on notice with regard to larger issue of mismatch, the petitioner could have provided a comprehensive explanation. Therefore, it is necessary to put the petitioner on terms.

The impugned Order was set-aside on the condition that petitioner deposits INR 3.5 crore towards disputed tax demand within 6 weeks from date of receipt of copy of this Order. The petitioner was also permitted to submit a reply to the show cause notice along with all relevant documents during the said period. Upon receipt of such reply and subject to being satisfied that the sum of Rs. 3.5 crore is received from the petitioner, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner’s reply.

M/S UTTAR PRADESH POWER TRANSMISSION CORPORATION LIMITED [2024(7) TMI 1062 – AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH]

The applicant (UPPTCL) was notified as the state transmission utility of Uttar Pradesh. In addition to providing electricity transmission services, UPPTCL (on consumer’s request) also undertook development of electricity infrastructure i.e. ‘deposit works’ for distribution of electricity. The deposit works was carried out in two modes- (1) where the entire material and the installation work is done by customer’s contractor and UPPTCL’s role is to merely supervise the work; for which supervision fees were charged; and (2) where the entire material and execution work is carried out by the applicant under their supervision and such cost including GST is recovered from the consumer.

In light of the above facts, applicant sought the advance ruling on whether in the first mode, where the applicant merely charges supervision fees, the value of material and cost of execution work for installation would be included in the value of supply for determination of taxable value under GST.

AAR held that where the consumer is required to pay supervision charges to the UPPTCL computed at a fixed percentage on total cost estimate, the cost of works would not be included in the value of supply for the following reasons:-

The applicant being a stranger to the works contract executed between the customer and a third-party; applicant shall not fall under Section 15 (2) (b) of the CGST Act since he is not obliged to pay anything to the third-party work contractor on behalf of customer.

UPPTCL, in the said scenario, does not fall under the definition of ‘supplier’ under Section 2(105) of the CGST Act.

There is no consideration (in terms of Section 2(31) of CGST Act) involved in the said scenario.

Therefore, the applicant shall be liable to pay GST only on the supervision charges.

IN RE: M/S. SAI SERVICE PRIVATE LIMITED [2024(7) TMI 1063 – APPELLATE AUTHORITY FOR ADVANCE RULING, GOA]

In the captioned case, AAAR has discussed the position with respect to availment of ITC relating to motor vehicles which are used for demonstration purpose.

The AAR had disposed the applicant’s application for advance ruling by the impugned order which ruled that ITC on demo car shall not be eligible for availment. Aggrieved by the same, the applicant filed a rectification application before the AAR, which was also subsequently dismissed. Thus, the said appeal was filed.

The Appellant also argued that expression ”further supply of such vehicles” does not prescribe any time limit for supply. Further, neither Section 7 nor section 9 of the CGST Act prescribe that the goods should be

recorded as stock in trade for it to be supplied further. Also, in support of its claim for eligibility of ITC on demo car, the appellant had relied on certain advance rulings which ruled in favor of the assesse.

With respect to appellant’s interpretation of the term ‘such vehicles’, AAAR held that the expression ‘such’ refers to class of motor vehicles provided undersection 17 (5) (a) i.e. motor vehicle having approved seating capacity not motor than 13 persons. Therefore, the argument that expression “such” bares wider contention cannot be accepted as it is well-defined under the said clause.

In light of the observations made by AAAR, discussed above, it held that from the plain reading of section 17 (5) (a) (A) it is cleared that ITC on motor vehicles as specified in clause 17(5(a) shall be available when further supplied. Since the appellant is not holding the goods for further supply and therefore the exception in clause (A) of section 17 (5) doesn’t apply to the appellant. Thus, the ITC on motor vehicles used for demo purpose cannot be allowed as per the provisions of the GST Act.

With respect to advances rulings relied upon by appellant, AAAR noted that in the matter of allowing the ITC on demo car there are divergent views given by AAR authorities across the country. Further with respect to favorable ruling in case of M/s Chowgule Industries, as per section103 (1) of CGST Act.  the advance ruling pronounced by the authority shall be binding only on the applicant who had sought it in respect of any matter listed in section 97 (2). Therefore, the said ruling shall not be applicable by De Facto in case of the present taxpayer. Hence, in light of the view discussed in foregoing paras, AAAR held that they do not find any deficiency in the reasoning provided by the AAR in the present matter. Therefore, the appeal of the taxpayer is dismissed.

P. ACHUTAN NAIR & COMPANY [2024(7) TMI 1344 –AUTHORITY FOR ADVANCE RULING, KERALA]

The applicant is a retail dealer of petroleum products of HPCL in the state of Kerala. Petroleum products being outside the purview of GST, the issue in the said matter is concerning the levy of GST on “Differential Dealer Margin”, provided by HPCL to the applicant. Thus, applicant sought the ruling covering following questions:-

1. Whether GST is applicable on differential dealer margin provided by the petroleum companies to its retail dealers?
2. If it is applicable, then what is the justification for bringing the same under the purview of GST?
3. If it is applicable, on which tax rate levy shall be calculated?

In the said regard, the following was discussed by the AAR:-

• With respect to the applicant’s contention that the differential margin is not in nature of any consideration for agreeing to the obligation to do an act (i.e. Sl. No. 5(e) of Schedule II- Activities or Transactions to be treated as supply of goods or supply of services); AAR held that in the instant case, the differential dealer margin is provided by HPCL to the applicant when the sales volume decreases below a mutually agreed level so that the applicant does not close down his petrol pump due to such loss. Thus, the amount paid as differential dealer margin is in the nature of a consideration in return of the applicant agreeing to run the dealership despite low sales volume and thus shall squarely fall under clause (e) of Sl No. 5 of Schedule II of the CGST Act, 2017 and hence liable to GST.

• With respect to the second contention that differential dealer Margin is only an incentive given after the supply has been effected and also fulfils the provisions under Section 15 (3) of the CGST Act; AAR held that although the consideration for this supply is linked to the sales volume of petrol, it is not a discount given on the supply of petrol and thus Section 15 (3) is not applicable in the instant case.

In light of the above, AAR held that there is no dispute that the applicant’s supply of petrol/diesel to end customer is not liable to GST. However, the supply in the present case is that of the service of agreeing to the obligation to refrain from an act under clause (e) of Sl No. 5 of Schedule II of the CGST Act, 2017 and hence liable to GST. Further, Notification No. 11/2017-Central Tax (Rate) dated

28.06.2017 at SI. No. 35 classifies that the same is taxable at 18% (CGST 9%and KSGST 9%).

Section B: Case Laws (SERVICE TAX)

M/S. VISHWAKARMA INFRASTRUCTURES VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [2024 (7) TMI 621 – CESTAT NEW DELHI]

The appellant herein is engaged in the business of giving cranes on hire basis for construction purposes. Appellant was paying VAT @ 5% of the value involved treating the same as Sale of goods (deemed sale) since they were of the view that the effective control and possession were transferred to their clients. Department from various clauses of the agreement observed that the operators and helpers, on the cranes given on hire, were agreed to be made available by the appellant for 24 Hrs a day. The staff deployed on those cranes was to be directed to follow the instructions of project manager. The salaries and welfare funds of the staff deployed was agreed to be the responsibility of the appellant. Hence, it was of the view that appellant has not transferred the possession and effective control of the cranes to their clients.  Therefore, the activity of the appellant is a taxable service of ‘Supply of Tangible Goods Thus, a show cause notice invoking the extended period of limitation was issued alleging deliberate act of petitioner suppressing the facts to avoid discharging its service tax liability, which was later confirmed in subsequent O-I-O. Being aggrieved by this order, the appellant filed the captioned Appeal.  

In the said regard, CESTAT held that the activity in question was a taxable service namely – Supply of Tangible Goods’. The payment of VAT is insufficient to alter said status when apparently complete possessions and the effective control of cranes was not transferred by the appellants. Hence, this act of appellant is rightly being held as an act of misrepresentation. Despite rendering taxable service, registration was not obtained and therefore rightly held as an act of suppression. Consequently, the extended period of limitation has been correctly invoked in the present case.

M/S MARUTI SUZUKI INDIA LIMITED VERSUS THE PRINCIPAL COMMISSIONER OF CGST, GURUGRAM [2024 (7) TMI 545 – CESTAT CHANDIGARH]

The subject matter of captioned case deals with valuation provisions i.e. whether pool lifting charges collected by the appellant from the dealers is includable in the assessable value of Motor Vehicles cleared by the appellants.

Further, the Commissioner(respondents) in the captioned matter invoked the extended period of limitation on the pretext that the short payment of duty was deliberately not brought to the knowledge of the Department and it came to the department’s notice only when audit was conducted at the factory premises of the appellant. On the contrary, the appellants contended that they were regularly filing the returns and were regularly subjected to audits right from inception; audit team were also supplied with financial documents like balance sheet etc. from time to time and therefore extended period cannot be invoked.

In light of the above, CESTAT held that when various show cause notices have been issued to the

appellants over the years based on very same financial records. In case the department had missed out on certain issues during the earlier scrutiny, the blame cannot be put on the appellant and extended period of limitation. cannot be invoked in the instant case. With respect to the view taken by Ld. Commissioner that “Mens rea” is not required in transaction matters for imposition of penalty shall not sustained since it is against the settled principle of law as envisaged in a catena of judgments.

In the view of the above, both the appeals are partly allowed restricting the demand to normal period and setting aside the penalty

M/S WILDNET TECHNOLOGIES PVT.LTD. VERSUS PRINCIPAL COMMISSIONER OF CGST, NOIDA [2024(7) TMI 1002 –CESTAT ALLAHABAD]

The appellant is a software developing company engaged in providing taxable services viz. “Search Engine

Optimization Service”, “Google ads/Pay per click service” and “Applications & Web development/Designing Service” in India and outside India. Service Tax was appropriately paid on the value of services provided in India and no service tax was paid on services provided out of India being export of services. Therefore, on the basis of mismatch in details reported in service tax return and income tax return, enquiries were raised alleging short payment of service tax. It was found that the difference in the returns were owing to non-payment of service tax on export of services.

Further, the respondent alleged that the said services fell under the category of “Online Information and Data base Access or Retrieval services (OIDAR) and as per the Place of Provision of Services Rules, 2012 (POPS Rules), the same could not qualify as export since the service provider i.e. the appellant was located in India. Thus, the appellant’s claim that the said services were export of service and are exempt from service tax was denied, accordingly demand was confirmed on the same.

In light of the above, the Ld. Counsel for Appellant contended that as per the definition of OIDAR under Rule 2(l) of the POPS Rules, 2012 read with the clarification issued by the CBIC under para 5.9.5 of the Education Guide dated 19.06.2012, the aforesaid services were not within the purview of OIDAR services. For the service to qualify as an OIDAR service, it is essential to have online information and data access/retrieval, which is not the instant case. In case of “Search Engine Optimizing Service”, the Appellant made technical changes in its client’s website to attract maximum number of customers. In Google aids service, the Appellant would setup advertisement campaign purchased by digital marketing companies on the Google site. Developing/designing

customized software was also carried out by the Appellant. Thus, he contended that no OIDAR Service was provided and the services provided to overseas client would qualify as export services and no service tax was chargeable as provisions of Rule 9(b) of the POPS Rules, 2012 would be applicable for the said services.

In light of the above, Tribunal held that OIDAR service would be that service where data or information for access or retrieval was provided in electronic form through computer network.  With respect to the dispute pertaining to ‘Search Engine Optimization’ service, CESTAT held that this was a process whereby the client’s visibility in search engines like Google, Microsoft Bing etc. is increased so as to keep the client’s website on a higher ranking. Thus, the said process does not provide any information and database for retrieval but is only a technological change in website of the client to rank it higher for prospective customers of the client and would not be covered under OIDAR service. Further with respect to Google ads service /Pay per click service, the Appellant’s client purchases space from Google and provides advertisement contents to the Appellant and the Appellant has to set-up campaign of the client by developing page on Google site. The distinguishing factor between the said service and OIDAR service is that OIDAR services can be accessed by anyone all over the globe whereas the service in question was provided only to specific person who in turn uses the same for viewers of world. The Appellant is also engaged in development of Mobile apps and web design & development activities for its clients whereby the software developed by the Appellant could be preinstalled on the device, downloaded from a mobile app store or accessed through a mobile web browser. Thus, it is not an information and database for retrieval but it is software development activity for further operation, hence the same cannot be classified under OIDAR. Since the said services are not covered under OIDAR Services, and the service is being rendered outside India, the place of provision Rule 9(b) of the POPS Rules, 2002 would not be applicable in the present case. Therefore, the impugned order was set aside and appeal was allowed with consequential relief

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