legal zinevolume –iii (march 2021)

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Legal Zine Volume –III(March 2021)

© Tattvam Advisors, All rights reserved

Case Law Index

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Party Citation/Forum Ratio decidendi Slide no.

In Re: Cognizance for Extension of Limitation

2021-VIL-32-SC Exclusion of Period from 15.03.2020 till 14.03.2021 for the purpose of computation of limitation period

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Westinghouse Saxby Farmer Ltd

2021-VIL-33-SC-CE Classification of relays used in railway signaling system as parts under Chapter Heading 8608 – “Suitability for use test or user test” applied

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M/s Canon India Pvt Ltd 2021-VIL-34-SC-CU Additional Director of DRI is not “the proper officer” to initiate recovery of duty under Section 28(4) of the Customs Act, 1962

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Rattan India Power Ltd 2021-VIL-153-DEL Prima facie finding of the Court that amounts received in the nature of penalty/compensation are not towards any supply under GST

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M/s Asiatic Clinical Research Pvt Ltd

2021-VIL-156-KAR Rejection of refund without giving an opportunity of personal hearing is inappropriate

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Dayamay Enterprise 2021-VIL-157-TRI Cancellation of GST registration without passing any order and based on SCN without citing any particular reason improper

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M/s. DMR Constructions MADRAS HCWP. No. 9991 of

2020 batch

Transition of accumulated credit of TDS under VAT regime to GST regime allowed

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Case Law Index

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M/s B.M. Patel & Co 2021-VIL-181-MAD Granting of opportunity for personal hearing is necessary as per Section 75(4), CGST Act in case of adverse decision

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Anuj M. Gupta 2021-VIL-191-BOM Bail to be granted where the accused has been in custody for a considerable time without filing of charge sheet

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Pentacle Plant machineries Pvt Ltd

2021-VIL-193-MAD In the absence of GSTR-2 and GSTR-1A, GSTR-1 allowed to be rectified on account of bonafide human error

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M/s Deepak Print 2021-VIL-197-GUJ FORM GST-3B can be rectified for the relevant period to which the error relates

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Tirthamoyee AluminiumProducts

2021-VIL-201-TRI Mentioning of wrong distance in E-way Bill die to clerical error is a minor lapse and GST liability with penalty cannot be demanded for the same

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Case Law Index

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M/s Rameswar Udyog Pvt. Ltd. 2021-VIL-219-GUJ Sanction of refund cannot be delayed on account of

technical error on GST portal

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M/s Jai Maa JwalamukhiIron & Scrap Suppliers

2021-VIL-226-ALH Where proper invoice and e-way bill have been issued, mere discrepancies in returns cannot lead to the conclusion that turnover has been concealed

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M/s Rajkamal Builder Infrastructure Pvt Ltd

2021-VIL-240-GUJ Interest under Section 50 of the CGST Act, 2017 has to be calculated on net tax liability and cannot be recovered vide a notice in FORM GST DRC-01

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M/s Transformative Learning Solutions Pvt Ltd

O-I-A No. 52/JC/CT/Appl-I/Delhi/2019 dt.

09.03.2021

Group companies which are separate legal entities are not ’mere establishments of distinct persons’ under GST

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M/s Fraunhofer-Gesellschaft

2021-VIL-11-AAAR Activities undertaken by Liaison office in India for its head office abroad does not constitute supply of service under GST and both are not distinct persons

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Case Law Index

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M/s Yulu Bikes Pvt Ltd 2021-VIL-10-AAAR Leasing or renting of e-bikes/bicycles is classifiable under HSN 9973

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M/s Ion Trading India Pvt Ltd 2021-VIL-16-AAAREmployer will qualify as ‘pure agent’ in case of amounts recovered from the employees towards car parking charges payable to building authorities

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M/s Wipro Enterprises Pvt Ltd 2021-VIL-142-AAR Hand sanitizers are not ‘Medicaments’ and hence warrant the classification under CTH 3808 32

M/s Premier Car Sales Ltd 2021-VIL-161-AAR

Supply of labour services alongwith replacement of parts under ‘warranty repair services’ is to be construed as ‘composite supply of repair services’ under GST

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M/s SPFL Securities Ltd 2021-VIL-165-AAR GST payable on recovery of delayed payment of charges in relation to securities 34


Case Law Index

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M/s Dwarikesh Sugar Industries Ltd 2021-VIL-168-AAR

ITC allowed in respect of supplies made as part of CSR activities as the same are not “gifts” under Section 17(5)(h); ITC disallowed for goods and services used for constructions capitilized

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M/s North Shore Technologies Pvt Ltd 2021-VIL-170-AAR Arranging subsidized transport facility for employees cannot be

treated as “supply of service” under GST 36

M/s Ajay Kumar Singh 2021-VIL-180-AAR Services relating to lease for mining and extracting merit classification under Heading 9973 as “Licensing services for right to use minerals including its exploration and evaluation” thereby attracting 18% GST

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M/s BG Elevators and Escalators Pvt Ltd

2021-VIL-181-AAR Erection and commissioning of lifts is taxable at 18% GST, irrespective of place of its installation and intended usage i.e. domestic or commercial

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Manoj Mittal 2021-VIL-185-AAR Supply from restaurant counters where there is no element of service to be treated as “Supply of goods” and catering services provided to an educational institute are exempt in terms of Exemption Notification

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Case Law Index

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Ratnamani Metals & Tubes Ltd 2021-VIL-75-CESTAT-

AHM-ST

Liquidated damages are not consideration towards any ‘service’ under service tax

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Anutham Exim Pvt Ltd 2021-VIL-91-CESTAT-KOL-CU

Carbonated beverages with fruit juice are classifiable under Customs Tariff Heading 22029920

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M/s Kafila Hospitality & Travels Pvt Ltd

2021-VIL-101-CESTAT-DEL-ST

Target-based incentives cannot be termed as “consideration” and are not leviable to service tax 43

Petronet LNG Limited 2021-VIL-118-CESTAT-DEL-ST

“Free of cost” supplies by service recipient to service provider do not form “consideration” and cannot be included in the value of taxable supply

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Supreme Court Decisions


IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION2021-VIL-32-SC

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Exclusion of period from 15.03.2020 till 14.03.2021 for the purpose of computation of limitation period

Facts:Due to the onset of COVID-19 pandemic, the Apex court took suo moto cognizance of the situation arising from the difficultiesthat might be faced by the litigants across the country in filing applications/appeals/suits/other proceedings within the prescribedperiod of limitation as per the general law of limitation or under any special law. By order dated 27.03.2020, the apex courtextended the period of limitation with effect from 15.03.2020 till further orders from time to time. Having considered theprevalent situation in the country with respect to the functionality of courts and the improvement of the pandemic situation, theSupreme Court has now decided to bring an end to the extended period of limitation order.

Held:After considering the suggestions of the learned Attorney General of India, the Apex court issued the following directions:-

• In computing the period of limitation for any suit, appeal, application or proceeding, period from 15.03.2020 till14.03.2021 shall stand excluded. Balance limitation remaining if any, shall become available with effect from 15.03.2021.

• Where limitation would have expired during the period between 15.03.2021 till 14.03.2021, irrespective of the actual balanceperiod of limitation remaining, a limitation period of 90 days with effect from 15.03.2021 shall be given to all persons,

• If the balance remaining is greater than 90 days, then that longer period shall apply in such cases.• The above period shall stand excluded in computing the periods prescribed under various provisions of Arbitration and

Conciliation Act 1996, Commercial Courts Act, Negotiable Instruments Act and any other laws, which prescribe period(s)for institution and termination of proceedings.


Westinghouse Saxby Farmer Ltd vs CCE, Calcutta2021-VIL-33-SC-CE

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Classification of relays used in railway signaling system as parts under Chapter Heading 8608 -“Suitability for use test or user test” applied

Facts:The appellants were engaged in the manufacture of “Relays” used as a part of the railway signaling equipment. After the revisionof excise duty rates in 1993, the appellants claimed that relays manufactured by them should be classified under sub-heading8608 which covers inter-alia “mechanical signaling equipment for railway and parts of the foregoing” whereas the revenuecontended that the goods fell under category of “electrical machinery” covered by specific Chapter Tariff Heading (CTH) 8536.The Adjudicating authority and the appellate authority also confirmed the revenue’s stand on the basis of the application of Rule3(a) of the General Rules to Interpretation (GRI). Hence, the appellants have appealed against the said orders before the apexcourt.Held:The Hon’ble Supreme Court observed that:-• Rule 3 of the GRI can only be invoked when a particular good is classifiable under two or more headings, but once the

authorities have concluded that by virtue of Note 2(f) of Section XVII, ‘relays’ manufactured by the appellants are not evenclassifiable under CTH 8608, invocation of Rule 3(a) is not just and proper in law

• By invoking Note 2(f) of Section XVII, the lower authorities have overlooked the “suitability for use test or user test”indicated in Note 3 of Section XVII which is not justifiable

• The exclusion under Note 2(f) applies to the goods of general use and not to those used in or as Railway signaling equipment.• Further, Note 3 clarifies, that the parts which are suitable for use solely or principally with an article in Chapter 86 cannot be

taken to a different Chapter as the same would negate the very object of group classification.• Since it is conceded by the revenue that relays manufactured by appellants are used solely as part of the railway

signaling/traffic control equipment, invocation of Note 2(f) after by passing the sole or principal user test as acknowledged byGRI is not justified

On the basis of the above, the Apex Court set aside the impugned orders and answered in favour of the appellants.


M/s Canon India Pvt Ltd vs Commissioner of Customs2021-VIL-34-SC-CU

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Additional Director of DRI is not “the Proper officer” to initiate recovery of duty under Section 28(4) of the Customs Act

Facts:The appellant had imported digital cameras and claimed exemption of basic customs duty in pursuance of an exemptionnotification. Upon the first check done by the customs authorities on request of appellants, the goods were cleared for homeconsumption as exempt from duty in terms of the exemption Notification. Later, a SCN was issued Additional Director ofDirectorate of Revenue Intelligence (DRI) under Section 28(4) of the Customs Act, 1962 for recovery of duties short-paid/notpaid alleging wilful mis-statement and suppression of facts by the appellants at the time of clearance. The main issue before thecourt was regarding the powers of the Additional Director DRI to issue the said SCN and initiate the proceedings in the firstplace?Held:The Hon’ble Supreme Court observed that:-• Under Section 28(4) of the Customs Act, it is only “the proper officer” and not “any proper officer” who is entitled to recover

duties. The Parliament has intentionally, and not accidently, employed the article “the” so as to designate the proper officer(or his successor in office or any other officer authorized in the same office) who had assessed the goods at the time ofclearance

• Where one officer has exercised his powers of assessment, the power to order re-assessment must also be exercised by thesame officer or his successor and not by another officer of another department

• Moreover, the Additional Director of DRI is not even a “Proper officer” under the Customs Act as the Notification whichpurports to entrust functions of a proper officer under Customs Act has been issued under non existing power under Section2(34) of the Act instead of Section 6 of the Act

Relying on the decision of this Apex Court in the case of Commissioner of Customs vs Sayed Ali discussing the concept of“proper officer” at length, the bench set aside the the demand notices and the order passed by the CESTAT.

GSTHigh Court Decisions


Rattan India Power Ltd vs UOI; 2021-VIL-153-DEL

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Amount received in the nature of penalty/compensation for short offtake of coal are not towards any supply under GST

Facts:

The respondents recovered payments from the petitioner as penalty/compensation for short lifting of coal. In recovering

so, GST has also been recovered on the said penal/compensation amount under Clause 5(e) of Schedule II, being an

agreement to refrain from act or tolerating an act. However, the petitioner contends that though the sale of coal constitutes

supply of goods under GST, but as regards the penalty amount, no sale/supply of goods has been effected. Moreover, as no

invoice is issued for such penalty amount, the petitioners are also not entitled to avail ITC on it, thus the petitioners will be

burdened with the payment of GST on coal, which was actually not purchased.

Held:

The Hon’ble High Court observed that:-

• Prima facie, CGST Act does not permit levy of GST on such penalty, without the sale of any goods

• Schedule II defines ‘sale of goods’, however no provision in Clause 5(e) exists for sale or services

• Prima facie, it appears that payment of penalty is not relevant for termination of agreement

Since the matter requires further consideration, Notice has been issued and accepted by the respondents.


M/s Asiatic Clinical Research Pvt Ltd vs. UOI, 2021-VIL-156-KAR

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Rejection of refund without giving an opportunity of personal hearing is inappropriate

Facts:

Petitioner had sought for refund of the IGST paid by him under Section 54 of the CGST Act, 2017 on the ground of zero-rated

supply. Further, the authority issued a show cause notice for furnishing a reply within 15 days. The authority without waiting

for the period of 15 days as made available vide the SCN to make reply to the show cause notice and the request of personal

hearing, rejected the refund application of the petitioner. The petitioner, now has challenged the impugned order on the

ground of violation of the principles of natural justice.

Held:

The Hon’ble High Court, while disposing of the Writ Petition held that in light of the admitted position that the orders have

been passed within a period of 15 days contrary to such period being made available to the petitioner and that request for

adjournment has not been considered by the authorities, the orders of rejection of refund are set aside and in the interest of

justice, it would be appropriate if the petitioner is afforded an opportunity of personal hearing.


Dayamay Enterprise vs State of Tripura, 2021-VIL-157-TRI

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Cancellation of GST registration without passing any order and based on SCN without citing any particular reason improper

Facts:

The petitioner is a proprietor, engaged in purchase and sale of consumables and other taxable goods for which the

petitioner had taken registration under the GST. The Superintendent of Taxes issued a show cause notice to the petitioner

for cancellation of registration. Further, the petitioner did not reply to the said notice and thereafter, the petitioner found

that his GST account was blocked on the GST portal without passing any order cancelling the GST registration. Hence, this

petition has been filed.

Held:

The Hon’ble High Court, while disposing of writ petition, held:

• The impugned notice has been issued only for cancellation of registration, that too without citing any particular reason

• The respondent surely cannot block the petitioner's GST account on the official portal without passing any order for

cancelling the petitioner’s GST registration

• Any such action would prevent the petitioner from carrying on his business in a lawful manner. Therefore, impugned

show cause notice is quashed on the ground of being vague and imprecise and the respondents are directed to unblock

the GST account


M/s. DMR Constructions vs Assistant Commsr., (Mad.)WP. No. 9991 of 2020 batch, Order dated 26.02.2021

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Transition of accumulated credit of TDS under VAT regime to GST regime allowed

Facts:The petitioners have challenged notices issued by the tax authorities proposing the denial of transition of accumulated creditof Tax deducted at source (TDS) in their respective accounts for setting off output GST liabilities, in terms of Section 13 ofTNVAT Act, 2006. The petitioners contended that TDS is a tax and in terms of Section 140 of the TNGST Act, since thetransition of value added taxes is envisaged, thus the petitioners should have been allowed the said transition. On thecontrary, the revenue contended that TDS deduction is in the nature of a “deposit” or “amount” when deducted and unlessand until it is utilized for adjustment, it does not take the character of tax and thus carry forward of the same should not bepermitted under the provisions of TNGST Act.

Held:The Hon’ble Madras High Court, while allowing the petition and setting aside impugned orders, held that:-

• Once any deduction is made towards anticipated tax liability, it would assume the character of tax and such character willnot change or fluctuate depending on whether it is held as credit or an adjustment against tax liability. To attribute suchfluctuating character to an amount would distort the scheme of taxation and cause difficulty in interpretation of ancillaryprovisions

• Since the amount collected/deducted has been captured in the returns of the turnover filed under TNVAT regime, theamounts of TDS would be included for the purposes of transition under Section 140

• Reliance should be placed on the decision in Magma Fincorp Ltd vs. State of Telangana where the Telangana HighCourt, considering the same issue, observed that ”once it is admitted that credit was available to petitioner on the date ofswitchover to GST regime, purposive interpretation should have been given to Section 140 of the Act.”


M/s B.M. Patel & Co. vs State Tax Officer 2021-VIL-181-MAD

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Granting of opportunity for personal hearing is necessary as per Section 75(4) of CGST Act in case of adverse decision

Facts:

The petitioner has challenged the order passed by the adjudicating authority on the ground of being violative of principles of

natural justice, as the petitioner was not given an opportunity of being heard prior to passing of the impugned order. Relying on

the provisions of Section 75(4) of the CGST Act, the petitioner contends that the officer is required to grant an opportunity of

hearing where either a specific request in that regard is received from the person chargeable with tax or where any adverse

decision is contemplated against such person. The Revenue on the other hand contended that as no specific request has been

received for personal hearing from the petitioner, there was no necessity for extending an opportunity of hearing per se.

Held:

• The Hon’ble High Court held that while Section 73 and 74 of the CGST Act doesn’t specifically requires the assessing officer

to give an opportunity of personal hearing, Section 75 of the CGST Act, relating to the procedure for determination of tax

contemplates that an opportunity of personal hearing shall be granted in all cases where a specific request is received or

where any adverse decision is contemplated against such person

• It is only in the cases where the explanation offered by the assessee is accepted, there is no necessity for granting a

personal hearing. In all other cases, it is incumbent upon the revenue to extend an opportunity of personal hearing to the

petitioner. Hence, the Court set aside the impugned order and allowed the petition.


Anuj M. Gupta vs Assistant Commsr. of State Tax, Mumbai 2021-VIL-191-BOM

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Bail to be granted where the accused has been in custody for a considerable time without filing of charge-sheet

Facts:

The Petitioner was arrested for allegedly receiving tax invoices without the actual supplies of goods or services, therebyclaiming ineligible input tax credit to the tune of at least 31 crores on such invoices, thus violating provisions of Sections132(1)(b) and (c) of the Maharashtra GST (MGST) Act. The petitioner has thus filed this petition seeking to be released onbail.

Held:

The Hon’ble High Court, while allowing the release of the petitioner on bail, observed that:-

• Considering the fact that offences in the present case are punishable for a term upto 5 years, in terms of Section167(2)(a)(ii) of the Code of Criminal Procedure, the maximum time for which the accused can be held in detention is 60days

• The petitioner has already completed 54 days in custody without any charge-sheet being filed by the respondentsbefore the competent court

• Reference made to decision of this court in Daulat Samirmal Mehta vs UOI, where the basic rule of criminal justicesystem “Bail, not jail” was reiterated

• Petitioner shall be released on bail, subject to the conditions that a cash surety of Rs. 5 Lacs to be furnished andpetitioner’s passport to be deposited


Pentacle Plant Machineries Pvt Ltd vs Office of GST Council2021-VIL-193-MAD

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In the absence of GSTR-2 and GSTR-1A, GSTR-1 allowed to be rectified on account of bonafide human error

Facts:

The petitioner, engaged in the manufacture of construction equipment, committed an inadvertent error in filing its GSTR-1,

by entering the GST number of the wrong purchaser. However, the credit claimed by the petitioner on the basis of

accompanying invoices has been denied solely on account of the mismatch in GSTR number. Therefore, the petitioner has

filed this petition contending that in the absence of GSTR-2 and GSTR-1A, the error couldn’t have been noticed in time.

Held:

The Hon’ble High Court, while allowing the Writ Petition, has held:

• The decision of the Hon’ble Supreme Court in the case of Sun Dye Chem (Supra) squarely applies to this case,

wherein an error arose relating to the distribution of credit as between IGST/CGST/SGST, which posed a difficulty to the

recipient in the matter of availment. The Court while allowing the recipient to avail credit, held that the error committed

by the petitioner was an inadvertent human error and the petitioner should be in a position to rectify the same

• Further, since Forms GSTR-1A and GSTR-2 are yet to be notified, the petitioner should not be fastened with any liability

on account of the bonafide human error and the petitioner must be permitted to correct the same

Hence, the petition is allowed and a direction is thus issued to respondents to enable amendment of petitioner’s GSTR-1.


M/s Deepak Print vs UOI, 2021-VIL-197-GUJ

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FORM GSTR-3B can be rectified for the relevant period to which the error relates

Facts:

The petitioner, engaged in the dress material printing process, inadvertently uploaded wrong entries while filing its GSTR-3B

for May 2019. Subsequently, the petitioner though made a representation to the nodal officer for allowing them to edit and

rectify the incorrect data so entered, however the nodal officer did not respond to the said representation. Hence, the

petitioner filed this petition to decide whether they are entitled to seek rectification of GSTR-3B for the month of May 2019?

Held:

The Hon’ble High Court heavily relying on the observations and the ratio as dictated by the Delhi High Court in the case of

Bharti Airtel Limited vs. Union of India & Ors. wherein the petitioner was permitted to rectify FORM GSTR-3B for the

period for which the error related; in the present case, held that the petitioner should be permitted to rectify FORM GSTR-3B

in respect of the relevant period and further directed the respondents to verify the claim as per the rectified GSTR-3B within a

period of two weeks.


Tirthamoyee Aluminium Products vs State of Tripura2021-VIL-201-TRI

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Mentioning of wrong distance in E-way Bill due to a clerical error is a minor lapse and GST with penalty cannot be demanded for the same

Facts:The petitioner, a proprietary concern, engaged in manufacturing of aluminium utensils, purchased certain products fromHindalco industries, a Govt. Company, which were to be supplied from Howrah (Kolkata) to Agartala. The Consignorgenerated the E-way Bill but due to a clerical error, the distance from the place of origin to the ultimate destination wasentered as 470 Kms instead of the actual distance which was 1470 Kms. Further, in terms of Rule 138(10) of the CGSTRules, the system automatically generated a validity period of 5 days for the E-way bill based on incorrect distanceentered. Consequently, the goods were intercepted and the inspecting agency issued a detention memo on the ground thatthe transporter had not produced a valid E-way Bill. Moreover, after issuing a notice to the petitioner to appear before theauthority, strangely the state tax officer passed the impugned order confirming the demand much before the day ofappearance of the petitioner.

Held:The Hon’ble High Court, while setting aside the impugned order, held that:-

• The demand of GST with penalty was not justified given the undisputable facts which infer that the discrepancy hademerged due to oversight and a clerical error

• Reference made to CBIC Circular No. 64/38/2018-GST dt. 14.09.2018, according to which in cases of minor lapseson the part of the consignor/transporter, specifically where the error relates to one or two digits of the documentnumber mentioned in the e-way bill, proceedings under Section 129 may not be initiated

• The order passed by the State Tax officer also suffers from gross irregularity as no hearing has been granted to thepetitioner and moreover, a separate order much before the appearance date has been passed confirming the taxdemand, treating it as a mandatory demand instead of a tentative demand


M/s Rameswar Udyog Pvt Ltd vs Union of India2021-VIL-219-GUJ

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Sanction of refund cannot be delayed on account of technical error on GST portal

Facts:The petitioner, an exporters of goods, committed certain errors while furnishing the details of outward supplies in FORM GSTR-1 on account of which there was a mismatch between the GST portal data and the data on ICEGATE customs portal andhence, the refund of the IGST was not granted to the petitioner. Further, the petitioner approached the GST authorities underthe aegis of the CBIC circular, which provides for steps to be taken for amending the GST portal data in case of exporters.Thereafter, the petitioner was allowed to amend 28 invoices on the portal but they were not permitted to amend remaining 14invoices due to technical error. In such circumstances, the petitioner approached this Hon’ble court for seeking direction toallow amendments to the remaining invoices.

Held:The Hon’ble High Court, while disposing off petition, held that:-

• The petitioner may approach the Port of export / Customs Zonal Office with the copy of GSTR-1 and GSTR-3B along withthe certificate of the Chartered Accountant stating that there is no discrepancy between the IGST amount refunded onexports and the actual IGST amount on exports

• Once the records are transmitted by GSTN to the Customs system, the usual procedure adopted in case of sanction of IGSTrefunds would be allowed

• The authorities are directed to immediately act as per the said procedure and sanction the refund, in accordance with law,and in case of any difficulty, it shall be open to the writ applicants to revive this writ application


M/s Jai Maa Jwalamukhi Iron Scrap Supplier vs State of U.P2021-VIL-226-ALH

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Where proper invoice and e-way bill have been issued, mere discrepancies in returns cannot lead to the conclusion that turnover has been concealed

Facts:

The petitioner had been alleged to have concealed stock of iron scrap and turnover related thereto, especially with respect to

two loose purchases and on the basis of non-production of books of accounts and alleged some discrepancies in GSTR-3B and

GSTR-2A, the adjudicating confirmed tax and penalty accordingly. On appeal, the appellate authority sustained the tax and

penalty only with respect to the two loose purchases. Hence, this current petition.

Held:

The Hon’ble High Court, while allowing the petition, held that:-

• Once the revenue admits that proper invoice and e-way bills had been issued in regular course, it is difficult to imagine

how a conclusion could have been reached that the goods were unaccounted for

• Mere existence of some discrepancies cannot lead to the conclusion that tax has been evaded or the transaction has not

been disclosed

• Once the revenue admits, even if impliedly, that the transaction was covered by regular invoices and e-way bill details had

been uploaded on the portal, the transaction cannot be said to be falling under undisclosed turnover


M/s Rajkamal Builder Infrastructure Private Limited vs UOI2021-VIL-240-GUJ

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Interest cannot be recovered under Section 50 of the CGST Act vide a notice in FORM GST DRC-01

Facts:

The petitioner was issued a show cause notice in FORM DRC-01 under Rule 142(1) of the CGST Rules, 2017 for recovering

interest under Section 50 of the CGST Act on gross tax liability. Consequently, the petitioner has filed this petition mainly on

two grounds. Firstly, whether interest under Section 50 of the CGST Act is to be levied on the net tax liability or the gross tax

liability. And Secondly, whether issuance of DRC-01 under Section 50 of the CGST Act is legal and proper?

Held:

The Hon’ble High Court, while quashing the impugned order issued in FORM GST DRC-01, held that:-

• It is clear from the amendment proposed vide Clause (103) of the Finance Bill 2021 that the interest under Section 50 of

the CGST Act can only be levied on the net tax liability and not on the gross tax liability. In such circumstances, the

demand raised by the respondent is not in accordance with law

• On plain reading of Rule 142(1) of the CGST Rules, it is evident that FORM DRC-01 can be served by proper officer along

with the notice issued under Sections 52, 73, 74, 76, 122, 123, 124, 125, 127, 129 or 130 and that too electronically

• On a conjoint reading of Section 75(12) of the CGST Act and Rule 142(5) of the CGST Rules, it is clear that the notice

should have been issued in FORM DRC-07, specifying the amount of tax, interest and penalty payable by the person, and

FORM GST DRC-01 had been issued without the authority of law

GSTAppellate Authority


M/s Transformative Learning Solutions Pvt LtdOrder-in-Appeal No. 52/JC/CT/Appl-I/Delhi/2019 dt. 09.03.2021

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Group companies which are separate legal entities are not ‘mere establishments of distinct persons’ under GST

Facts:The Appellant was providing services to its group company in Singapore. Subsequently, it had filed a refund claim on accountof export of such services under IGST Act, however, the adjudicating authority rejected the claim of the Appellant on theground that the services provided by the appellant did not qualify as ‘export of services’ as defined under Section 2(6) of theIGST Act, as such group company was covered under ‘mere establishment of distinct persons as per Explanation 1 in section8’ as opposed to the condition (v) contained definition of ‘export of services’ provided under IGST Act. This view oddepartment was fortified by the presence of a common director in both entities.

Held:The GST Appellate Authority observed that:-

• Explanation 1 to Section 8 of the IGST Act refers to two establishments of the same person, one in India and one outsideIndia. However, a subsidiary company is not a branch or a part of its holding company and both entities are two separatelegal entities having their own independent existence

• Following the decision of Gujarat High Court in the case of Linde Engineering India Pvt Ltd, issued under pre-GSTregime, it can be said that appellant and its group company are not mere establishments of a distinct person and allconditions of ‘export of service’ are fulfilled

• Appellant and its group company can be said to be ‘related persons’ under Explanation (a) to Section 15 of the CGST Act• Presence of a single common director cannot make them an establishment of a single person

On the basis of the above, the Appellate Authority quashed the order of the refund authority which had rejected the claim.

GSTAppellate Advance Rulings


M/s Fraunhofer-Gesellschaft; 2021-VIL-11-AAAR

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Activities undertaken by Liaison Office in India for its Head office abroad is not supply under GST

Facts:The Appellant, registered in Germany (HO), established its Liaison office (LO) in India, for carrying out liaison activities asper the conditions of approval letter from RBI. The appellant had sought ruling from AAR regarding the taxability of suchactivities under GST, wherein the AAR had ruled against the appellant holding that such activities amount to supply underSection 7 of CGST Act and hence is liable to pay GST. Now, the appellant has appealed against the said ruling, mainly onthe grounds that the LO is merely an extended arm of the HO and not a separate person in the eyes of law, thereforerelying on the SC decision in Calcutta Club Ltd., service to self cannot be called as a supply under GST. Also, merereimbursement of expenses from HO cannot be called as ‘consideration’ for any supply.

Held:The Appellate Authority for Advance Ruling observed that:-• LO is not recognized as a separate legal entity in India, and at best, can be considered as a geographical extension of

its parent company in Germany. Even under Companies Act, 2013, such office shall be considered as foreign entity• As LO is not a ‘person’ under CGST Act, the question of LO and HO being related does not arise as for being related,

presence of two distinct persons is requisite• The liaison activity performed by the LO is in nature of service of self, which does not come under the purview of

‘supply’ under GST• Reimbursement received from HO cannot be considered as ‘consideration’ for any supply under GST

Basis the above, the AAAR ruled that the activities under taken by liaison office do not amount to supply of services underGST and for this reason, no GST is payable by the Appellants.


M/s Yulu Bikes Pvt Ltd; 2021-VIL-10-AAAR

29

Leasing or renting of e-bikes/bicycles without operator is classifiable under HSN 9973

Facts:The Appellant is engaged in renting of vehicles like e-bikes, bicycles through a technology driven mobility platform. Theyenter into contract/agreement with the customers with regard to usage /renting of the e-bikes, bicycles and charge thembased on the time of usage of such vehicles. The Appellant is charging GST @ 18% on the renting of e-bikes ‘Miracle andMove’ under HSN Code 9966, but was of the view that HSN 9973 would be a more appropriate classification. Pursuant tothis, it had approached the AAR which had ruled that renting of e-bikes/bicycles cannot be classified under ChapterHeading 9973. Hence, this appeal.

Held:

The Appellate Authority for Advance Ruling, overruling the order passed by AAR, held that:-• Service of renting of e-bikes and bicycles by the Appellant without an operator is classifiable under Chapter Heading

9973• The amendment Notification No. 20/2019 CT(R) is not only an amendment to the GST rate but also the classification of

goods• Therefore, while the renting service supplied by the Appellant would be classifiable under Chapter Heading 9966 upto

30th September, 2019, post amendment with effect from 1st October 2019 the classification had changed to ChapterHeading 9973 under Sl. No. 17(via) of Notification 11/2017 dt. 28.06.2017

• The applicable rate of tax on such goods will be the same rate of tax as applicable on supply of like goods involving transfer of title in goods


M/s Ion Trading India Private Ltd2021-VIL-16-AAAR

30

Employer will qualify as a pure agent in case of amount recovered from the employees towards car parking charges payable to building authorities

Facts:The appellant is engaged in the business of software development which is exported to overseas companies. The appellantfacilitated procurement of car parking spaces for its employees from the Building authority and procured them on payment ofagreed lease charges on the basis of per car parking per month. Further, the appellant pays part of the lease charges andrecovers the balance amount equally from the employees using such spaces. The appellant had sought ruling from AAR as towhether the amount recovered from the employees towards car parking charges payable to building authorities would bedeemed as “supply of service” by the appellant to its employees or not. The AAR had ruled that in the absence of requisitedocuments, no ruling can be given on the questions asked by the appellant. Hence, this appellant has appealed to AAAR.

Held:The Appellate Authority for Advance Ruling observed that:

• The appellant is providing right to its employees to use parking facility on the parking space provided by the buildingauthority and for this facility they are collecting certain amount from their employees. Hence, the activity provided by theappellant squarely falls under the Schedule II i.e. "Activities to be treated as Supply of Goods or supply of Service" of theCGST Act, 2017, specifically, under Para 2(a) which reads “any lease, tenancy, easement, license to occupy land..”

• The appellant procures the parking services on request of employees, declare it separately in manual and collects only thatamount which is charged by Building Authority for the parking. Hence, it satisfies all the conditions of Rule 33 of CGST Rulesrelating to “Pure agency” and thus, it qualifies as a Pure Agent of the employees availing parking facility. Reliance is alsoplaced on the Advance ruling in M/s DRS Marine Service Pvt Ltd.

• Accordingly, the value of the services in the present case will be NIL, as the appellant is providing the same in the capacityof a pure agent

GSTAdvance Rulings


M/s Wipro Enterprises Pvt Ltd, 2021-VIL-142-AAR

32

Hand Sanitizers are not ‘Medicaments’ and hence warrant the classification under Chapter Heading 3808 taxable @18%

Facts:

The applicant is manufacturing and marketing hand sanitizers to combat the situation of COVID-19. As per the Applicant, thesaid sanitizers should be classified under chapter heading 3004 which covers ‘medicaments used for therapeutic orprophylactic value’. The applicant has strongly relied on the decisions of apex court in Sujanil Chemo Industries and CiensLaboratories to contend that the hand sanitizers prevent spreading of disease (COVID-19) and hence the same should beconsidered to be of prophylactic use, qualifying as a medicament.

Held:

The Advance Ruling Authority has ruled:• An agent would be called a ‘therapeutic agent’ only if it has a curative effect against an already prevalent disease• The product in question cannot be said to have prophylactic use is COVID infection, as it cannot be compared to Covaxin,

which specifically prevents a disease i.e. COVID-19 infection• The decisions relied upon by the applicant are not helpful to the applicant and rather go against the case of the applicant

as in Ciens Laboratories, the Apex court had ruled that if a product’s primary function is ‘care’ and not ‘cure’, then itcannot be considered as a medicament.

• In the instant case, the hand sanitizers are primarily used for care rather than cure for COVID-19.• Likewise in the case of Sujanil Chemo Industries the product in dispute for anti-lice agent which is against a particular

organism which is not there in the case of hand sanitizers• In view of the above, the hand sanitizers in question are appropriatelt classifiable under Chapter Heading 3808 of the Tariff

and are liable to GST @18%


M/s Premier Car Sales Ltd, Lucknow2021-VIL-161-AAR

33

Supply of labour services alongwith replacement of parts under ‘warranty repair services’ are to be construed as ‘Composite supply of services’ under GST

Facts:

The applicant, engaged in the sale of motor vehicle parts and accessories, entered into an agreement with Hyundai Motors for

providing repair services to their customers on their behalf under warranty period, and in return, the applicant received

consideration for both, labour charges as well as reimbursement of cost of parts replaced, if any. The applicant thus has

sought advance ruling as to whether repair services which also involves replacement of parts as provided by the applicant can

be classified as a ‘composite supply’ in terms of Section 2(30) of the CGST Act?

Held:

The Authority for Advance Ruling held ruled that:-

• The predominant supply in such transaction is that of repair service and supply of parts/components is only incidental or

ancillary to the main supply of ‘labour services’

• Supplies of labour services in conjunction with of parts/components together under ‘warranty repair services’ should be

construed as naturally bundled in the ordinary course of business, and accordingly, can be said to be ‘composite supply of

service’ with ’repair service’ being the ‘principal/predominant supply’

• However, such classification shall only hold good only when such services are provided under warranty period, parts are

replaced as incidental to repair service and applicant is being reimbursed for labour charges and parts.


M/s SPFL Securities Ltd., 2021-VIL-165-AAR

34

GST payable on recovery of delayed payment of charges in relation to securities

Facts:

The applicant is engaged in the business of providing services of stock broking i.e. purchasing and selling of shares on behalf

of the clients. The applicant has sought advance ruling as to whether GST was leviable on delayed payment of charges

reimbursed, which were deducted by Stock exchange subject to (T+1) regulation from the applicant’s account.

Held:

The Advance Ruling Authority ruled as under:-

• Although securities as such are not leviable to GST, but the applicant is providing services of 'trading of securities on behalf

of customers' which is a supply of service liable to GST

• The delayed payment charges are also linked to the activity of ‘trading of securities on behalf of customers’

• In view of Section 15(2)(d) of the CGST Act which includes the value of “any interest, late fee or penalty for delayed

payment of any consideration for any supply”, such charges should be included in the value for charging GST

On the basis of the above, the applicant was held liable to pay GST on the delayed payment of charges which are overdue

from the client towards trading of securities.


M/s Dwarikesh Sugar Industries Ltd2020-VIL-168-AAR

35

ITC allowed in respect of supplies made as part of CSR activities as the same are not “gifts” under Section 17(5)(h); ITC disallowed for goods and services used for constructions capitilized

Facts:The applicant, a company incorporated under Companies Act 2013 had undertaken activities like construction of schoolbuilding, free supply of furniture and electrical goods to school, and other goods and services on which GST is charged, inorder to comply with its CSR obligations as mandated by. Section 135 of the Companies Act, 2013. Pursuant to the aboveprocurements and supplies, the applicant sought an advance ruling as to whether such expenses incurred by the companyqualify as being incurred “in the course of business” for availing ITC in terms of Section 16 of the CGST Act or not.Additionally, whether ITC in relation to CSR activities is blocked under Section 17(5)(h) of not, as free supply of goods.Further, whether goods or services used for construction of building, to the extent they are not capitalized in the books, arerestricted under Section 17(5)(c)/(d) or not.

Held:The Authority for Advance Ruling ruled that:-

• In view of the decision of Tribunal in Essel Propack Ltd. as well as the Hon’ble High Court decision in Millipore India (P)Ltd., as the applicant is compulsorily required to undertake CSR activities in order to run its business, it becomes anessential part of its business and thus are to be treated as incurred “in the course of business”

• Carving out a clear distinction between goods given as “gifts” and those provided as a part of CSR activities, it can be saidthat while former is voluntary and occasional, the latter is obligatory and regular in nature, and thus, CSR expenses do notqualify as “gifts” and hence, its credit is not restricted under Section 17(5)(h) of the CGST Act.

• ITC on construction/works contract services is restricted under Section 17(5)(c)&(d) only to the extent of capitalization inthe books of the Applicant. Thus, ITC on goods/services related to construction/WCS, not capitalized, will be available.


M/s North Shore Technologies Private Limited, Noida2021-VIL-170-AAR

36

Arranging subsidized transport facility for employees cannot be treated as a “supply of service” under GST

Facts:

The applicant, engaged in the business of software development, was providing optional subsidized shared transport facility to

its employees for commutation between workplace and their residence. The facility is provided by third party vendor who

issues bill in the name of the applicant. The applicants deducts subsidized amount from the salaries of employees and bear

the balance cost itself. Consequently, the applicant has sought this advance ruling as to whether this subsidized shared

transport facility provided to its employees would be construed as “supply of service” by the applicant to its employees or not.

Held:

The Authority for Advance Ruling ruled that:-

• Referring to Section 7 of the CGST Act read with Schedule II to the Act, it is imperative that to qualify as “supply of

services”, the same should be in furtherance of business. However, the said activity undertaken by the applicant is not

integrally connected to the functioning of their business. Hence, the same cannot be said to be in “furtherance of business”

• Further, relying on the ruling of this authority in case of Posco India, Ion Trading India Pvt Ltd and CBIC press

release dated 10.07.2017, it is observed that arranging transport facility for employees and subsequent recovery under

the terms of employment contract, cannot be considered as a supply of service in the course of furtherance of business


M/s Ajay Kumar Singh; 2021-VIL-180-AAR

37

Services relating to lease for mining and extracting merit classification under Heading 9973 as “Licensing services for right to use minerals including its exploration and evaluation” attracting 18% GST

Facts:The applicant, engaged in the business of sand mining have been granted mining lease rights by the Government for extractionof sand, for which the applicant pays license fee/charge or royalty and discharges GST on RCM basis. The applicant soughtadvance ruling as to whether the said services can be classified under chapter number 9973 as “Licensing services for the rightto use minerals including its exploration and evolution” and what shall be the GST rate on the given services on which royalty isbeing paid.

Held:The Authority for Advance Ruling ruled that:-• The applicant enjoys the title over the minerals extracted from the lease hold area and accordingly appropriates the property

in minerals by way of sale or otherwise. Thus, there is a transfer of right to exploit the minerals and to appropriate theexploit. Hence, the services merit the classification “Licensing services for the right to use minerals including its explorationand evaluation” at Sl. No. 257, Heading 9973

• Amendment to Notification No. 11/2017-CT(R) vide Notification 27/2018-CT(R) dt. 31.12.2018 had been issued on therecommendations of the GST Council consequent to 31st Council meeting, the purpose of which was to clarify the GST rateapplicable to the right to use Intellectual Property (IP) and similar products other than IPR under group 99733

• However, as per the agenda of the meeting, it has been made clear that “same rate of central tax as on supply of like goodsinvolving transfer of title in goods” does not apply to transfer of IP and similar products other than IPR

• The underlying principle is that in the absence of any underlying goods, transfer of IPR and other similar products is not likelease and rental of goods where title remains with the lessor and the lessee merely enjoys the right to use the goods duringthe lease period. Thus, the rate prescribed for lease of goods can’t be made applicable for leasing of mining area conferringright to extract and appropriate minerals. Relying on various Rulings, it is clear that such services will attract GST@ 18%


M/s BG Elevators and Escalators Pvt Ltd; 2021-VIL-181-AAR

38

Erection and commissioning of lifts is taxable at 18% GST, irrespective of place of installation

Facts:

The applicant is engaged in erection and commissioning of lifts and elevators for domestic and commercial use and is charging

GST at the rate of 18% at present on both types of supplies. The applicant submits that they learnt that their competitors are

charging 12% GST on erection and commissioning of lifts on immovable property for domestic use and hence, filed the instant

application to determine the tax rate for such services. In support, the applicant furnished proforma invoice of a competitor

for erecting and installation of lift on immovable property for domestic use.

Held:

The Advance Ruling Authority ruled as follows:-

• The service of erection and commissioning of lifts and escalators is covered under SAC 995466

• Sl. No.3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, stipulates the rate of GST on

the services covered under 995466 at 18%.

• The said GST rate is irrespective of the place of installation i.e. at the residence or at the mall or shopping complex and

also irrespective of the intended usage of the lifts/escalators either for domestic use or commercial use


Manoj Mittal; 2021-VIL-185-AAR

39

Supply from restaurant counters where there is no element of service to be treated as ”supply of goods” and catering services provided to an educational institute are exempt in terms of Exemption Notification

Facts:The applicant has a place of business with sections, one being a sweet parlour where only sweetmeats, namkeens and bakeryitems are sold off the counter in the form of takeaways, and in the other section, fast food and snacks can either be consumed orallowed as takeaway. In addition, the applicant is also engaged in providing catering services to an educational institutionproviding education services up to secondary school. The applicant thus sought this advance ruling as to whether sale from sweetparlour could be categorized as supply of goods or not, there being no element of service. Additionally, whether the supply fromthe other section where one can eat be classified as restaurant services liable to 5% GST or not. Further, whether cateringservices provided to the educational institute qualify as an exempt supply or not.

Held:The Authority for Advance Ruling, after examining the business model of the applicant, ruled the following:-• The supplies from the sweetmeats parlour without any element of supply of services or as a part of services cannot be

considered as a “composite supply” and hence shall be treated as supply of goods and shall attract tax accordingly• Supply of food and beverages made in the eating section from the restaurant counter having an element of supply shall

qualify as “composite supply”, where the principal supply is restaurant service and accordingly, to be taxed at 5% GST• As catering services provided to an educational institution providing educational services up to higher secondary school or

equivalent are exempt in terms of Sl. No. 66(b)(ii) of the Exemption Notification No. 12/2017-CT(R), drawing referenceto Para 2 of Circular No. 85/04/2019-GST dt. 01.01.2019, such supply is covered under the said entry and accordinglyshall be exempt from tax

• However, part of the agreement with the educational institution provides for catering to the auditor, guests, parents onprogram days etc. Evidently, such supplies are occasional in nature and hence fall under the category of “outdoor catering”and shall attract 5% GST without the credit of input tax

SERVICE TAX, CUSTOMS & CENTRAL EXCISE


Ratnamani Metals & Tubes Ltd vs CCE & ST, Kutch; 2021-VIL-75-CESTAT-AHM-ST

41

Liquidated damages are not consideration towards any ‘service’ and hence not liable to under service tax

Facts:

The appellants recovered certain amounts from its suppliers in the nature of liquidated damages for compensating the

appellants against poor quality of material supplied. The department contended that the said amounts form a ‘declared

service’ of tolerating an act/refraining to do an act under Section 66E(e) of the Finance Act 1994 and hence, the appellants

ought to have discharged applicable service tax on it. However, the appellants contended that recovery of liquidated

damages do not involve the element of service and hence there is no activity which would fall under ‘declared service’.

Further, the amount recovered is not a consideration towards any service. The appellants also strongly relied on the

decisions of K N Foods Industries Pvt. Ltd, GE T&D India Ltd and Repco Home Finance Ltd. However, still the

adjudicating authority and the first appellate authority have decided against the appellants.

Held:

The Tribunal held that the vital point raised by the appellants that ‘liquidated damages’ are not “consideration” towards any

service, has not been considered either by the adjudicating authority or the first appellate authority. The judgements relied

upon by the the appellants shall directly apply only after verifying the facts of the case. Therefore, the impugned order is

set aside and the matter has been remanded back to the adjudicating authority.


CC (Prev.) Kolkata vs M/s Anutham Exim Pvt Ltd, 2021-VIL-91-CESTAT-KOL-CU

42

Carbonated beverages with Fruit juice are classifiable under Customs Tariff Heading 22029920

Facts:The respondent-assessee are importers of branded drinks namely Big lemon, Big orange etc. which they described as“Carbonated beverage with fruit juice”. The assessee contended that the same is classifiable under CTH 22029920 whichcovers “fruit pulp or fruit juice based drinks” whereas the revenue contended that the correct classification of thedrinks imported by the assessee is CTH 22021020 (which covers lemonade) for carbonated beverage with fruit juicecontaining lime and CTH 22021090 (which covers others) for carbonated beverages containing other fruit juices, on thegrounds that the main ingredient of all products is carbonated water and the fruit juice content is merely 5% (or 2.5% incase of lime). The Commissioner(appeals) upheld the assesee’s stand against which, the revenue has preferred this appeal.

Held:The Hon’ble Tribunal, while upholding the order of Commissioner(Appeals) and rejecting Revenue’s Appeal, held that:-

• The drinks in question form a separate specie of products known to the market, as neither carbonated beverage alonenor fruit juice alone gives the essential character of the products in question

• Whenever goods cannot be classified as per Rule 3(a) or Rule 3(b) of the General Rules to Interpretation (GRI), thenRule 3(c) is to be resorted to, as per which, the customs tariff heading appearing last in order prevails for classification,which in the present case, is CTH 22029920 as preferred by the assessee and confirmed by the Commissioner (appeals)

• The ruling of the Advance Ruling Authority as relied on by the revenue is not applicable as the same is only applicable tothe assessee who has sought clarification. Even the food category description of FSSAI regulations are not relevant forclassification of products under Customs Tariff, as relied upon by the revenue

• Respectfully following the decision of Supreme Court in case of Parle Agro and Tribunal’s larger bench decision ofBrindhavan Beverages, the above products have been correctly classified under CTH 22029920 by Commissioner(A)


Kafila Hospitality & Travels Pvt Ltd vs Commissioner, ST, Delhi2020-VIL-101-CESTAT-DEL-ST

43

Target-based incentives cannot be termed as “consideration” for services and are not leviable to service tax

Facts:Appellant, an approved agent of IATA, is engaged in providing air tickets. In addition to commission, IATA agents receive target-based incentives, linked to guaranteed booking of a minimum number of airline tickets. In cases where sub-agents fulfil similartargets, IATA agents pay incentives to sub-agents as well. Similarly, CRS companies (Central Reservation System) also paycommission to agents when agents achieve a minimum number of bookings through the concerned CRS portal. The Departmentproposed to raise a demand of service tax upon the target-based incentives as well as the CRS commission paid to travel agentson the grounds that such agents are thereby providing a service of ‘promoting and marketing’ the business of airlines/CRScompanies by achieving a minimum number of bookings and receiving commission in return as consideration for the same. Basedon the department’s stand, commissioner held against the appellants. Hence, they have appealed before Tribunal.Held:• Travel agents are only providing options to the passenger and it is the passenger who determines the airline for travel.

Therefore, it cannot be said that travel agent is promoting services of any particular airline• Reliance is placed on the decision of Madras High Court in Airlines Agents Association wherein it was held that commission

earned by travel agents has a direct nexus with the service of booking of air tickets for customers and it cannot be said thatthe travel agent was promoting or marketing the business of airlines. Further, reliance also placed on the decision of KeralaHigh Court in Shabeer Travels wherein it was held that where a sub-agent books air tickets through another travel agent,the sub-agent is essentially rendering “air travel agent” services to travel agent and not liable to service tax under BAS

• For CRS incentives, it was held that the air travel agent is promoting its own business and not the business of CRS companiesand hence the same should be classified as air travel agent services and not business auxiliary services

• Similarly, w.r.t. target based incentives, relying on the decision of Rohan Motors Ltd, it clearly transpires that incentives paidfor achieving targets cannot be termed as “consideration” as travel agent is not promoting anyone’s business and hence, arenot liable to service tax


Petronet LNG Limited vs Princ. Commr. of ST, Delhi2021-VIL-118-CESTAT-DEL-ST

44

”Free of cost” supplies by service recipient to service provider do not form “consideration” and cannot be included in the value of taxable supply

Facts:The appellant entered into an agreement with its customer for regasification of Liquified Natural Gas (LNG). The agreementcontains a clause relating to “allowed loss and consumption” under which a certain percentage of LNG made available to theappellant by its customer is understood to be lost/consumed in performing regasification services. The appellant accordinglydischarged service tax liability on amount received for regasification services, however, the revenue proposed to levy servicetax on the value of pre-fixed quantum of LNG identified towards “allowed loss and consumption” on the ground that such “freeof cost” supplies by customer to appellant should form part of “consideration” received and hence should have been includedin the taxable value for payment of service tax. The demand was confirmed by the commissioner, hence the appeal.

Held:

The Hon’ble CESTAT (President bench) observed that:-• This Tribunal, in the appellant’s own case (2019-VIL-659-CESTAT-DEL-ST), having identical facts and grounds, had

earlier held that the “allowed loss and consumption” would not represent a quid pro quo for the regasification servicesrendered by the appellant. In fact, “allowed loss and consumption” is a stipulation contained in the agreement betweenparties to remit the performance of obligation of regasification in relation to the LNG lost and consumed. Hence, it does notqualify as ”consideration” for services of regasification

• In the above decision, the Tribunal also relied upon the Supreme Court decision in Bhayana Builders wherein the apexcourt emphasized that service tax is payable on gross amount charged which would be the amount billed by serviceprovider to the service receiver. Further, it emphasized that cost of “free supply of goods” provided by the service recipientto the service provider is neither an amount charged nor it can be regarded as a consideration for services provided.

On the basis of the above order, the Tribunal set aside the commissioner’s order and allowed the appeal

45

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