Article

ISD vs. Cross Charge – The saga continues

By Preeti Goyal and Neha Jain

The article in this issue of Tax Amicus revolves around the recommendation of the 50th Meeting of the GST Council and the clarification brought in by the CBIC Circular No. 199/2023-GST, dated 17 August 2023 with respect to distribution of credit through Input Service Distributor (‘ISD’). The article in this regard notes that ISD vs. Cross Charge issue has been an area of ambiguity both for the taxman and the taxpayer since the inception of GST, as different practices have been prevalent in the industry. Noting that the Circular has put at rest many disputes surrounding the issue, the authors highlight some of the open issues and aspects which need to be addressed in view of the proposed amendment in law to make the ISD registration mandatory. They, in this regard, discuss the issues like valuation in case of cross-charge, issues when recipient unit is in SEZ, and the ambiguity regarding the costs which need to be included for the purpose of cross charge of internally generated services. According to them, before making ISD mandatory, it is important that government brings clarification.

Goods and Services Tax (GST)

Notifications and Circulars

• Online gaming – CGST (Amendment) Bill, 2023 and IGST (Amendment) Bill, 2023 granted assent by the President
• Central Goods and Services Tax Rules, 2017 amended for second time in 2023
• Amendments in CGST Act and IGST Act by Finance Acts, 2021 and 2023 notified

Ratio decidendi

• Cash not forming part of stock-in-trade of business cannot be seized during investigation aimed at detecting GST evasion – SC approves Kerala HC decision – Delhi HC also holds that Section 67 is not to seize assets, which are not subject matter of evasion, for recovering tax
• Registration – Show cause notice to be not merely uploaded on web-portal but also forwarded by email or hand delivered – Bombay High Court
• Cancellation of registration – Delay in filing appeal thereagainst to be condoned – Madras High Court
• Input Tax Credit is not available if seller not paid tax to government – Patna High Court
• ITC reversal when not to be asked from the buyer in case the seller had not paid tax – Calcutta High Court
• Provisional blocking of ITC under CGST Rule 86A – Post-decisional hearing to be granted – Karnataka High Court
• Confiscation of goods of the buyer, in case of doubtful existence of the seller, when not sustainable – Andhra Pradesh
• Retrospective cancellation of registration when not sustainable – Delhi High Court
• Natural justice – Telephonic conversation is no substitute for personal hearing – Delhi High Court
• Loan to a credit card holder – IGST when not chargeable on interest – Calcutta High Court
• Demand – Notice under Section 61(3) is not mandatory for proceeding under Section 74 – Allahabad High Court
• Amount deposited under Section 73(5) to be accepted towards fulfillment of pre-deposit under Section 107(6) – Bombay High Court
• Cancellation of registration by succeeding officer – Succeeding officer to also issue notice – Kerala High Court
• Amount paid during investigation is not paid under self-assessment even if paid in Form DRC-03 – Punjab & Haryana High Court
• Advisory to foreign group company for investment in India does not fall under intermediary services – Delhi High Court
• Credit note is not required to accompany return of goods – Madras High Court
• Training for appearing in an examination is not exempt, even though a course completion certificate provided – Uttar Pradesh Appellate AAR
• Restaurant service – ITC reversal required in respect of sale of alcoholic liquor – West Bengal Appellate AAR

Customs

Notifications and Circulars

• Onions – Export duty @ 40% imposed
• Rice, parboiled – Export duty @ 20% imposed till 15 October 2023
• De-oiled rice bran under ITC (HS) Code 2306 prohibited for export
• Laptops, tablets, all-in-one personal computers, and ultra small form factor computers and servers – Import clearances to require licence for restricted imports from 1 November 2023
• Rice – Export policy of non-basmati white rice clarified

Ratio decidendi

• No interest and penalty against demand of Additional Customs duty and Special Additional Duty – Supreme Court affirms Bombay High Court decision
• Time period for adjudication of SCN under Section 28(9) – Words ‘where it is possible to do so’ do not allow Department to defer adjudication for indeterminate period – Delhi High Court
• Exemption benefit can be claimed post amendment and re-assessment of Bill of Entry – CESTAT Ahmedabad
• Vehicle cannot be confiscated for possibility of future use as means of transport of smuggled goods – Kerala High Court
• Power to search premises under Customs Section 105 does not mean power to seal it – Bombay High Court
• Snow goggles are not classifiable as sunglasses – No confiscation for classifying goods under a Heading different from what opined by Department – CESTAT New Delhi
• Lawn mower is classifiable under Heading 8433 and not under Heading 8467 – CESTAT Chennai
• Roasted areca nut is classifiable under Customs Heading 2008 and not Heading 0802 – Madras High Court
• Different thresholds of Bank Guarantee cannot be fixed when the issues/facts are identical – CESTAT Ahmedabad

Central Excise, Service Tax & VAT

Ratio decidendi

• Intravenous fluids – Exemption – Composition of product important – Addition of chemicals which do not alter character of product is immaterial – Supreme Court
• Flue gas generated during manufacture of metallurgical coke is not a manufactured product – CESTAT Kolkata
• Parking – Building used for parking is excluded from Renting of Immovable Property service – CESTAT Chennai
• Mere raising of ‘debit notes’ on sister concern does not make assessee liable to service tax under Management Consultancy services – CESTAT Kolkata
• Cenvat credit available on service fees paid for development of Part Manual and Maintenance, Repair and Construction Manual – CESTAT Allahabad
• Savoury Oats/Silk Oats are classifiable under TI 1104 12 00 and not under TI 1904 20 00 – No change in essential character of oats even after mixing with dehydrated vegetables – CESTAT Chennai