Article

Secondment or employment: Court’s observation opens new opportunities for tax risk mitigation in 2024

By Asish Philip Abraham and Mahi Vyas

The article in this issue of Tax Amicus discusses the observation of the Supreme Court in Northern Operating Systems case, recent investigations on the issue, CBIC Instruction, interim orders passed by different High Courts on factual matrix of the cases, legal position under the GST law and the way forward. Elaborating on the test / factors to determine the employee-employer relationship, the article deliberates on application of said tests/factors on the Supreme Court decision, and the factual differentiation of this case. According to the authors, the pending litigation of GST and service tax needs to be examined in light of various aspects as discussed, and that the factual position, evidence and legal arguments are required to be taken at appropriate forum. They also believe that the Tribunals and lower authorities blindly following decision in NOS case need to be made aware of distinguishing factors of each case. Further, secondment arrangement in future needs to be examined taking into consideration the factors laid down by the Court of law, and legal jurisprudence in relation to employer-employee relationship, to mitigate the tax risk.

Goods and Services Tax (GST)

Ratio decidendi

• Show cause notice invoking extended period - Audit report need not contain findings of fraud, willful-mistatement or suppression - Madras High Court
• Show cause notice under Section 74 not containing reasons and particulars of any suppression, is not fatal - Andhra Pradesh High Court
• Notice to be issued through other prescribed modes of service, if notice sent to registered email ID is not responded by assessee - Madras High Court
• Search - Certified copies of search warrant and order sheet/note sheet when not to be made available to assessee - Orissa High Court
• Refund of accumulated ITC on exports - Not uploading of shipping bills in GSTR-1 at time of claiming refund is not fatal - Calcutta High Court
• Refund of amount paid upon wrongful reversal of transitioned credit is available under Section 54 - Not falling under categories specified in Circular No. 125/44/2019-GST is not fatal - Madras High Court
• Refund under CGST Section 142(3) of payment after 1 July 2017, of IGST on non-fulfilment of export obligation, differential excise duty on inter-unit transfer, and in case of forgoing export benefits on re-imports - CESTAT Hyderabad
• Refund of ITC and IGST on exports - Receipt of payment through an intermediary will qualify as payment received by exporter - Madras High Court
• No inherent power with Appellate Authority to set aside order under appeal and remand proceedings to original authority - Allahabad High Court
• Personal hearing is mandatory, even if not requested, if adverse decision is contemplated - Allahabad High Court
• Appeal to Appellate Authority - Limitation - Section 5 of Limitation Act is not applicable - Calcutta HC decision differed with - Allahabad High Court
• Appeal to Appellate Authority - Self-certified copy of decision appealed against is not required if appeal filed electronically - Allahabad High Court
• ITC claim should not be rejected solely because GST registration of supplier cancelled with retrospective effect - Madras High Court
• Registration cannot be cancelled merely because of absence of stock at place of business - Allahabad High Court
• No intention to evade when most documents accompanying goods though there is some typographical error in e-way bill - Allahabad High Court
• Detention of goods on ground of alleged undervaluation is not valid - Allahabad High Court
• Agricultural produce - Loading and unloading of imported pulses is not exempt - West Bengal Appellate AAR

Customs

Notifications and Circulars

• Rice, parboiled - Export duty extended beyond 31 March 2024
• Yellow peas - Exemption from BCD and AIDC extended beyond 31 March 2024 - Import Policy condition also revised
• Cotton, not carded or combed, of staple length exceeding 32.0 mm, exempted from BCD and AIDC
• Turkey meat, cranberries and blueberries - BCD reduced
• ITC(HS) of Export Items notified for Chapters 01 to 39
• EPCG scheme - Relief in average Export Obligation for EPCG Authorizations for 2022-23

Ratio decidendi

• No interest and penalty against demand of Additional Customs duty and Special Additional Duty - SC dismisses review petition against its earlier order affirming Bombay HC decision - Supreme Court
• No confiscation even if classification or exemption is not in conformity with the Department’s view or held not correct in appellate proceedings - CESTAT New Delhi
• Amendment of documents - Ambit of Section 149 is not confined to rectification of bona fide errors - Documentary evidence should be in existence and not necessarily produced at time of clearance - Madras High Court
• Amendment of documents - Application not to be rejected in absence of reference to Section 149 or when word ‘rectification’ is not used - Madras High Court
• SCN under Customs Section 28AAA is not correct till DGFT cancels instrument/scrip - Madras High Court
• Valuation of exports - Reasonable doubt cannot be based on mere opinion of DRI officers - CESTAT New Delhi
• ASEAN-India FTA - Absence of cost data from Malaysian exporter when not fatal for claiming benefit - CESTAT Ahmedabad
• Swim seats, arm bands, etc., used by kids to remain afloat are classifiable under TI 9506 29 00 - Goods even used for fun and not competition are covered as sport equipment - CESTAT Chennai

Central Excise, Service Tax & VAT

Ratio decidendi

• Cevat credit is available on inputs used in generation of power wheeled out and not sold to sister units - Supreme Court’s decision in Maruti Suzuki distinguished - Madras High Court
• Venture Capital Funds, rendering services of asset management, are not liable to service tax - Karnataka High Court
• GTA services - Exemption under Notification No. 32/2004-S.T. - Declaration separately made and not on consignment note is not fatal - Calcutta High Court
• Sabka Vishwas (LDR) Scheme - Time period for making payment is not extended by Supreme Court’s decision in suo-motu writ petition due to Covid-19 - Jharkhand High Court
• Scrap-veg-refuse is classifiable under Heading 2308 - Mere presence of starch content does not make the product potato starch - CESTAT Chandigarh