Article

Westinghouse Saxby Farmer Ltd. – The saga continues

By Sai Prashanth and Krithika Jaganathan

The article in this issue of Tax Amicus explores the on-ground impact of the recent CBIC Instruction dated 5 January 2022 on the Supreme Court’s decision in Westinghouse Saxby Farmer Ltd. v. CCE, Calcutta case. The Apex Court had applied the ‘principal use test’ embodied in Note 3 to Chapter XVII of the Central Excise Tariff Act and held that the relays were more appropriately classifiable under Heading 8608 as they were manufactured and supplied to the Railways solely for use as part of railway signalling equipment. The Supreme Court disagreed with the Revenue’s classification of relays under Heading 8536 while it rejected the plea that relays were excluded from Heading 8608 per Note 2(f) in Section XVII. The authors elaborately discuss the Instruction and various case law cited therein. According to them, the Instruction appears to be a graceful attempt to qualify the operation of the Westinghouse decision by indirectly restraining the tax administration from applying it…

Goods & Services Tax (GST)

Notifications and Circulars

• GSTR-1 and GSTR-3B mis-match – Reasonable time to be allowed to assessee to explain short-payment or non-payment of tax
• GST rate not increased for textiles and textile articles but increased for footwear priced at less than INR 1000/pair
• Classification of goods – GST rate notifications amended to implement changes in HSN effective from 1 January 2022
• CGST Act – Changes effective from 1 January 2022

Ratio decidendi

• Investigations – Transfer of investigations from State Authorities to Central Authorities when permissible – Section 6 and CBIC Circular dated 5 October 2018 do not cover all situations – Delhi High Court
• Detention of goods in transit – Mere change of route by itself not sufficient to infer intention to evade – Gujarat High Court
• Mining lease – Levy of GST on royalty and district mineral fund contribution paid to State for minor mineral lease, stayed – Jharkhand High Court
• Registration cannot be denied for non-submission of electricity bill – Allahabad High Court
• Upfront payment to State Government for mining lease is ‘advance ’ – Madhya Pradesh AAR
• Electricity and water charges collected by lessor of property, on actuals, are liable to GST – Maharashtra AAR
• Land filling pit is a civil structure – ITC not available on inputs and input services used for its construction – Karnataka Appellate AAR
• Centage charges and Building and Other Construction Worker Welfare Cess includible in value of supply – Uttar Pradesh AAR
• Technical testing in India for foreign clients, on samples provided by latter, is not export of services – Goa Appellate AAR

GST/VAT outside India

• Bahamas reduces VAT from 12% to 10%
• Bahrain increases standard rate of VAT from 5% to 10%
• China exempts insurance of export goods from VAT till 31 December 2025
• EU VAT – Right to deduct input VAT can be refused if taxable person fails to adduce proof that supplier a taxable person

Customs

Notifications and Circulars

• Classification of automobile parts – Supreme Court decision in case of Westinghouse Saxby does not refer to its wider applicability
• SCOMET items – Annual update released
• ASEAN-India FTA – Effective rate of duty further reduced on certain products
• Duty credit scrips under FTP – Last date for submitting applications extended
• Steel Import Monitoring System registration when not required
• General Authorisation for Export of Chemicals and related equipment under SCOMET list specified
• Palm oil (other than crude) and fractions – Basic Customs duty reduced, and ‘free ’ import policy extended
• Liquid Medical Oxygen containers imported temporarily – Retention relaxed

Ratio decidendi

• TED refund on supplies to EOU by DTA unit – DGFT to refund TED paid in cash – Supreme Court
• Valuation – Technical know-how and technical assistance when not includible – CESTAT Mumbai
• Foreign going vessel – Exemption to ship stores – Appeal maintainable before High Court – Kerala High Court
• MEIS – Non-ticking of box on web portal not debars benefit under MEIS – Bombay High Court
• MEIS benefit when shipping bill sought to be amended manually, permissible – Gujarat High Court
• MEIS – Manual amendment permissible in EDI shipping bill when EGM closed – CESTAT Hyderabad
• Investigating Officer cannot seize goods and documents under Customs Section 110 – Delhi High Court
• Every irreversible process does not result in obtaining a distinct product falling under a different classification – AAR

Central Excise, Service Tax & VAT

Ratio decidendi

• Appeal against Tribunal order on limitation for demand maintainable before High Court, even though on merits issue related to rate of duty – Bombay High Court Larger Bench
• Cenvat credit – Availing balance 50% credit on capital goods, in different location, by service provider – CESTAT Ahmedabad
• Limitation for refund of Cenvat credit to SEZ unit – Refund filed within one year of ISD invoice correct – CESTAT Ahmedabad
• Land procurement from farmers, seeking government permissions, etc. not liable to service tax – Tax not be levied on basis of agreements not fulfilled – CESTAT Bengaluru
• No demand under Cenvat Rule 6(3) for provision of free residential accommodation to employees – CESTAT Ahmedabad
• Limitation for refund of tax paid on advances – Date of cancellation of purchase order is relevant – CESTAT Chandigarh
• Animal or vegetable fertilisers in liquid form, though in packing less than 10 kg, classifiable under TI 3101 0099 – CESTAT Chandigarh

News Nuggets

• Limitation for judicial or quasi-judicial proceedings – Supreme Court excludes period from 15 March 2020 till 28 February 2022