Article

Competency and powers for VAT law amendments in GST regime

By Asish Philip and Krina Shah

The article in this issue of Tax Amicus discusses the recent decision of the Supreme Court wherein the Apex Court has held that the amendments to the Telangana VAT Act, the Gujarat VAT Act and Maharashtra VAT Act, after 1 July 2017 were not correct. According to the Court, amendments to the Telangana VAT Act, and the Gujarat VAT Act after 1 July 2017 were correctly declared void, by the respective High Courts, due to a lack of legislative competence. Further, the Supreme Court set aside the judgment of the Bombay High Court and held that the amendment to the Maharashtra VAT Act, requiring mandatory pre-deposit, was void. The article notes that the impact of the Court’s observations on competency of the State legislature for VAT amendments and introduction of VAT Amnesty Schemes by the States, is an interesting issue to explore. According to the authors, the observations of the Court will have an impact on levying VAT on Extra Neutral Alcohol (ENA) used for manufacture of alcoholic liquor for human consumption. The 52nd GST Council has ceded the right to tax the ENA to the States. The implementation and legislative changes to give effect to the same will be fraught with challenges.

Goods and Services Tax (GST)

Notifications and Circulars

• Personal guarantee and corporate guarantee - Taxability and valuation clarified
• GST rate changes and changes in RCM as effective from 20 October 2023
• Place of supply in certain circumstances clarified
• Online gaming, casinos and horse racing - New regime effective from 1 October 2023
• No IGST on ocean freight in case of CIF imports
• Export of services - Receipt of export remittances in Special INR Vostro account, permissible

Ratio decidendi

• Limitation for ITC - Applicability of Section 16(4) to ITC on reverse charge payments - Karnataka High Court stays adjudication of SCNs
• Cancelled registration cannot be restored by subsequent payment of tax with interest - CGST Sections 50 and 29 have different scope, purpose and intent - Kerala High Court
• Commonality of location of assessee and its parent company is not sufficient to hold that registration obtained by fraud, etc. - Andhra Pradesh High Court
• Mere issuance of SCN, devoid of requisite particulars, is not proper compliance - Andhra Pradesh High Court
• Detention of goods in transit - Intention to evade is sine quo non for initiation of proceedings under Sections 129 and 130 - Allahabad High Court
• Detention/seizure - Time period for issuance of notice for penalty - Date of detention to be included - Madras High Court
• Detention of goods on the ground of cancellation of GSTIN when not sustainable - Allahabad High Court
• Detention of goods in transit for non-disclosure of transportation route is not permissible - Allahabad High Court
• Appeal by transporter against a detention order cannot be refused merely because tax and penalty paid by owner of goods - Bombay High Court
• Demand notice, devoid of any specific reason, is not sustainable - No provision however for interest on blocked ITC - Delhi High Court
• Refund of ITC on exports - Amendment in Rule 89(4)(c) in 2020 is not applicable for exports prior to the amendment even if refund is claimed after the change - Delhi High Court
• Refund - Limitation under Section 54 is not applicable for amount deposited under mistake of law - Delhi High Court
• Investigations - Parallel investigations by different authorities - Section 6(2)(b) does not proscribe transfer/consolidation of investigations/proceedings to a single authority - Delhi High Court
• Absence of delivery challan - Proceedings to be under CGST Section 122 and not under Section 129 when tax and intention factors absent - Uttarakhand High Court
• Valuation - Subsidies from Government, not separately recoverable and part of the price, are not to be excluded - Karnataka AAR
• Input Tax Credit on central air-conditioning plant, lift, electrical fittings, roof solar plant, fire safety extinguisher, architectural service fees and interior designing fees - Gujarat Appellate AAR
• E-commerce operator is not liable under CGST Section 9(5) when service is not supplied ‘through’ it - Karnataka AAR
• Broken rice - GST rate would be same as for rice - West Bengal AAR

Customs

Notifications and Circulars

• IT hardware (laptops, tablets, personal computers, etc.) - Exemption from import authorisation provided in specific cases
• New All Industry Rates (AIR) of Drawback to be effective from 30 October 2023
• Foreign Going Vessel converted for a coastal run - Additional Customs duty exempted
• Rice, parboiled - Export duty extended till 31 March 2024
• “Spirits for industrial use” and “specified actionable claim” - Tariff entries inserted
• Air freight station in Gujarat notified for export/import of gems and jewellery
• Chemicals - Revision in additional declarations to be made in relation to imports of certain items

Ratio decidendi

• Valuation (Customs) - Unattested copies of export declarations filed by foreign supplier when cannot be basis for enhancement of value - Charge of under valuation need to be supported by evidence - Supreme Court
• Investigation against importer - Detention of goods in hands of third-party purchaser from open market is not permissible - Bombay High Court
• Amendment of document under Customs Section 149 - Department to confine itself to provisions of Customs Act - Bombay High Court
• Export promotion - Exemption notification dealing with export benefit scheme to be liberally construed - CESTAT Ahmedabad
• DFIA - Possibility of use and not actual use important - New technologies to be encouraged - CESTAT Ahmedabad
• Drawback on goods manufactured from inputs imported under Advance Licence when available - Madras High Court
• Amendment of shipping bill - Section 149 not casts any obligation upon exporter to establish ‘intendment’ - Delhi High Court
• Valuation (Customs) - Contemporaneous imports should match in all aspects - CESTAT Ahmedabad
• Cheese Polvaromas is classifiable under Customs Tariff TI 3302 10 90 - CESTAT Chennai

Central Excise, Service Tax & VAT

Ratio decidendi

• Refund of service tax is maintainable even when assessment/self-assessment is not challenged in appeal - CESTAT Larger Bench
• IIT, Patna and NIT, Rourkela covered within definition of ‘governmental authority’ - SC clarifies on scope of ‘governmental authority’ in service tax exemption notification - Supreme Court
• Service tax audit for period prior to GST regime - Power to audit saved under CGST Section 174(2)(e) and Chapter XIII of CGST Act to be followed for procedure - Gauhati High Court
• Refund available of SBC and KKC paid on services used for export of goods - CESTAT Kolkata
• Service tax on royalty paid to Government for mining of minerals (Petroleum or Natural Gas) - GST Circular applicable to service tax regime - CESTAT Mumbai
• Service of order-in-original to authorised legal representative is not service to authorised agent - CESTAT Ahmedabad