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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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GST Update No 139 ITC available as common pool for utilization

GST Update No 139 ITC available as common pool for utilization
The major driving force of implementing GST was to allow seamless flow of input tax credit in the transaction chain and enable its effective utilization thereby removing the cascading effect of taxes. The provisions formulated with respect to availment, and utilisation of Input Tax Credit is litmus test for Government’s commitment to ensure that there is no disruption in the credit chain. However, at times, interpretation adopted by AARs distort the intention and create confusion. Recently, Gujarat AAR in the case of M/S. ARISTO BULLION PVT. LTD. held that the taxpayer can utilize ITC only if there is direct nexus between inputs and outputs which is totally against the basic principle of credit facility extended to the assessees. This decision was further challenged before the Gujarat AAAR and recently decision has been pronounced by AAAR. The outcome and the reasoning adopted by the AAAR is the subject matter of discussion of our present update. The appellant in engaged in manufacturing as well as trading of Gold and Silver Bullion including coins etc. They intend to utilize ITC available on purchase or import of Gold & Silver Dore against payment of GST on outward supply of trading of castor oil seeds However, it was concluded by AAR that since as per Section 16, assessee shall be entitled to take input tax on supply of goods and services which are intended to be used in the course or furtherance of business and since no one to one correlation exists between the two supplies, appellant shall not be entitled to utilize ITC. The appellant contended before AAAR that raw materials or trading material procured in form of Gold & Silver Dore for further supply will qualify in the definition of “goods”, being movable property. Hence, it amounts to “input tax” as per Section 16(1) of CGST Act, 2017. As per Rule 86 of CGST Rules 2017, there is no provision in rules which restricts the utilization of electronic credit ledger towards output tax in respect of taxable supply. Thus, credit ledger can be utilized to make payment of output tax liability of other business verticals as well. Further, as per Section 49(2) & (4), credit ledger does not contain any identification for utilization of Input Tax Credit. The inputs are available as a common pool which can be utilized to discharge output tax liability. The appellant quoted the illustration of nationally renowned organizations such as “D mart”, “Big Bazar” etc. which provide a diverse range of products and avails ITC as per Section 16. Once the condition of availment of credit is fulfilled as per Section 16, it transpires to be deposited in a common pool of credits which can be subsequently utilized against output tax liability. Reliance was placed on the similar issues which came across Courts in Pre-GST regime. The courts held that there is no requirement to prove existence of direct nexus between inputs and output. Reliance was placed on decisions rendered in the case of Tally Solutions (P.) Ltd. v. CCE, Pipavav Shipyard Ltd. v. CCE & ST, Nitin Spinners Ltd. v. CCE, Entraco Power Systems (P.) Ltd. v. CCE, CCE v. Graphite India Ltd, Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise, Pune-III, and CCE, Coimbatore v. Lakshmi Technology and Engineering Industries Ltd. The AAAR held that section 17(5) does not impose any restriction on availing ITC on gold bars. The AAAR held that even if logic of AAR is adopted, taxpayers who are selling large number of commodities would require to maintain input tax credit accounts in respect of each commodity which is impossible and is nowhere prescribed in the law. It was held that once the taxpayer validly takes ITC on inputs, that ITC merges into common portal which is not maintained commodity wise. Further, it was held that Section 16(5) does not mandate assessee to prove one to one correlation between inputs and output. It only prescribes that inward supply should be used in the course or furtherance of business. Since, it is undisputed fact that the inward supply of Gold and Silver Dore bars are used in the course of business of the appellant, input tax is validly taken and it can be utilized against payment of outward taxable or zero rated supply. Therefore, it was concluded that Input Tax Credit balance available in its Electronic Credit Ledger which has been legitimately earned on the inputs can be utilized for payment of outward supply of castor oil seeds. The GST law has subsumed various indirect taxation law but it appears that the points of dispute raised in the erstwhile tax regime are also carried forward in the new regime. The issue regarding proving one-to-one correlation of inputs used for the purpose of outward supplies was also litigated in earlier laws but the matter was settled in favour of the assessee that no nexus is required to be established for inputs and output for the purpose of utilisation of credit by numerous decisions rendered by CESTAT. It is appreciated that similar view was taken by AAAR and the order passed by the AAR was rectified by reversing the same.
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