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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 168 on Notice pay recovery- Divergent Views

GST Update No 168 on Notice pay recovery- Divergent Views
Levy of GST on notice pay recovery of employees has been a matter of discussion since introduction of GST. Although Schedule III of CGST Act, 2017 clearly states that no GST shall be leviable in case of services provided by employee to employer during employment, still, the issue revolves around on the fact that whether GST shall be applicable on notice pay recovery. Similar issue was raised in the case of M/s Amneal Pharmaceuticals Pvt. Ltd. in front of Gujarat AAAR challenging the decision of AAR. The decision imparted is subject matter of our present update. The appellant submitted that a contract is entered by the employee having a clause that services can be terminated by either giving three months’ notice or notice pay in lieu of notice period. This is done to compensate the loss of immediate recruitment and regularize working of the employee in case of sudden resignation by the employee. Therefore, advance ruling was sought on applicability of GST on notice pay recovery. The appellant submitted that the recovery cannot be termed as a consideration against agreeing to the obligation to refrain from an act or tolerance of an act since employer cannot sue for mandatory serving of notice period. Further, it was argued that the aforesaid supply shall be covered under Schedule III of CGST Act, 2017 and therefore, no GST shall be leviable. Reliance was placed on Nandinho Rebello Vs. Deputy Commissioner of Income Tax [(2017) 80 taxmann.com 297 (Ahmedabad – Trib.)], GE T & D India Limited Vs. Deputy Commissioner of Central Excise, Gujarat State Fertilizers and Chemical Ltd., and HCL Learning System Vs. CCE, Noida, Madhya Pradesh AAAR in the case of M/s. Bharat Oman Refineries Ltd., M.P. The decision of AAR is challenged in front of AAAR. According to the first member, the appellant is agreeing to tolerate an act against the consideration which shall be termed as “liquidated damages”. Further, as per para 5(e) of Schedule II of CGST Act, 2017, “agreeing to obligation to refrain from an act or to tolerate an act” shall be treated as supply of service. Further, it is not also covered under Notification No. 12/2017 dated 28.06.2017 entry no. 62. Furthermore, entry 1 of Schedule III of CGST Rules, 2017 does not covers entry of tolerating any breach or act by employer. Neither the employee is providing service nor it is in relation to employment. Therefore, GST is payable. The dissenting member held that all the conditions as prescribed under Section 7 of CGST Act, 2017 should be satisfied to term it as “supply”. The words “made or agreed to be made” were interpreted and it was concluded that it suggests a degree of voluntary act on the part of service provider. The act of notice is only extinguishment of obligation of employee and does not constitute an independent/voluntary act. It was held that notice pay recovery arising out of breach of condition and is not a benefit to the employer. Accordingly, there is no supply of service. Furthermore, no consideration exists since any consideration should have a direct nexus to the voluntary act of supply. Moreover, no benefit accrues to the employer rather, he has suffered due to sudden exit of the employee. Furthermore, it was stated that the aforesaid transaction does not comes under the ambit of business. The said transaction is not covered under Schedule III of CGST Act, 2017 and Schedule II of CGST Act, 2017 as well since it does not constitute as supply. Reliance was placed on Section 66E(e) of the Finance Act, 1994 and para 2.9.3 of “Taxation of Services: An Education guide” issued by CBEC dated 20th June, 2012. Reference was made to decision of Madras High Court in the case of GE T & D India Limited Versus Deputy Commissioner of C. Ex., Chennai (2020 (35) G.S.T.L. 89 (Mad.)). The divergent views delivered by the members of the bench created a problematic situation for the appellant since as per Section 101(3) of CGST Act, 2017, in case of advance ruling wherein divergent views are delivered it shall be considered as if no advance ruling is sought by the appellant. This harms the basic intention behind implementing concept of advance ruling. While on the other hand if the appeal is preferred in CESTAT or in any court and divergent opinion is delivered, the said matter is referred to third member to decide the matter through majority. This is done to impart fairness in judgment. The Government should make amendment and bring concept of Advance Ruling as well on the same line to do justice with the basic purpose of setting up Authority for Advance Ruling and to avoid unnecessary and unwanted litigations in future. No decision on divergent views will end the process for the applicant. However, he does not any role on the above divergent view. Everyone knows that one members is from CGST and other is from SGST and there is bound to be conflicts between these members. But ending the process on such difference of opinion does not result into justice to applicant. No decision after spending so much time and money is helpless situation for the applicant. The matter should be referred to independent third member and decision should be given to the applicant. The GST council should consider it and amend the provisions accordingly.
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