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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 on amendment of Section 140(1)

GST Update on amendment of Section 140(1)
Retrospective Effect of denial on credit of cess
The government has excluded the credit that taxpayers could avail at the time of transitioning to GST for the cesses paid in the previous indirect tax regime, according to amendments in the Central Goods and Services Tax Act moved in the Lok Sabha. The change in the amendment bill has been made effective from from July 1, 2017 i.e. retrospectively.
Prior to the amendment, many experts were of the view that this credit shall be carried forward as Section 140(1) didn't place a bar on transition of various cesses which were part of the Central Value Added Tax credit ledger of companies. Krishi Kalyan Cess, education Cess and secondary and higher eduction cess were included in the CENVAT credit ledger of companies.
Section 140 (1) of the CGST Act reads as follows-
A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed. Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:-
(1)where the said amount of credit is not admissible as input tax credit under this Act; or
(2) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or
(3)where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government”
As there was no specific restriction for transition of this credit under GST, many taxpayers took a view that the cess paid can be carried forward in the GST regime. But the FAQ released by CBIC clearly said that the balance of cess cannot be carry forward in GST regime. But many scholars opined against this FAQ and held that FAQ do not legal binding and its balance can be carried forward.
However,Authority of Advance Ruling pronounced in case of KANSAI Nerolac Paints Limited in favour of department wherein carry forward of credit in KKC of service tax has been denied. The head note of this decision read as under:-
GST - Migration - Cenvat credit - Carry forward of accumulated credit by way of Krishi Kalyan Cess (KKC) appearing in Service Tax return of Input Service Distributor in electronic credit ledger maintained under Central Goods and Services Tax Act, 2017 - Admissibility as input tax credit - Insertion of sub-rule (1a) to Rule 3 of Cenvat Credit Rules, 2004 allowing provider of output services credit of KKC on taxable services leviable under Section 161 of Finance Act, 2016 - Cenvat credit was available in respect of KKC - However it was to be utilised only towards payment of KKC - KKC cannot be treated as Excise duty or Service Tax and Cenvat credit as referred to in Section 140(1) of Central Goods and Services Tax Act, 2017 would not include credit in respect of KKC - Non-availability of carry forward of credit with respect to KKC has been clarified to Trade in Frequently Asked Questions (FAQ) issued by Central Board of Excise and Customs - Accumulated credit by way of KKC as it appeared in Service Tax return of Input Service Distributor (ISD) on June 30, 2017 which was carried forward in electronic credit ledger maintained under Central Goods and Services Tax Act, 2017, will not be considered as admissible input tax credit.
 But after this amendment, there is no ambiguity and this credit will be denied after assent of these bills. The impact shall be that the taxpayers aren’t eligible to transfer the credit of various cesses, they may be required to reverse the credit they have availed. Even the department will demand the interest on the same.
Taxpayers may question the retrospective applicability of the proposed amendment.They may take the support in the landmark Income tax case of Vodafone Limited wherein the Government introduced a retrospective clarification to the Income-Tax (I-T) Act, 1961, virtually amending the law to ensure that cross-border transactions are taxable. There was all round protest against the Government in the international arena at that time and the Government has promised at that time that no retrospective amendment will be made in the tax law against the assessee.
But again retrospective amendment has been made against the assessee.  This will again prove that the Government is not keeping its words and amending the law retrospectively which affect badly the interests of the poor taxpayers.
Thus government shall consider the plea of the taxpayers and allow carry forward of credit of Cess.
 
The content of this GST update is for educational purpose only and not intended for solicitation.
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