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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 LANDMARK SUPREME COURT DECISION REGARDING SERVICE TAX ON CLUB PART-2

GST UPDATE ON LANDMARK SUPREME COURT DECISION REGARDING SERVICE TAX ON CLUB PART-2
We had discussed the landmark Supreme Court decision and the reasoning adopted by Apex Court for arriving at the conclusion in the said case in depth in our earlier update.  In the present update, we seek to discuss the applicability of the decision in GST regime.
 
Applicability of judgment in GST era: -The Service Tax Law has been repealed and it has been 2 years of implementation of GST. Now, the question arises is whether benefit of this Supreme Court decision will be available in the GST era or not? Before proceeding further, it is important to look at the relevant provisions of the Constitution of India. It is submitted that vide The Constitution (One Hundred and First Amendment) Act, 2016, a new article 246A has been inserted to enable the Central Government and the State Government (subject to clause 2) to make laws with respect to goods and services tax imposed. Hence, the power to collect GST on goods and services is being derived from the newly inserted Article 246A of the Constitution of India. At the same time, it is pertinent to mention that the other Articles which had relevance in the erstwhile regime are still prevalent as on date and have been referred by the judgment of the Supreme Court discussed by us. One such Article is 366(29A) pertaining to tax on sale or purchase of goods. It may be noted that certain entries of this Article are inconsistent with the entries of Schedule II of the CGST Act, 2017, for example, works contract being specified as service in Schedule II of the CGST Act, 2017 but the transfer of property in goods in the execution of works contract is covered under sale of goods as per Article 366(29A)(b) of the Constitution of India. Consequently, one may argue that the entries of Article 366(29A) have no relevance in GST Laws. If such an interpretation is taken, then too, the analogy drawn by the Supreme Court in the above cited decision will have persuasive value as the same was considered even while deciding leviability of service tax on services provided by club to its members whereas the provisions of Article 366(29A) pertain to sale or purchase of goods. Nonetheless, the other relevant provisions of the GST law are discussed for ascertaining the applicability of the above cited decision in GST era.
 
 The clause (e) of the defination of ‘business’ given under section 2(17) of the CGST Act, 2017 includes provision by a club, association, society or any such body (for a subscription or any other consideration) of the facilities or benefits to its members. The above provision indicates that the activity of club is treated as business.
 
However, if we observe the definition of supply given under section 7 of the CGST Act, 2017, we find that supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. We submit that although it is not explicitly stated that supply should be made by one person to another, it is understood that supply involves two persons as sale/barter and other activities require at least two persons. It is further submitted that the definition of person is also given under section 2(84) of the CGST Act, 2017 which includes an association of persons or a body of individuals, whether incorporated or not, in India or outside India. We submit that the definition of person is similar to the Service Tax Laws and is wide enough to cover clubs/association of persons whether incorporated or not.
 
Before coming to any conclusion, it is also pertinent to make reference to entry no. 7 of Schedule II of the CGST Act, 2017 which reads as follows:-
 
7. Supply of Goods
The following shall be treated as supply of goods, namely:—
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
It is also worth noting that according to amendment made in section 7 of the CGST Act, a new sub-section (1A) has been inserted wherein certain activities or transactions which constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. This has the effect that the transactions which are specified in Schedule II shall be treated as supply only if they are made by a person in course or furtherance of business for consideration. We submit that the definition of business includes clubs and so on harmonious reading of the entry 7 of Schedule II, it can be concluded that supply of goods by unincorporated association or body of persons to member for cash is liable to GST. However, it is also to be noted that there is no similar entry for supply of services. Moreover, now the question arises is that whether the interpretation of the term “body of persons” as taken by Supreme Court can be made applicable in GST or not? Well, in our opinion, the analogy of Supreme Court decision can be applied in GST regime too as the explicit mention of “unincorporated association or body of persons” indicates levy of GST only on unincorporated body of persons. Hence, we may say that the purport of the legislation under erstwhile indirect taxation regime is being carried forward in the GST regime also. However, doubt may be created as regards the relevance of doctrine of mutuality as definition of business expressly includes membership fees charged by every kind of club or association whether incorporated or not.  Nonetheless, it appears that the litigation baggage of erstwhile indirect taxation regime will continued in the GST era also after pronouncement of decision by the Supreme Court of India.
 
The content of this GST update is for educational purpose only and not intended for solicitation.
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