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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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Update on Notification no. 26

Rule 89 (5) CGST Rules- Refund
Notification No. 26/2018 – Central Tax dated 13.06.2018 has been issued making amendment to the CGST Rules, 2017. This notification intends to make several changes. One of the changes is reproduced as following:
 
 
Earlier there was mentioned in the provision under the section 54(3)(ii) of CGST Act that output goods and service will be eligible for refund but rule 89 does not include the refund for servcies. So there was a contradiction in Act and Rule. It is proposition of law that when there is conflict in Act and Rule then Act will prevail.
 
However, the department did not agree. Many assessees providing output service and having inward duty structure have applied for refund but were not granted. They have received show cause notices from the department that there is no provision in the Rule to grant the refund on output services. Textile job workers have mostly applied such type of refund claims.
 
However, the CBIC had come forward to resolve the issue and they have issued notification number 21/2018-CGST dated 18.04.2018 and amended the rule 89 to allow the refund to output service providers. But their problems did not end here. The department took the stand that it is prospective amendment and refund will be allowed after that date. Earlier refund claims continued with the show cause notice. Even some of the claims were rejected also. Many associations once again represented the matter to the Government.
 
The present Government is listening to voice of associations and they came up with this present notification 26/2018 cited supra wherein the rule was amended retrospectively. Now there was no dispute and now service providers having inward duty structure will get the refund from the department. But for those assesses whose refund claim has been rejected, they have only a remedial action of going further for an appeal, and can refer to this Notification 26/2018 dated 13.06.2018 on the basis of the order received from the department. But it will take some time and hearing will come in due course before the Commissioner (Appeal). However, there is no doubt that they will get the refund claim. The government intended to more specific for textile processors and came up with a circular 48/22/2018 dated 14.06.2018 that wherein it clearly provided that refund will be granted to textile processors. The Textile industry should welcome this step of present Government.
 
Further, roses always have thorns also. This notification came up with a big relief for output service providers having inverted duty structure but has also a demerit point also.
Initially, the Section 54 of CGST Act does not allow the refund of input services whereas the rule 89 provided for the same. Many assessees have applied for the refund and it was allowed also.
Later on, to remove the ambiguity, the CBIC has came up with the amendment by notification 21/2018 and amended the rules. Now, it was clear that refund will not be allowed on input services. It will be allowed only on inputs. But since this notification had prospective effect, the refund of previous period was allowed.
However, by current notification, the Government has amended the Rule 89 with retrospective effect and amended the rule. The change in the rule 89(5) of CGST Rules, 2017 has been reproduced as following:
 
“(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:-
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services.
 
Explanation: - For the purposes of this sub-rule, the expressions –
(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and
(b) Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4).”
 
            However, many assessee who had applied for refund and were also granted the refund of input services, they may face the problem of receiving the show cause notices from the department now. This is a demerit of this Notification.
 
In this regard we would like to point out that why Input service should be not included for the purpose of refund as in respect of input goods are eligible for refund but input services are not bought under this bracket. This issue has been discussed at various forums also. The representation is sent to Government in this regard but Government has answered the same with retrospective amendment. Not even a single logic came to mind to authors as to why the refund on input services should be disallowed. We would like to suggest that input service must also be included so that the cost burden may be reduced for the consumers and the industry will also be benefitted. In GST, it was told that there will not be any distinction between goods and services. But the same has again be reflected by the Government.
 
We hope the above is useful to you.
 
The content of this GST update is for educational purpose only and not intended for solicitation.
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