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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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Publish Date: 08 Mar, 2008
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Goods Transport Agency-Still Transporting Problems

 
GOODS TRANSPORT AGENCY –STILL TRANSPORTING PROBLEMS
                                                                                               
-         CA Pradeep Jain
-         CA Preeti Parihar
 
 
INTRODUCTION:-
 
Levy of Service Tax on Goods Transport operator was introduced for the first time on November 16, 1997 which remained in force till June 1, 1998. Later on, it was re introduced on January 1, 2005 with the name of “Goods Transport agency”. This levy on transport of goods is always problematic and subject to litigation. Even during this continuous period of three years also, it has been a matter of litigation. A number of Notifications and clarifications have been issued on the various aspects of this levy during the period. But whenever the Board tries to resolve one of the lacunas, the other problem crops up. Budget for the financial year 2008-09 as presented in the Parliament on February 29, 2008 has also brought about the changes in the various provisions relating to the Good Transport Agency Service. This is once again the trial of the Govt. to resolve the complicacies of the issue.
 
 
MATTERS OF DISPUTE IN GTA:-
 
Prior to introduction of Budget 2008, there were a number of points of litigation like whether the abatement of 75% is available to the consignor or consignee? Whether Service Tax on GTA can be paid from Cenvat Credit? Whether the Cenvat Credit of Service Tax paid on outward freight is allowed? Government has taken one more step to remove these litigations by the latest provisions inserted vide Budget 2008.
 
 WHETHER THE ABATEMENT OF 75% AVAILABLE TO CONSIGNOR OR CONSIGNEE:-
There was dispute whether abatement of 75% as specified in Notification no. 1/2006-ST dated 1-3-2006 will be allowed to consignor or consignee? The Director General of Service tax has clarified against it and it has lead to numerous show cause notices all over India. This Notification allows the abatement of 75% to GTA if the Cenvat Credit of inputs, input services and capital goods is not taken. The issue was resolved by clarification vide circular no. 166/13/2006-CX.4 dated 12-3-2007 that it will be allowed but the declaration is given by the transporter on the bilty that he has not availed credit on input, input services and capital goods and he has not availed the benefit of Notification no. 12/2003. But this declaration is not normally given by the transporters and it lead to another round of litigation. Now this is tried to be resolved by amendment in Notification no. 1/2006-ST dated 1-3-2006. GTA is excluded from this Notification vide Notification no. 12/2008-ST dated 1-3-2008 and a new Notification no. 13/2008-ST dated 1-3-2008 has been issued which allows the exemption of 75% of freight unconditionally. This means the reduced rate of Service Tax, i.e. 3.06% is available and there is no increase in rate of service tax. However, there is no restriction in this Notification regarding availment of Cenvat Credit as is there in Notification no. 1/2006-ST dated 1-3-2006. To resolve this issue, the GTA service has been excluded from the definition of “Output Service” given under Rule 2(p) of Cenvat Credit Rules vide Notification number 10/2008-C.E.(N.T.) dated -1.03.2008. Thus, the transporter will not be able to take the Cenvat credit at all.
 
CAN WE PAY SERVICE TAX ON GTA FROM CENVAT CREDIT?
Whether Service Tax on GTA can be paid from Cenvat Credit – was a matter of litigation between the department and assessees. But the above amendment in Cenvat credit Rules has tried to resolve the issue in favour of Government. Now the definition of Output Service excludes the services provided by the Goods Transport Agency. In other words, GTA will not be treated as an output service as from 1-4-2008.
 
 
 IMPLICATIONS OF THESE NEWLY ISSUED NOTIFICATIONS:-
 
The above three newly issued Notifications are inter related. Notification no. 12/2008-ST 1-3-2008 deletes the GTA from the Notification no. 1/2006-ST dated 1-3-2006 which allows 75% abatement on the assessable value in this service provided the Cenvat Credit is not taken by the Service Provider. However, a new Notification no. 13/2008-ST dated 1-3-2008 has been issued which allows the exemption of 75% of the value under GTA. This Notification does not contain any restriction regarding the availment of Cenvat Credit. Both of these Notifications are effective as from 1-3-2008. However, GTA is excluded from the definition of Output Service w.e.f. 1-4-2008. The effect of above three changes is that the provider of Service, i.e., Goods Transport Agency can take the Cenvat Credit during the period from 1-3-2008 to 1-4-2008 as well as exemption of 75% of the value of freight can be taken during this period simultaneously. However, due to exclusion of GTA from the definition of output service, the assessees will not be able to pay the Service tax on GTA from credit and it will have to be paid from cash. But this provision will also be applicable from 01.04.2008. But there is some relief to assessees also. The GTA has been excluded from the definition of “output Services” implies that the earlier it was included in the same. Thus, they can very plead this in earlier litigation.
 
 
 IS CENVAT CREDIT ON OUTWARD FREIGHT STILL ALLOWED?
 
Another issue is regarding the availment of Cenvat Credit on the Outward freight. Notification no. 10/2008-CE(NT) dated 1-3-2008 has brought an amendment in the definition of “Input Service” as defined under Rule 2(l) of the Cenvat Credit Rules, 2004. Prior to this Notification, there was conflict in the main substantive part and the illustrative part of this definition. In the main part, the suffix “from place of removal” was there and the illustrative part had a suffix “upto the place of removal”. Since the main part allowed the Cenvat Credit on the input services availed even after the manufacture of goods while the illustrative part restricted the credit on the outward freight upto the factory of the manufacturer. There was dispute between the Department and assessee whether the Cenvat Credit in respect of outward freight will be allowed or not? Now, the aforesaid Notification no.10/2008-CE(NT) dated 1-3-2008 has amended the definition of “Input Service” w.e.f. 1-4-2008 and the phrase in the main part will now be read as “upto the place of removal”. Thus, the Govt. has tried to resolve the matter and both the main and illustrative parts will now include the services availed upto the place to removal, i.e. the factory of the manufacturer or warehouse or depot or the premises of the consignment agent of that manufacturer. But is it so? Is the Cenvat Credit on Outward Freight will not be allowed as from 1-4-2008? Let’s consider another aspect of this issue:-
 
Remember the Circular no. 97/8/2007 dated 23-8-2008 issued by the Government, wherein the clarification was given regarding the Outward Freight? In this Circular, it was clarified that in the cases where the sale takes place at the buyer’s door. i.e. the risk of damages during the transit is borne by the seller/manufacturer and the freight charges forms integral part of the price of goods ; the Cenvat Credit will be allowed on the freight upto the buyer’s premises. In other words, this Circular allows the Cenvat Credit on outward freight provided the following conditions are satisfied:-
·                    The sale takes place at the buyer’s door or the property in the goods remains with the seller till the goods reaches buyer in an acceptable condition;
·                    The risk of damage to goods during the transit is borne by the seller/manufacturer; and
·                    The freight charges are integral part of the price of the goods.
This clarification was given after considering the fact that the place of removal in this case will be as defined in the Rule 4(3)(c) of the Central Excise Act, 1944. Thus, it is clear that the “place of removal” includes sale upto doors of seller. It hardly makes any difference with “from place of removal” or “upto place of Removal”. In other words, since this Circular allows the Cenvat Credit on outward freight upto the place at which sale takes place; there will be no affect of amendment in the definition of “input service” on this Circular. This Circular is not yet withdrawn and it still allows the Cenvat Credit on Outward freight if the  above conditions are satisfied. Of course, this will be a device in the hands of assessees but will not be acceptable to the Department; thus, giving rise to a new war.
 
Thus, it seems that there is always problem in GTA whenever the Board tries to resolve the problem. The correct words for the GTA lie in the Hindi proverb “MARZ BADHTA GAYA JAISE-JAISE ILAAZ KIYA” (means the disease increases as the treatment is undertaken). But why this happened? The answer is “Because it relates to service tax on Goods transported by road”.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Department News


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PRADEEP JAIN, F.C.A.

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