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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: 12 May, 2007
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LEVY ON GOODS TRANSPORT AGENCY: - TOTAL CONFUSION

LEVY ON GOODS TRANSPORT AGENCY: - TOTAL CONFUSION
The recently introduced service tax on “Goods Transport Agency” is creating a lot of confusions. It will be very difficult to implement it in absence of clarification. Otherwise, it will lead to undue litigation. The points of confusion are discussed below: -
 
  1. Confusion of Responsibility: -The responsibility to pay service tax is on consignor or consignee when they fall in the specified categories. Otherwise, the responsibility shifts on the transport agency. The agency has to write in the consignment note the person liable to pay the service tax. It will be very difficult for the transporter to collect details of payer of freight for each such consignment more particularly when the liability is on the consignee. Suppose an agency books a consignment from Delhi to Hyderabad and the freight is to be paid by the consignee. Then the transport agency sitting in Delhi should know whether the consignee is proprietor or partnership firm so that he can mention in the consignment note about person liable to pay service tax. The agency will like to pay the service tax instead. But the rule does not provide such option to the transport agency. This will give rise to litigation.
  2. Payment of service tax on receipt basis: -The Service Tax Rules provide for the payment of service tax on receipt basis. When the responsibility is on the transport agency to pay service tax, it is very difficult for the agency to pay on such basis. The consignment note is prepared at the place of origin and payment is to be made at the time of delivery by the consignee. The tax is to be paid at the time of receipt of freight from delivery point to the place of origin or at the time of receipt at the delivery point itself. Secondly, the transport agency has to sort out the consignment falling under his responsibility and then to look for its receipt. Thereafter, pay the service tax. It is cumbersome job. The regular account with the parties creates more problems. He has to see which consignment is paid when consignee makes a lump sum payment.
Suppose, a transport agency does not have office at the place of destination then he hand over the goods to other transport agency. Who will pay the service tax? Whether the agency that has raised the consignment note or the agency that has received the payment? In such a situation, payment of service tax at the time of raising of bill itself is simple solution.
 The payment of service tax on receipt basis by consignee or consignor is also a problem. The consignor or consignee has to pay the tax when the payment is made to the agency. But it will not be acceptable to the department. They will insist on payment of service tax in the month when the bill is received.
 
  1. Delivery charges: - Normally a transport agency charges extra delivery charges, loading and unloading expenses from the customer at the time of delivery of goods. These are not included in the consignment note. The service tax liability occurs on the same. But the delivery office will not pay the tax on the same, as they have not raised the consignment note. Secondly, in case change of transport agency, the agency receiving the payment will pay the service tax even though he has not issued the consignment note for such consignment. This needs immediate attention.
 
  1. Preparation of Consignment Note: -Notification requires that the transport agency should write the goods carriage number in the consignment note. But when the small consignments are received then the agency keeps the goods in godown and put them in the truck when the complete truck load is available. Sometimes it takes weeks altogether to complete a truckload for small consignments. As such it is impossible to mention the vehicle number at the time of booking of consignment note. This condition should be dispensed with.
 
  1. Sale in Transit: - When a consignment note is booked by the transport agency in name of specified person as consignee then the agency mentions the liability of the consignee in the consignment note. The consignee sales the goods to a non-specified person before these goods reach the destination. This sale is known as Sale-in-transit and approved under the Sales Tax Laws. Who will bear the responsibility of the service tax? The original consignee has not paid the freight and new consignee is not liable to pay the service tax. The Transport agency can not bear the same from his pocket.
 
  1. Endorsed Bilty: - It is normal practice in textile industry that the goods are delivered unsold to the transport agency. When the goods are sold at the place of destination then the consignment note is endorsed to the consignee. He takes the delivery and pays the freight. Suppose the consignee is a specified person in such sale. In such cases, who will pay the service tax? If the transporter pays the service tax and consignee is a specified person then the department will not accept the same, as the option is not available with the transporter to pay the service tax. But the agency can not forgo the liability, as he does not know the consignee at the time of preparation of consignment note.
 
  1. Absence of Transport Agency: -The next point of confusion is whether the service tax is payable when the goods carriage owner directly takes the goods from the consignor and no consignment note is issued. No transport agency is involved for this consignment. No service tax will be payable as the tax is on the transport agency only. But this position will endanger the very existence of the transport agencies. In case of full truckload, everyone will prefer the direct delivery because it will extinguish their tax liability.
 
These all confusion points need immediate attention for smooth implementation of this new levy. In absence of the same, this complicated levy will have the same outcome as earlier had. It will be withdrawn in next budget.       

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