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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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PJ/Case Law/2016-2017/3454

Whether the sale of a functional business unit would amount to supply of goods or supply of services or supply of goods & services
Case:RAJASHRI FOODS PVT. LTD.
Citation:2018 (13) G.S.T.L. 221 (A.A.R. - GST)
Issue: Whether the sale of a functional business unit would amount to supply of goods or supply of services or supply of goods & services
Brief facts:The issues involved in the appeal are filed by M/s. Rajashri Foods Private Ltd. (hereinafter referred to as ‘Applicant’). The assessee, Shri S. Amarnath (Director), is involved in the B0usiness of manufacturing animal feed known as  - M/s. Rajashri Foods Private Ltd. (hereinafter referred to as ‘Applicant’) holding GSTIN Number 29AAACR6946B1ZC, having registered address at #17, Platform Road, Seshadripuram, Bengaluru - 560 020. M/s. Rajashri Foods Private Ltd. have filed an application in form GST ARA-01 on 19-12-2017 seeking Advance Ruling  under Section 97 of CGST Act, 2017, KGST Act, 2017 & IGST Act, 2017 read with Rule 104 of CGST Rules, 2017 & KGST Rules, 2017. They enclosed copy of challan for Rs. 10,000/- bearing CIN Number SB1N17122900184487 dated 19-12-2017 towards the applicable fee. The applicant, having three manufacturing units situated at Ramanagara, Hiriyur and Bengaluru (Seshadripuram), intends to sell the unit situated at Hiriyur along with all its fixed assets namely land, building, plant and machinery etc., current assets namely stock and trade receivables, etc., and liabilities namely Bank term loans, bank working capital loans, creditors for supplies, etc., for a lump sum consideration. The applicant has sought Advance Ruling as to whether the transaction would amount to supply of goods or supply of services or supply of goods & services and also whether the transaction would cover under Sl. No. 2 of the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 that is if the said transaction is covered under the definition of Services.
 
Appellant’s contention: Sri S. Vishnu Murthy, Chartered Accountant and the authorized representative of the Applicant appeared and presented the case. The assessee mentioned that the unit in question, which is intended to be sold, is an independent one and is involved in the manufacture of animal feeds.This unit has fixed assets in the form of land, building, plant and machinery and current assets in the form of inventory and receivables. It has also availed term loans from the bank for the purpose of setting up of the unit and working capital loans availed from the banks for meeting the working capital requirements. The unit has also liabilities in the form of sundry creditors and certain outstanding liabilities. The proposed transaction of sale of unit as a whole involves transferring of all the assets to the purchaser and also taking over of all the liabilities by the purchaser. Therefore, the applicant wants to know if the said transaction would amount to sale and attract the GST Act or not.
 
Respondent’s Contention: The authority for Advance Ruling stated that it has considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri S. Vishnu Murthy, Chartered Accountant, the authorized representative of the applicant, during the personal hearing. It has also considered the questions/issues on which advance rulings have been sought for by the applicant, relevant facts having bearing on the questions/issues raised, and the applicant’s understanding/interpretation of law in respect of the issue. It has been summarised that the transaction envisages the transfer of all assets to the buyer and the buyer shall also take over all the liabilities. It also conveyed that the unit sought to be sold is a fully functional unit and the transaction relates to the transfer of the entire business to a new person, who would not only enjoy a right over the assets but shall also take over the liabilities. It thus also implies that there will be continuity of business. As the unit is said to be functional and is desired to be transferred as a whole to a new owner it amounts to transfer of a going concern as a whole.
 
Reasoning of Judgement: Section 7(1) (d) stipulates that activities referred to in Schedule II shall be treated as supply of goods or supply of services. In Schedule II the entry at serial Number 4 refers to ‘transfer of business assets’. Transfer of business assets is considered as supply of goods. The transfer of business assets implies that a part of the assets are transferred and not the whole business. Further in Part 4(c) of Schedule II it is provided that when the business is transferred as a going concern then it does not amount to supply of goods. It, therefore, becomes clear that such transfer of business does not constitute a supply of goods. Activities which constitute supply of services are also described in Schedule II. However the transaction involving the transfer of a going concern is not covered under this Schedule. This analysis further brings us to the Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017. Column Number 3 of the Table in the said Notification gives the description of the services. Serial Number 2 of the Notification provides for ‘Services by way of transfer of a going concern, as a whole or an independent part thereof’. This indicates that the activity of transfer of a going concern constitutes a supply of service. The Notification further provides ‘Nil’ rate of tax on such a supply.
 
Decision: The transaction of transfer of business as a whole of one of the units of the Applicant in the nature of a going concern amounts to supply of service.
 
Comment: The gist of this case is that the transfer of one of the independent business units of an assessee would amount to supply of service as per Notification No.12/2017-Central Tax (Rate), dated 28-6-2017. Although, it attracts NIL rate of tax.
 
Prepared by:  Adit Gupta
 
 
 
 
 
               
 

 
 
  
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