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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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ANALYSIS OF FINAL TRANSITIONAL RULES VIS A VIS TEXTILE SECTOR

ANALYSIS OF FINAL TRANSITIONAL RULES VIS A VIS TEXTILE SECTOR

The GST Council has finalized the transitional rules in the meeting held on 03.06.2017 and the final rules are available on the public domain. Representations were made to the government for increasing the percentage of credit admissible in case of non-availability of duty paid documents and it appears that the cries of the assessees have been considered. The final transitional rules provide that where a registered person other than a manufacturer or supplier of services, is not in possession of an invoice or any other document evidencing payment of duty, then the said person will be allowed to avail input tax credit on goods on which duty of excise or CVD under section 3(1) of the Customs Act is leviable in the following manner:-
• If the rate of CGST leviable on the goods is 9% or more, then credit admissible shall be 60% of central tax applicable. 
• If the rate of CGST leviable on goods is less than 9%, then credit admissible on such inputs shall be 40% of central tax applicable.
Furthermore, if IGST is applicable on supply, then also credit shall be admissible. In this case, goods on which IGST is leviable at the rate of 18% or above then credit admissible shall be 30%. In other cases the credit admissible shall be 20%. 
 This credit shall be allowed for 6 months subject to following conditions:-
1. These goods were not unconditionally exempt from the whole of the duty of excise or were not nil rated in the said Schedule. 
2. The procurement documents of goods is available with the registered person. 
3. The assessee must have provided details of stock in statement FORM GST TRAN 2 at the end of each of the six months giving details of supplies of such goods.
4. The credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the Common Portal. 
5. The stock of goods on which the credit is availed is stored so therefore they can be easily identified by the registered person.

The above provision has great implication in the context of textile industry. It is pertinent to note that the benefit of credit shall be admissible only if such goods were not unconditionally exempt from whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said schedule. This condition is required to be critically analysed. It is also worth noting that the draft transitional rules released on 31.03.2017 stated the similar condition with the difference that the benefit of credit was allowed only if such goods were not wholly exempt from duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated. On comparing the provisions of the final transitional rules with that proposed in the draft rules, we find that the scope of the condition has been narrowed in the final rules. As per the draft transitional rules, the benefit of deemed credit on stock of goods was available only on the condition that the goods were not wholly exempt from the duty of excise and were not nil rated. However, as per the final transitional rules, the benefit of deemed credit will not be admissible if the goods were unconditionally exempt or were nil rated. It is worth noting that the word exempt is being prefixed with word unconditional thereby meaning that if deemed credit will not be available only if the goods were unconditionally exempt or nil rated. This means that if the goods are exempt but with condition, the benefit of deemed credit will be still available. This interpretation is of immense importance to the textile industry.

Another point that needs deliberation is that the benefit of deemed credit is admissible on goods on which duty of excise or CVD under section 3(1) of the Customs Act is leviable. We submit that it is important to understand that the term used is ‘leviable’ and not ‘paid’. We submit that it is possible that the duty is leviable but the same is not paid due to exemption prevalent in law. Consequently, we may interpret that the benefit of deemed credit is admissible with respect to textile products falling under chapter 50 to 63 because the central excise duty is leviable on such products but is exempted by virtue of exemption notification no. 30/2004-CE dated 09.07.2004. Since, the term ‘leviable’ is of wider scope than ‘payable’, the goods on which central excise duty is leviable irrespective of the fact whether the said duty is paid or not will be eligible for credit availment.

Presently, according to notification no. 30/2004-C.E. dated 09.07.2004, there is complete exemption to specified textile products falling under chapter 50 to 63 on the condition that no cenvat credit of inputs has been taken. Hence, we can say that the exemption to the textile sector is a conditional exemption with the condition that cenvat credit of inputs used has not been taken. Consequently, one may interpret that trader of textile products which has procured goods cleared under notification no. 30/2004-C.E. dated 09.07.2004 may be eligible to avail the benefit of deemed credit as the restriction is only for goods which are unconditionally exempt from the whole of duty of excise. Since the goods cleared under notification no. 30/2004-C.E. dated 09.07.2004 are conditionally exempt, the embargo will not apply to such goods. This interpretation may lead to manufacturers of such products transferring all their stock to their dealers/traders as it is quite probable that such manufacturers do not have valid duty paying document to avail credit under the provision of section 140(3) of the CGST Act, 2017 but they may ensure that at least the benefit of deemed credit is taken by the dealers/traders. In our opinion, such a practise although legally valid may not be accepted by the revenue authorities and the assessees may end up fastening themselves with penal consequences.

 

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