Amicus monthly review on recent high court and aar rulings (12th March, 2019- 12th April, 2019)

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Advocates & Solicitors
Issue: 1.1 | April, 2019

AMICUS MONTHLY REVIEW ON RECENT HIGH COURT AND AAR RULINGS (12th MARCH, 2019- 12th APRIL, 2019)

Commissioner Has Power To Arrest if ‘reason to believe’ is satisfied- – investigation revealed that fake invoices and bogus firms had been created

High Court of Madhya Pradesh in JagdishKanani vs. Commissioner, CGST & Central Excise held that the Commissioner has power to arrest if he has reason to believe that a person has committed an offence under section 132(1) of CGST Act. Section 132(1) defines type of offences as per which, whoever supplies any goods or services without issuance of invoice or issues any invoice without supply of goods or services or both or avails input tax credit using such invoice, shall be punished with imprisonment of term which may extend to 5 years and with fine, if the amount involved is more than Rs. 5 Crores. In the present case, the investigation revealed that the fake invoices and bogus firms were created, hence, ‘reason to believe’ was satisfied.

Writ Petition for Habeas Corpus is not maintainable when the detention of taxpayer was not illegal.

High Court of Punjab and Haryana in MandeepDhiman v. Deputy Director, Directorate General of GST Intelligence held that where the Competent Authority, in exercise of its powers under section 69 of CGST Act, had arrested taxpayer and taxpayer filed writ petition for issuance of ‘Habeas Corpus’ commanding Competent Authority to produce detenue, the same was not maintainable as a reasoned order was passed and the arrest did not qualify as illegal detention.

Suspicious Circumstances (multiple buy sell transactions with related parties) and interception of goods was enough to prove ‘reason to believe’ for search and seizure operations

High Court of Allahabad in RimjhimIspat Ltd. V.Juhi Alloys Ltd. held that the search and seizure operation carried out by revenue was justified as the ‘reason to believe’ was framed on the basis of suspicious transactions like multiple buying and selling transactions between related parties and interception of goods by GST Authorities.

Writ Petition for Penalty and Interest imposed is not maintainable as the same is appealable under section 107 of CGST Act

High Court of Allahabad in AdilAsagarvs. State Of U.P. held that writ petition filed against penalty and interest imposed by Competent Authority is not maintainable as the same is appealable under section 107 of CGST Act.

Courts normally do not entertain writ petitions unless local remedies have been exhausted.

AAR/AAAR RULINGS

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Services provided by Line Producer in shooting of film outside India must be considered as ‘supply of services’ and hence liable to IGST

Taxpayer was interested in producing film and a part of film was planned to be shot at locations outside India. For this, taxpayer appointed a line producer in Brazil under which all the expenses of line producer were reimbursed by the taxpayer (including those of the crew residing in Brazil). The AAR West Bengal in In re Udayan Cinema (P.) held that transaction between line producer and taxpayer is import of service and constitutes an inter-state supply as per section 7(4) of the IGST Act, 2017. Taxpayer is liable to pay GST @ 18% based on Sl No. 34(vi) of Notification No. 08/2017 – IT(Rate) dated 28/06/2017 as amended from time to time.

Further, the Line Producer is not a pure agent, hence, reimbursements shall not be deducted from the actual value of supply.

Procurement and delivery of goods at a place located outside taxable territory are outside the purview of GST

AARMaharashtra in Jotun India (P.) Ltd., held that wheresupplier receives purchase order from a customer located in India to supply certain paints at his vessel located near Norway and supplier places back to back purchase order on its related party [JN] located in Norway and ‘JN’ delivers paints at vessel of customer, located outside taxable territory and thereafter raises invoice on supplier, pursuant to which supplier raises invoice on its customer will not be liable under GST in accordance with section 7(2) and proviso to section 5(1) of the IGST Act as the goods do not cross the customs frontiers of India.

Computers, laptops, etc. used by taxpayer for providing output service would not qualify as ‘inputs’ for purpose of availing transactional input tax credit under section 140

In Geojit Financial Services Ltd,.AAAR, Kerala ruled that taxpayer being service provider had no tax liability under the erstwhile KVAT Act and thereby not eligible to avail input tax credit on computers and laptops which formed part of capital assets under the KVAT Act in accordance with section 2(19) and 2(59) of KSGST Act and 140(2) of CGST Act which states that a registered person under GST shall not be allowed to take credit unless such credit was admissible as input tax credit under the earlier law and is also admissible as input tax credit under the CGST Act.

Reselling Ice-creams in wholesale and as retail sale packages amounts to ‘Supply of Goods’

AAR Maharashtra in Arihant Enterprises Case ruled that supply of ice-cream by supplier (Franchisee) exclusively dealing in selling of ice-creams to its customers on “as it is” basis without any further processing/alteration/structural or chemical change from retail outlets would be ‘supply of goods’ as it amounts to transfer of title in goods from supplier to its customers as per entry no. 1(a) of the Schedule II of the CGST Act.

The information contained in this newsletter is solely intended to provide general guidance on matters of interest. Nothing herein constitutes professional or legal advice, nor does any information herein constitute a comprehensive or complete statement of the issues discussed. It is recommended that you seek a professional advice to confirm your understanding on the issues dealt above.