By:
Pradeep K. Mittal
B.Com, LL.B., FCS
Advocate, PKMG Law Chambers
Past Central Council Member,
The Institute of Company Secretaries of India,
New Delhi
e-mail id: [email protected]
Mob: +91-9811044365
GST - JOB WORK
Raw
Material
Activity done by Job
Worker
Intermediate
Goods
Initial Process
Component
Parts
Semi
Finished
Goods
Intermediate Process
Assembly
Packing or any other
completion process or
complete manufacture
Further
Processed
Goods
Complete
Goods
Specific Provision for JOB WORK under GST
Section 19 read with Section 143:
Input Tax Credit in respect of Inputs Sent for Job Work.
While looking at the provision of Section 19 which
pertains to the availment of Input Tax Credit in respect of
Inputs sent to a Job Worker for Job Work.
ANALYSIS
Before looking at the provisions, it is quite
imperative to interpret the expressions “Job Work”
and “Job Worker” under the GST Act.
The definition of Job Work is given under Section
2(68) of the GST Act, which defines that “any
treatment or process done by a person on goods
belonging to a registered taxable person and the
expression “job worker” to be construed
accordingly.
“Job worker” to mean a person who does any
treatment or process on goods of registered taxable
person.
Looking from the prospect of comparative review, the
term Job Work has not been defined in the Central
Excise Act or Customs Act but the same has been
provided for in Notification No. 214/86- CE. dated
25.03.1986 and CENVAT Credit Rules, 2004. The
definition given GST law is much wider than the one
given in Notification No. 214/86- CE, wherein jobwork has been defined in such a manner so as to
ensure that the activity of job work must amount to
manufacture. Thus, the definition of job work itself
reflects the change in basic scheme of taxation relating
to job work in the proposed GST regime.
 Entitlement of credit on inputs:
The principal can take credit of input tax on
inputs sent to job-worker, for job work – Section
19(1).
subject to such conditions and restrictions as may
be prescribed
the inputs, after completion of job-work, are
received back by him within one years of their
being sent out
 credit of inputs can be taken even if inputs are sent
directly to job-worker’s place without bringing to
principal’s place of business – Section 19(2).
 If input sent directly to job worker, the period of One year
days is counted from the date when job worker receives
input.
 If the inputs are not received back within one year
days, it shall be deemed that such inputs had been
supplied by the Principal to Job Worker on the day when
the inputs were sent out. Section 19(3)
 If the inputs are received back by the principal, he may
reclaim the input tax credit and interest paid earlier.
Entitlement of credit on capital goods
 The principal can take credit of input tax on capital
goods sent to job-worker – Section 19(4)
 The said capital goods, after completion of job-work, are
received back by him within 3 years of their being sent
out, it shall be deemed that such capital goods had been
supplied by the principal to the Job Worker on the day
when the said capital goods were sent out – Section 19(6)
 The principal can take credit of capital goods even if
such capital goods are sent directly to job-worker’s
place without bringing to principal’s place of business –
Section 19(5).
 If the capital goods are not received back within 3
years, the principal shall pay an amount equal to
input tax credit taken on the said capital goods.
 If the capital goods are received back by the principal,
he may reclaim the input tax credit and interest paid
earlier.
 Any waste and scrap generated during the job work
may be supplied by the job worker directly from his
place of business on payment of tax if job worker is
registered or by the principal if the job worker is not
registered .
Present Regime v. GST
Reversal of credit along with the interest where
inputs or capital goods are not received back
within the time specified:
As per Rule 4(5)(a)(iii) of the Credit Rules, if the inputs or
the capital goods , as the case may be are not received back
within the time specified i.e. 180 days/ 2 years by the
manufacturer or provider of output service, the
manufacturer or the provider of output service shall pay an
amount equivalent to the CENVAT Credit attributable to
the inputs or capital goods, as the case may be, by
debiting the Cenvat Credit or otherwise.
 The CGST Law provides that where the inputs or
capital goods are not received back by the principal
within the time specified (i.e. 1 year or 3 years), as the
case may be , he shall pay an amount equivalent to
the input tax credit availed of on the said inputs or
capital goods , as the case may be along with
interest and reclaim the said amount (input tax
credit and interest) as and when goods are received
back at his place of business.
 Section 143 of the GST Act provides for working under Job
Work Scheme, under intimation to concerned officer, send
inputs or capital goods to a Job Worker without payment of
tax for job work and from there subsequently goods can be
sent from one job worker to another job worker as well
without payment of tax on such goods being sent.
 After the processing of goods, the goods may be dealt with
in any of the following manner by the principal:
(a) Brought back to any place of business without payment
of tax and thereafter supplied,
i. Within India on payment of tax;
ii. For export with or without payment of tax;
(b) Supplied from the place of business of job worker –
i. Within India on payment of tax;
ii. For export with or without payment of tax;
 The goods can be supplied directly from the place of
business of job worker by the principal only when the
principal declares the place of business of the job
worker as his additional place of business.
However, the exceptions are –
 (a) If job worker is registered under Section 25;
 (b) The principal is engaged in the supply of notified
goods as may be notified by the Commissioner.
If the benefit under this section is availed, the principal
is responsible and accountable for all the transactions
between him and the job worker.
SUMMARY
 The principal undertakes the primary responsibility and
accountability of the goods including payment of taxes if
any.
 The goods sent by a registered taxable person (principal)
to a job worker shall not be treated as supply and cannot
be held liable to GST. The reason being, that in terms of
Schedule I of the GST Act, the supply of goods by a
Principal to a Job worker shall not be regarded as supply.
Therefore, no GST is applicable on such goods.
 A registered taxable person can send the taxable
goods to job worker for job work without
payment of tax. He can further send the goods
from one job-worker to another job-worker and
so on subject to certain conditions. It may be
noted that provisions of Section 143 are not
applicable if non-taxable or exempted goods are
proposed to be sent for job-work. .
 The goods can be supplied from job worker’s
premises to customers but only on payment of
taxes within India and without payment of taxes
for export.
 Concerning the job worker’s registration, since a
job worker would be a supplier of services, he
would be required to obtain registration if his
aggregate turnover exceeds the prescribed
threshold.
 The Principal can supply the goods directly from
the job worker premises without bringing such
goods to his own premises provided the Principal
should have declared the premises of such job
worker as his additional place of business.
 However, goods can be supplied directly from the
place of business of the job worker without
declaring it as additional place of business in two
circumstances namely where the job worker is a
registered taxable person or where the principal is
engaged in the supply of such goods as may be
notified in this behalf.
 The responsibility for keeping proper accounts
for the inputs or capital goods shall lie with the
principal.
 Any waste and scrap generating during the job work
may be supplied by the Job Worker directly from his
place of business on payment of tax, if such Job
Worker is registered, or by the Principal , if the Job
Worker is not registered.
Explanation: For the purpose of Job Work, inputs includes
intermediate goods arising from any treatment or process
carried out on the inputs by the principal or job worker.
Considering the job worker’s increasing role and
contribution
in the economy and the symbiotic
relationship they maintain with the principal manufacturer
or large scale units, it is desirable that the law pertaining to
job work should provide simplicity and ease of doing
business to support Make in India Initiative.
PART-II
OFFENCES AND PENALTIES
Section 122 (1) Where a taxable person who –
(i) supplies any goods or services or both without issue of
any invoice or issues an incorrect or false invoice with
regard to any such supply; (CLANDESTINE REMOVAL OF
GOODS)
The Customs Excise & Service Tax Appellate Tribunal in the
case
of
Pilania
Steel
Pvt.
Ltd.
vs.
MANU/CE/0338/2017, while relying upon
CCE,
Raipur,:
(ii) RA Casting (P) ltd Vs. CCE 2009(237)ELT 674
(Tri); CCE Vs. Anand Founders & Engg. Vs. CCE
MANU/PH/3994/2015 and Continental Cement Co
Vs. CCE MANU/UP/1995/2014, has observed as
under:-
Further, unless there is clinching evidence of the
nature of purchase of raw materials, use of electricity,
sale of final products, clandestine removals, the mode
and flow back of funds, demands cannot be confirmed
solely on the basis of presumptions and assumptions.
Clandestine removal is a serious charge against the
manufacturer, which is required to be discharged by
the Revenue by production of sufficient and tangible
evidence. On careful examination, it is found that
with regard to alleged removals, the department has
not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have
been purchased.
(iii) To find out the dispatch particulars from the regular
transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from
regular dealers/buyers.
(vi) To find out the excess power consumptions.
Issues any invoice or bill without supply of goods
or services or both in violation of the provisions of
this Act or the rules made there-under. The Punjab
& Haryana High Court in the case of Vee Kay
Enterprises vs. Commissioner of Central Excise
MANU/PH/1440/2011
“The person who purports to sell goods cannot say that
he was not a person concerned with the selling of goods
and merely issued invoice or that he did not contravene
a provision relating to evasion of duty. The Appellant
issued invoices without delivery of goods with intent to
enable evasion of duty to which effect a finding has been
recorded and which finding has not been challenged. We
are, thus, unable to hold that Appellant was not liable to
pay any penalty.”
The CESTAT in the case of CCE vs. Prag Pentachem Pvt.
Ltd. and Ors. (17.06.2015 - CESTAT - Delhi) :
MANU/CE/0224/2015
On independent examination of the said statement, I find
that the goods/inputs were not available in the Indore and
the respondent had procured the inputs from the open
market in Delhi without cover of invoices.
No prudent manufacturer shall procure inputs from
Delhi without cover of invoice to cover those purchases
shall procure the invoices from Indore. Possibly, the
Revenue has not made any enquiry from Delhi Market in
respect of statement of Shri Karni Singh Kothari to
ascertain the truth.
Moreover, no statement has been recorded from the
transporter in order to ascertain that the goods have
been procured without cover of invoice from the Delhi
market. The statement has not been supported with
tangible evidence, the same cannot be relied upon in
view of the decision of Hon'ble Allahabad High Court in
Vikram Cement Pvt. Ltd.
The CESTAT in the case of Victoria Tools Engineers (P)
Ltd.
vs.
C.C.E. (26.05.2015 - CESTAT - Delhi) :
MANU/CE/0215/2015, has observed as under:-
Hence, in my opinion, confirmation of duty/Cenvat
demand, without proper evidence, is not legal and
appropriate. Further, in view of the fact that the appellant
has maintained adequate records to demonstrate receipt of
the disputed goods under the cover of valid and proper
duty paid documents, the charges leveled against the
appellant for taking fraudulent credit is not sustainable in
the eyes of law. Thus, I am of the view that confirmation of
the cenvat demand, imposition of penalty by the Authorities
below are liable to be set aside.
(iii)
collects any amount as tax but fails to pay the same
to the Government beyond a period of three months from
the date on which such payment becomes due;
(iv)
collects any tax in contravention of the provisions
of this Act but fails to pay the same to the Government
beyond a period of three months from the date on which
such payment becomes due;
The Supreme Court in CST v. Mool Chand Shyam Lal,
MANU/SC/0104/1988: (1988) 4 SCC 486 observed as
under:
"4. Therefore, it is necessary that realization must be of
the sales tax or purchase tax, secondly, that realization
must be in excess and thirdly the amount of tax should be
legally payable under the Act. The High Court has
construed the expression "as" in the beginning of the subclause as significant.
Penalty is leviable for excess realization of tax,
therefore, realization of the amount should be as tax and
not in any other manner. Then excess should be over and
above the amount of tax legally payable. This expression
obviously means tax payable under the Act, rules or
notification. Therefore, realization by the assessee from
customers should not be of only sales or purchases but it
should be of the tax legally payable. If the purchaser
realises more money that by itself will not attract the
penal provisions.
This is a method of realisation in case of indirect tax.
Penalty can be levied or is leviable for realisation of
excess of tax legally payable and not for contravention of
Section 8-A(2)(b). Realisation of excess amount is not
impermissible but what is not permissible is realisation
of excess amount as tax......It has to be borne in mind that
the imposition of a penalty under the Act is quasi-
criminal and unless strictly proved the assessee is not
liable for the same."
Further the Supreme Court in the case of R.S. Joshi,
Sales Tax Officer, Gujarat v. Ajit Mills Limited
MANU/SC/0300/1977 : (1977) 4 SCC 98, the Supreme
Court was analysing what the expression "collected'
meant in the context of the sales tax legislation of
Gujarat. It observed as under:
"Section 37 (1) uses the expressions, in relation to
forfeiture, 'any sum collected by the person - shall
be forfeited'. What does 'collected' mean here?
Words cannot be construed effectively without
reference to their context. The setting colours the
sense of the word. The spirit of the provision lends
force to the construction that "collected" means
"collected and kept as his" by the trader. If the
dealer merely gathered the sum by way of tax and
kept it in suspense account because of dispute about
taxability or was ready to return if eventually it was not
taxable, it is not collected. "Collected", in an Australian
Customs Tariff Act, was held by Griffth C.J., not 'to
include money deposited under an agreement that if it
was not legally payable it will be returned' (Words &
Phrases p. 274). We therefore, semanticise 'Collected'
not to cover amounts gathered tentatively to be given
back if found non-exigible from the dealer."
eBiz.Com. Pvt. Ltd. vs. Union of India and Ors.
(01.09.2016 - DELHC) : MANU/DE/2740/2016
(v)
fails to deduct the tax in accordance with the
provisions of sub-section (1) of section 51, or deducts an
amount which is less than the amount required to be
deducted under the said sub-section, or where he fails to
pay to the Government under sub-section (2) thereof, the
amount deducted as tax;
(vi) fails to collect tax in accordance with the
provisions of sub-section (1) of Section 52, or
collects an amount which is less than the amount
required to be collected under the said sub-section
or where he fails to pay to the Government the
amount collected as tax under sub-section (3) of
section 52;
The Division Bench of Delhi High Court in the case of
Commissioner
Motocorp
of
Limited
Income
Tax-IV
(08.05.2017
-
vs.
Hero
DELHC)
:
MANU/DE/1288/2017 has observed as under:In this context, the Court concurs with the following
findings of the ITAT:
"Therefore, by export agreement, the assessee has not been
transferred or permitted to use any patent, invention, model,
design or secret formula. Similarly, HMCL, by way of export
agreement, has not rendered any managerial, technical or
consultancy services. In view of the above, we hold that export
commission was neither royalty nor fee for technical services
and, therefore, the assessee was not required to deduct tax at
source on the payment of export fee. Once the assessee was not
required to deduct the tax at source, it cannot be said that the
assessee failed to deduct tax at source so as to apply Section
40(a)(ia)."
The Division Bench of Delhi High Court in the case
of Hightension Switchgears (P) Ltd Vs. CIT
MANU/WB/0651/2016
has
made
interesting observations as under:-
a
very
Even assuming that the supplier in transporting the
goods to the asses-see acted "as an agent of the assessee
and the assessee has reimbursed the freight charges to
the suppliers, who in turn have paid to the concerned
transporters" as held by the learned Tribunal is
conceptually correct, no other conclusion is possible.
The agent being the supplier in this case has admittedly
paid to the transporters and has also deducted tax at
source. When the agent has complied with the provision,
the principal cannot be visited with penal consequences.
For one payment there could not have been two deductions.
Moreover, when a person acts through another, in law, he acts
himself. In that view of the matter, the question, quoted
above, is answered by holding that the Tribunal was wrong in
holding that the appellant was liable to deduct tax at source
in respect of the freight component. When the assessee was
not liable to make any deduction under section 194C, the
rigours of section 40(a)(ia) could not have been applied to
him. The question is thus answered. The appeal is thus
allowed.
(vii) takes or utilizes input tax credit without
actual receipt of goods or services or both either
fully or partly, in contravention of the provisions of
this Act or the rules made there-under;
The Tribunal in the case of Mittal Pigments Pvt. Ltd.
and Ors. vs. C.C.E. and S.T., Jaipur-I (20.12.2016 CESTAT - Delhi) : MANU/CE/0813/2016 -
By considering the rival submissions, it appears that mere
non entry of the consignment at one of the toll posts cannot
prove that the goods covered under the subject invoice were
not received by the appellant company, unless there are
other substantial corroboratory evidences to prove the
charge of non-receipt of such goods. In the instant case,
there is no material brought on record by the Department in
support of allegation. When it so then the demand of Cenvat
Credit of Rs. 2,33,694/- on this account is not sustainable
and is hereby dropped.
The Tribunal in the case of Adhunik Alloys Ltd. and
Ors.
vs.
Commissioner
of
Central
Excise,
Chandigarh (21.03.2016 - CESTAT - Chandigarh) :
MANU/CJ/0003/2016 -
I also find that some kachaa ledger was also recovered from Sh.
Praveen Kumar Garg, the same cannot be relied upon as evidence
in the matter as these records have been recovered from third
party whose cross examination has not granted to prove the truth,
therefore these Kucha Ledger is not admissible as evidence. In fact
the initially statement of Sh. Sanjeev Kumar of M/s. Ritco Kirti
Associate (P) Ltd. was recorded but for cross examination, Sh.
Mukesh was produced. As the person who made the statement
was not produced, the cross examination of the third person is not
relevant to reveal the truth. As the revenue fails to produce Sh.
Sanjeev Kumar for cross examination, the statement of M/s. Ritco
Kirti Associate (P) Ltd. is not admissible at all.
Further, I find that the revenue is relied on the opinion obtained from
the NISST to the extent that furnace oil is not required for the
appellant for operation of their furnace or induction furnace. In fact
the person gave the opinion have never visited the factory premises to
the appellant and made a general statement. On the other hand, the
appellant has produced the certificate issued by the chartered
Engineer who has physically visited the factory and stated that furnace
oil is required for the running of induction furnace of the appellant.
The said chartered engineer was not cross examined by the revenue,
on the contrary, he affirmed the contents of the certificate issued by
him therefore the said certificate is having evidential value.
In the absence of any contrary evidence produced by the
revenue, the certificate issued by the chartered engineer who
has visited the factory is admissible. Further, I find that during
the course of investigation the furnace oil was found in stock of
the appellant. The allegation of the revenue that the furnace oil
is not required for manufacturing by the appellant but the same
was available in the factory premises of the appellant, in that
circumstances, the revenue is failed to prove their case by
cogent evidence to show that the furnace oil has not required
by the appellant.
(viii) fraudulently obtains refund of tax under this
Act;
(ix) Takes or distributes input tax credit in
contravention of Section 20, or the rules made
thereunder;
The Calcutta High Court in the case of Singh Alloys
and Steel Ltd. vs. Assistant Collector of Central
Excise - CALHC : MANU/WB/0305/1993
The respondents then argued that steel ingots could be
manufactured even without the items. That may be so, but that is
immaterial. The definition of inputs is not dependent upon what
ought to be used but what is in fact used. There is no dispute that the
petitioner No. 1 had in fact, used and uses the items in the
manufacturing of ingots. The Supreme Court has also held that
manufacture would include a process which was commercially
expedient in the production of goods [See : Collector of Central
Excise v. Eastend Paper Industries - MANU/SC/0107/1989 :
1989(43)ELT201(SC) ; Collector of Central Excise, Jaipur v. Rajasthan
State Chemical Works : AIR 1991 SCC 2222] That the process in
question is commercially expedient has not been doubted.
The Tribunal in the case of Bostik India Pvt. Ltd. vs.
Commr. of C. Ex., Cus. and S.T. (23.09.2016 - CESTAT Bangalore) : MANU/CB/0262/2016 He also submitted that these input services have nexus
with the business of the appellant and the appellant has
hired the services of advocates for providing legal services
on commercial contracts, business transactions and
initiating legal proceedings before the appropriate courts
against the defaulting customers for recovery of dues.
Similarly the appellants have availed credit of tax paid
on installation and commissioning services of elevator
installed in the registered office of the company which
is also situated within the same premises wherein the
factory is situated. In support of his submissions he
relied upon the decision of the Hon'ble Bombay High
Court in the case of CCE, Nagpur v. Ultratech Cement
Ltd. MANU/MH/1408/2010 : [2010-TIOL-745-HCMUM-ST : 2010 (20) S.T.R. 577 (Bom.) : 2010 (260)
E.L.T. 369 (Bom.)].
The
Commissioner
of
Central
Excise
vs.
Thyssenkrupp Industries India Ltd. (06.10.2016 CESTAT - Mumbai) : MANU/CM/0766/2016 -
The eligibility to avail credit of Rs.47,244/- for services
rendered at registered office has been allowed in the light
of a catena of pronouncements. It cannot be denied that in
rendering of services, it is not physically possible to
identify the limits of the area that are used. Likewise, the
eligibility for availment of credit of tax paid on customs
house agents service amounting to ` 90,804/- is based on a
circular of Central Board of Excise & Customs which is
binding on the appellant-Commissioner.
That the excess credit of Rs.12,24,333/- allegedly taken on
payment of cess has been found to be based on unfounded
presumptions is recorded in the impugned order which
Revenue has not been able to counter in the grounds of
appeal. In the matter of trading activities alleged in the
notice for availment of ineligible credit of Rs.97,14,931/-,
the impugned order has established that these were items
bought out for on-site installations; that this is erroneous
has not been established by Revenue.
It is also clearly established in the impugned order
that the credit of Rs.67,59,102/- pertains to services
rendered by sub-contractors which the appellant, as
main contractor discharging service tax, is entitled
to. As all these are disputes of fact which have not
been countered by Revenue in its appeal, there is no
reason to interfere with the findings thereon.
LANDMARK JUDGMENTS ON CENVAT - INPUTS
(1) CCE Vs. Rajasthan State Chemical Works-MANU/SC/0482/1991 :
1991(55) ELT 444(SC).
(2) J.K. Cotton Spg. & Wvg. Mills Co. Ltd.-1997(91) ELT 34 (SC)
(3) Union Carbide India Ltd. Vs. CCE-MANU/CE/0284/1996 :
1996(86) ELT 613(T-Larger B)
(4)
CCE
Vs.
Tata
Engg.
and
Locomotives
Co.
Ltd.-
MANU/SC/0872/2003 : 2003(158) ELT 130(SC).
(5)Aditya Cement vs. CCE (31.08.2016 - CESTAT - Delhi) :
MANU/CE/0395/2016
(6) Indian Farmers Fertilizers Ltd Vs. CCE MANU/SC/1204/1996
LANDMARK JUDGMENTS ON INPUT SERVICES
•Coca Cola Indian(P) Ltd Vs. CCE MANU/MH/0784/2009
•Ultra-tech Cements Ltd Vs. CCE MANU/MH/14-8/2010
•Manikgarh Cements Ltd Vs. CCE MANU/MH/1285/2010
•Pepsi Foods Ltd Vs. CCE MANU/SC/0974/2003;
The Tribunal in the case of Aditya Cement vs. CCE
(31.08.2016 - CESTAT - Delhi) : MANU/CE/0395/2016, has
held as under:The subject goods (s), assessee manufacturer is using for
carrying raw materials like limestone etc. from the mining
area to the site of the crusher, the Tribunal in the case of
Malabar Cements Ltd. (supra) and CESTAT, Delhi in the case
of
Jindal
Steel
and
Power
Ltd.
Vs.
CCE,
Raipur
MANU/CE/0634/2015 : 2015-TIOL-2376 (CESTAT-Delhi)
and considering the Hon'ble Supreme Court's decisions in
the cases of CCE, Jaipur Vs. Rajasthan Spinning & Weaving
Mills Ltd. MANU/SC/0465/2010 : 2010(255) ELT 481 (SC)
and Jawahar Mills Ltd. MANU/SC/0397/2001 : 2001(132)
ELT 3 (SC), where yardstick of user test has been
mentioned, we are of the considered view that the dumpers
as such are accessory to the capital goods involved in
manufacture of final products.
(x) falsifies or substitutes financial records or
produces fake accounts or documents or furnishes
any false information or return with an intention to
evade payment of tax due under this Act;
WHY FALSICIATION OF RECORDS:
a) SSI Benefit
b) Composition Scheme;
c) Export Benefits;
e) Evasion of Duty (i) Non Taxable (ii) Exempt
COVERAGE UNDER OTHER LAWS:
Section 448 of Companies Act; 2013 (b) Indian Penal Code
Section 463 to 477
(xi) is liable to be registered under this Act but fails to obtain
registration;
(xii) furnishes any false information with regard to registration
particulars, either at the time of applying for registration, or
subsequently;
(xiii)obstructs or prevents any officer in discharge of his duties
under this Act;
(xiv) transports any taxable goods without the cover of
documents as may be specified in this behalf;
(xiv) suppresses his turnover leading to evasion of tax under
this Act;
The revenue authorities/taxing authorities do not have the
power to dictate as to what would be the appropriate business
module/method to be adopted - Hemraj Udyog Vs
Commissioner
of
Trade
Tax
U.P.
Lucknow.
MANU/UP/2027/1997, Commissioner of Income Tax Vs
Oberoi Hotels (P) Ltd., MANU/WB/0146/2011 : [(2011) 334
ITR 293 (Cal.)] and Commissioner, Sales Tax Vs Saurashtra
Chemicals, [MANU/UP/1013/1995). These decisions lay
down that it is not the business of a taxing officer to guide the
businessman about the manner in which later should conduct
his business.
A businessman is not expected to earn more so as to be
able to pay higher tax nor can the Assessing Officer force a
dealer to sale his goods at a particular price. It is
essentially for the assessee to manage his business affairs
according to his wisdom. Accordingly, the authorities have
gone wrong in initiating reassessment proceeding
thinking that business module adopted by the petitioner
of selling ROM at a particular price was unusual
particularly when there is nothing to show that such a
business practice was prohibited by law.
ONUS TO PROVE – ON REVENUE
In the cases of Girdhari Lal Nannelal-vrs-The Sales Tax
Commissioner M.P. [MANU/SC/0401/1976 : (1976) 3 SCC 701]
and K.P. Varghese-vrs-Income Tax Officer, Ernakulam and
another, [MANU/SC/0300/1981 : (1981) 4 SCC 173. In both the
above cases, the Hon'ble Supreme Court has made it clear that
burden of proving understatement or concealment is on Revenue.
This burden can be discharged by establishing facts and
circumstances from which a reasonable inference can be drawn
that the assessee had not correctly declared/disclosed the
consideration received by him.
According to Mr. Jain, learned Sr. Advocate in the present
case, no such thing has been proved by the petitioner or
that the petitioner has concealed the turnover of sales.
Thus, the Revenue has not discharged its burden. In such
background, merely by introducing new and artificial
parameters based on conjectures and surmises to
reconsider the same set of facts, the Assessing Officer has
acted merely on the basis of change of opinion and thus
beyond jurisdiction.
Vinod
Trading
Company-vrs-State
of
Assam
and
others
[MANU/GH/0162/2005 : (2006) 144 STC 573] (Gauhati), Delux
Wines-vrs-State of Andhra Pradesh [MANU/AP/0157/1990 : (1990)
77 STC 373 (A.P.)] where the assessment has been sought to be reopened on the ground of variation between prices charged by the
assessee/dealer and the alleged prevailing market price, the same
has not been allowed by the Courts. Here according to Mr. G. Jain,
learned Sr. Advocate the facts of the present case are still better as in
the instant case except saying that the petitioner has sold ROM at an
abysmally low price, there exists no evidence to show high prevailing
market price of ROM in order to come to a conclusion for re-opening
assessment.
The Tribunal in the case of Rathi TMT Saria Pvt. Limited vs. CCE, Jaipur
(11.05.2017 - CESTAT - Delhi) : MANU/CE/0343/2017 has observed as
under:After recovery of the above documents, during investigation, the
departmental officers have confronted these documents with various
employees of the assessee company. Sh. Nagendra Dutt Sharma, Excise
Clerk has identified the author of these documents as Sh. Kartar Singh. Sh.
Kartar Singh, Shri Tiwari, Sh. Mahendra Kumar Kabra, Director as well as
Sh. Srivats Rathi, Director have independently, in their respective statements,
have admitted that goods covered by all these documents were cleared
without accounting the same in the statutory records and without payment of
Central Excise duty.
It is further on record that none of the statements have ever been
retracted. In view of the fact that the factum of clandestine
clearance has been admitted by all concerned including Sh. Srivats
Rathi, Director, we find no reason to interfere with the demand of
Central Excise duty based on these records. It is well established
that what stands admitted need not be proved by revenue.
Next we turn to alleged fraudulent availment of cenvat credit of Rs.
50 lakhs. It is noteworthy that at the time of search proceedings on
21.07.2008, the RG-23A Part-II was not available prior to
10.10.2007.
On a perusal of the relevant register, it was noticed by the
departmental officers that the balance of credit which
should have been Rs. 1,12,08,677/- has been shown as Rs.
1,62,08,677/- i.e. an excess credit of Rs. 50 lakhs has been
availed and subsequently utilised. The RG-23A register
was in the custody of Sh. Mahendra Kumar Kabra, Director
at the tune of search. He admitted in his statement dated
21.07.2008 that on the directions of the owners of the
company, he has debited an amount of Rs. 50 lakhs vide
entry No. 569 dated 18.07.2008.
This was admitted to have been done with back date as
per direction of Sh. Srivats Rathi, Director. He further
admitted that for making the entry with back date,
page No. 35 of the RG-23A register was destroyed and
page No. 36 was made as 35 and debit entry of Rs. 50
lakhs was made. Later the amount of Rs. 50 lakhs was
deposited in cash as per the directions of the
department on 11.08.2008 alongwith interest of Rs.
5,16,438/-.
(xvi) fails to keep, maintain or retain books of account
and other documents in accordance with the provisions
of this Act or the rules made there-under;
(xvii) fails to furnish information or documents called
for by an officer in accordance with the provisions of
this Act or the rules made there-under or furnishes
false information or documents during any proceedings
under this Act;
(xviii) supplies, transports or stores any goods which
he has reasons to believe are liable to confiscation
under this Act;
(xix) issues any invoice or document by using the
registration number of another registered person;
(xx) tampers with, or destroys any material evidence
or document;
(xxi) disposes off or tampers with any goods that have
been detained, seized, or attached under this Act,
He shall be liable to pay a penalty of ten thousand
rupees or an amount equivalent to the tax evaded or
the tax not deducted under Section 51 or short
deducted or deducted but not paid to the Government
or tax not collected under Section 52 or short collected
or collected but not paid to the Government or input tax
credit availed of or passed on or distributed irregularly,
or the refund claimed fraudulently, whichever is higher.
(2)
Any registered person who supplies any goods or services or
both on which any tax has not been paid or short-paid or
erroneously refunded, or where the input tax credit has been
wrongly availed or utilized, (a) for any reason, other than the reason of fraud or any willful
misstatement or suppression of facts to evade tax, shall be liable to a
penalty of ten thousand rupees or ten per cent of the tax due from
such person, whichever is higher;
(b)
for reason of fraud or any willful mis-statement or
suppression of facts to evade tax, shall be liable to a penalty equal to
ten thousand rupees or the tax due from such person, whichever is
higher.
The Supreme Court in case of Commissioner of Central
Excise, Chandigarh v. Punjab Laminates Pvt. Ltd. reported
in MANU/SC/3609/2006 –
: 2006(202)ELT 578 has propounded the following position of
law.
The Petitioner furnished all information that was called for by
the Department from time to time. Once the information is
supplied pursuant to the directions of the revenue authority
and information so supplied has not been questioned, a
belated demand has to be held to be barred by limitation.
The Hon'ble Apex Court in the case of Commissioner of
Central
Excise,
Chennai
v.
Chennai
Petroleum
Corporation Ltd. reported in 2007(211) ELT 193 where
it was held in effect that where the Department was
aware of the activities of the assessee and nothing
prevented the Department from visiting the assessee's
site to make enquiries, it had to be held that there was
no suppression on the part of the assessee to warrant
invocation of the extended period of limitation.
In Collector of Central Excise, Hyderabad v. Chemphar
Drugs and Liniments, Hyderabad reported in
MANU/SC/0112/1989 : (1989) 2 SCC 127, the
Supreme Court held:--
"In order to make the demand for duty sustainable beyond a period
of 6 months and up to a period of 5 years in view of the proviso to
sub-section (1) of Section 11A of the Act, it has to be established that
the duty of excise has not been levied or paid or short-levied or
short-paid or erroneously refunded by reasons of either fraud or
collusion or willful misstatement or suppression of facts or
contravention of any provision of the Act or Rules made thereunder,
with intent to evade payment of duty. Something positive other than
mere inaction or failure on the part of the manufacturer or producer
or conscious or deliberate withholding of information when the
manufacturer knew otherwise, is required before it is saddled with
any liability, before the period of six months.
In Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise,
Meerut, reported in MANU/SC/0641/2005 : (2005)7 SCC 749 :
2005 (188) E.L.T. 149 (S.C.), the Supreme Court held:
"...we find that "suppression of facts" can have only one meaning
that the correct information was not disclosed deliberately to
evade payment of duty. When facts were known to both the
parties, the omission by one to do what he might have done not
that he must have done would not render it suppression. It is
settled law that mere failure to declare does not amount to wilful
suppression. There must be some positive act from the side of the
assessee to find wilful suppression."
In Commissioner of Central Excise, Aurangabad v. Bajaj Auto
Ltd. reported in MANU/SC/0945/2010 : 2010 (260) E.L.T 17
(S.C.) the Supreme Court held that it was settled that mere failure
to declare would not amount to wilful suppression. There must
be some conscious, deliberate act with a view to evade tax.
The Tribunal in the case of CCE Vs. Medicap Ltd 2011(24) STR
572 (Tri) has observed as under:-
The cenvat credit availed has been reflected in the
Monthly Return but, however, there is no column in the
Return to show the service on which the cenvat credit
has been availed, the assessee cannot be blamed for
not making proper disclosure and invoking the
extended period of limitation. It was for the
department to have asked for the nature of service on
which credit has been availed.
barred by time.
The demand being
(3)
Any person who –
(a)
aids or abets any of the offences specified in
clauses (i) or (xxi) of sub-section (1);
(b)
acquires possession of, or in any way concerns
himself in transporting, removing, depositing, keeping,
concealing, supplying or purchasing or in any other
manner deals with any goods which he knows or has
reasons to believe are liable to confiscation under this
Act or the rules made there-under;
(c)
receives or is in any way concerned with the supply of, or
in any other manner deals with any supply of services which he
known or has reasons to believe are in contravention of any
provisions of this Act or the rules made there-under;
(d)
fails to appear before the officer of central tax, when
issued with a summon for appearance to give evidence or
produce a document in an inquiry;
(e)
fails to issue invoice in accordance with the provisions of
this Act or the rules made there-under or fails to account for an
invoice in his books of account, shall be liable to penalty which
may extend to twenty-five thousand rupees.
Section 123:
If a person who is required to furnish an
information return under Section 150 fails to do so within
the period specified in the notice issued under sub-section
(3) thereof, the proper officer may direct that such person
shall be liable to pay a penalty of one hundred rupees for
each day of the period during which the failure to furnish
such return continues:
Provided that the penalty imposed under this section shall
not exceed five thousand rupees
Section 124:
If any person required to furnish any
information or return under section 151, (a) without reasonable cause fails to furnish such
information or return as may be required under that
section, or
(b)
willfully furnishes or causes to furnish any
information or return which he knows to be false.
15. he shall be punishable with a find which may
extend to ten thousand rupees and in case of a
continuing offence to a further fine which may extend
to one hundred rupees for each day after the first day
during which the offence continues subject to a
maximum limit of twenty-five thousand rupees.
125. Any person, who contravenes any of the
provisions of this Act or any rules made there-under for
which no penalty is separately provided for in this Act,
shall be liable to a penalty which may extend to twentyfive thousand rupees.
126.(1) No officer under this Act shall impose any penalty
for minor breaches of tax, regulations or procedural
requirements and in particular, any omission or mistake in
documentation which is easily rectifiable and made without
fraudulent intent or gross negligence.
Explanation - For the purpose of this sub-section • a breach shall be considered a ‘minor breach’ if the
amount of tax involved is less than five thousand rupees;
• an omission or mistake in documentation shall be
considered to be easily rectifiable if the same is an error
apparent on the fact of record.
(2) The penalty imposed under this Act shall depend on the
facts and circumstances of each and shall be
commensurate with the degree and severity of the
breach.
(3) No penalty shall be imposed on any person without
giving him an opportunity of being heard.
(4) The officer under this Act shall while imposing penalty
in an order for a breach of any law, regulation or
procedural requirement, specify the nature of the
breach and the applicable law, regulation or procedure
under which the amount of penalty for the breach has
been specified.
(5)When a person voluntarily discloses to an officer
under this Act the circumstances of a breach of the tax
law, regulation or procedural requirement prior to the
discovery of the breach by the officer under this Act,
the proper officer may consider this fact as a
mitigating factor when quantifying a penalty for that
person.
(6)The provisions of this section shall not apply in such
cases where the penalty specified under this Act is
either a fixed sum or expressed as a fixed percentage.
127. Where the proper officer is of the view that a person
is liable to penalty and the same is not covered under
any proceeding under Section 62 or section 63 or
section 64 or Section 73 or Section 74 or Section 129
or section 130, be may issue an order levying such
penalty after giving a reasonable opportunity of being
heard to such person.
128. The Government may, by notification, waive in part
or full, any penalty referred to in Section 122 or
Section 125 or any late fee referred to in Section 47 for
such class of taxpayers and under such mitigating
circumstances as may be specified therein on the
recommendation of the Council.
129. (1) Notwithstanding anything contained in this Act,
where any person transports any goods or stores any
goods while they are in transit in contravention of the
provisions of this Act or the rules made there-under, all
such goods and conveyance used as a means of transport
for carrying the said goods and documents relating to
such goods and conveyance shall be liable to detention or
seizure and after detention or seizure, shall be released –
a) on payment of the applicable tax and penalty equal to one
hundred per cent of the tax payable on such goods and, in
case of exempted goods, on payment of an amount equal
to two per cent of the value of goods or twenty five
thousand rupees, whichever is less, where the owner of
the goods comes forward for payment of such tax and
penalty;
b) on payment of the applicable tax and penalty equal to the
fifty per cent of the value of the goods reduced by the tax
amount paid thereon and, in case of exempted goods, on
payment of an amount equal to five per cent of the value
of the goods or twenty five thousand rupees, whichever is
less, where the owner of the goods does not come
forward for payment of such tax and penalty;
c) upon furnishing a security equivalent to the amount
payable under clause (a) or clause (b) in such form and
manner as may be prescribed:
Provided that no such goods or conveyance shall be
detained or seized without serving an order of detention
or seizure on the person transporting the goods.
(2)The provisions of sub-section (6) of Section 67 shall,
mutatis mutandis, apply for detention and seizure of
goods and conveyances.
(3)The proper officer detaining or seizing goods or
conveyances shall issue a notice specifying the tax and
penalty payable and thereafter, pass an order for payment
of tax and penalty under clause (a) or clause (b) or clause
(c).
(4)No tax, interest or penalty shall be determined under
sub-section (3) without giving the person concerned an
opportunity of being heard.
(5) On payment of amount referred in sub-section (1), all
proceedings in respect of the notice specified in subsection (3) shall be deemed to be concluded.
(6)Where the person transporting any goods or the owner
of the goods fails to pay the amount of tax and penalty as
provided in sub-section (1) within seven days of such
detention or seizure, further proceedings shall be
initiated in accordance with the provisions of Section
130;
Provided that where the detained or seized goods are
perishable or hazardous in nature or are likely to depreciate
in value with passage of time, the said period of seven days
may be reduced by the proper officer.
130.(1) Notwithstanding anything contained in this Act, if
any person(i)supplies or receives any goods in contravention of any
of the provisions of this Act or the rules made there-under
with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to
pay tax under this Act; or
(iii)supplies any goods liable to tax under this Act without
having applied for registration; or
(iv)contravenes any of the provisions of this Act or the
rules made there-under with intent to evade payment of
tax; or
(v)uses any conveyance as a means of transport for
carriage of goods in contravention of the provisions of
this Act or the rules made there-under unless the
owner of the conveyance proves that if was so used
without the knowledge or connivance of the owner
himself, his agent, if any, and the person in charge of
the conveyance, then, all such goods or conveyances
shall be liable to confiscation and the person shall be
liable to penalty under Section 122.
(2)Whenever confiscation of any goods or conveyance is
authorized by this Act, the officer adjudging it shall give to
the owner of the goods an option to pay in lieu of
confiscation, such fine as the said officer thinks fit:
Provided that such fine leviable shall not exceed the market
value of the goods confiscated, less the tax chargeable thereon:
Provided further that the aggregate of such fine and penalty
leviable shall not be less than the amount of penalty leviable
under sub-section (1) of Section 129:
Provided also that where any such conveyance is used for the
carriage of the goods or passengers for hire, the owner of the
conveyance shall be given an option to pay in lieu of the
confiscation of the conveyance in fine equal to the tax payable
on the goods being transported thereon.
(3) Where any fine in lieu of confiscation of goods or
conveyance is imposed under sub-section (2), the
owner of such goods or conveyance or the person
referred to in sub-section (1), shall, in addition, be
liable to any tax, penalty and charges payable in
respect of such goods or conveyance.
(4) No order for confiscation of goods or conveyance or
for imposition of penalty shall be issued without
giving the person an opportunity of being heard.
(5) Where any goods or conveyance are confiscated under
this Act, the title of such goods or conveyance shall
thereupon vest in the Government.
(6)The proper officer adjudging confiscation shall take
and hold possession of the things confiscated and
every officer of Police, on the requisition of such
proper officer, shall assist him in taking and holding
such possession.
(7)The proper officer may, after satisfying himself that
the confiscated goods or conveyance are not required
in any other proceedings under this Act and after
giving reasonable time not exceeding three months to
pay fine in lieu of confiscation, dispose of such goods or
conveyance and deposit the sale proceeds thereof with
the Government.
131.Without prejudice to the provisions contained in the
Code of Criminal Procedure, 1973, no confiscation
made or penalty imposed under the provisions of this
Act or the rules made thereunder shall prevent the
infliction of any other punishment to which the person
affected thereby is liable under the provisions of this
Act or under any other law for the time being in force.
132.(1) Whoever commits any of the following offences,
namely:(a)supplies any goods or services or both without issue of
any invoice, in violation of the provisions of this Act or the
rules made thereunder, with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or
services or both in violation of the provisions of this Act, or
the rules made there-under leading to wrongful availment
or utilization of input tax credit or refund of tax;
(c)avails input tax credit using such invoice or bill referred
to in clause (b);
(d) collects any amount as tax but fails to pay the same to
the Government beyond a period of three months from the
date on which such payment becomes due;
(e) evades tax, fraudulently avails input tax credit or
fraudulently obtains refund and where such offence is not
covered under clause (a) to (d);
(f) falsifies or substitutes financial records or produces
fake accounts or documents or furnishes any false
information with an intention to evade payment of tax due
under this Act;
(g) obstructs or prevents any officer in the discharge of his
duties under this Act;
(h) acquires possession of, or in any way concerns himself in
transporting, removing, depositing, keeping, concealing,
supplying, or purchasing or in any other manner deals with, any
goods which he knows or has reasons to believe are liable to
confiscation under this Act or the rules made thereunder;
(i) receives or is in any way concerned with the supply of, or in
any other manner deals with any supply of services which he
knows or has reasons to believe are in contravention of any
provisions of this Act or the rules made thereunder;
(j) tampers with or destroys any material evidence or
documents;
(k) fails to supply any information which he is required to
supply under this Act or the rules made thereunder or (unless
with a reasonable belief, the burden of proving which shall be
upon him, that the information supplied by him is true) supplies
false information; or
(l) attempts to commit, or abets the commission of any of the
offences mentioned in clauses (a) to (k) of this section, shall
be punishable–
(i) in cases where the amount of tax evaded or the amount
of input tax credit wrongly availed or utilised or the
amount of refund wrongly taken exceeds five hundred
lakh rupees, with imprisonment for a term which may
extend to five years and with fine;
(ii) in cases where the amount of tax evaded or the amount
of input tax credit wrongly availed or utilised or the
amount of refund wrongly taken exceeds two hundred
lakh rupees but does not exceed five hundred lakh
rupees, with imprisonment for a term which may extend
to three years and with fine;
(iii) in the case of any other offence where the amount of
tax evaded or the amount of input tax credit wrongly
availed or utilised or the amount of refund wrongly
taken exceeds one hundred lakh rupees but does not
exceed two hundred lakh rupees, with imprisonment
for a term which may extend to one year and with fine;
(iv) in cases where he commits or abets the commission of
an offence specified in clause (f) or clause (g) or clause
(j), he shall be punishable with imprisonment for a
term which may extend to six months or with fine or
with both.
(2) Where any person convicted of an offence under this
section is again convicted of an offence under this
section, then, he shall be punishable for the second and
for every subsequent offence with imprisonment for a
term which may extend to five years and with fine.
(3) The imprisonment referred to in clauses (i), (ii) and
(iii) of sub-section (1) and sub-section (2) shall, in the
absence of special and adequate reasons to the contrary
to be recorded in the judgment of the Court, be for a term
not less than six months.
(4) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973, all offences under this Act,
except the offences referred to in sub-section (5) shall be
non-cognizable and bailable.
(5) The offences specified in clause (a) or clause (b) or
clause (c) or clause (d) of subsection (1) and punishable
under clause (i) of that sub-section shall be cognizable
and non-bailable.
(6) A person shall not be prosecuted for any offence
under this section except with the previous sanction of
the Commissioner.
Explanation— For the purposes of this section, the term
“tax” shall include the amount of tax evaded or the
amount of input tax credit wrongly availed or utilised or
refund wrongly taken under the provisions of this Act, the
State Goods and Services Tax Act, the Integrated Goods
and Services Tax Act or the Union Territory Goods and
Services Tax Act and cess levied under the Goods and
Services Tax (Compensation to States) Act.
133. (1) Where any person engaged in connection with the
collection of statistics under section 151 or compilation or
computerization thereof or if any officer of central tax
having access to information specified under sub-section (1)
of section 150, or if any person engaged in connection with
the provision of service on the common portal or the agent
of common portal, willfully discloses any information or the
contents of any return furnished under this Act or rules
made thereunder otherwise than in execution of his duties
under the said sections or for the purposes of prosecution
for an offence under this Act or under any other Act for the
time being in force, he shall be punishable with
imprisonment for a term which may extend to six months or
with fine which may extend to twenty-five thousand rupees,
or with both.
(2) Any person (a) who is a Government servant shall not be prosecuted
for any offence under this section except with the
previous sanction of the Government;
(b) who is not a Government servant shall not be
prosecuted for any offence under this section except
with the previous sanction of the Commissioner.
134. No court shall take cognizance of any offence
punishable under this Act or the rules made thereunder
except with the previous sanction of the Commissioner,
and no court inferior to that of a Magistrate of the First
Class, shall try any such offence.
135. In any prosecution for an offence under this Act which
requires a culpable mental state on the part of the accused,
the court shall presume the existence of such mental state but
it shall be a defence for the accused to prove the fact that he
had no such mental state with respect to the act charged as
an offence in that prosecution.
Explanation.—For the purposes of this section,–
(i) the expression “culpable mental state” includes intention,
motive, knowledge of a fact, and belief in, or reason to
believe, a fact;
(ii) a fact is said to be proved only when the court believes it
to exist beyond reasonable doubt and not merely when its
existence is established by a preponderance of probability
136. A statement made and signed by a person on
appearance in response to any summons issued under
section 70 during the course of any inquiry or proceedings
under this Act shall be relevant, for the purpose of proving,
in any prosecution for an offence under this Act, the truth of
the facts which it contains–
(a) when the person who made the statement is dead or
cannot be found, or is incapable of giving evidence, or is
kept out of the way by the adverse party, or whose
presence cannot be obtained without an amount of delay
or expense which, under the circumstances of the case,
the court considers unreasonable; or
(2) Notwithstanding anything contained in sub-section (1),
where an offence under this Act has been committed by a
company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to any
negligence on the part of, any director, manager, secretary or
other officer of the company, such director, manager, secretary
or other officer shall also be deemed to be guilty of that offence
and shall be liable to be proceeded against and punished
accordingly.
(3) Where an offence under this Act has been committed by a
taxable person being a partnership firm or a Limited Liability
Partnership or a Hindu undivided family or a trust, the partner
or karta or managing trustee shall be deemed to be guilty of
that offence and shall be liable to be proceeded against and
punished accordingly and the provisions of sub-section (2)
shall, mutatis mutandis, apply to such persons.
(4) Nothing contained in this section shall render any
such person liable to any punishment provided in this Act,
if he proves that the offence was committed without his
knowledge or that he had exercised all due diligence to
prevent the commission of such offence.
Explanation.––For the purposes of this section,––
(i) “company” means a body corporate and includes a firm
or other association of individuals; and
(ii) “director”, in relation to a firm, means a partner in the
firm
138. (1) Any offence under this Act may, either before or
after the institution of prosecution, be compounded by
the Commissioner on payment, by the person accused
of the offence, to the Central Government or the State
Government, as the case be, of such compounding
amount in such manner as may be prescribed:
Provided that nothing contained in this section shall
apply to—
(a) a person who has been allowed to compound once in
respect of any of the offences specified in clauses (a) to
(f) of sub-section (1) of section 132 and the offences
specified in clause (l) which are relatable to offences
specified in clauses (a) to (f) of the said sub-section;
(b) a person who has been allowed to compound once in
respect of any offence, other than those in clause (a),
under this Act or under the provisions of any State
Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act or the Integrated Goods
and Services Tax Act in respect of supplies of value
exceeding one crore rupees;
(c) a person who has been accused of committing an
offence under this Act which is also an offence under
any other law for the time being in force;
(d) a person who has been convicted for an offence under
this Act by a court;
(e) a person who has been accused of committing an
offence specified in clause (g) or clause (j) or clause (k)
of sub-section (1) of section 132; and
(f) any other class of persons or offences as may be
prescribed:
Provided further that any compounding allowed under
the provisions of this section shall not affect the
proceedings, if any, instituted under any other law:
Provided also that compounding shall be allowed only
after making payment of tax, interest and penalty involved
in such offences.
(2) The amount for compounding of offences under this
section shall be such as may be prescribed, subject to the
minimum amount not being less than ten thousand rupees
or fifty per cent of the tax involved, whichever is higher,
and the maximum amount not being less than thirty
thousand rupees or one hundred and fifty per cent. of the
tax, whichever is higher.
(3) On payment of such compounding amount as may be
determined by the Commissioner, no further proceedings
shall be initiated under this Act against the accused person
in respect of the same offence and any criminal
proceedings, if already initiated in respect of the said
offence, shall stand abated.
QUANTUM OF PENALTY:In the context of exercise of discretion of imposition of
appropriate sentence, it was observed in State of
Karnataka V. Puttaraja MANU/SC/0976/2003 : AIR 2004
SC 433:
“10. No formula of a foolproof nature is possible that would
provide a reasonable criterion in determining a just and
appropriate punishment, it will depend upon discretionary
judgment, in the facts of each case, is the only way in
which penalty could be determined. ”
INVOLUNTARY PAYMENT OF TAXES:
The Bombay High Court in the context of abuse of the powers vested in
officers under the Customs Act, 1962 observed in Vodafone Essar
South Limited v. Union of India MANU/MH/0131/2009 : 2009 (237)
ELT 35 (Bom), as under:
"22. In these circumstances, we are clearly of the opinion that in the
present case, the conduct of the DRI Officers is not only high handed
but it is in gross abuse of the powers vested in them under the
Customs Act. It is apparent that the DRI officers in utter disregard to
the order passed by the Commissioner of Customs (A), Mumbai have
forced the Petitioners to pay the amount by threat and coercion which
is not permissible in law. Thus, the conduct of the DRI officers in the
present case in collecting the amount from the Petitioners towards the
alleged differential duty is wholly arbitrary, illegal and contrary to law.
Having terrorised the Petitioners with the threat of arrest, it is not
open to the DRI Officers to contend that the amount has been paid by
the Petitioners voluntarily.”
HOW SEARCH TO BE CARRIED OUT ORDER FOR
PROSECTUION OF OFFICER OF THE COMPANY;
The Division Bench of Delhi High Court in the case of
eBiz.Com. Pvt. Ltd. vs. Union of India and Ors.
MANU/DE/2740/2016 has laid down various criterion for (i)
arrest (ii) detention (iii) forcible extraction of money (iv) how
and in what manner search to be carried out (v) if search is
illegal, no arrest to be made and (v) amount forcible extracted
to be refunded.
"(i) The scheme of the provisions of the Finance Act 1994
(FA), does not permit the DGCEI or for that matter the Service
Tax Department (ST Department) to by-pass the procedure as
set out in Section 73A (3) and (4) of the FA before going ahead
with the arrest of a person under Sections 90 and 91 of the FA.
The power of arrest is to be used with great circumspection
and not casually.”
The Bombay High Court in ICICI Bank Ltd. v. Union of
India MANU/MH/0774/2015 : 2015 (38) S.T.R. 907
(Bom)
The Court there was dealing with a case where the
Assessee had made payments under protest of alleged
service tax dues under threat by the ST Department of
taking drastic action under Section 87 in the form of
sealing of the business premises, attachment of bank
accounts and so on, the "the amount payable by a person
can be said to be payable only after there is determination
as provided under Section 72 or Section 73 of the Act.
WHAT SCN SHOULD CONTAIN ?
The Hon'ble Supreme Court in the case of CCE v. Brindavan
Beverages (P) Ltd. - MANU/SC/2645/2007 : 2007 (231)
ELT 487 (SC) has held that if the allegations in the show
cause notice are not specific and are on the contrary vague,
lack details and/or unintelligible, then it is sufficient to hold
that the noticee was not given proper opportunity to meet
the allegations indicated in the show cause notice.
THE CROSS EXAMINATIN OF WITNESS:
The appellant has also relied on the judgment of Hon'ble
Apex Court in Sukhwant Singh v. State of Punjab,
MANU/SC/0305/1995 : (1995) 3 SCC 367 to give
emphasis on his submission that examination of witness
is mandatory unless specified exceptional circumstances
mentioned in clause (a) of Section 138B(1) exist. The
Hon'ble Apex Court was pleased to hold that.
THE LIABILITY TO PAY INTEREST IS AUTOMATIC
The liability of interest is limited to the amount of
Cenvat credit only for the period beyond 180 days,
when goods were not returned and credit continued in
the assessee's books of accounts. Hon'ble Supreme
Court in the case of Commissioner of Trade Tax,
Lucknow
v.
Kanhai
Ram
Thekedar
MANU/SC/0338/2005 : 2005 (185) ELT 3 (SC) has
held that liability of interest is automatic on the
assessee.
In this regard, Hon'ble Supreme Court, though the decision
mainly deals with sales tax it is applicable for Central Excise
law of Union Government, has observed as under:
"12. In the case of The Sales Tax Officer, Sector I, Kanpur &
Anr. v. M/s. Dwarika Prasad Sheo Karan Dass,
MANU/SC/0424/1976 : (1977) 1 SCC 22, this Court has
held that the assessee is liable to pay interest under Section
8(1-A) of the U.P. Sales Tax Act, 1948 on unpaid amount of
tax and that such liability arises automatically by operation
of law. This Court also held that fresh notice of demand not
necessary where amount of tax or other dues reduced as a
result of the appeal, revision or other proceedings.
IF THE PRINTS OUT TAKEN FROM CD IN THE ABSENCE OF
PETITIONER OR PANCHAS WERE NOT ALLOWED TO BE CROSSEXAMINED, DEMAND CANNOT BE CONFIRMED.
The Tribunal in the case of Modern Laboratories and Ors. vs.
CCE,
Indore
(09.05.2017
CESTAT
Delhi)
:
MANU/CE/0340/2017, has observed as under:Moreover, the print-outs have been taken in the absence of the
appellants and panchnama was drawn. The panchas were not
allowed for cross examination by the appellants and the data
retrieved from the CD was never confronted with the appellants
during the course of investigation. In that circumstance, we hold
that the data retrieved from the CD is not admissible to confirm
the demand. No investigation was conducted at the end of the
buyer/transporters or the person whose name was mentioned in
the data retrieved from the CD. In the absence of any corroborative
evidence on the basis of the data retrieved from the CD, the
demand is not sustainable.
The Supreme Court in the case of S.P. Chengalvaraya Naidu v.
Jagannath and Others reported as MANU/SC/0192/1994 :"The principle of "finality of litigation" cannot be pressed to the
extent of such an absurdity that it becomes an engine of fraud
in the hands of dishonest litigants. The courts of law are meant
for importing justice between the parties. One who comes to
the court, must come with clean hands. We are constrained to
say that more often than not, process of the court is being
abused. Property -grabbers, tax-evaders, bank-loan-dodgers
and other unscrupulous persons from all walks of like find the
court-process a convenient lever to retain the illegal gains
indefinitely. We have no hesitation to say that a person, who's
case is based on falsehood, has no right to approach the court.
He can be summarily thrown out at any stage of the litigation."
PART- III
BRANCH TRANSFER
TRANSFER OF GOODS/SERVICES TO BRANCH/AGENT
As per Sec 7 (1) of the GST Act, the term “supply” includes a
supply specified in Schedule-I made even without
consideration to cover cases of Branch Transfers.
Schedule I comprises of the following entries –
•Supply of goods or services between related persons, or
between distinct persons as specified in Sec.25, when made
obviously in the course of or furtherance of business.
•Supply of goods•By a principal to his agent where the agent undertakes to
supply such goods on behalf of the principal, or
•By an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
Further, as per Sec 25(4) and (5) of the GST Act,
• A person who has obtained or is required to obtain
more than one registration, whether in one State or UT
or more than one State or UT shall, in respect of each
such registration, be treated as distinct persons for the
purposes of this Act.
• Where a person who has obtained or is required to
obtain registration in a State or UT in respect of an
establishment, has an establishment in another State or
UT, then such establishments shall be treated as
establishments of distinct persons for the purposes of
this Act.
As per Explanation 1 of the Sec 8(2) of the IGST Act, in
the following cases establishments of a person shall be
treated as establishments of distinct persons, where a
person has, • An establishment in India and any other establishment
outside India;
• An establishment in a State or UT and any other
establishment outside that State or UT; or
• An establishment in a State or UT and any other
establishment being a business vertical registered within
that State or UT.
As per Explanation 2 of the sec. 8(2) of the IGST Act, a
person carrying on a business through a branch or an
agency or a representational office in any territory shall be
treated as having an establishment in that territory.
To summarize, stock transfer by one unit of a person to
another unit located in other state would be subject to
IGST. Similarly, stock transfer by principal to its agent in
other State would also be subject to IGST. When there is a
stock transfer from one city to another city in the same
state will not be subject to tax. However, when goods are
transferred from one GSTIN to another GSTIN, it would be
subject to GST.
Value of supply in case of stock transfer – Rule 2 of the
Draft Determination of Value of Rules, The value of the
supply of goods or services or both between distinct
persons or related persons, other than where the supply
is made through an agent, shall, -
•Be the open market value of such supply;
•If open market value is not available, it shall be the
value of supply of goods or services of like kind and
quality;
•If value is not determinable under clause (a) or (b), it
shall be the value as determined by application of rule 4
or rule 5, in that order.
However, where the recipient is eligible for full input tax
credit, the value declared in the invoice shall be deemed
to be the open market value of goods or services.
•Value of services shall be NIL if such services are
provided by such class of service providers as may be
notified by the Government on recommendations of the
Council between the distinct persons as referred to in sec.
25, other than those where ITC is not available under sec
17 (5) (non-creditable) [Rule 6(7) of the Draft
Determination of Value Rules].
PAYMENT OF TAX :-
51. (1) Notwithstanding anything to the contrary
contained in this Act, the Government may
mandate–
(a) a department or establishment of the Central
Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be
notified by the Government on the recommendations of
the Council, (hereafter in this section referred to as “the
deductor”), to deduct tax at the rate of one per cent. from
the payment made or credited to the supplier (hereafter
in this section referred to as “the deductee”) of taxable
goods or services or both, where the total value of such
supply, under a contract, exceeds two lakh and fifty
thousand rupees:
Provided that no deduction shall be made if the location
of the supplier and the place of supply is in a State or
Union territory which is different from the State or as the
case may be, Union territory of registration of the
recipient.
Explanation.––For the purpose of deduction of tax specified
above, the value of supply shall be taken as the amount
excluding the central tax, State tax, Union territory tax,
integrated tax and cess indicated in the invoice.
(2) The amount deducted as tax under this section shall be
paid to the Government by the deductor within ten days
after the end of the month in which such deduction is
made, in such manner as may be prescribed.
(3) The deductor shall furnish to the deductee a certificate
mentioning therein the contract value, rate of deduction,
amount deducted, amount paid to the Government and
such other particulars in such manner as may be
prescribed.
(4) If any deductor fails to furnish to the deductee the
certificate, after deducting the tax at source, within
five days of crediting the amount so deducted to the
Government, the deductor shall pay, by way of a late
fee, a sum of one hundred rupees per day from the day
after the expiry of such five day period until the failure
is rectified, subject to a maximum amount of five
thousand rupees.
(5) The deductee shall claim credit, in his electronic cash
ledger, of the tax deducted and reflected in the return
of the deductor furnished under sub-section (3) of
section 39, in such manner as may be prescribed.
(6) If any deductor fails to pay to the Government the
amount deducted as tax under sub-section (1), he shall
pay interest in accordance with the provisions of subsection (1) of section 50, in addition to the amount of
tax deducted.
(7) The determination of the amount in default under
this section shall be made in the manner specified in
section 73 or section74.
(8) The refund to the deductor or the deductee arising on
account of excess or erroneous deduction shall be
dealt with in accordance with the provisions of section
54:
Provided that no refund to the deductor shall be
granted, if the amount deducted has been credited to
the electronic cash ledger of the deductee.
52. (1) Notwithstanding anything to the contrary
contained in this Act, every electronic commerce operator
(hereafter in this section referred to as the “operator”),
not being an agent, shall collect an amount calculated at
such rate not exceeding one per cent., as may be notified
by the Government on the recommendations of the
Council, of the net value of taxable supplies made through
it by other suppliers where the consideration with
respect to such supplies is to be collected by the operator.
Explanation.––For the purposes of this sub-section, the
expression “net value of taxable supplies” shall mean the
aggregate value of taxable supplies of goods or services or
both, other than services notified under sub-section (5) of
section 9, made during any month by all registered persons
through the operator reduced by the aggregate value of
taxable supplies returned to the suppliers during the said
month.
(2) The power to collect the amount specified in subsection (1) shall be without prejudice to any other mode of
recovery from the operator.
(3) The amount collected under sub-section (1) shall be
paid to the Government by the operator within ten
days after the end of the month in which such
collection is made, in such manner as may be
prescribed.
(4) Every operator who collects the amount specified in
sub-section (1) shall furnish a statement,
electronically, containing the details of outward
supplies of goods or services or both effected through
it, including the supplies of goods or services or both
returned through it, and the amount collected under
sub-section (1) during a month, in such form and
manner as may be prescribed, within ten days after the
end of such month.
(5) Every operator who collects the amount specified in
sub-section (1) shall furnish an annual statement,
electronically, containing the details of outward
supplies of goods or services or both effected through
it, including the supplies of goods or services or both
returned through it, and the amount collected under
the said sub-section during the financial year, in such
form and manner as may be prescribed, before the
thirty first day of December following the end of such
financial year.
(6) If any operator after furnishing a statement under subsection (4) discovers any omission or incorrect
particulars therein, other than as a result of scrutiny,
audit, inspection or enforcement activity by the tax
authorities, he shall rectify such omission or incorrect
particulars in the statement to be furnished for the
month during which such omission or incorrect
particulars are noticed, subject to payment of interest, as
specified in sub-section (1) of section 50:
Provided that no such rectification of any omission or
incorrect particulars shall be allowed after the due date for
furnishing of statement for the month of September
following the end of the financial year or the actual date of
furnishing of the relevant annual statement, whichever is
earlier.
(7) The supplier who has supplied the goods or services or
both through the operator shall claim credit, in his
electronic cash ledger, of the amount collected and
reflected in the statement of the operator furnished
under sub-section (4), in such manner as may be
prescribed.
(8) The details of supplies furnished by every operator
under sub-section (4) shall be matched with the
corresponding details of outward supplies furnished by
the concerned supplier registered under this Act in
such manner and within such time as may be
prescribed.
(9) Where the details of outward supplies furnished by the
operator under sub-section (4) do not match with the
corresponding details furnished by the supplier under
section 37, the discrepancy shall be communicated to both
persons in such manner and within such time as may be
prescribed.
(10) The amount in respect of which any discrepancy is
communicated under sub-section (9) and which is not
rectified by the supplier in his valid return or the operator
in his statement for the month in which discrepancy is
communicated, shall be added to the output tax liability of
the said supplier, where the value of outward supplies
furnished by the operator is more than the value of
outward supplies furnished by the supplier, in his return for
the month succeeding the month in which the discrepancy
is communicated in such manner as may be prescribed.
(11) The concerned supplier, in whose output tax liability
any amount has been added under sub-section (10), shall
pay the tax payable in respect of such supply along with
interest, at the rate specified under sub-section (1) of
section 50 on the amount so added from the date such tax
was due till the date of its payment.
(12) Any authority not below the rank of Deputy
Commissioner may serve a notice, either before or during
the course of any proceedings under this Act, requiring the
operator to furnish such details relating to—
(a) supplies of goods or services or both effected through
such operator during any period; or
(b) stock of goods held by the suppliers making
supplies through such operator in the godowns or
warehouses, by whatever name called, managed by
such operator and declared as additional places of
business by such suppliers, as may be specified in
the notice.
(13) Every operator on whom a notice has been served
under sub-section (12) shall furnish the required
information within fifteen working days of the date
of service of such notice.
(14) Any person who fails to furnish the information
required by the notice served under sub-section (12)
shall, without prejudice to any action that may be
taken under section 122, be liable to a penalty which
may extend to twenty-five thousand rupees.
Explanation.—For the purposes of this section, the
expression “concerned supplier” shall mean the supplier
of goods or services or both making supplies through
the operator
DETERMINATION OF NATURE OF SUPPLY:
8. (1) Subject to the provisions of Section 10, supply of
goods where the location of the supplier and the place of
supply of goods are in the same State or same Union
Territory shall be treated as intra-State supply:
Provided that the following supply of goods shall not be
treated as intra-State supply, namely:•supply of goods to or by a Special Economic Zone
developer or a Special Economic Zone unit;
•goods imported into the territory of India till they cross
the customs frontiers of India; or
•supplies made to a tourist referred to in Section 15.
(2)Subject to the provisions of Section 12, supply of
services where the location of the supplier and the place
of supply of services are in the same State or same Union
territory shall be treated as intra-State supply:
Provided that the intra-State supply of services shall not
include supply of services to or by a Special Economic
Zone developer or a Special Economic Zone unit.
Explanation 1 – For the purposes of this Act, where a
person has, •an establishment in India and any other establishment
outside India;
•an establishment in a State or Union territory; or
•an establishment in a State or Union territory and any
other establishment being a business vertical registered
within that State or Union territory,
then such establishments shall be treated as
establishments of distinct persons.
Explanation 2 – A person carrying on a business
through a branch or an agency or a representational
office in any territory shall be treated as having an
establishment in that territory.
THANK YOU