Second-Hand Goods are Restricted for Import Under Foreign Trade Policy: CESTAT Imposes Customs Duty Demand

The Bangalore Bench of the Customs, Excise and Service Tax (CESTAT), imposed customs duty demand and held that second-hand goods are restricted for import under Foreign Trade Policy.

The appellant M/s. American Power Conversion India Private Ltd. (the importer) are engaged in the manufacture of uninterrupted power supply and inverters within the electronics hardware technology Park. The appellant imported used Enviro-tuff Liner (ETL) packing material classifying the product under 39232990. They claimed the benefit of Notification No. 52/2003 dated 01.03.2003.

The Commissioner (A) in the impugned order held that the Enviro-tuff Liner (ETL) was neither used in the process of manufacture of the articles of exported goods nor it was used in connection with production or packing of exported goods. He observed that merely because the item is used for facilitating safe transportation of the export goods, it did not entitle the goods for the exemption as packing material as stipulated in the exemption Notification. The Commissioner accordingly confirmed the demand of duty, redemption fine and penalty.

The counsels for the appellant submitted that Enviro-tuff Liner (ETL) is a fully woven liner which is hung into a general purposes ISO shipping container and allows for forklift loading and hand loading and slip sheet. Once loaded, it is completely sealed providing a closed off temperature and humidity-controlled environment for the goods inside, therefore, it is claimed that this being a packaging material the benefit of Notification should be extended.

A Two-Member Bench comprising Dr DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “The items imported were also found to be used ETL Liners which are categorised as second-hand goods fall under the category of restricted items. As per Para 2.17 of the Foreign Trade Policy, all second-hand goods are restricted for import and by importing used ETL liners, the importer had violated the provisions of Foreign Trade Policy thereby rendering the goods liable for confiscation.

“In view of the above, the Commissioner (A) had rightly confiscated the goods and imposed redemption fine and penalty. We, therefore, find no reasons to interfere with the order of the Commissioner (Appeals) and accordingly, we uphold the demand of duty of Rs.7,02,981/- along with interest” the Bench concluded.

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Inference as to Certificate of Origin cannot be Merely Drawn from Bill of Lading: CESTAT grants Customs Duty Exemption

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), granted customs duty exemption and observed that Inference as to certificate of origin cannot be merely drawn from bill of lading.

Anti-Dumping duty was demanded under Notification No.82/2011-Cus dated 25.08.2011 by treating the goods covered by all 05 bills of entry of Chinese origin, by brushing aside the Certificate of origin produced by the appellant, Alfakrina Exports.

Vikash Mehta, Consultant appearing on behalf of the appellant submitted that the certificate of origin showing the goods of Malaysian origin has not been proved as fake or not genuine. Therefore, merely on the basis of bill of lading issued by shipping line. It cannot be concluded that the goods are not of Malaysia origin. He refers to Rule 9 of Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of The Republic of India and Malaysia) Rules 2011.

It was further submitted that even in case of any doubt the departmental officer cannot sit as an Adjudicator over the certificate of origin issue by the designated authority, that certificate of origin cannot be questioned on the basis of statements of the importers and after establishing by following the procedure the certificate origin needs to be cancelled, which was not followed by the department in the present case.

A Two Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “We find that the department, when made an allegation about the country of origin did not follow the procedure prescribed under Rule 9 of Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of the Republic of India and Malaysia) Rules 2011. Therefore, merely on the basis of the bill of lading whereby, it was inferred that the goods were originated from China cannot be accepted.”

‘Without checking the authenticity of the certificate of origin issued by Malay Chamber of Commerce, Malaysia. The certificate of origin cannot be discarded and, on that basis, benefit cannot be denied” the Tribunal concluded.

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Bombay HC directs Finance Ministry to take appropriate action against Officers who Delayed Adjudication of SCN issued 13 years back [Read Order]

“If prompt adjudication of the show cause notice is not undertaken, such lapse of time and certainly a long lapse of time is likely to cause irreversible changes frustrating the whole adjudication.” The Bombay High Court directed the Finance Ministry to take action against the officers who are involved in delaying the adjudication of the…

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Aadhaar-GST Scam: SIT arrests 13 individuals for using Aadhaar Data for GST Registration and Fake Billing

Thirteen additional individuals have been apprehended by the Special Investigation Team (SIT) in Bhavnagar for exploiting Aadhaar data belonging to innocent individuals. They were involved in using this data for Goods and Services Tax Registration and subsequently engaging in fraudulent invoicing activities.

The most recent operation was conducted under the leadership of Gautam Parmar, the Inspector General of Police for the Bhavnagar range, who also heads the Special Investigation Team (SIT).

Back in March 2023, the Gujarat State Goods and Services Tax (GSGST) reported that 3 people were involved in the fake billing of Goods and Services Tax (GST). A total of 2,725 Aadhaar cards and their associated cellphone numbers were found to have been tampered with following searches at 25 Aadhaar facilitation centres.

Also read: Aadhaar Scam in Gujarat: 1500 cards used Illegally to create Fake GST numbers

The Bhavnagar Police detained three people for deceiving Aadhaar card holders into visiting centres where the mobile number associated with their Aadhaar identity will be altered. The FIR stated that “People were called to the Aadhaar centre at the Bank of Baroda branch near Virani Circle in Bhavnagar and to the Common Services Centre near Chavdi Road in Bhavnagar. After their Aadhaar data was tampered with, their IDs were used to obtain bogus GST registrations.”

The recent capture of these 13 individuals is a fresh inclusion to the list of scam perpetrators.

The 48th GST Council proposed to conduct a pilot in the State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants, also reported by Taxscan.

Read More: PAN-linked mobile and Email to be used along with Biometric Authentication for GST Registration: GST Council recommends test-run in Gujarat

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Payment for Manufacturing Activities Undertaken on Job Work basis is not Manpower Recruitment or Supply Agency Service: CESTAT

A Division Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench observed that the payment for manufacturing activities undertaken on job work basis is not Manpower Recruitment or Supply Agency Service.

The case of the department is that the contract between the appellant and their client is for supply of labour therefore, the activity of the appellant, Dosti Fabricators, falls under the category of Manpower Recruitment or Supply Agency Service hence, the same is taxable.

The Counsel for the appellant, Vikash Mehta, submitted that the contract it is clear that appellant have undertaken job of fabrication of tugs and barges and there is no supply of labour to their client therefore, activity does not fall under the category of “Manpower Recruitment or Supply Agency Service”.

In this regard the counsel referred to the relevant clauses of the contract whereby he submits that the contract is not for supply of manpower but specifically for fabrication of barges and tugs which does not fall under Manpower Recruitment or Supply Agency Service and that the activity of the appellant is of manufacturing which is evident from the undisputed fact that with effect from 01.03.2011, Central Excise duty was levied on the manufacture of tugs and barges.

Rajesh Nathan, the Authorized Representative for the Revenue reiterated the findings in the impugned order.

In SA Engineering Works vs. CCE&ST, it was held that over and above paying the amount for manufacturing activities undertaken by the appellant on jobwork basis, the said service receiver had not paid any specific price to the workmen/ Labour deployed by the appellant. Thus, under such circumstances, it cannot be said that the appellant had provided the Manpower Recruitment and Supply Agency Service.

A Two-Member Bench comprising Ramesh Nair, Judicial Member and CK Mahar, Technical Member observed that “it can be seen that even though manpower was deployed by the service provider but the job is for specific activity such as manufacture, processing etc. and charges is paid on the basis of job and not on the basis of manpower, the activity was held not to be classifiable under Manpower Recruitment or Supply Agency Service. The ratio of the above judgments is directly applicable in the facts of the present case.”

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Activity of Fabrication of Tugs and Barges out of Raw Material not Classifiable under Manpower Recruitment or Supply Agency Service: CESTAT quashes Service Tax Demand

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and observed that activity of fabrication of tugs and barges out of raw material not to be classified under Manpower Recruitment or Supply Agency Service.

The appellant, Dosti Fabricators, is primarily engaged in the fabrication of tugs and barges out of raw material like steel plates etc supplied by the clients. Fabrication charge is paid to the appellant on lumpsum or per ton basis. The case of the department is that the contract between the appellant and their client is for supply of labour therefore, the activity of the appellant falls under the category of Manpower Recruitment or Supply Agency Service hence, the same is taxable.

The counsel for the appellant, Vikash Mehta, submitted that the activity of the appellant is of manufacturing which is evident from the undisputed fact that with effect from 01.03.2011, Central Excise duty was levied on the manufacture of tugs and barges. The appellant took Central Excise registration and paid Central Excise duty during the years 2011-12 and 2012-13 respectively. This also shows that the activity is not of supply of manpower but of manufacturing.

Rajesh Nathan, Assistant Commissioner, (AR), who appeared on behalf of the Revenue reiterates the findings of the impugned order

A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “We also find that appellant have also argued that from 01.03.2011, Central Excise duty was levied on the manufacturing of tugs and barges and the appellants have started paying excise duty on the same activity. This further reinforce the claim of the appellant that the activity of fabrication of barges is a manufacturing activity and the appellant are indeed a manufacturer. If the contention of the Revenue is assumed to be correct then the appellant cannot be treated as manufacturer but in such case, their client shall be held as manufacturer which is not a case here.”

“As per our above discussion and findings the entire service tax demand (except the demand of service tax of Rs. 1,05,12,549/-) in respect of repair service) is not sustainable, hence the same is set-aside. The impugned orders are modified to the above extent” the Tribunal noted.

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ED attaches assets worth over 5 crores of Companies Operating Illegal Online Betting, Gambling apps in Money Laundering case

The Enforcement Directorate (ED) has seized movable assets totaling Rs. 5.87 Crore, represented by funds held in the bank accounts of different individuals/entities, as part of a case linked to illicit online betting/gambling. This action has been carried out in accordance with the stipulations outlined in the Prevention of Money Laundering Act, 2002.

The ED investigation was in pursuant to the PMLA following the filing of a First Information Report (FIR) by the Bengaluru-based Vivek Nagar Police Station. The complaint was initiated based on information received from the Directorate General of Goods and Services Tax Intelligence (DGGI) office in Bengaluru, which raised concerns about the engagement of companies in activities such as online gambling, betting, and potentially illicit operations.

ED revealed that the individuals Shyamala N and Umar Farooq established various companies using the credentials of other individuals. The Companies’ HR manager illicitly acquired multiple SIM cards and linked them to bank accounts for conducting online transactions.

Also read: 28% GST on Online Gaming: An Overview of GST Council’s Bold Decision

Furthermore, it was discovered that a cluster of associated entities, including Rockstar Interactive, Indie World Studio, Falcon Entertainment Agencies, The Next Level Technology, Rift Gamer Technologies, Reality Code Technology, Tenes Solutions, Electronic Virtual Solutions, Zazago Systems, Zynga Interactive, Whale Bytes Technology, Iobitcode Interactive Agency, Oculus Valve Entertainment, and Nestra Web Solutions, were set up with the intent to defraud the public. These entities engaged in deceptive practices under the guise of betting and gambling through websites like bestartech, khelo24bet, and betinexchange.

The investigation also revealed that the individuals Shyamala N and Umar Farooq registered several companies using the identities of other individuals. The inquiry also alleged that the Human Resource (HR) manager of these companies unlawfully acquired multiple SIM cards and connected them to bank accounts for conducting online transactions. The investigation is still in progress.

Also read: Lok Sabha Passes CGST and IGST Amendment  Bill Proposing 28% GST on Online Gaming

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Implementation of GST Orders Appealable till Constitution of GSTAT: Maharashtra GST Dept Issues Trade Circular [Read Circular]

On July 31, 2023, the Maharashtra Goods and Services Tax (GST) Department issued Circular No. 20 of 2023 to address the concerns arising from the absence of the GST Appellate Tribunal‘s formation.

Taking into account the directions of the Bombay High Court in the cases of Lubricant Gulf Oil India Vs. Joint Commissioner of State Tax Appeal and T&M Service Consulting Vs. Joint Commissioner of State Tax Appeal, the department has issued a directive to the state government. This directive aims to implement two measures: firstly, to mitigate the influx of writ petitions in the court resulting from the non-constitution of the GSTAT, and secondly, to incorporate the said direction in the order issued by the First Appellate Authority.

As per the instructions of the Bombay High Court, all the appellate authorities operating under the GST Act have been mandated to include operative paragraphs 4.3 and 4.5 of Trade Circular 9th of 2020 dated 26th May 2020 in their orders under the MGST Act.

The circular stated that taxpayers who failed to submit Annexure-1 within the specified 15-day period, as per the given trade circular 9T of 2023, shall file the Annexure within 15 days from the issuance of this trade circular. Furthermore, the department clarified that Annexure-1 filed within this extended timeframe will be considered as filed in accordance with the above-mentioned trade circular.

Read More: GSTAT: West Bengal Govt announces 2 tribunals to be Functional from October 1st 2023

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Audit Lapses: NFRA Bars Auditor of Bartronics India for 10 Years, Imposes Fine of 5 Lakh Rupees [Read Order]

The National Financial Reporting Authority (NFRA) barred the auditor of Bartronics India for 10 Years, Imposes Fine of 5 Lakh Rupees on the ground of audit lapses.

Pursuant to the information received from the Ministry of Corporate Affairs (MCA) regarding irregularities observed by Financial Reporting Review Board (FRRB) of the Institute of Chartered Accountants of India (ICAI) in the Financial Statements of FY 2013-15 of Bartronics, the NFRA initiated an investigation under Section 132(4) of the Companies Act 2013 into the role of the statutory auditors, CA T. Raghavendra, for the audit of financial statements for FY 2013-15.

The Engagement Partner (EP) issued an unmodified audit opinion certifying that the financial statements presented a true and fair picture of the affairs of the company. In the Independent Auditor’s Report dated 20.05.2015, the EP has reported that standalone financial statements comply with the Accounting Standards specified under Section 133 of the Companies Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

The Company has erroneously applied the provisions of Companies Act, 2013 while the Companies Act, 1956 was applicable for the reporting period.

The company had been in loss for the current reporting period FY 2013-15 and the previous reporting period FY 2012-13. Moreover, it is not clear from the financial statements whether the conditions for the recognition of deferred tax assets were met.

The EP should have exercised professional scepticism and challenged the management’s judgement of recognising the deferred tax assets. The EP has therefore failed to report non-compliance with the provisions of AS 22 regarding deferred tax assets as there is no comment in the Auditor’s report.

The waiver of principal amount of Rupees 9.74 crores is shown as Increase/(Decrease) in other reserves in the Cash Flow Statement. Since waiver of principal amount is a non-cash transaction, it should have been excluded from Cash Flow Statement as per para 40 of AS 3. As this has not been reported by EP, the failure to report and address the errors in cash flow statement stands established.

A Three Member Bench comprising Dr. Ajay Bhushan Prasad Pandey, Chairperson, Dr. Praveen Kumar Tiwari, Full-Time Member and Smita Jhingran, Full-Time Member observed that “In view of the fact that the EP has not only shown blatant disregard to the Standards on Auditing in conducting audit of a company that affects public interest, but has also shown scant regard to the legal process undertaken by NFRA under Section 132 (4) of the Companies Act, 2013 we take a serious view of his professional misconduct, which assumes further importance in light of the fact that he had long association with the company being its statutory auditor.”

The Bench imposed a monetary penalty of Rs 5,00,000 (Rupees Five Lakhs) on the EP, CA T. Raghavendra and debarred him, for ten years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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GSTAT: Govt Notifies Special Procedure for filing Appeal, No Pre-Deposit Required [Read Notification]

The Central Government vide notification no. No. 29/2023 – CENTRAL TAX S.O. 3423(E) has notified the special procedures for filing appeal before the appellate authority under Section 107 of the Central Goods and Services Tax Act (CGST), 2017.

According to the special procedures, the registered taxpayers under the GST who are in dispute are not required to pay the pre-deposit as a pre-condition for filing the appeal before the GST Appellate Tribunal (GSTAT). The same was issued based on the circular issued subsequent to the directions issued by the Supreme Court in the case of Union of India v/s Filco Trade Centre Pvt. Ltd., SLP(C) No.32709-32710/2018.

In the exercise of the authority granted by section 148 of the Central Goods and Services Tax Act, 2017, the Central Government, based on the Council’s recommendations, notified a special procedure to be followed by a registered person or an officer mentioned in sub-section (2) of Section 107 of the CGST Act, who intends to file an appeal against the order issued by the proper officer under section 73 or 74 of the CGST Act.

This procedure was issued in accordance with Circular No. 182/14/2022-GST dated 10th November 2022, following the directions of the Hon’ble Supreme Court in the case of Union of India v/s Filco Trade Centre Pvt. Ltd., SLP(C) No.32709-32710/2018.

The special procedures in the notification states that:

  1. An appeal against the order shall be made in duplicate in the Form appended to this notification at ANNEXURE-1 and shall be presented manually before the Appellate Authority within the time specified in subsection (1) of section 107 or sub-section (2) of section 107 of the said Act, as the case may be, and such time shall be computed from the date of issuance of this notification or the date of the said order, whichever is later:

Provided that any appeal against the order filed in accordance with the provisions of section 107 of the said Act with the Appellate Authority before the issuance of this notification, shall be deemed to have been filed in accordance with this notification.”

  1. The appellant shall not be required to deposit any amount as referred to in sub-section (6) of section 107 of the CGST Act as a pre-condition for filing an appeal against the said order.
  1. An appeal filed under this notification shall be accompanied by relevant documents including a self-certified copy of the order and such appeal and relevant documents shall be signed by the person specified in sub-rule (2) of rule 26 of Central Goods and Services Tax Rules, 2017.
  1. Upon receipt of the appeal which fulfills all the requirements as provided in this notification, an acknowledgement, indicating the appeal number, shall be issued manually in FORM GST APL-02 by the Appellate Authority or an officer authorised by him in this behalf and the appeal shall be treated as filed only when the aforesaid acknowledgement is issued.

The annexure – 1 as mentioned above is the form of appeal that should be presented before the appellate authority which is attached to the notification itself.

It shall contain GSTIN, Legal name of the appellant, Trade name, if any, Address, Order No., Order dated, Designation of the officer passing the order appealed against, Date of communication of the order appealed against, Name of the authorized representative,  Details of the case under dispute including Brief issue of the case under dispute and Amount of transitional credit claimed before the issuance of circular no. 182/14/2022-GST, dated 10th of November, 2022 (Act-wise)..etc.

And the annexure-2 mentioned in the notification is about the summary of transitional credit available after issue of order by the appellate authority with reference to an order passed in accordance with the above-mentioned circular.

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ITR Due Date: Gujarat Tax Advocates Association represents to Extend Due Date to 31st August 2023

The Tax Advocates Association of Gujarat has requested the Finance Ministry to extend the due date of Income Tax Returns (ITR) Filing for the Assessment Year 2023-24 from 31st July 2023 to 31st August 2023.

The representation addressed Union Finance Minister Nirmala Sitharaman, CBDT Chairman and Principal Chief Commissioner of Income Tax (PCCIT) of Gujarat.

The Tax Advocates Association Gujarat is a professional organization consisting of registered and enrolled Tax Advocates/Consultants affiliated with The Bar Council of Gujarat. Their registered office is located in Ahmedabad.

The letter states that ‘The due date for filing of Income Tax return for A.Y. 2023-24 for taxpayer whose accounts are not audited is fast approaching i.e. 31/07/2023 and if the taxpayer fails to file Income Tax return on or before due date then late fees will be applicable as per taxable income of the assessee. In view of the flood situation in many states across the country it is requested to extend the last date for filing of Income Tax return from 31/07/2023 to 31/08/2023.”

The association earnestly urges consideration of the country’s dire situation, which has resulted in significant disruptions to daily life due to extraordinary and unavoidable circumstances. They express concern about the continuous heavy rainfall, making it challenging for taxpayers to communicate with professionals, and vice versa, regarding tax compliances. Both taxpayers’ and professionals’ businesses have suffered considerable damage as a result of the rain and floods.

The letter also mentioned that “ it would appreciate that particularly with regards to the Non Audited segment of taxpayers who have to file their ITRS on or before 3 1 July, 2023, and considering the verification Of Annual Information Reports which exhaustively provides the details of various transactions and incomes reflected on the portal, the taxpayers are finding it difficult to match and finalizing their Income statements due to non-availability of their accounting staff or else the tax consultants who get stuck with water blockage and disruption of their routine office work due to heavy and consistent Rainfall since last 15 days.”

Further stated, it has been observed that due to the accurate availability of the AIR’s data, the meticulous data preparation Of a tax payer in order to meet with the true and Correct filing of their Income Tax Returns would be of utmost important. Therefore, unless and until the assessee and the Tax Professional sit together for reconciling and finalizing the data, it would be hard to file a Return. And the whole routine was disturbed due to the current situation.

Besides above, since the due date of filing quarter-4 TDS Returns being 31st May of each financial year and most of the Tax payer liable to do this compliance would fail in filing a correct single TDS return, it is observed that the tendency of correcting and revising the TDS returns are huge and large due to various transactions being a part of TDS compliance as per the provisions of law and therefore these tax payers fail in doing a one-time correct single compliance of 26-Q TDS Return correctly which unable the deductee to get his credit in FORM-26AS who would not be able to file his Income Tax Return immediately.

Most of these deductee tax payers who are largely dependent on dividend Income, Interest Income and now Share market capital gains income which has also become subject to TDS on certain transactions as per sec.194LBB, the finalizing Of the data for these types of tax payer gets delayed which results into late filing Of the Income Tax Returns.

The association also sought attention that this year so far there have been number to times the utilities of TDS-TCS in the form of FVU files and the utilities of the Income Tax Returns have been changed. Due to this frequent changes of the utilities, the larger section Of the Tax professionals Who are using the private authorized software also got stuck in getting the updated utilities. This has also delayed the work process.

The association mentioned that “it is very much understandable that these utilities have been frequently changed by CBDT & the system for better accuracy Of the Returns however the practical aspects Of getting the work delayed can also not be denied since the Tax Professionals get unsettled with the changes. The frequent disturbance of the natural calamity in the form of heavy Rain fall has further added to the delayed process of preparing the Returns.”

The association stating the above facts and situations, requested the ministry to extend the due date till 31st August 2023.

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File Form DPT-3 By 31st July 2023 to Avoid Additional Fee: MCA

The Ministry of Corporate Affairs(MCA ) has reminded Stakeholders to file DPT-3 form for the F.Y. 2022-23 by  31st July 2023 to avoid paying additional fees.

By the circular on 21st June 2023, the MCA has extended the due date of filing Form DPT-3 without additional fee up to 31st July 2023 due to portal issues. The form filers do not need to pay additional fees till 31st July 2023.

All businesses (non-government) are required to provide DPT-3 reports of deposits, information of transactions that are not deemed deposits, or both, on or before June 31st, 2023.

Documents For Filing Form DPT-3

Every Stakeholder may complete your filing without postponing it to the last day.

Read More : MCA relaxes Filing of Form DPT-3 without Additional Fee up to 31st July 2023 due to portal glitches

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ICAI invites Comments on Request of IASB for Information on Post-Implementation Review of IFRS 15

The Institute of Chartered Accountants of India  (ICAI) has invited comments on request of the International Accounting Standards Board (IASB) for Information on the Post-Implementation Review  of IFRS 15.

The IASB requested to undertake a post-implementation review of IFRS 15, Revenue from Contracts with Customers. Accordingly, the IASB has issued the following Request for information for public comments:

“A Post-implementation Review is an opportunity for the IASB to assess whether the effects of applying the new requirements on users of financial statements, preparers, auditors and regulators are as intended when the IASB developed those new requirements. Accordingly, IASB has issued the Post-implementation Review of IFRS 15 to assess whether the standard is working as intended.

With the view to contribute to standard setting at international level, the above-mentioned Request for Information issued by the IASB has been hosted on the website of the Institute of Chartered Accountants of India (www.icai.org) for public comments with last date as August 31, 2023. The downloadable version is available at: https://resource.cdn.icai.org/75209asb60761.pdf”

The Comments on the request for information may be submitted through any of the following modes:

1. Electronically: Click on http://www.icai.org/comments/asb/ to submit comment online (Preferred method)

2. Email: commentsasb@icai.in

3. Postal : Secretary, Accounting Standards Board,

                 The Institute of Chartered Accountants of India,

                  ICAI Bhawan, Post Box No. 7100,

                  Indraprastha Marg, New Delhi 110 002

The stakeholders may send their suggestions/objections in regard to the aforesaid request.

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GST Leviable on Services by Head Office to Branch Offices in Other States, Branch Offices Eligible for ITC: CBIC [Read Circular]

With respect to the recommendations of the 50th Goods and Services Tax (GST) Council, the Central Board of Indirect Taxes and Customs (CBIC) has issued circular No. 199/11/2023-GST on 17th July 2023, clarifying the taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons.

Suppose we have a business entity with its Head Office (HO) situated in State-1 and several branch offices (BOs) located in different states. The HO acquires certain input services, such as security services, from an external security agency to cater to the entire organization. Additionally, the HO provides other services internally to the branch offices (referred to as internally generated services).

The issues that may arise with regard to taxability of supply of services between distinct

persons in terms of sub-section (4) of section 25 of the CGST Act are being clarified.

1. It was clarified that in respect of common input services procured by the HO from a third party but attributable to both HO and BOs or exclusively to one or more BOs, HO has an option to distribute ITC in respect of such common input services by following ISD mechanism laid down in Section 20 of CGST Act read with rule 39 of the Central Goods and Services Tax Rules, 2017.

However, as per the present provisions of the CGST Act and CGST Rules, it is not mandatory for the HO to distribute such input tax credit by ISD mechanism. HO can also issue tax invoices under section 31 of CGST Act to the concerned BOs in respect of common input services procured from a third party by HO but attributable to the said BOs and the BOs can then avail ITC on the same subject to the provisions of section 16 and 17 of CGST Act.

In case, the HO distributes or wishes to distribute ITC to BOs in respect of such common input services through the ISD mechanism as per the provisions of section 20 of CGST Act read with rule 39 of the CGST Rules, HO is required to get itself registered mandatorily as an ISD in accordance with Section 24(viii) of the CGST Act.

Further, such distribution of the ITC in respect a common input services procured from a third party can be made by the HO to a BO through ISD mechanism only if the said input services are attributable to the said BO or have actually been provided to the said BO. Similarly, the HO can issue tax invoices under section 31 of CGST Act to the concerned BOs, in respect of any input services, procured by HO from a third party for on or behalf of a BO, only if the said services have actually been provided to the concerned BOs.

2. Regarding the full input tax credit is available to the concerned BOs, the CBIC has clarified that the value of supply of services made by a registered person to a distinct person needs to be determined as per rule 28 of CGST Rules, read with sub-section (4) of section 15 of CGST Act.

As per clause (a) of rule 28, the value of supply of goods or services or both between distinct persons shall be the open market value of such supply. The second proviso to rule 28 of CGST Rules provides that 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 the goods or services.

Accordingly, in respect of supply of services by HO to BOs, the value of the said supply of services declared in the invoice by HO shall be deemed to be the open market value of such services, if the recipient BO is eligible for full input tax credit. 

Accordingly, in cases where full input tax credit is available to a BO, the value declared on the invoice by HO to the said BO in respect of a supply of services shall be deemed to be the open market value of such services, irrespective of the fact whether cost of any particular component of such services, like employee cost etc., has been included or not in the value of the services in the invoice.

Further, in such cases where full input tax credit is available to the recipient, if HO has not issued a tax invoice to the BO in respect of any particular services being rendered by HO to the said BO, the value of such services may be deemed to be declared as Nil by HO to BO, and may be deemed as open market value in terms of second proviso to rule 28 of CGST Rules.

3.The CBIC also clarified that in respect of internally generated services provided by the HO to BOs, the cost of salary of employees of the HO, involved in providing the said services to the BOs, is not mandatorily required to be included while computing the taxable value of the supply of such services, even in cases where full input tax credit is not available to the concerned BO.

The Tamil Nadu State Appellate Authority for Advance Ruling (AAAR) held that the Head office adopting the value for supply to other branches is eligible for Input Tax Credit (ITC) as provided under Proviso 2 to Rule 28 of the CGST/TNGST Rules 2OI7.

The Bench ruled that the appellant is eligible to adopt the value as per Second Proviso to Rule 28 of the CGST/TNGST Rules 2OI7, at the time of supply of goods from the State of Tamilnadu in the terms of the scenario discussed, in as much as the recipient distinct person is eligible for full Input Tax credit as required under the said proviso.

Read More: Head Office adopting the Value for Supply to other branches Outside State is eligible for ITC: AAAR

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ICAI Puducherry Branch to conduct Tax Clinics to assist Taxpayers to File ITR on 13th and 14th July

The Puducherry branch of the Institute of Chartered Accountants of India (ICAI) has announced that they will be organizing tax clinics on the 13th and 14th of July, 2023. These clinics aim to provide assistance to taxpayers in the process of filing their Income Tax Returns (ITR). The clinics will particularly benefit those taxpayers who are required to file the ITR as per mandatory regulations.

According to a press release by Kushal Raj, Secretary of ICAI Puducherry, two tax specialists will be heading the consultation clinics to address inquiries related to direct taxes. These clinics will take place at the chapter’s office located at ICAI Bhawan, No. 8, Second Main Road, Ilango Nagar, Puducherry 605011.

As the due date is nearing, the clinics will benefit the taxpayers. Also, the public need necessary directions on the tax filing as the majority of them are ignorant on filing tax. The clinics are organized in alignment with a nationwide initiative led by the Central Board of Direct Taxes.

The last date to file the income tax return is July 31st. According to reports issued by the income tax department, on 11th July, over 2 crores filings were done. Also, this filing has happened before the fixed target days.

The last date for ITR filing of salaried taxpayers and individuals not requiring audit is 31st July 2023. The due dates are:

  1. Individual / HUF/ Association of Persons(AOP)/ Body of Individuals (BOI) (books of accounts not required to be audited):  Last Date 31st July
  2. Businesses (Require Audit): Last Date 31st October 2023
  3. Businesses/Partnership Firm requiring transfer pricing reports (Audit Form 3CEB -in case of international/specified domestic transactions): Last Date 30th November 2023
  4. Revised Return : Last Date 31st December 2023
  5. Belated Return : Last Date 31st December 2023

It is pertinent to consistently keep in mind the specified due dates for tax filings. Additionally, due to the ongoing server problems with the Income Tax Portal, it is advisable to promptly submit tax returns as soon as possible.

The taxpayers who encounter difficulties or require assistance in filing their income tax returns are encouraged to visit the clinic located at the provided address on July 13th and 14th, 2023.

Address of Clinic

 ICAI Bhawan, No. 8, Second Main Road,

 Ilango Nagar,

 Puducherry 605011.

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CBIC issues Guidelines for  Processing Application for GST Registration

The guidelines for processing applications for Goods and Services Tax Registration have been released by the Central Board of Customs and Indirect Taxes (CBIC) on 14th June 2023.

The board has made the decision to issue suitable recommendations regarding the matter as a result of occurrences of fraudulent people using fake or fictitious registration under the Goods and Services Tax (GST) registration.

The board directed the proper officer to initiate the process of the scrutiny and verification of the details filed by the applicant for the registration in Form GST REG-01 immediately along with the application. Also directed to careful examination of the documents furnished accordingly, as stated in the Form GST REG-01. It was directed to the proper officer to check the completeness of the same and the authenticity of the applicant.

Additionally, stated that special attention needs to be paid to the cases where “High” risk rating has been assigned to an ARN. The proper officer may also check as to whether the registration(s) has been obtained on the same PAN earlier, either within the same State or other State(s).

The proper officer may also give due consideration and special attention to the cases involving inter alia the following circumstances:

  1. where any registration obtained on the PAN of the applicant has been cancelled previously;
  2. where any registration obtained on the PAN of the applicant is suspended at the time of verification of a new application of registration;
  3. whether any application for registration on the PAN of the applicant has been rejected previously;
  4. whether the place of business of the applicant appears to be risky based on local risk parameters;
  5. whether the proof of address of place(s) of business prima facie appear to be suspicious/ doubtful on the basis of scrutiny of the application and the documents

The board further instructed that the proper officer shall send an electronic notice to the applicant in the Form GST REG-03 within the prescribed time frame if the application is found to be deficient in any way, including in terms of information or any required document, or where he needs clarification regarding any information provided in the application or documents furnished therewith, or in respect of any other fact.

In addition, the appropriate official must carefully review any clarifications, details, or documents submitted by the applicant in response to the notice sent in Form GST REG-03. The grant of registration to the applicant may be approved within the stipulated time frame if the proper official is satisfied with the response provided by the applicant in Form GST REG-04.

If the proper officer discovers that the application either skipped the Aadhaar number authentication process or did not choose to do so, the proper officer must immediately start the process for a physical inspection of the applicant’s place of business.

If there are any problems implementing these instructions, please contact the Board at gst-cbec@gov.in.

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IBBI restores Registration of Suspended Registered Valuer Entity in view of Stay Order from Bombay HC [Read Order]

The Insolvency and Bankruptcy Board of India (IBBI) has recently restored the registration details of the registered valuer Entity Since the matter was sub judice t by the stay order of the Bombay High Court. Yardi Prabhu Consultants & Valuers Pvt. Ltd, the appellant challenged the Order which disposed of the Show Cause Notice issued…

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Reasons for Violating Sections 269SS & 269T of Income Tax Act Genuine and Bonafide: ITAT quashes Penalty Order [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) concurred with the contentions of the assessee and found that there was genuine and bonafide reason for violating sections 269SS and 269T of the Income Tax Act, 1961.

The two-member bench of Shamim Yahya and Asta Chandra while cancelling the penalty order observed that discarding the explanation submitted by the assessee merely because they proceeded on the premise that breach of condition provided under section 269SS and 269T shall necessarily lead to penal consequences which understanding in our humble opinion is not in accordance with law.

The assessee, M/s. Delhi State Taxi Operators’s Co-operative Thrift Credit & Services Society Ltd., a Cooperative society filed two appeals against the two separate orders of the Commissioner of Income Tax (Appeals) [CIT(A)].

The CIT(A) upheld the penalty of Rs. 16,71,24,134 and Rs. 2,01,58,524 levied by the Joint Commissioner of Income Tax (JCIT) under section 271D and 271E of the Income Tax Act, 1961 for the Assessment Year 2013-14 for violation of the provisions of section 269SS and 269T respectively of the Income Tax Act.

Before the Joint Commissioner of Income Tax (JCIT) and the Commissioner of Income Tax (Appeals), the assessee claimed that section 273B of the Income Tax Act’s definition of “reasonable cause” applied to its default.

The JCIT observed that during the assessment proceedings, the Assessing Officer order vide sheet entry sought a list of members of the assessee society from whom deposits have been accepted. On perusal, cash deposits of Rs. 16,71,24,134 and repayment of deposits of Rs. 2,01,58,524 were found to be in contravention of section 269SS and 269T respectively of the Income Tax Act.

The assessee submitted that the society is under the bonafide belief that the deposits are made/repaid voluntarily by the members and are genuine. The case of the assessee is of mutually aided society for the benefit of its members. The penalty proceedings be kindly dropped

According to JCIT, the genuineness of deposits in cash and repayment of deposits is not a criteria while considering the provisions of section 269SS and section 269T of the Income Tax Act which have been inserted to curb the circulation of black money.

The counsel of the assessee contended that the Assessing Officer /JCIT have not established that there was deliberate and intentional violation of the provisions of Section 269SS/269T in order to hide any income or to evade any payment of tax.

Also submitted that the assessee society runs on the principles of mutuality. The money received from the members of the society is in the nature of capital receipt and can in no way be treated as loan/deposit. The deposits accepted and repaid by the assessee were part of its business activities and the depositors were its members. 

Conversely, the Counsel of the Department vehemently argued that genuineness of transaction is not a criteria for imposition of penalty. Even in genuine transactions transacting in cash is not allowed under Sections 269SS and 269T of the Income Tax Act. The case of the assessee does not fall under the exclusionary clause.

The bench observed that there was no allegation at all against the assessee that by accepting loans/deposits in cash its intention ever was to avoid payment of tax or to defraud Revenue.

Further observed  the CBDT circular Circular F. No. 415/6/2000-IT(Inv.I) dated 25th March, 2004 acknowledging that it was a widespread belief, even if erroneous that the provisions of section 269SS do not apply to the credit co-operative societies and advised the field officers not to impose penalty under section 271D and 271E indiscriminately and should keep in view the provisions of section 273B of the Income Tax Act.

Section 273 of the Income Tax Act ordains that no penalty under Sections 271D and 271E shall be imposed on the person or the assessee if he proves that there was reasonable cause for the failure.

Thus, while allowing the appeals, the tribunal cancelled the penalty levied under Section 271D and 271E of the Income Tax Act.

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RBI to withdraw Rs. 2000 Notes From Circulation; Exchange Notes till Sept. 30, 2023

The Reserve Bank of India (RBI) has announced a big break that Rs. 2000 denomination bank notes will be out of the economy soon. Though the RBI stopped the printing of the Rs. 2000 notes, the apex bank announced that they are going to withdraw the note completely from circulation. However, it will be continued as a Legal Tender.

The Reserve Bank of India announced that the facility for deposit and/or exchange of rupee 2000 banknotes will be accessible to the general public from May 23, 2023 to September 30, 2023. Also, the facility to exchange will be provided to the public through all branches of the banks.

In Pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, the Rs. 2000 denomination banknotes shall be withdrawn from the circulation. As per the notification, all banks may exchange ₹2000 banknotes up to a limit of ₹20,000 at a time. This is to avoid the disruption and for the operational convenience.

Business Correspondents (BCs) may also be permitted to convert up to a total of Rs. 4,000 worth of currency for an account holder each day. Banks may, at their discretion, increase the BCs’ cash holding limitations for this purpose.

In response to the economy’s acute need for money following the revocation of the legal tender status of the Rs. 500 and Rs. 1000 bank notes, which the Indian people will never forget, the Rs. 2000 bank notes were issued in November 2016.

The RBI claims that the objective of the official introduction of the Rs. 2000 notes was achieved and that there are sufficient supplies of banknotes in other denominations. As a result, from 2018 to 2019, no fresh Rs. 2000 notes were printed.

The apex bank has directed all the banks to take necessary actions to help the customers and also to make special arrangements for the senior citizens, persons with disabilities and women.

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Netflix under Income Tax Scanner for Income from Streaming Services provided in India

In a first-time-ever action, the Indian government is contemplating taxing income of Netflix generated from streaming services in the country, according to sources. Overseas digital companies are not yet taxed in India for providing electronic commerce services, without a permanent establishment.

The Indian government is contemplating taxing income of Netflix generated from streaming services in the country, according to sources. This is the first time overseas digital companies are being taxed in India for providing electronic commerce services.

The US-based entertainment company is deemed to have a permanent establishment (PE) in India, requiring its income in the country to be taxed.

As per the draft order, Netflix acquired Income from India through streaming services and is accountable for tax assessment. The tax obligation is a result of Netflix Inc’s employment of seconded employees to support its services in India.

Even if seconded employees are only loaned for a short period, previous tax authorities have ruled that they form a permanent establishment. In 2016, Netflix launched its streaming service in India, which now boasts over six million subscribers.

Netflix Entertainment Services India earned a gross revenue of Rs 1,529.36 crore at the end of FY21. Monika Shergill, Netflix India’s vice president of content, revealed in a recent interview that India had the highest net subscriber additions globally in 2022 following the introduction of an aggressive pricing plan in December 2021, along with Indian originals and licensed movies.

The assessee company may challenge the draft order before the assessing officer (AO) or the Dispute Resolution Panel (DRP) in international taxation.

Section 144C of the Income Tax Act, 1961 governs the provisions relating to DRP and defines DRP as a collegium comprising three Commissioners of Income Tax constituted by the Central Board of Direct Taxes for this purpose.

When the Assessing Officer (AO) proposes by a way of draft assessment order made under Section 144C of the Income Tax Act to make any variation in the income or loss stated in the return filed by the assessee on the basis of Transfer Pricing adjustment and invites assessee’s acceptance or objections to the same.

Assessee may communicate his acceptance to the order or may file an objection before the DRP against the proposed assessment order. The DRP after giving the opportunity of hearing to the assessee, passes a suitable order in the case within 9 months.

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CBIC rolls out Automated GST Return Scrutiny Module in ACES-GST Application for Central Tax Officers

The Central Board of Indirect Taxes and Customs (CBIC) has released the Automated Return Scrutiny Module for automated scrutiny of Goods and Services Tax (GST) Returns in the backend of ACES-GST Application for Central Tax Officers.

Recently, during a performance review of the Central Board of Indirect Taxes & Customs (CBIC), Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman instructed the CBIC to implement an Automated Return Scrutiny Module for GST returns at the earliest.

The new system was expected to launch soon and will correlate data from various GST returns to identify any mismatches.  The CBIC has taken steps to comply with this directive by launching the module in the ACES-GST backend application for Central Tax Officers this week.

The purpose of this module is to enable tax officers to scrutinize GST returns of Centre Administered Taxpayers based on data analytics and identified risks. The module provides tax officers with a workflow to interact with taxpayers through the GSTN Common Portal, communicating discrepancies under FORM ASMT-10, receiving the taxpayer’s reply in FORM ASMT-11.

It also allows taking subsequent action in the form of either issuing an order of acceptance in FORM ASMT-12, issuing a show cause notice, or initiating an audit/investigation. The Automated Return Scrutiny Module is currently being implemented for the scrutiny of GST returns for the fiscal year 2019-20, with the necessary data already made available on officers’ dashboards.

To help with the crackdown on fraud, the Finance Minister had asked CBIC to conduct a comprehensive root cause analysis of cases already booked and provide recommendations for technology-based solutions to prevent future occurrences.

Additionally, the FM had stressed the need for continuous improvement of taxpayer services and suggested organizing interactions in each zone with members of trade and industry in the GST ecosystem to identify and systematically address any issues or suggestions they may have.

The new returns scrutiny system is expected to be implemented very soon for taxpayers and will correlate data from various GST returns to identify any mismatches. 

The new automated GST Returns Scrutiny System automates the process of scrutinizing GST returns and generates alerts in cases of non-compliance. This technology-based solution aims to enhance tax compliance, reduce manual intervention, and increase the efficiency of tax administration.

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